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APT Electronics Co., Ltd.
廣東晶科電子股份有限公司
APT Electronics Co., Ltd.
廣東晶科電子股份有限公司
(A joint stock company incorporated in the People’s Republic of China with limited liability)
Stock Code:  2551
Sole Sponsor, Sole Overall Coordinator,
Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
GLOBAL
OFFERING
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers


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If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
APT Electronics 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
: 33,600,000 H Shares (subject to the Offer Size
Adjustment Option)
Number of Hong Kong Offer Shares : 3,360,000 H Shares (subject to the Offer Size
Adjustment Option and reallocation)
Number of International Offer Shares : 30,240,000 H Shares (subject to reallocation and the
Offer Size Adjustment Option)
Offer Price : HK$3.61 per H Share, plus brokerage of 1.0%, SFC
transaction levy of 0.0027%, AFRC transaction levy
of 0.00015% and Hong Kong Stock Exchange
trading fee of 0.00565% (payable in full on
application in Hong Kong dollars and
subject to refund)
Nominal value : RMB1.00 per H Share
Stock code : 2551
Sole Sponsor, Sole Overall Coordinator,
Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents of this prospectus, make
no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in relian ce upon the whole or any part of the contents of this
prospectus.
A copy of this prospectus, having attached thereto the documents specified in “Documents Delivered to the Registrar of Companies and Available on Dis play “in Appendix VII to 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) Ordinanc e, 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 will be HK$3.61 per H Share, unless other wise announced. Applicants for Hong Kong Offer Share are required to pay, on application, the O ffer Price of HK$3.61 for each Hong Kong Offer
Share together with a brokerage of 1.0%, a SFC transaction levy of 0.0027%, AFRC transaction levy of 0.00015% and a Hong Kong Stock Exchange trading fee of 0.00565%.
The Sole Overall Coordinator, for itself and on behalf of the Underwriters, and with our consent may, where considered appropriate, reduce the number of Hong Kong Offer Shares and/or the
Offer Price at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, notices of the re duction in the number of Hong Kong
Offer Shares and/or the Offer Price will be published on the website of our Company at www.apt-hk.com and the website of the 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 day which is the last day for lodging applications under the Hong Kong Public Offering. Further
details are set forth in “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 Sole Overall Coordinator ( for itself and on behalf of the Hong
Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Date. See “Underwriting — Grounds for Termination” of this Prospectus .
The Offer Shares have not been and will not be registered under the US Securities Act or securities law of any state in the United States and may be offered and sold only outside the United States in an
offshore transaction according to Regulation S under the US Securities Act.
ATTENTION
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 p ublic in relation to the Hong Kong Public
Offering.
This prospectus is available at the websites of the Stock Exchange ( www.hkexnews.hk ) and our Company ( www.apt-hk.com ). If you require a printed copy of this prospectus, you may download and
print from the website addresses above.
IMPORTANT
October 31, 2024


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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 document to the public in relation to the
Hong Kong Public Offering.
This document 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 www.apt-hk.com . If you require a printed copy of this document,
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 ;
(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 document 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 document is available online at the website addresses above.
Please refer to the section headed “How to Apply for Hong Kong Offer Shares” in this
prospectus 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 made for a minimum of 1,000 Hong Kong Offer Shares and in multiples of that number of
Hong Kong Offer Shares as set out in the table below.
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 Shares you have selected. You must pay the respective
amount payable on application in full upon application for Hong Kong Offer Shares.
IMPORTANT


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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.
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$
1,000 3,646.41 20,000 72,928.14 100,000 364,640.69 800,000 2,917,125.48
2,000 7,292.81 25,000 91,160.18 150,000 546,961.02 900,000 3,281,766.16
3,000 10,939.22 30,000 109,392.20 200,000 729,281.36 1,000,000 3,646,406.86
4,000 14,585.63 35,000 127,624.24 250,000 911,601.71 1,100,000 4,011,047.54
5,000 18,232.04 40,000 145,856.28 300,000 1,093,922.05 1,200,000 4,375,688.22
6,000 21,878.43 45,000 164,088.31 350,000 1,276,242.40 1,300,000 4,740,328.90
7,000 25,524.85 50,000 182,320.34 400,000 1,458,562.75 1,400,000 5,104,969.59
8,000 29,171.25 60,000 218,784.41 450,000 1,640,883.08 1,500,000 5,469,610.28
9,000 32,817.67 70,000 255,248.48 500,000 1,823,203.43 1,680,000
(1) 6,125,963.51
10,000 36,464.06 80,000 291,712.55 600,000 2,187,844.11
15,000 54,696.10 90,000 328,176.62 700,000 2,552,484.80
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) or to the White Form eIPO Service Provider (for applications made through the application
channel of the White Form eIPO Service Provider) while the SFC transaction levy, the Stock Exchange trading fee
and the AFRC transaction levy will be paid to the SFC, the Stock Exchange and the AFRC, respectively.
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 in the following expected timetable of the Global Offering, we will
issue an announcement on the website of our Company at www.apt-hk.com and the website of
the Stock Exchange at www.hkexnews.hk .
Hong Kong Public Offering commences ................................... 9:00 a.m. on
Thursday, October 31, 2024
Latest time for completing electronic applications via the White
Form eIPO service through the designated website at
www.eipo.com.hk (2) ...............................................1 1:30 a.m. on
Tuesday, November 5, 2024
Application lists of the Hong Kong Public Offering open (3) ...................1 1:45 a.m. on
Tuesday, November 5, 2024
Latest time for (a) completing full payment of application
monies via the White Form eIPO service, or
(b) giving electronic application instructions to HKSCC (4) ................ 12:00 noon on
Tuesday, November 5, 2024
If you are instructing your broker or custodian who is a HKSCC Participant to submit
HKSCC EIPO applications on your behalf through HKSCC’s FINI system in accordance with your
instruction, you are advised to contact your broker or custodian for the latest time for giving such
instructions which may be different from the latest time as stated above.
Application lists of the Hong Kong Public Offering close
(3) .................. 12:00 noon on
Tuesday, November 5, 2024
Announcement of:
 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 the Hong Kong Offer Shares
EXPECTED TIMETABLE (1)
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to be published on the website of our Company at
www.apt-hk.com (5) and the website of
the Stock Exchange at www.hkexnews.hk ...............................n o later than
11:00 p.m. on Thursday, November 7, 2024
Results of allocations in the Hong Kong Public Offering (with successful applicants’
identification document numbers, where appropriate) to be available through a variety of channels,
including:
 from the designated results of allocations website at
www.iporesults.com.hk
(alternatively:
www.eipo.com.hk/eIPOAllotment )
with a “search by ID” function from (6) ...........1 1:00 p.m. on Thursday, November 7,
2024 to 12:00 midnight
Wednesday, November 13, 2024
 The Stock Exchange’s website at www.hkexnews.hk
and our website at www.apt-hk.com (5) which will
provide links to the above mentioned websites of
the H Share Registrar ................................n o later than 11:00 p.m. on
Thursday, November 7, 2024
 from the allocation results telephone enquiry line by
calling +852 28628555 between 9:00 a.m. and
6:00 p.m. from .................................... Friday, November 8, 2024 to
Wednesday, November 13, 2024
(excluding Saturdays, Sundays and
public holidays in Hong Kong)
H Share certificates in respect of wholly or partially successful
applications pursuant to the Hong Kong Public Offering to be
dispatched or deposited into CCASS
(6)(7) ................................o no r before
Thursday, November 7, 2024
White Form e-Refund payment instructions/refund checks in
respect of wholly or partially unsuccessful applications to be
dispatched/collected
(8) ...............................................o no r before
Friday, November 8, 2024
EXPECTED TIMETABLE (1)
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Dealings in the Shares on the Stock Exchange expected
to commence at .................................................... 9:00 a.m. on
Friday, November 8, 2024
Notes:
(1) Unless otherwise stated, all times and dates refer to Hong Kong local times and dates.
(2) You will not be permitted to submit your application under the White Form eIPO service through the designated
website at www.eipo.com.hk
after 11:30 a.m. on the last day for submitting applications. If you have already
submitted your application and obtained an application reference number from the designated website prior to
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 submitting applications, when the application lists close.
(3) If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above and/or Extreme
Conditions (collectively, “ Bad Weather Signal ”) in force in Hong Kong at any time between 9:00 a.m. and 12:00
noon on Tuesday, November 5, 2024, the application lists will not open or close on that day. For further details,
see “How to Apply for Hong Kong Offer Shares — E. Bad Weather Arrangements.”
(4) Applicants who apply via HKSCC EIPO channel shall contact their broker or custodian for the earliest and latest
time for giving such instructions, as this may vary by broker or custodian.
(5) Neither of the websites nor any of the information contained on the websites forms part of this prospectus.
(6) 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 at www.iporesults.com.hk
or www.eipo.com.hk/eIPOAllotment .
(7) H Share certificates will only become valid at 8:00 a.m. on the Listing Date provided that the Global Offering has
become unconditional and the right of termination described in “Underwriting — Underwriting Arrangements and
Expenses — Hong Kong Public Offering — Grounds for Termination” has not been exercised. Investors who trade
the Shares prior to the receipt of Share certificates or prior to the H Share certificates becoming valid evidence of
title do so entirely at their own risk.
(8) Refund mechanism for surplus application monies paid by application via HKSCC EIPO channel is subject to the
arrangement between applicants and their broker or custodian.
Applicants who have applied for Hong Kong Offer Shares through the HKSCC EIPO channel should refer to “How
to Apply for Hong Kong Offer Shares — D. Dispatch/Collection of H Share Certificates and Refund of Application
Monies” for details.
Applicants who have applied through the White Form eIPO service and paid their applications monies through
single bank accounts may have refund monies (if any) dispatched to the designated bank account in the form of
White Form e-Refund payment instructions. Applicants who have applied through the White Form eIPO service
and paid their application monies through multiple bank accounts may have refund monies (if any) dispatched to
the address as specified in their application instructions in the form of refund cheques in favor of the applicant (or,
in the case of joint applications, the first-named applicant) by ordinary post at their own risk.
Further information is set out in “How to Apply for Hong Kong Offer Shares — D. Dispatch/Collection of H Share
Certificates and Refund of Application Monies.”
EXPECTED TIMETABLE (1)
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The above expected timetable is a summary only. For further details of the structure of the
Global Offering, including its conditions, and the procedures for applications for Hong Kong Offer
Shares, see “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in
this prospectus.
If the Global Offering does not become unconditional or is terminated in accordance with its
terms, the Global Offering will not proceed. In such case, our Company will make an
announcement as soon as practicable thereafter.
EXPECTED TIMETABLE (1)
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IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
This prospectus is issued by our Company 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 subscribe for or buy any security other than the Hong Kong Offer
Shares. This prospectus may not be used for the purpose of, and does not constitute, an offer to
sell or a solicitation of an offer to subscribe for or buy any security in any other jurisdiction or
in any other circumstances. No action has been taken to permit a public offering of the Offer
Shares or the distribution of this prospectus in any jurisdiction other than Hong Kong. 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.
You should rely only on the information contained in this prospectus to make your
investment decision. 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
included in this prospectus must not be relied on by you as having been authorized by us, the
Sole Sponsor , the Sponsor-Overall Coordinator , the Sole Overall Coordinator , the Capital
Market Intermediaries, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Underwriters, any of our or their respective directors or advisors, or any other
person or party involved in the Global Offering. Information contained on our website, located
at www.apt-hk.com
, does not form part of this prospectus.
Page
Expected Timetable .................................................... i
Contents ............................................................. v
Summary ............................................................ 1
Definitions ............................................................ 2 9
Glossary of Technical Terms ............................................. 4 3
Forward-Looking Statements ............................................. 5 0
Risk Factors .......................................................... 5 2
CONTENTS
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Waivers from Strict Compliance with the Listing Rules ........................ 9 3
Information about this Prospectus and the Global Offering .................... 9 8
Directors, Supervisors and Parties Involved in the Global Offering .............. 1 0 4
Corporate Information .................................................. 1 1 3
Industry Overview ..................................................... 1 1 6
Regulatory Overview .................................................... 1 4 0
History, Development and Corporate Structure .............................. 1 6 3
Business ............................................................. 1 8 8
Relationship With Our Controlling Shareholder Group ........................ 3 1 4
Directors, Supervisors and Senior Management .............................. 3 1 9
Connected Transactions ................................................. 3 4 0
Share Capital ......................................................... 3 5 0
Substantial Shareholders ................................................ 3 5 5
Financial Information .................................................. 3 6 0
Future Plans and Use of Proceeds ......................................... 4 3 3
Underwriting ......................................................... 4 3 8
Structure of the Global Offering .......................................... 4 5 2
How to Apply for Hong Kong Offer Shares .................................. 4 6 4
Appendix IA — Accountants’ Report of the Group ......................... IA-1
Appendix IB — Accountants’ Report of Lynway Vision ...................... IB-1
CONTENTS
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Appendix II — Unaudited Pro Forma Financial Information .................. II-1
Appendix III — Taxation and Foreign Exchange ............................ III-1
Appendix IV — Summary of Principal Legal and Regulatory Provisions ......... I V - 1
Appendix V — Summary of Articles of Association ......................... V - 1
Appendix VI — Statutory and General Information ......................... VI-1
Appendix VII — Documents Delivered to the Registrar of Companies and
Available on Display ................................... VII-1
CONTENTS
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This summary aims to give you an overview of the information contained in this document.
As it is a summary, it does not contain all the information that may be important to you and is
qualified in its entirety by, and should be in conjunction with, the full text of this document. You
should read the entire document 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 “Risk Factors” in this document. You should read that section
carefully before you decide to invest in the Offer Shares.
OVERVIEW
We are a provider of intelligent vision products and system solutions encompassing
intelligent automotive vision, high-end lighting and advanced display. Leveraging industry insights
and proactive approaches to technological innovation, we house a broad array of “LED+”
technologies that integrate LED technologies with integrated circuits (ICs), electronic control,
software, sensors, optics and others. Our energy-efficient and rapidly evolving “LED+”
technologies further empower our intelligent vision products and systems, enabling us to penetrate
high-value, high-growth markets. According to CIC, in terms of revenue, we ranked third among
domestic device and module manufacturers in China’s high-end lighting industry and fifth among
all device and module manufacturers in the same industry, with a market share of 5.3% in 2023.
We ranked fifth among domestic manufacturers in China’s mid- to high-end intelligent automotive
vision industry and twelfth among all manufacturers in the same industry, with a market share of
0.5% in 2023. We ranked fourth among both domestic and all manufacturers in China’s LCD TV
backlight display industry, with a market share of 9.1% in 2023. As of the Latest Practicable Date,
we passed all product verifications and audit procedures on our manufacturing facilities, conducted
by the majority of the top-tier domestic and international companies in intelligent automotive
vision, high-end lighting and advanced display businesses. In 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, our revenue amounted to RMB1,388.4 million,
RMB1,410.6 million, RMB1,858.0 million, RMB624.6 million and RMB843.2 million,
respectively; our gross profit amounted to RMB228.3 million, RMB235.2 million, RMB339.0
million, RMB104.3 million and RMB154.2 million, respectively; our net profit amounted to
RMB78.0 million, RMB39.1 million, RMB72.0 million, RMB7.6 million and RMB32.2 million,
respectively.
The LED intelligent vision industry can be categorized into three areas based on application:
intelligent automotive vision, high-end lighting and advanced display. In 2023, the industry had a
substantial global market size of USD192.0 billion in terms of revenue. Within this, the market
size of China’s LED intelligent vision market amounted to RMB440.2 billion, with intelligent
automotive vision, high-end lighting and advanced display accounting for 20.2%, 33.2% and
46.6% of the market, respectively, in terms of revenue for their respective end products. China
SUMMARY
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stands out as the world’s largest and most comprehensive hub for automobile manufacturing,
lighting and LCD TV industries. After an extended development phase, the LED intelligent vision
industry in China is consolidating rapidly. The emergence of “LED+” technologies, which integrate
LED technologies with ICs, electronic control, software, sensors, optics and others, are rapidly
changing the landscape of the high-end LED intelligent vision industry. Such technological
revolutions are now the key drivers for advancements in high-end LED products. Intelligent
automotive vision, high-end lighting and advanced display thus represent unsaturated market
segments with great potential in the industry, offering the largest room for technological
advancement and future development.
We are one of the first companies in China to commence mass production of high-power
flip-chip LED products. With years of dedication to R&D and technological accumulation, we
developed a series of flip-chip LED technologies for different application scenarios. Our
fundamental technologies also include advanced white LED packaging photoconversion
technology, advanced LED integrated packaging technology and high-end LED device packaging
technology. Benefiting from the synergies in developing these technologies, our technological
capabilities remain at the forefront of global innovation.
OUR STRENGTHS
We believe that the following strengths contribute to our robust market position, ensuring our
success and distinguishing us from our competitors:
 trusted solution provider of LED intelligent vision products and systems in China;
 vertical integration of industry value chain;
 robust technological expertise and advanced R&D capabilities;
 top-tier global customer base;
 large-scale lean manufacturing and information technology-driven production; and
 insightful, dedicated and experienced management.
SUMMARY
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OUR STRATEGIES
Underpinned by our core team’s capabilities in self-innovation and technology iteration and
leveraging our profound understanding of “LED+” technologies, we aim to effectively allocate
resources to transition into a technology-focused industry leader that is driven by technological
innovation and empowered by system development capabilities. We plan to implement the
following strategies:
 expand into high-growth sectors through technological innovations;
 prioritize “LED+” innovation to drive technological breakthroughs;
 enhance vertical integration of industry value chain;
 improve lean manufacturing and intelligent production system; and
 adapt to market dynamics and expand production capacity.
OUR PRODUCTS
With the advancement of LED technologies and the widespread application of LED products,
the industry has witnessed a shift towards “LED+” technologies. According to the Guangdong
Illuminating Engineering Society, “LED+” technologies have become the industry norm, widely
adopted by the industry and extensively cited by organizations and entities. “LED+” technologies
integrate LED technologies with electronic control, software, sensors, optics and others, setting a
new trajectory for industry development. This integration endows LED products with enhanced
features of intelligence, integration and customization. According to CIC, the intelligence features
include the ability to acquire, analyze and understand information, and to use knowledge to solve
complex problems, adapt to environmental changes and make effective decisions, leading to the
extensive utilization of “LED+” technologies across various application scenarios, including
intelligent automotive vision, high-end lighting and advanced displays. See “Industry Overview.”
Through years of technological development and accumulation, we established a
comprehensive technology and product matrix. This matrix, representing our core competitiveness,
demonstrates a complete system for technology development and product iteration. It ensures the
continual innovation and evolution of our technologies and products, underpinning our robust
position in the fields of intelligent automotive vision, high-end lighting and advanced display.
SUMMARY
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We design, develop and manufacture a wide range of LED intelligent vision products and
system solutions, namely, LED products and system solutions, covering functions of lighting,
illumination, display, sensing, decoration and interaction, with intelligent features. Specifically, our
LED intelligent vision products encompass:
 intelligent automotive vision products, primarily including intelligent automotive lamps
and automotive-grade LED devices and modules;
 high-end lighting products, primarily including high-end lighting devices and high-end
lighting modules; and
 advanced display products, primarily including LED devices and modules that are
applied to direct-lit or edge-lit LED backlight for LCD TVs.
The tables below set out a breakdown of our revenue, gross profit/(loss) and gross margin by
product category for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except for percentages)
(unaudited)
Intelligent automotive vision ..... 74,251 5.3 399,674 28.3 770,973 41.5 225,676 36.1 365,445 43.4
Intelligent automotive lamps ...... 50,732 3.7 351,792 24.9 707,945 38.1 211,550 33.9 331,355 39.3
Automotive-grade LED devices and
modules .............. 23,519 1.6 47,882 3.4 63,028 3.4 14,126 2.2 34,090 4.1
High-end lighting .......... 1,033,857 74.5 670,242 47.5 650,821 35.0 253,630 40.6 254,103 30.1
High-end lighting devices ....... 849,273 61.2 494,608 35.1 469,971 25.3 175,302 28.1 177,117 21.0
High-end lighting modules ...... 184,584 13.3 175,634 12.4 180,850 9.7 78,328 12.5 76,986 9.1
Advanced display .......... 280,272 20.2 340,716 24.2 436,238 23.5 145,311 23.3 223,645 26.5
Total ................ 1,388,380 100.0 1,410,632 100.0 1,858,032 100.0 624,617 100.0 843,193 100.0
SUMMARY
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Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Gross
profit/(loss)
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin
(RMB in thousands, except for percentages)
(unaudited)
Intelligent automotive vision ..... (846) (1.1) 70,061 17.5 115,240 14.9 23,077 10.2 56,084 15.3
Intelligent automotive lamps ...... (1,210) (2.4) 60,026 17.1 97,446 13.8 19,121 9.0 43,216 13.0
Automotive-grade LED devices and
modules .............. 364 1.5 10,035 21.0 17,794 28.2 3,956 28.0 12,868 37.7
High-end lighting .......... 202,348 19.6 128,768 19.2 152,429 23.4 57,440 22.6 62,973 24.8
High-end lighting devices ....... 178,753 21.0 103,066 20.8 110,918 23.6 38,738 22.1 45,158 25.5
High-end lighting modules ...... 23,595 12.8 25,702 14.6 41,511 23.0 18,702 23.9 17,815 23.1
Advanced display .......... 26,776 9.6 36,356 10.7 71,342 16.4 23,793 16.4 35,189 15.7
Total ................ 228,278 16.4 235,185 16.7 339,011 18.2 104,310 16.7 154,246 18.3
See “Business — Our Products” and “Financial Information — Principal Components of Our
Consolidated Statements of Profit or Loss.”
Intelligent Automotive Vision
Intelligent automotive vision is our fastest-growing business in terms of revenue and has
become a strategic focus of our LED intelligent vision business. Our intelligent automotive vision
products primarily include intelligent automotive lamps and automotive-grade LED devices and
modules.
Intelligent automotive lamps, based on functions and applications, mainly include headlamps,
rear lamps and interior lights. In line with the growing trend of automotive intelligence, intelligent
automotive lamps are evolving towards higher-end, smarter and more customized solutions. As a
key component in enhancing driving safety and experience, headlamps possess the highest value
among all intelligent automotive lamps. In addition to providing light at night or in conditions of
low visibility, our intelligent high-pixel ADB headlamps enable a longer illumination distance.
They also feature intelligent anti-glare and cornering lamp functions, facilitating the drivers’
prompt detection of nearby objects and enhancing safety. In 2021, 2022, 2023 and the five months
ended May 31, 2023 and 2024, we sold 41,722, 243,081, 455,049, 147,202 and 222,628 sets of
intelligent automotive lamps, respectively, with an average selling price of RMB1,216.0,
RMB1,447.2, RMB1,555.8, RMB1,437.2 and RMB1,488.4, respectively, both of which
experienced a steady growth, showcasing the robust development of our intelligent automotive
vision business.
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Automotive-grade LED devices and modules are the core components of automotive lamps,
and their functionality and performance are highly correlated with driving safety. We are one of
the first companies in China to develop flip-chip high-power automotive-grade LED technology
and products, and to adopt this technology in automotive headlamps. The sales of our
automotive-grade LED devices and modules also experienced steady growth during the Track
Record Period. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, we sold
114.1 million, 207.6 million, 172.0 million, 62.2 million and 80.4 million pieces of
automotive-grade LED devices, respectively, with an average selling price of RMB0.17, RMB0.17,
RMB 0.27, RMB0.14 and RMB0.32, respectively. During the same periods, we sold 63.8 thousand,
531.8 thousand, 1,133.8 thousand, 449.6 thousand and 483.8 thousand bars of automotive LED
modules, respectively, with an average selling price of RMB20.81, RMB23.62, RMB14.85,
RMB11.87 and RMB16.88, respectively. See “Business — Our Products — Intelligent Automotive
Vision — Automotive-Grade LED Devices and Modules.”
Relationship with Geely Related Group
We have maintained a strategic business relationship with Geely Holding and many of its
related automotive OEMs since the establishment of Lynway Vision in 2018. Leveraging its
globally innovative automobile ecosystem, Geely Holding is developing new automobile models
that feature a variety of advanced intelligent technologies, resulting in substantial and ongoing
needs for intelligent automotive vision products. Our swift response to the needs of Geely Holding
and its related automotive OEMs shortens the R&D cycle for intelligent automotive lamp projects,
while our innovative products and services support their development of competitive new
automobile models that appeal to the evolving demands of consumers. See “Business — Sales and
Marketing — Relationship with Geely Related Group.” Geely Related Group includes (i) Geely
Group, (ii) LI Shufu and his related companies other than Geely Group and (iii) Yaoning
Technology and its associates. During the Track Record Period, a majority of the sales of our
intelligent automotive vision products were attributable to Geely Related Group. In 2021, 2022,
2023 and the five months ended May 31, 2023 and 2024, revenue from Geely Related Group was
RMB50.6 million, RMB350.1 million, RMB705.8 million RMB211.4 million and RMB326.7
million, respectively, accounting for 3.6%, 24.8%, 38.0%, 33.8% and 38.8% of our total revenue,
respectively, for the same periods. We expect that revenue from Geely Related Group will continue
to increase in the near future. We were certified as a supplier candidate and secured intelligent
automotive lamps products from Geely Holding and its related OEMs through competitive bidding
processes. In 2021, 2022 and 2023, our tender success rates for intelligent automotive lamp
projects from Geely Related Group were 80.0%, 53.3% and 40.0%, respectively. Our tender
success rate decreased from 2021 to 2022 primarily because we engaged in a limited number of
project tenders to ensure stable and high-quality delivery during the initial development stage of
our intelligent automotive lamp business in 2021. Our tender success rate decreased in 2023
primarily because (i) we reduced our engagement in bidding processes to focus on projects
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commencing mass production, which required significant R&D resources, and (ii) we strategically
participated in the bidding processes of projects with higher profit margins, which were inherently
more competitive.
Manufacturers of intelligent automotive lamps undergo complicated procedures in their
project acquisition phase. Automotive OEMs inspect the qualifications of supplier candidates and
select their suppliers for individual automotive lamp projects through a bidding process, where
supplier candidates are typically scrutinized for their R&D, manufacturing and quality control
capabilities. Only supplier candidates who passed such inspections can qualify as a supplier for
automotive OEMs. According to CIC, automotive OEMs rarely switch suppliers during the mass
production stage once the qualified suppliers have secured the corresponding intelligent
automotive vision projects, as the switching process can be very costly and inefficient for the
automotive OEMs.
Benefiting from our robust technical capabilities, vertical integration of the industry value
chain and the experience in the LED intelligent vision industry and intelligent automotive vision
projects, we carry out efficient design and production processes and respond swiftly to customer
requirements. As a result, in addition to supplying to Geely Holding and its related automotive
OEMs, we are a qualified supplier for more than 20 automotive OEMs and Tier-1 suppliers,
including GAC, Changan Auto and Li Auto, to provide them with our automotive-grade LED
devices and modules.
High-End Lighting
Our high-end lighting products primarily include high-end lighting devices and high-end
lighting modules.
Our high-end lighting devices, featuring high luminous efficacy, high light quality, high color
rendering index (CRI) and high brightness, are primarily applied in specialized lighting scenarios
such as indoor lighting, outdoor lighting, horticultural lighting, intelligent lighting and special
lighting. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, we sold 7,961.8
million, 3,567.3 million, 3,239.5 million, 1,399.5 million and 1,320.5 million pieces of high-end
lighting devices, respectively, due to the adverse impact of the COVID-19 pandemic in 2020 on
market demand and the intensification of competition in the high-end lighting market. During the
Track Record Period, the average selling price of our high-end lighting devices increased from
RMB0.11 per piece in 2021 to RMB0.14 in 2022, further to RMB0.15 in 2023, which was in line
with our strategy towards high-end products with enhanced performance and higher gross profit
margins. The average selling price remained relatively stable at RMB0.13 per piece in the five
months ended May 31, 2023 and 2024.
SUMMARY
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Our high-end lighting modules, featuring high luminous efficacy, high color consistency,
simple assembly and the functions of intelligent dimming, meet the needs for intelligent and
specialized lighting applications. In 2021, 2022, 2023 and the five months ended May 31, 2023
and 2024, we sold 15.6 million, 13.4 million, 12.4 million, 4.8 million and 6.2 million bars of
high-end lighting modules, respectively. The average selling price of our high-end lighting
modules was RMB11.82, RMB13.09, RMB14.57, RMB16.46 and RMB12.51 per bar, respectively,
in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024. The fluctuations during
the Track Record Period were primarily due to the customized nature of module products and
adjustments of product portfolio corresponding to customer demand.
Advanced Display
Our advanced display device and module products are categorized into direct-lit and edge-lit,
and they are mainly designed for backlight displays. Backlight displays, which use LEDs to
illuminate LCD panels, are applied to LCD TVs, computer monitors and other electronic products.
We are among the first companies in China that accomplished the packaging technology and
product development of leadframe-type flip-chip LED high color gamut devices. The sales volume
of our advanced display devices was 426.2 million, 240.3 million, 368.2 million, 152.8 million and
255.2 million in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024,
respectively, and the fluctuation was primarily due to changes in customer demand. The average
selling prices stayed relatively stable at RMB0.15 per piece in 2021 and 2022, slightly decreased
to RMB0.12 per piece in 2023. The average selling price remained relatively stable at RMB0.12
and RMB0.13 per piece in the five months ended May 31, 2023 and 2024, respectively. Leveraging
our advanced display devices, we engineered advanced display modules for backlight applications,
offering uniform color and luminance, cost-effectiveness, high brightness and high color gamut, to
cater to diverse application requirements concerning size, slimness and brightness. During the
Track Record Period, the sales volume of our advanced display modules steadily increased from
32.3 million bars in 2021 to 42.7 million bars in 2022, further to 55.0 million bars in 2023, and
from 18.7 million bars in the five months ended May 31, 2023 to 23.1 million bars in the five
months ended May 31, 2024. The average selling price of our advanced display modules increased
from RMB6.69 per bar in 2021 to RMB7.12 in 2022, remained relatively stable at RMB7.10 in
2023, and increased from RMB6.76 per bar in the five months ended May 31, 2023 to RMB8.25 in
the five months ended May 31, 2024. The increases in both sales volume and average selling
prices were primarily due to the growing trend of large screen televisions and our development
focus towards high-tech and high-profit margin products.
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OUR SALES CHANNELS
During the Track Record Period, our products were sold in more than 20 countries and
regions, primarily in the Asia, Europe and North America. The following table sets forth a
breakdown of our revenue, gross profit and gross margin by geographic region for the periods
indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Revenue
%o f
total
revenue
Gross
profit
Gross
margin Revenue
%o f
total
revenue
Gross
profit
Gross
margin Revenue
%o f
total
revenue
Gross
profit
Gross
margin Revenue
%o f
total
revenue
Gross
profit
Gross
margin Revenue
%o f
total
revenue
Gross
profit
Gross
margin
(RMB in thousands, except for percentages)
(unaudited)
Mainland China ..... 1,058,750 76.3 173,885 16.4 1,136,009 80.5 197,392 17.4 1,576,756 84.9 293,017 18.6 515,804 82.6 89,639 17.4 707,518 83.9 127,148 18.0
Overseas ....... 329,630 23.7 54,393 16.5 274,623 19.5 37,793 13.8 281,276 15.1 45,994 16.4 108,813 17.4 14,671 13.5 135,675 16.1 27,098 20.0
Total ....... 1,388,380 100.0 228,278 16.4 1,410,632 100.0 235,185 16.7 1,858,032 100.0 339,011 18.2 624,617 100.0 104,310 16.7 843,193 100.0 154,246 18.3
During the Track Record Period, high-end lighting business contributed to the majority of our
overseas revenue. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024,
overseas revenue from high-end lighting amounted to RMB289.7 million, RMB225.0 million,
RMB234.0 million, RMB91.5 million and RMB105.2 million, respectively. Overseas revenue from
intelligent automotive vision increased from RMB0.2 million in 2021 to RMB0.8 million in 2022,
further to RMB5.9 million in 2023. Overseas revenue from intelligent automotive vision was
RMB2.5 million and RMB3.9 thousand in the five months ended May 31, 2023 and 2024,
respectively. Overseas revenue from advanced display amounted to RMB39.7 million, RMB48.9
million, RMB41.3 million, RMB14.8 million and RMB30.5 million in 2021, 2022, 2023 and the
five months ended May 31, 2023 and 2024, respectively.
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Our products are primarily sold through direct sales, such as direct orders from automotive
OEMs, TV and lighting companies. During the Track Record Period, we also engaged three
channel partners, including two distributors for the sales of automotive-grade devices, and
Shenzhen MPEG for the sales of advanced display products. The engagement of distributors helps
expedite and enhance our penetration into the automotive-grade LED lighting markets, and allows
us to save on costs and effort relating to the supplier approval process and supplier qualification
maintenance. The collaboration with Shenzhen MPEG is a strategic move for us to penetrate the
supply chain of major TV brands in China. The table below sets out a breakdown of our revenue
by sales channel for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentage)
(unaudited)
Direct sales .... 1,220,663 87.9 1,261,897 89.5 1,718,451 92.5 585,254 93.7 780,251 92.5
Channel partners . 167,717 12.1 148,735 10.5 139,581 7.5 39,363 6.3 62,942 7.5
Total ....... 1,388,380 100.0 1,410,632 100.0 1,858,032 100.0 624,617 100.0 843,193 100.0
We price our products based on factors including prices of competing products, costs of raw
materials and consumables, cost of production, market position of the product as well as expected
purchase orders. For products to be sold overseas, we also consider the direct competition with
overseas competitors and the need for maintaining the premium status of our brands and high-end
products. Our final quotation is determined based on the reasonable range of gross profit margin
generated by the pricing process. We provide guide prices for our products. Distributors are not
permitted to set prices lower than our guide prices unless otherwise authorized by us.
See “Business — Sales and Marketing.”
OUR PRODUCTION
Given the commonalities in raw materials and manufacturing processes for LED devices and
modules used in intelligent automotive vision, high-end lighting and advanced display
applications, we can leverage the benefits of large-scale procurement and mass production, which
allows us to achieve economies of scale, thereby significantly reducing our production costs.
During the Track Record Period, we had three production bases, namely the APT production base,
the Linlux production base and the Lynway Ningbo production base.
SUMMARY
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Set forth below are the details of the designed production capacity and utilization rates for
our production bases for the periods indicated.
Y ear Ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Designed
Capacity
Actual
Production
Utilization
Rate
(%)
Designed
Capacity
Actual
Production
Utilization
Rate
(%)
Designed
Capacity
Actual
Production
Utilization
Rate
(%)
Designed
Capacity
Actual
Production
Utilization
Rate
(%)
Designed
Capacity
Actual
Production
Utilization
Rate
(%)
APT production base (kkpcs) .... 21,950.0 20,403.6 93.0 24,195.0 12,549.9 51.9 24,845.5 13,572.1 54.6 10,352.3 5,024.7 48.5 10,594.2 6,296.1 59.4
Linlux production base (’000 bars) . 86,320.7 56,616.4 65.6 128,862.5 80,831.1 62.7 145,637.8 114,726.5 78.8 57,548.8 35,815.0 62.2 69,307.2 60,282.6 87.0
Lynway Ningbo production base
Headlamps (’000 sets) ..... 86.4 28.1 32.5 241.0 170.7 70.9 373.8 284.5 76.1 115.8 89.5 77.3 195.8 110.3 56.3
Rear lamps (’000 sets) ..... 127.5 64.0 50.2 159.0 96.9 61.0 291.0 141.3 48.6 66.3 34.6 52.2 226.3 125.8 55.6
Note:
(1) Our production capacity is measured in different units due to different forms of our products. See “Business —
Production — Production Bases.”
Our production capabilities are designed to align with our customers’ demands, ensuring a
consistent and reliable supply of products. Our production process is designed to promote high
standards of quality while simultaneously providing the agility to expedite production to meet
customers’ demands in a timely manner. Our design and manufacturing capabilities also facilitate
the introduction of a diverse spectrum of LED products into the markets.
See “Business — Production.”
PROCUREMENT AND SUPPLY CHAIN MANAGEMENT
We procure certain raw materials and consumables from qualified suppliers to maintain
quality standards, optimize our cost structure and achieve desired scale of production. The key raw
materials and consumables for our operations primarily include LED chips, leadframes, PCBs,
automotive lamp modules, plastic particles, drivers and electronic components. During the Track
Record Period, we sourced raw materials and consumables from both domestic and international
suppliers. In addition, benefited from our vertical integration capabilities, we use self-produced
LED devices as key components of our LED modules and advanced display products.
We have adopted a series of supplier management system to stipulate the selection and
engagement process, quality standards and regular evaluation and assessment. We generally select
suppliers that can offer quality products, cost efficiency, timely delivery, production capacity and
valuable customer services. We also consider our needs for technological development and
SUMMARY
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--- page 23 ---
security. Our supply chain management system, with its data and analytical capabilities, reduces
procurement costs, improves our quality control implementation and enhances overall operating
efficiency.
During the Track Record Period, our major suppliers primarily include providers of LED
chips, leadframes, LED devices and bonding wires. Purchase amount from our five largest
suppliers in each period of the Track Record Period accounted for 43.0%, 26.2%, 22.1% and
21.6% of our total purchase amount, respectively. Purchase amount from our largest supplier in
each period of the Track Record Period accounted for 25.9%, 12.8%, 9.3% and 7.5% of our total
purchase amount, respectively.
See “Business — Procurement and Supply Chain Management.”
CUSTOMERS
Our strong industry reputation and recognition enable us to build lasting relationships with
customers. We collaborated with more than 20 domestic automotive OEMs, automotive brands and
Tier-1 suppliers, including industry leaders such as Geely Auto ( Λлӛԓ) ,L y n k&C o( ჯд),
ZEEKR ( ฽ὄ), Smart, Lotus ( ༩त౶), GAC ( ᄿӛ), Changan Auto (τӛԓ), Li Auto ( ଣซӛ
ԓ), Marelli and Koito. Our customers and end users include top-tier international lighting
companies such as Signify (formerly known as Philips Lighting), Samsung, Panasonic and Toyoda
Gosei, as well as well-known TV brands such as Hisense (ڦTCL, Skyworth ( ௴ၪ),
Changhong (ࠀڗLG and Samsung.
Revenue from our five largest customers in each period of the Track Record Period accounted
for 71.8%, 73.2%, 73.5% and 77.1% of our total revenue, respectively. Revenue from our largest
customer in each period of the Track Record Period accounted for 30.5%, 24.8%, 38.0% and
38.8% of our total revenue, respectively.
See “Business — Sales and Marketing — Our Customers.”
QUALITY CONTROL
We have devoted substantial resources to quality control since the inception of our business.
In 2009, we obtained our first ISO9001 certification for our quality management system, and
obtained our first IATF16949 certification for our quality management system in automotive
industry in 2017. We established our proprietary quality control system based on the ISO9001 and
IATF16949 standards. Our quality policy targets customer satisfaction and comprehensive quality
control throughout our operation. Our quality control team is responsible for the overall quality
management of our operations which mainly covers the formation and implementation of various
policies and standards, quality inspections, resolution of accidents and disputes, internal reviews
and continuous quality improvement. In addition to our internal reviews, we are also subject to
external reviews as requested by our customers, which involve both comprehensive and target
SUMMARY
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--- page 24 ---
reviews of our quality control system, product certification and production facilities. Through both
internal and external reviews, we pinpoint areas for enhancement and address concerns based on a
closed-loop process. As a result of our commitment to quality control, we did not experience any
material sales returns or any material product liability or major legal claims due to quality control
issues, and did not recall any products during the Track Record Period and up to the Latest
Practicable Date.
See “Business — Quality Control.”
COMPETITIVE LANDSCAPE
We compete in a large yet highly competitive market. China has the world’s largest LED
intelligent vision industry, with a market size of RMB440.2 billion in 2023 in terms of revenue.
China’s LED intelligent vision market grew at a CAGR of 6.7% from 2019 to 2023 and is
expected to grow at a CAGR of 9.1% from 2023 to 2028, reaching RMB679.2 billion in 2028.
We compete with both solution providers of intelligent automotive vision products and
systems and LED product manufacturers. For the intelligent automotive vision sector, the ongoing
shifts towards intelligence and new energy present great opportunities for emerging manufacturers
with innovative technology and strategic product positioning. We compete with solution providers
of intelligent automotive vision products and systems on key factors such as technological
advantages, large-scale mass production and quality control capabilities as well as vertical
integration capabilities within the industry value chain spanning from devices and modules to
automotive lamps. For the high-end lighting and LCD TV backlight display market, the emergence
of new technologies and product iteration became key drivers for domestic LED product
manufacturers to capture a larger market share. In terms of revenue, we ranked third among
domestic device and module manufacturers in China’s high-end lighting industry and fifth among
all device and module manufacturers in the same industry, with a market share of 5.3% in 2023.
We ranked fifth among domestic manufacturers in China’s mid- to high-end intelligent automotive
vision industry and twelfth among all manufacturers in the same industry, with a market share of
0.5% in 2023. We ranked fourth among both domestic and all manufacturers in China’s LCD TV
backlight display industry, with a market share of 9.1% in 2023.
Leveraging our profound understanding of “LED+” technologies, we are committed to
expanding our market share with LED products with enhanced performance catering to the
evolving customer expectations.
See “Industry Overview” and “Business — Competition.”
SUMMARY
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SUMMARY OF HISTORICAL AND FINANCIAL INFORMATION
The tables below present our summary consolidated financial data derived from our
consolidated statements of profit or loss and other comprehensive income and consolidated cash
flow statements in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024 and our
consolidated statements of financial position as of December 31, 2021, 2022, 2023 and May 31,
2024 included in the Accountants’ Report of the Group in Appendix IA 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.”
Key Items of the 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.
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Revenue ..................... 1,388,380 1,410,632 1,858,032 624,617 843,193
Cost of sales ................. (1,160,102) (1,175,447) (1,519,021) (520,307) (688,947)
Gross profit ................. 228,278 235,185 339,011 104,310 154,246
Profit for the year/period ......... 78,000 39,071 72,043 7,563 32,173
Attributable to:
Owners of the parent ............ 85,896 40,791 66,378 14,146 32,173
Non-controlling interests ........... (7,896) (1,720) 5,665 (6,583) —
78,000 39,071 72,043 7,563 32,173
Non-IFRS Financial Measure
To supplement our consolidated financial statements which are presented in accordance with
IFRS, we also use EBITDA (non-IFRS measure)/adjusted EBITDA (non-IFRS measure) and
adjusted net profit (non-IFRS measure) as additional financial measures, which are not required by,
or presented in accordance with, IFRS. We believe that these non-IFRS measures facilitate
comparisons of operating performance from period to period and company to company by
eliminating potential impacts of certain items. We believe that these measures provide useful
information to investors and others in understanding and evaluating our consolidated results of
operations in the same manner as they help our management. However, our presentation of
EBITDA (non-IFRS measure)/adjusted EBITDA (non-IFRS measure) and adjusted net profit
(non-IFRS measure) may not be comparable to similarly titled measures presented by other
SUMMARY
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companies. The use of these non-IFRS measures has limitations as an analytical tool and you
should not consider them in isolation from, or as a substitute for analysis of, our results of
operations or financial condition as reported under IFRS.
We define EBITDA (non-IFRS measure) as profit for the period adjusted for depreciation and
amortization, finance costs and income tax expense. We define adjusted EBITDA (non-IFRS
measure) as EBITDA (non-IFRS measure) adjusted by adding back share-based payment expenses
and listing expenses. We define adjusted net profit (non-IFRS measure) as profit for the period
adjusted by adding back share-based payment expenses and listing expenses. Share-based payment
expenses are non-cash in nature. Listing expenses are expenses relating to the Global Offering.
The following table sets out a reconciliation of profit for the period to EBITDA (non-IFRS
measure) and adjusted EBITDA (non-IFRS measure) for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Reconciliation of profit for the
year/period to EBITDA (non-IFRS
measure) and adjusted EBITDA
(non-IFRS measure)
Profit for the year/period ......... 78,000 39,071 72,043 7,563 32,173
Add:
Depreciation of property, plant and
equipment .................. 61,173 97,469 118,489 49,417 50,794
Depreciation of right-of-use assets ..... 1,468 2,478 2,649 1,104 1,104
Amortization of intangible assets ..... 7,499 10,087 9,988 4,323 4,133
Finance costs ................. 2,817 6,445 4,838 2,188 1,272
Income tax expenses/(credit) ........ 13,022 (28,368) (282) (4,285) 2,529
EBITDA (non-IFRS measure) ....... 163,979 127,182 207,725 60,310 92,005
Add:
Share-based payment expenses ....... 1,669 1,698 3,187 724 3,101
Listing expense ................ — — 6,590 — 11,569
Adjusted EBITDA (non-IFRS
measure) ................... 165,648 128,880 217,502 61,034 106,675
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The following table reconciles our adjusted net profit (non-IFRS measure) for the periods
presented in accordance with IFRS, which is profit for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Reconciliation of profit for the
year/period to adjusted net profit
(non-IFRS measure)
Profit for the year/period ......... 78,000 39,071 72,043 7,563 32,173
Add:
Share-based payment expenses ....... 1,669 1,698 3,187 724 3,101
Listing expense ................ — — 6,590 — 11,569
Adjusted net profit (non-IFRS
measure) ................... 79,669 40,769 81,820 8,287 46,843
Principal Components of Our Consolidated Statements Of Profit or Loss
Our revenue increased from RMB1,388.4 million in 2021 to RMB1,410.6 million in 2022,
and further increased to RMB1,858.0 million in 2023, primarily due to the increase in revenue
from intelligent automotive vision and advanced display, partially offset by the decrease in revenue
from high-end lighting. Specifically, since we acquired a controlling interest in Lynway Vision in
September 2021 and consolidated its results, our intelligent automotive vision business started to
generate revenue, which amounted to RMB74.3 million in 2021. During the same year, we also
recorded a share of loss of Lynway Vision of RMB23.3 million, as a result of its significant
upfront R&D expenses while it had yet to commence mass production. Our revenue increased from
RMB624.6 million in the five months ended May 31, 2023 to RMB843.2 million in the five
months ended May 31, 2024, primarily due to the increases in revenue from intelligent automotive
vision and advanced display. During the Track Record Period, revenue from intelligent automotive
vision increased significantly from RMB74.3 million in 2021 by 438.3% to RMB399.7 million in
2022, further increased by 92.9% to RMB771.0 million in 2023, and increased by 61.9% from
RMB225.7 million in the five months ended May 31, 2023 to RMB365.4 million in the five
months ended May 31, 2024.
Our gross profit increased from RMB228.3 million in 2021 to RMB235.2 million in 2022 and
further increased to RMB339.0 million in 2023. Our gross profit increased by 47.9% from
RMB104.3 million in the five months ended May 31, 2023 to RMB154.2 million in the five
months ended May 31, 2024, which was in line with the increase of our revenue.
SUMMARY
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Our profit for the year decreased from RMB78.0 million in 2021 to RMB39.1 million in
2022, primarily due to (i) the decreased market demand and orders as a result of our customers’
stocking up in 2021 and subsequent inventory depleting in 2022 in the high-end lighting business,
(ii) the increased raw material and consumable costs and staff costs incurred in the intelligent
automotive vision business and advanced display business, and (iii) the non-recurrence of the gain
on remeasurement of the equity interest in an associate to a subsidiary at the date of acquisition as
a result of the consolidation of Lynway Vision in September 2021. Our profit for the year
increased from RMB39.1 million in 2022 to RMB72.0 million in 2023, primarily due to (i) the
significant revenue increase from our intelligent automotive vision business as we achieved
economies of scale, (ii) our expansion of product offerings that focused on high-tech and
high-profit margin products in high-end lighting business and advanced display business, and (iii)
our strengthened supply chain management and production management. Our profit for the period
increased from RMB7.6 million in the five months ended May 31, 2023 to RMB32.2 million in the
five months ended May 31, 2024, primarily due to the revenue growth of our intelligent
automotive vision and advanced display business, and the decrease in the net provision for
impairment of inventory. We also recognized government grants in profit or loss amounted to
RMB29.9 million, RMB12.7 million, RMB11.2 million, RMB6.2 million and RMB1.4 million in
2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, respectively.
Our net profit margin decreased from 5.6% in 2021 to 2.8% in 2022, and increased to 3.9%
in 2023. Our net profit margin increased from 1.2% in the five months ended May 31, 2023 to
3.8% in five months ended May 31, 2024, which was in line with our net profit.
See “Financial Information — Principal Components of Our Consolidated Statements of
Profit or Loss.”
SUMMARY
–1 7–


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Selected Items from the Consolidated Statements of Financial Position
The following table sets forth selected information from our consolidated statements of
financial position as of the dates indicated:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Total current assets ........................ 1,013,544 1,062,753 1,368,281 1,479,669
Total non-current assets ..................... 966,312 1,014,916 1,031,876 1,029,918
Total assets ............................ 1,979,856 2,077,669 2,400,157 2,509,587
Total current liabilities ...................... 919,728 1,002,910 1,300,698 1,321,638
Total non-current liabilities ................... 150,269 123,677 73,096 83,168
Total liabilities .......................... 1,069,997 1,126,587 1,373,794 1,404,806
Net current assets ........................ 93,816 59,843 67,583 158,031
Non-controlling interests .................... 62,286 60,566 — —
Total equity ............................ 909,859 951,082 1,026,363 1,104,781
Our net current assets increased by 133.8% from RMB67.6 million as of December 31, 2023
to RMB158.0 million as of May 31, 2024, primarily due to an increase in trade and bills
receivables, partially offset by an increase in trade and bills payables due to the increase in the
procurement volume of raw materials and consumables. Such changes were primarily in line with
the growth of our intelligent automotive vision and advanced display businesses.
Our net current assets increased by 13.0% from RMB59.8 million as of December 31, 2022 to
RMB67.6 million as of December 31, 2023, primarily due to (i) an increase in cash and cash
equivalents due to an increase in settlements through cash by our customers, and (ii) an increase in
financial assets at fair value through profit or loss due to our increased investment in wealth
management products, both in line with our overall business expansion and revenue growth,
partially offset by an increase in trade and bills payables primarily due to (i) an increase in the
procurement volume of raw materials and consumables in line with the revenue growth of
intelligent automotive vision and advanced display businesses and (ii) the longer trade and bills
payables turnover days resulting from our enhanced bargaining power in procurement.
Our net current assets decreased by 36.2% from RMB93.8 million as of December 31, 2021
to RMB59.8 million as of December 31, 2022, primarily due to (i) an increase in trade and bills
payables as a result of the increase in demand for raw materials and consumables in line with the
expansion of our intelligent automotive vision business and (ii) an increase in other payables and
accruals because we used more commercial papers in settlements. This was partially offset by an
increase in trade and bills receivables in line with the growth of our intelligent automotive vision
business and advanced display business.
SUMMARY
–1 8–


--- page 30 ---
Our total equity increased from RMB909.9 million as of December 31, 2021 to RMB951.1
million as of December 31, 2022, primarily due to (i) the profit for the year of RMB39.1 million
in 2022 and (ii) the share-based payment expenses of RMB1.7 million as a result of the restricted
shares granted under the Share Incentive Scheme I. Our total equity further increased from
RMB951.1 million as of December 31, 2022 to RMB1,026.4 million as of December 31, 2023,
primarily due to (i) the profit for the year of RMB72.0 million in 2023 and (ii) the share-based
payment expenses of RMB3.2 million as a result of the restricted shares granted under the Share
Incentive Schemes. Our total equity increased by 7.6% from RMB1,026.4 million as of December
31, 2023 to RMB1,104.8 million as of May 31, 2024, primarily due to (i) the profit for the period
of RMB32.2 million in the five months ended May 31, 2024, (ii) the capital contribution from
shareholders of RMB43.2 million, and (iii) the share-based payment expenses of RMB3.1 million
as a result of the restricted shares granted under the Share Incentive Schemes.
See “Financial Information — Description of Certain Components of Our Consolidated
Statements of Financial Position.”
Summary of the Consolidated Statements of Cash Flow
The following table sets forth selected cash flow statement information for the periods
indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Cash generated from operations ...... 93,575 120,554 424,735 201,866 43,705
Interest received ................ 2,800 3,241 3,276 1,289 1,627
Income taxes (paid)/refund ......... (9,128) 1,492 3,481 3,481 (3,109)
Net cash flows from operating
activities ................... 87,247 125,287 431,492 206,636 43,223
Net cash flows (used in)/from investing
activities ................... (281,024) (85,720) (272,750) (266,035) 3,275
Net cash flows from/(used in) financing
activities ................... 116,220 (28,524) (57,070) 3,465 24,529
Net (decrease)/increase in cash and
cash equivalents .............. (77,557) 11,043 101,672 (55,934) 70,027
Cash and cash equivalents at beginning
of the year/period ............. 174,391 96,778 108,231 108,231 209,878
Effect of foreign exchange rate changes,
net ....................... (56) 410 (25) (184) 180
Cash and cash equivalents at the end
of the year/period ............. 96,778 108,231 209,878 52,113 280,085
SUMMARY
–1 9–


--- page 31 ---
See “Financial Information — Liquidity and Capital Resources — Cash Flows.”
Selected Financial Ratios
The following table sets forth our key financial ratios for the periods or as of the dates
indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(unaudited)
Revenue growth (1) ............... — 1.6% 31.7% — 35.0%
Gross profit growth (2) ............ — 3.0% 44.1% — 47.9%
Gross profit margin (3) ............ 16.4% 16.7% 18.2% 16.7% 18.3%
Adjusted net profit margin
(non-IFRS measure) (4) ........... 5.7% 2.9% 4.4% 1.3% 5.6%
Adjusted EBITDA margin
(non-IFRS measure) (5) ........... 11.9% 9.1% 11.7% 9.8% 12.7%
As of December 31, As of May 31,
2021 2022 2023 2024
Current ratio (times) (6). .............. 1.1 1.1 1.1 1.1
Quick ratio (times) (7) ................ 0.9 0.8 0.9 0.9
Gearing ratio (8) .................... 16.5% 13.7% 7.8% 5.7%
Notes:
(1) Revenue growth is calculated as the period-on-period growth rate of revenue.
(2) Gross profit growth is calculated as the period-on-period growth rate of gross profit.
(3) The calculation of gross profit margin is based on gross profit for the period divided by revenue and multiplied by
100%. See “Financial Information — Principal Components of Our Consolidated Statements of Profit or Loss —
Gross Profit/(Loss) and Gross Margin.”
(4) Adjusted net profit margin (non-IFRS measure) is calculated as adjusted net profit (non-IFRS measure) divided by
revenue and multiplied by 100%.
(5) Adjusted EBITDA margin (non-IFRS measure) is calculated as adjusted EBITDA (non-IFRS measure) divided by
revenue and multiplied by 100%.
(6) Current ratio is calculated as current assets divided by current liabilities as of the relevant period end.
(7) Quick ratio is calculated as current assets less inventories divided by current liabilities as of the relevant period
end.
(8) Gearing ratio is calculated as total bank borrowings divided by the total equity as of the end of the respective
period and multiplied by 100%.
SUMMARY
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Revenue growth
See “Financial Information — Results of Operations” for a discussion of the factors affecting
our revenue growth during the Track Record Period.
Gross profit growth
See “Financial Information — Results of Operations” for a discussion of the factors affecting
our gross profit growth during the Track Record Period.
Gross profit margin
Our gross profit margin increased from 16.4% in 2021 to 16.7% in 2022, primarily because
(i) we achieved economies of scale and improved profit margins in our intelligent automotive
vision business in 2022, and (ii) our bargaining power in procurement and internal production
management enhanced as our advanced display business developed. Our gross profit margin
increased to 18.2% in 2023, primarily due to (i) the increased sales of our high-profit margin
products in the high-end lighting business and advanced display business, and (ii) our strengthened
supply chain management and production management, partially offset by the decrease in the gross
profit margin for intelligent automotive lamps as we adopted more competitive pricing strategies in
response to the intensified competition. Our gross profit margin increased from 16.7% in the five
months ended May 31, 2023 to 18.3% in the five months ended May 31, 2024, primarily due to (i)
improved operational efficiencies achieved from the growth of our intelligent automotive business,
(ii) the increased sales of our high-tech and high-profit margin products in the high-end lighting
business, and (iii) measures taken to maintain the competitive advantage of our products, including
product design optimization, process improvement and enhanced supply chain management. See
“Financial Information — Results of Operations” for a discussion of the factors affecting our gross
profit margin during the Track Record Period.
Adjusted net profit margin (non-IFRS measure)
Our adjusted net profit margin (non-IFRS measure) decreased from 5.7% in 2021 to 2.9% in
2022, primarily due to the increase in our revenue attributable to the intelligent automotive vision
business and advanced display business and the decrease in our profit for the year. Our adjusted
net profit margin (non-IFRS measure) increased from 2.9% in 2022 to 4.4% in 2023 and from
1.3% in the five months ended May 31, 2023 to 5.6% in the five months ended May 31, 2024,
primarily due to the increase in our profit for the year/period. See “Financial Information —
Results of Operations” for a discussion of the factors affecting our adjusted net profit margin
(non-IFRS measure) during the Track Record Period.
SUMMARY
–2 1–


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Adjusted EBITDA margin (non-IFRS measure)
Our adjusted EBITDA margin (non-IFRS measure) decreased from 11.9% in 2021 to 9.1% in
2022, primarily due to the decrease in our profit for the year. Our adjusted EBITDA margin
(non-IFRS measure) increased from 9.1% in 2022 to 11.7% in 2023 and from 9.8% in the five
months ended May 31, 2023 to 12.7% in the five months ended May 31, 2024, primarily due to the
increase in our profit for the year and the increase in depreciation of property, plant and
equipment. See “Financial Information — Results of Operations” and “Financial Information —
Principal Components of Our Consolidated Statements of Profit or Loss — Non-IFRS Financial
Measure — EBITDA (Non-IFRS Measure) and Adjusted EBITDA (Non-IFRS Measure)” for a
discussion of the factors affecting our adjusted EBITDA margin (non-IFRS measure) during the
Track Record Period.
Current ratio
Our current ratio remained stable at 1.1x as of December 31, 2021, 2022, 2023 and May 31,
2024.
Quick ratio
Our quick ratio remained relatively stable at 0.9x, 0.8x, 0.9x and 0.9x as of December 31,
2021, 2022, 2023 and May 31, 2024, respectively.
Gearing ratio
Our gearing ratio decreased from 16.5% as of December 31, 2021 to 13.7% as of December
31, 2022, to 7.8% as of December 31, 2023, and further decreased to 5.7% as of May 31, 2024,
primarily due to (i) the decrease in our bank borrowings and (ii) the increase in our total equity.
RISK FACTORS
Our business and the Global Offering involve certain risks as set out in “Risk Factors” in this
prospectus. You should read that section in its entirety carefully before you decide to invest in our
Shares. We believe the most significant risks we face include but are not limited to the following:
 we face significant competition in the industry in which we operate, and if we are
unable to compete effectively, our results of operations and financial condition may be
materially and adversely affected;
 we are exposed to customer concentration risk;
 demand for our LED products depends on trends and developments in their
corresponding end products and end markets;
SUMMARY
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 any adjustment in our business mix may result in fluctuations in our profitability, which
may adversely and materially affect our financial condition and results of operations;
and
 we rely on the stability of our supply chain as well as a number of key suppliers, the
loss of which could adversely affect our business.
See “Risk Factors.”
OUR CONTROLLING SHAREHOLDER GROUP
As of the Latest Practicable Date, the Controlling Shareholder Group, including Mr. Xiao,
Mr. Chan, Mr. Yuan, APTESS Company Limited, Giant Power Limited, Ms. Loh, Advanced
Photoelectronic, Jingyu Investment, Jingling Investment, Jingrui Investment and Jingshi
Investment by virtue of the acting-in-concert agreements and relationship among them, was
collectively interested in approximately 47.11% of our total share capital. See “History,
Development and Corporate Structure — The Concert Party Group” in this prospectus for details.
Immediately following the completion of the Global Offering (assuming the Offer Size
Adjustment Option is not exercised), the Controlling Shareholder Group will continue to control in
aggregate approximately 44.13% of our total share capital. Therefore, they will remain as a group
of our Controlling Shareholders. See “Relationship With Our Controlling Shareholder Group” for
details.
PRE-IPO INVESTMENTS
We concluded several Pre-IPO Investments subsequent to our voluntary withdrawal of the
STAR application in May 2020, through share transfers initiated by our then Shareholders. As of
the Latest Practicable Date, our Pre-IPO Investors consisted of Gossel, Yuecai, Jiaoying Yihao,
DENG Zhifeng, Vision Capital, Shidiya (each as defined in the section headed “History,
Development and Corporate Structure” in this prospectus), FAN Wuzhou, HUANG Dinghe, GU
Wenjun, ZHOU Xiaoyang and LIU Jun. For further details of the background of the Pre-IPO
Investors and the principal terms of the Pre-IPO Investments, see “History, Development and
Corporate Structure — Pre-IPO Investments” in this prospectus.
CONTINUING CONNECTED TRANSACTIONS
We have entered into and are expected to continue with certain transactions after the
completion of the Global Offering which will constitute our non-exempt continuing connected
transactions under Chapter 14A of Listing Rules upon Listing. See “Connected Transactions” and
“Waivers from Strict Compliance with the Listing Rules — Waiver in Relation to Non-Exempt
Continuing Connected Transactions” for further details.
SUMMARY
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PREVIOUS A-SHARE LISTING APPLICATION
We had historically explored the opportunity of establishing a capital market platform in the
A-share market. We applied for listing of our Shares on STAR in December 2019, and voluntarily
withdrew the STAR application in May 2020. See “History, Development and Corporate Structure
— Previous A-share Listing Application” for further details.
USE OF PROCEEDS
Assuming an Offer Price of HK$3.61 per Offer Share, we estimate that we will receive net
proceeds of approximately HK$64.1 million from the Global Offering after deducting the
underwriting commissions and other estimated expenses in connection with the Global Offering
and assuming that the Offer Size Adjustment Option is not exercised. In line with our strategies,
we intend to use our proceeds from the Global Offering for the purposes and in the amounts set
forth below:
 approximately 70.0% of the net proceeds, or HK$44.8 million, will be used for
expanding our production capacity in intelligent automotive vision in an effort to
continue promoting its development, meeting customer demands, optimizing our
regional layout and further increasing our market share.
 approximately 20.0% of the net proceeds, or HK$12.8 million, will be used for
technological innovation and product upgrades to continually improve our technologies,
accelerate our R&D on cutting-edge technologies, optimize and expand our product
pipeline and expand our R&D team.
 approximately 10.0% of the net proceeds, or HK$6.4 million, as working capital and for
general corporate uses to support our day-to-day business operations and growth.
See “Future Plans and Use of Proceeds.”
IMPACT OF COVID-19
The outbreak of the COVID-19 pandemic materially and adversely affected the global
economy since the first quarter of 2020. Global container shipping operations faced disruptions,
leading to constrained capacity and increased freight costs, which in turn adversely affected the
volume of overseas purchase orders. Our revenue from sales overseas decreased by 16.7% from
RMB329.6 million in 2021 to RMB274.6 million in 2022. While high-end lighting contributed to
the majority of our overseas revenue in 2021 and 2022, revenue from high-end lighting decreased
by 35.2% from RMB1,033.9 million in 2021 to RMB670.2 million in 2022, as our customers
previously stocked up on LED devices and thus prioritized depleting existing inventory in 2022.
SUMMARY
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Similarly, the utilization rate of our APT production base decreased from 93.0% in 2021 to 51.9%
in 2022 as the actual production volume of LED devices decreased in response to the decreased
market demand and orders overseas caused by COVID-19.
As the impact of the pandemic gradually subsided during the Track Record Period, revenue
from our sales overseas increased by 2.4% from RMB274.6 million in 2022 to RMB281.3 million
in 2023, and the utilization rate of our APT production base started to recover from 51.9% in 2022
to 54.6% in 2023. Revenue from our sales overseas increased by 24.7% from RMB108.8 million in
the five months ended May 31, 2023 to RMB135.7 million in the five months ended May 31,
2024, and the utilization rate of our APT production base increased from 48.5% in the five months
ended May 31, 2023 to 59.4% in the five months ended May 31, 2024.
Although decreased market demand and orders overseas caused by COVID-19 resulted in the
lower utilization rate of our APT production base in 2022, our overall production activities had not
been materially and adversely affected by the COVID-19 outbreak. During the Track Record
Period and up to the Latest Practicable Date, we did not experience temporary closure or shutdown
of our offices or production facilities or large-scale lockdowns in the areas or districts where we
operated due to the COVID-19 pandemic. In response to the COVID-19 pandemic, we proactively
communicated with our suppliers and strategically procured key raw materials, to ensure the
normal operation of our production activities and our product delivery. We also actively engaged
with our customers to alert them to potential logistical challenges and force majeure events,
advising them to increase their inventory levels or planning for sufficient transportation time. In
addition, we adjusted our staffing plans timely in line with business volumes, ensuring an efficient
production arrangement across all departments and avoiding underutilization. Furthermore, we
actively monitored government policies for COVID-19 mitigation and financial relief to ensure the
stability of our operation and financial conditions. Although the implementation of prevention
measures and constrained shipping capacity led to an increase in logistics expenses, we did not
experience significant cost and fees increases as a result of COVID-19. In addition, although our
high-end lighting business was impacted by COVID-19 in 2022, our total revenue increased from
RMB1,388.4 million in 2021 to RMB1,410.6 million in 2022, due to the strong performance of our
intelligent automotive vision and advanced display businesses. As a result, our Directors are of the
view that the COVID-19 pandemic did not materially and adversely impacted our operations or
financial conditions during the Track Record Period and up to the Latest Practicable Date.
However, there is no assurance that our operation, production activities or financial condition
will not be affected in the future due to the COVID-19 pandemic or other natural disasters, health
epidemics or outbreaks. See “Risk Factors — Risks Relating to Our Industry and Business — We
face risks related to natural disasters, health epidemics and other outbreaks, which could
significantly disrupt our operations.”
SUMMARY
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RECENT DEVELOPMENT AND NO MATERIAL ADVERSE CHANGE
Our business operations continued to expand subsequent to the Track Record Period:
 Intelligent Automotive Vision : The sales volume of our intelligent automotive lamps
increased from 312,811 sets in the nine months ended September 30, 2023 to 443,494
sets in the same period of 2024. The sales volume of our automotive-grade LED devices
increased from 112.9 million pieces in the nine months ended September 30, 2023 to
196.1 million pieces in the same period of 2024. The sales volume of our automotive
LED modules increased from 707.6 thousand pieces in the nine months ended
September 30, 2023 to 993.3 thousand pieces in the same period of 2024.
 High-End Lighting : The sales volume of our high-end lighting devices increased from
2,455.4 million pieces in the nine months ended September 30, 2023 to 2,704.1 million
pieces in the same period of 2024. The sales volume of our high-end lighting modules
increased from 9.0 million bars in the nine months ended September 30, 2023 to 10.5
million bars in the same period of 2024.
 Advanced Display : The sales volume of our advanced display devices increased from
275.0 million pieces in the nine months ended September 30, 2023 to 480.7 million
pieces in the same period of 2024. The sales volume of our advanced display modules
increased from 38.2 million bars in the nine months ended September 30, 2023 to 45.4
million bars in the same period of 2024.
While we had sales growth, the average selling price of intelligent automotive lamps and
high-end lighting products both decreased in the nine months ended September 30, 2024 which is
expected to result in slower revenue growth compared to the increase in sales volume.
During the nine months ended September 30, 2024, we sold 529 types of intelligent
automotive vision products, 3,425 types of high-end lighting products and 1,072 types of advanced
display products. We further introduced 1,369 new products in the nine months ended September
30, 2024.
In addition, we have been expanding our production facilities to meet the evolving market
demands for our products. As of the Latest Practicable Date, the automotive modules production
line I had passed our acceptance and was undergoing testing; the automotive modules production
line II was in the acceptance stage. Both are expected to commence operations in the second half
of 2024. Once operational, these lines are anticipated to boost our annual production capacity by
3.84 million pieces of automotive LED modules. See “Business — Production — Production
Expansion Plan.”
SUMMARY
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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 May 31, 2024
(being the date of our latest audited financial statements) and there has been no event since May
31, 2024 which would materially affect the information shown in the Accountants’ Report of the
Group set out in Appendix IA to this prospectus.
Pursuant to the Trial Administrative Measures on the Overseas Securities Offering and
Listing of Domestic Companies ( ), we have
submitted a filing to the CSRC for application of listing of the H Shares on the Stock Exchange
and the Global Offering on February 2, 2024. The CSRC confirmed our completion of filing on
June 1, 2024. No other approvals from the CSRC are required to be obtained for the listing of the
H Shares on the Stock Exchange.
GLOBAL OFFERING STATISTICS
Based on an Offer Price of
HK$3.61 per H Share
Market capitalization of our Shares immediately after completion of
the Global Offering (1) .................................... HK$1,920.9 million
Market capitalization of our H Shares immediately after completion of
the Global Offering (2) .................................... HK$899.3 million
Unaudited pro forma adjusted consolidated net tangible
assets per Share (3) ....................................... HK$2.35
Notes:
(1) The calculation of the market capitalization of our Shares is based on the assumption that 532,106,709 Shares will
be in issue immediately upon completion of the Global Offering, assuming the Offer Size Adjustment Option is not
exercised.
(2) The calculation of the market capitalization of our H Shares is based on the assumption that 249,106,643 H Shares
will be in issue immediately upon completion of the Global Offering (assuming the Offer Size Adjustment Option is
not exercised), comprising 33,600,000 H Shares to be issued pursuant to the Global Offering and 215,506,643 H
Shares to be converted from our Domestic Unlisted Shares.
(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is calculated after making the
adjustments referred to in the section headed “Appendix II — Unaudited Pro Forma Financial Information” in this
prospectus.
DIVIDENDS AND DIVIDEND POLICY
Our Company is a joint stock company incorporated in the People’s Republic of China with
limited liability. The payment and amount of any future dividend depend on the availability of
dividends received from our subsidiaries.
SUMMARY
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During the Track Record Period, no dividend was declared or paid by the Company. Our
dividend distribution record in the past may not be used as a reference or basis to determine the
level of dividends that may be declared or paid by us in the future.
Any proposed distribution of dividends shall be formulated by our Board and will be subject
to approval in our shareholders’ meeting. A decision to declare or to pay any dividends in the
future, and the amount of any such dividends, will depend on a number of factors, including our
results of operations, cash flows, financial condition, payments by our subsidiaries of cash
dividends to us, business prospects, statutory, regulatory and contractual restrictions on our
declaration and payment of dividends and other factors that our Board may consider important.
Over the next three years, we intend to adopt a dividend payout ratio of no less than 30% of our
net profit of the year of dividend payment, according to our business operations and cash flow
position, which is subject to the approvals of the Board and the shareholders’ meeting. No
dividend will be declared or payable except out of our profits and reserves lawfully available for
distribution. There can be no assurance that dividends of any amount will be declared or
distributed in any year.
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 RMB52.3 million (at the Offer Price of HK$3.61 per Offer Share and no exercise of
the Offer Size Adjustment Option), representing 47.2% of the gross proceeds (based on the Offer
Price of HK$3.61 per Offer Share and assuming that the Offer Size Adjustment Option is not
exercised) of the Global Offering. During the Track Record Period, we incurred listing expenses of
RMB19.3 million, including RMB18.2 million recorded as administrative expenses and RMB1.1
million capitalized. We expect to incur listing expenses of approximately RMB33.0 million, of
which approximately RMB19.4 million is expected to be recognized in the consolidated statements
of profit or loss as administrative expenses and approximately RMB13.6 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 2024. By nature, our listing expenses are
composed of (i) underwriting commission of approximately RMB11.7 million and (ii)
non-underwriting-related expenses of approximately RMB40.6 million, which consist of fees and
expenses of legal advisors and the Reporting Accountant of approximately RMB25.5 million and
other fees and expenses of approximately RMB15.1 million.
SUMMARY
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In this prospectus, unless the context otherwise requires, the following terms and
expressions have the meanings set forth below. Certain other terms are explained in the section
headed “Glossary of Technical Terms” in this prospectus.
“Accountants’ Report of the Group” the accountants’ report of our Group, the text of which is
set out in Appendix IA to this prospectus
“Accountants’ Report of Lynway
Vision”
the accountants’ report of Lynway Vision, the text of which
is set out in Appendix IB to this prospectus
“Advanced Photoelectronic” Advanced Photoelectronic Technology Limited ( ฆ౺΋ආ
ʮ̡ ), formerly known as Advanced
Packaging Technology Limited (ʮ
̡), a limited company established in Hong Kong on
February 17, 2003, and member of our Controlling
Shareholder Group
“affiliate” 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
“APT (HK)” APT Electronics (HK) Co., Limited, a limited company
established in Hong Kong on June 26, 2017, a
wholly-owned subsidiary of our Company
“Articles of Association” or
“Articles”
the articles of association of our Company, conditionally
adopted on January 19, 2024 with effect from the Listing
Date, and as amended from time to time, a summary of
which is set out in Appendix V to this prospectus
“Board” or “Board of Directors” the Board of directors of our Company
“Business Day” or “business day” a day on which banks in Hong Kong are generally open for
normal banking business to the public and which is not a
Saturday, Sunday or public holiday in Hong Kong
DEFINITIONS
–2 9–


--- page 41 ---
“Capital Market Intermediaries” the capital market intermediaries named in the section
headed “Directors, Supervisors and Parties Involved in the
Global Offering” of this prospectus
“CCASS” the Central Clearing and Settlement System established and
operated by HKSCC
“China” or “PRC” the People’s Republic of China, but for the purpose of this
document and for geographical reference only and except
where the context requires, references in this document to
“China” and the “PRC” do not apply to Hong Kong, Macau
Special Administrative Region and Taiwan, China
“Companies (Winding up and
Miscellaneous Provisions)
Ordinance”
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
“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), as amended, supplemented or otherwise
modified from time to time
“Company”, “our Company”, “the
Company” or “APT Electronics”
APT Electronics Co., Ltd. (ʮ̡ ),
formerly known as APT Electronics (Guangzhou) Ltd. ( ౺
ཥɿ(ᄿψ)ʮ̡), a limited liability company
established in the PRC on August 30, 2006, which was
converted into a joint stock limited company in the PRC on
December 3, 2015
“Company Law” or “PRC Company
Law”
Company Law of the People’s Republic of China ( ʕശɛ͏
جas amended, supplemented or otherwise
modified from time to time
“Controlling Shareholder(s)” or
“Controlling Shareholder Group”
has the meaning ascribed to it under the Listing Rules and
unless the context otherwise requires, refers to Mr. Xiao,
Mr. Chan, Mr. Yuan, APTESS Company Limited, Giant
Power Limited, Ms. Loh, Advanced Photoelectronic, Jingyu
Investment, Jingling Investment, Jingrui Investment and
Jingshi Investment, as further detailed in the section headed
“Relationship with Our Controlling Shareholder Group” in
this prospectus
DEFINITIONS
–3 0–


--- page 42 ---
“Conversion of Domestic Unlisted
Shares into H Shares”
The conversion of 215,506,643 Domestic Unlisted Shares
in aggregate held by 32 existing Shareholders into H Shares
upon the completion of the Global Offering. Such
conversion of Domestic Unlisted Shares into H Shares has
been filed with the CSRC and CSRC has issued the filing
notices in respect of the Global Offering and the conversion
dated June 1, 2024 and September 30, 2024; and an
application for H Shares to be listed on the Hong Kong
Stock Exchange has been made to the Hong Kong Stock
Exchange
“CSDC” China Securities Depositary and Clearing Corporation
Limited (ப΂ʮ̡ )
“CSDC (Hong Kong)” China Securities Depository and Clearing (Hong Kong)
Company Limited
“CSRC” the China Securities Regulatory Commission ( ʕ਷ᗇՎ္
ึ )
“Director(s)” director(s) of our Company
“Domestic Unlisted Share(s)” ordinary share(s) issued by the Company, with a nominal
value of RMB1.00 each, which is/are subscribed for or
credited as paid in Renminbi and not listed on any stock
exchange
“EIT Law” Enterprise Income Tax Law of the People’s Republic of
China (جas amended,
supplemented or otherwise modified from time to time
“EU” European Union
“Exchange Participant(s)” a person: (a) who, in accordance with the Hong Kong
Listing Rules, may trade on or through the Hong Kong
Stock Exchange; and (b) whose name is entered in a list,
register or roll kept by the Hong Kong Stock Exchange as a
person who may trade on or through the Hong Kong Stock
Exchange
DEFINITIONS
–3 1–


--- page 43 ---
“Extreme Conditions” the occurrence of “extreme conditions” as announced by
any government authority of Hong Kong due to a super
typhoon or other natural disaster of a substantial scale
seriously affects the working public’s ability to resume
work or brings safety concern for a prolonged period
“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
“GDP” gross domestic product
“Geely Group” Geely Holding and its subsidiaries
“Geely Holding” Zhejiang Geely Holding Group Company Limited ( एϪΛ
ʮ̡ ), a limited liability company
established in the PRC on March 24, 2003 and a connected
person of our Company
“Geely Related Group” includes (i) Geely Group, (ii) LI Shufu and his related
companies other than Geely Group, and (iii) Yaoning
Technology and its associates. Among the Geely Related
Group, LI Shufu and his majority-controlled companies
(including Geely Group) and Yaoning Technology and its
associates are connected persons of our Company. LI Shufu
is (i) the father of LI Xingxing, a substantial Shareholder
by virtue of his interest in Yaoning Technology, and (ii) the
father-in-law of ZHENG Xin, a non-executive Director, and
hence LI Shufu is an associate of LI Xingxing under Rule
14A.12(2)(a) of the Listing Rules and a deemed connected
person under Rule 14A.21(1)(a) of the Listing Rules.
Accordingly, the majority-controlled companies of LI Shufu
are connected persons of our Company under Rules
14A.12(2)(b) and 14A.21(1)(b) of the Listing Rules. For
the avoidance of doubt, the related companies of LI Shufu
other than his majority-controlled companies are not
regarded as connected persons of our Company
DEFINITIONS
–3 2–


--- page 44 ---
“Global Offering” the Hong Kong Public Offering and the International
Offering
“Group,” “our Group,” “we” or
“us”
our Company and its subsidiaries (or our Company and any
one or more of its subsidiaries, as the context may require)
“H Share Registrar” Computershare Hong Kong Investor Services Limited
“H Share(s)” overseas listed foreign shares in the share capital of our
Company with nominal value of RMB1.00 each, which are
to be subscribed for and traded in HK dollars and are to be
listed on the Hong Kong Stock Exchange
“HK$” or “HK dollars” Hong Kong dollars and cents, respectively, 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 Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of
HKSCC
“HKSCC Participant” a participant admitted to participate in CCASS as a direct
clearing participant, a general clearing participant or a
custodian participant
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC
“Hong Kong Listing Rules” or
“Listing Rules”
the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (as amended from time to
time)
“Hong Kong Offer Shares” the 3,360,000 H Shares initially offered by our Company
for subscription at the Offer Price pursuant to the Hong
Kong Public Offering (subject to the Offer Size Adjustment
Option and reallocation as described in “Structure of the
Global Offering” in this prospectus)
DEFINITIONS
–3 3–


--- page 45 ---
“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares for subscription
by the public in Hong Kong (subject to the Offer Size
Adjustment Option and reallocation as described in
“Structure of the Global Offering” in this prospectus) at the
Offer Price (plus brokerage, SFC transaction levies, AFRC
transaction levy and Hong Kong Stock Exchange trading
fees), on and subject to the terms and conditions described
in this prospectus as further described in “Structure of the
Global Offering — Hong Kong Public Offering” in this
prospectus
“Hong Kong Stock Exchange” or
“Stock Exchange”
The Stock Exchange of Hong Kong Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering listed in
“Underwriting — Hong Kong Underwriters” in this
prospectus
“Hong Kong Underwriting
Agreement”
the underwriting agreement, dated October 30, 2024,
relating to the Hong Kong Public Offering and entered into
by, among others, our Company, Mr. Xiao, Mr. Yuan,
Advanced Photoelectronic, the Sole Sponsor, the Sole
Overall Coordinator and the Hong Kong Underwriters, as
further described in the section headed “Underwriting —
Underwriting Arrangements and Expenses — The Hong
Kong Public Offering — Hong Kong Underwriting
Agreement” in this prospectus
“IFRS” International Financial Reporting Standards, which include
standards, amendments and interpretations promulgated by
the International Accounting Standards Board and the
International Accounting Standards and interpretation
issued by the International Accounting Standards
Committee
“Independent Third Party(ies)” any entity or person who to the best of our Directors’
knowledge, information and belief, is not a connected
person of our Company within the meaning ascribed thereto
under the Listing Rules
DEFINITIONS
–3 4–


--- page 46 ---
“International Offer Shares” the 30,240,000 H Shares initially offered by our Company
for subscription pursuant to the International Offering
(subject to the Offer Size Adjustment Option and
reallocation as described in “Structure of the Global
Offering” in this prospectus)
“International Offering” the offer of the International Offer Shares by the
International Underwriters at the Offer Price outside the
United States in offshore transactions in accordance with
Regulation S or any other available exemption from
registration under the US Securities Act, as further
described in “Structure of the Global Offering” in this
prospectus
“International Underwriters” the group of international underwriters expected to enter
into the International Underwriting Agreement to
underwrite the International Offering
“International Underwriting
Agreement”
the underwriting agreement expected to be entered into on
or around Wednesday, November 6, 2024 by, among others,
our Company, Mr. Xiao, Mr. Yuan, Advanced
Photoelectronic, the Sole Sponsor, the Sole Overall
Coordinator and the International Underwriters in respect
of the International Offering, as further described in
“Underwriting — International Offering” in this prospectus
“Jingling Investment” Guangzhou Jingling Investment Partnership (Limited
Partnership) ( ᄿψ౺ჯҳ༟ΥྫΆุ (Υྫ)), a limited
partnership established in the PRC on October 25, 2023, one
of our employee shareholding platforms and member of our
Controlling Shareholder Group
“Jingrui Investment” Guangzhou Jingrui Investment Partnership (Limited
Partnership) ( ᄿψ౺๿ҳ༟ΥྫΆุ (Υྫ)), a limited
partnership established in the PRC on November 30, 2023,
one of our employee shareholding platforms and member of
our Controlling Shareholder Group
DEFINITIONS
–3 5–


--- page 47 ---
“Jingshi Investment” Guangzhou Jingshi Investment Partnership (Limited
Partnership) ( ᄿψ౺ྼҳ༟ΥྫΆุ (Υྫ)), a limited
partnership established in the PRC on November 30, 2023,
one of our employee shareholding platforms and member of
our Controlling Shareholder Group
“Jingyu Investment” Guangzhou Jingyu Equity Investment Partnership (Limited
Partnership) (ᛆҳ༟ΥྫΆุ (Υྫ)), a
limited partnership established in the PRC on September 29,
2017, one of our employee shareholding platforms and
member of our Controlling Shareholder Group
“Joint Bookrunners” the joint bookrunners as named in “Directors, Supervisors
and Parties Involved in the Global Offering”
“Joint Global Coordinator” 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”
“Latest Practicable Date” October 21, 2024, being the latest practicable date for the
purpose of ascertaining certain information contained in this
prospectus prior to its publication
“Linlux” Linlux Electronics Ltd. (ʮ̡ ), a limited
liability company established in the PRC on October 9, 2018
and a wholly-owned subsidiary of our Company
“Listing” listing of the H Shares on the Main Board of the Hong Kong
Stock Exchange
“Listing Committee” the Listing Committee of the Hong Kong Stock Exchange
“Listing Date” the date, expected to be on or around November 8, 2024, on
which our H Shares are listed and from which dealings
therein are first permitted to take place on the Hong Kong
Stock Exchange
“Lynway Vision” L ynway Vision Technology (Ningbo) Co., Ltd. (ൖᙂ౽
Ҧ(ت)ʮ̡), a limited liability company
established in the PRC on October 26, 2018 and a
wholly-owned subsidiary of our Company
DEFINITIONS
–3 6–


--- page 48 ---
“Lynway Vision (Guangzhou)” Lynway Vision Automobile Parts (Guangzhou) Co., Ltd. ( ჯ
ൖᙂӛԓཧ௅΁(ᄿψ)ʮ̡), a limited liability
company established in the PRC on June 17, 2024 and a
wholly-owned subsidiary of our Company
“Macau” the Macau Special Administrative Region of the PRC
“Main Board” the stock market (excluding the option market) operated by
the Stock Exchange which is independent from and operated
in parallel with the Growth Enterprise Market of the Stock
Exchange
“Ministry of Finance” or “MOF” the Ministry of Finance of the PRC (௅ )
“MOFCOM” Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷ਠਕ௅ )
“Mr. Chan” Mr. CHAN Philip Ching Ho ( ௓͍Ⴔ), our non-executive
Director and member of our Controlling Shareholder Group
“Mr. Xiao” Mr. XIAO Guowei David ( ӽ਷ਃ), our executive Director,
chairperson of the Board, the chief strategic officer and
member of our Controlling Shareholder Group
“Mr. Yuan” Mr. YUAN Lie Ming Peter (׼our non-executive
Director and member of our Controlling Shareholder Group
“Ms. Loh” Ms. LOH Rebecca May-Leung (Ԅ), the spouse of Mr.
Chan and member of our Controlling Shareholder Group
“NDRC” the National Development and Reform Commission of the
PRC (ึ )
“NEEQ” The National Equities Exchange and Quotations ( Ό਷ʕʃΆ
΅ᔷᜫӻ୕)
“NPC” the National People’s Congress of the PRC ( ʕശɛ͏΍ձ਷
ɽึ)
DEFINITIONS
–3 7–


--- page 49 ---
“Offer Price” HK$3.61 per Offer Share (exclusive of brokerage fee of 1%,
SFC transaction levy of 0.0027%, AFRC transaction levy of
0.00015% and Hong Kong Stock Exchange trading fee of
0.00565%) at which Offer Shares are to be subscribed for and
issued pursuant to the Global Offering as described in
“Structure of the Global Offering” in this prospectus
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer
Shares, together with, where relevant, any additional H
Shares which may be issued by our Company pursuant to the
exercise of the Offer Size Adjustment Option
“Offer Size Adjustment Option” the option under the Hong Kong Underwriting Agreement,
exercisable by the Company on or before the date of the
International Underwriting Agreement, pursuant to which the
Company may issue and allot up to an aggregate of 5,040,000
additional H Shares (representing in aggregate approximately
15% of the initial Offer Shares) at the Offer Price, to cover
additional market demand, if any, as described in the section
headed “Structure of the Global Offering” in this Prospectus
“PBOC” the People’s Bank of China ( ʕ਷ɛ͏ვБ), the central bank
of the PRC
“PRC GAAP” generally accepted accounting principles of PRC
“PRC Legal Advisor” AllBright Law Offices, the PRC legal advisor of our
Company
“Pre-IPO Investment(s)” the Pre-IPO investment(s) in our Company undertaken by the
Pre-IPO Investor(s) prior to the Listing, details of which are
set out in the section headed “History, Development and
Corporate Structure” in this prospectus
“Pre-IPO Investor(s)” the investor(s) who participated in our Pre-IPO Investments,
details of which are set out in the section headed “History,
Development and Corporate Structure” in this prospectus
“prospectus” or “Prospectus” this prospectus being issued in connection with the Hong
Kong Public Offering
DEFINITIONS
–3 8–


--- page 50 ---
“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
“Regulation S” Regulation S under the US Securities Act
“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC
“SAC” the Securities Association of China ( ʕ਷ᗇՎุ՘ึ)
“SAFE” the State Administration of Foreign Exchange of the PRC ( ʕ
̮ි၍ଣ҅ )
“SASAC” State-owned Assets Supervision and Administration
Commission of the State Council ( ਷ਕ৫਷Ϟ༟ପ္ຖ၍ଣ
ึ)
“SAT” the State Administration of Taxation of the PRC ( ʕശɛ͏΍
೼ਕᐼ҅)
“Securities and Futures Ordinance”
or “SFO”
the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Securities Law” the Securities Law of the People’s Republic of China ( ʕശɛ
جas amended, supplemented or otherwise
modified from time to time
“SFC” the Securities and Futures Commission of Hong Kong
“Shanghai Stock Exchange” the Shanghai Stock Exchange (ה׸)
Share Incentive Scheme I” the share incentive scheme adopted by our Company on May
31, 2019 and renewed on December 8, 2023
“Share Incentive Scheme II” the share incentive scheme adopted by our Company on
December 8, 2023
“Share Incentive Scheme III” the share incentive scheme adopted by our Company on
December 4, 2023
DEFINITIONS
–3 9–


--- page 51 ---
“Share Incentive Schemes” the Share Incentive Scheme I, the Share Incentive Scheme II
and the Share Incentive Scheme III
“Share(s)” ordinary shares in the capital of our Company with a nominal
value of RMB1.00 each
“Shareholders(s)” holder(s) of the Share(s)
“Shenzhen Stock Exchange” the Shenzhen Stock Exchange (ה׸)
Shenzhen MPEG” Shenzhen MPEG Electronics Co., Ltd. (ࠢ
ʮ̡), a limited liability company established in the PRC on
April 29, 2000 and our channel partner
“SME Fund” Guangdong SME Equity Investment Fund Limited (ʕʃ
ʮ̡ ), a limited liability company
established in the PRC on November 15, 2010 and one of our
Shareholders
“Sole Overall Coordinator” CLSA Limited
“Sole Sponsor” CITIC Securities (Hong Kong) Limited
“Sponsor-Overall Coordinator” CLSA Limited
“State Council” State Council of the People’s Republic of China ( ʕശɛ͏΍
ձ਷਷ਕ৫)
“subsidiary(ies)” has the meaning ascribed to it in section 15 of the Companies
Ordinance
“Supervisor(s)” member(s) of our Supervisory Committee
“Supervisory Committee” the supervisory committee of our Company
“Taiwan Stock Exchange” the Taiwan Stock Exchange Corporation
“Takeovers Code” the Codes on Takeovers and Mergers and Share Buy-backs
issued by the SFC, as amended, supplemented or otherwise
modified from time to time
DEFINITIONS
–4 0–


--- page 52 ---
“Track Record Period” the three years ended December 31, 2021, 2022 and 2023,
and the five months ended May 31, 2024
“Underwriters” The Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” The Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“US Securities Act” the United States Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder
“US$” or “US dollars” United States dollars, the lawful currency of the United States
“US” or “United States” the United States of America, its territories, its possessions
and all areas subject to its jurisdiction
“White Form eIPO ” the application for Hong Kong Offer Shares to be issued in
the applicant’s own name by submitting applications online
through the designated website of White Form eIPO Service
Provider at www.eipo.com.hk
“White Form eIPO Service
Provider”
Computershare Hong Kong Investor Services Limited
“Yaoning Technology” Z hejiang Yaoning Technology Group Co., Ltd. (߅
ʮ̡), formerly known as Zhejiang Yaoning
Technology Co., Ltd. (ʮ̡ ), a limited
liability company established in the PRC on December 22,
2020 and our substantial Shareholder
DEFINITIONS
–4 1–


--- page 53 ---
“%” per cent
In this prospectus, the terms “associate,” “close associate,” “connected person,” “core
connected person,” “connected transaction” and “substantial shareholder” shall have the
meanings given to such terms in the Hong Kong Listing Rules, unless the context otherwise
requires.
Certain amounts and percentage figures included in this prospectus have been subject to
rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures preceding them. Any discrepancies in any table or chart between the
total shown and the sum of the amounts listed are due to rounding.
For ease of reference, the names of the PRC established companies or entities, laws or
regulations 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.
DEFINITIONS
–4 2–


--- page 54 ---
This glossary of technical terms contains explanations of certain technical terms used in
this prospectus. As such, these terms and their meanings may not correspond to standard
industry meanings or usage of these terms.
“ADAS” advanced driver assistance systems, electronic systems
developed to automate, adapt, and enhance vehicle systems
for safety and better driving
“ADB” adaptive driving beam, a technology that adjusts the
direction and intensity of the light of the vehicle’s
headlamps based on road conditions to enhance the driver’s
view and minimize glare for other drivers
“automotive OEM” the original equipment manufacturer, which assembles and
installs automotive parts during the construction of a new
vehicle
“AI” artificial intelligence
“AR HUD” augmented reality head-up display, an advanced version of
a HUD that uses augmented reality technology to project
virtual images onto the windshield
“AR navigation” augmented reality navigation, a system that uses augmented
reality technology to project virtual images onto the
real-world environment, providing drivers with real-time,
turn-by-turn directions and other relevant information
“CAGR” compound annual growth rate
“CASN” a substance with the same crystal structure as CaAlSiN3
and a substance whose main component is crystal of
CaAli+xSi1-xN3-xOx where part of each Ca, Al and Si
may be substituted with a divalent metallic element (II
metallic element value), a trivalent metallic element (III
metallic element value) or a tetravalent metallic element
(IV metallic element value)
“CNAS” China National Accreditation Service for Conformity
Assessment
GLOSSARY OF TECHNICAL TERMS
–4 3–


--- page 55 ---
“COB” chip-on-board, a packaging process that integrates multiple
LED chips into a circuit board
“CRI” color rendering index, a quantitative measure of the ability
of a light source to reveal the colors of various objects
faithfully in comparison with a natural or standard light
source
“direct-lit” a method of illumination used in LCD displays where a
panel of LEDs is placed directly behind the display stack to
produce the visuals on the screen
“DLP” digital lighting processing, a set of chipsets based on
optical micro-electro-mechanical technology that uses a
digital micromirror device. DLP technology is used in a
variety of display applications from traditional static
displays to interactive displays and also non-traditional
embedded applications including medical, security and
industrial uses
“DOB” driver-on-board, a technology used in LED lighting systems
in which the driver is integrated directly onto the LED
circuit board
“draft angle” a slight incline on the vertical surfaces of a mold that
facilitates the removal of the finished part
“edge-lit” a method of illumination used in LCD displays where LEDs
are placed along the edges of the screen to produce the
visuals on the screen
“EMC” epoxy molding compound, a type of epoxy material used in
the production of compact, highly heat-resistant leadframes
with high application power for LED devices through
molding equipment and process
“EVs” electric vehicles, primarily including battery electric
passenger vehicles (BEVs), plug-in hybrid electric
passenger vehicles (PHEVs) and fuel-cell electric vehicles
(FCEVs)
GLOSSARY OF TECHNICAL TERMS
–4 4–


--- page 56 ---
“flip-chip LED” an LED structure installed in a flipped orientation
compared to lateral LED without wires for electrical
connections
“GFA” gross floor area
“HCM” headlamp control module, an advanced front lighting
control system in vehicles that provide optimized
illumination
“HD” high definition
“HUD” head-up display, a display that projects important
information onto the windscreen without requiring the
drivers to look away from their usual viewpoint
“IATF16949” the international technical specification of automotive
industry quality management system, prepared by the IATF
(International Automotive Task Force) and the ISO
“IC” integrated circuit, a small unit or package which is made as
a single indivisible structure (such as a chip) and is
electrically equivalent to a conventional circuit of many
separate components
“ICE” internal combustion engine
“IP” intellectual property
“IR” infrared, a type of electromagnetic radiation with
wavelength just greater than that of the red end of the
visible light spectrum but less than that of microwaves
“ISO” the International Organization for Standardization, a
worldwide federation of national standards bodies
“ISO14001” the Environmental Management System published by the
ISO
“ISO45001” the Occupational Health and Safety Management System
published by the ISO
GLOSSARY OF TECHNICAL TERMS
–4 5–


--- page 57 ---
“ISO9001” the International Quality Management System published by
the ISO
“ISD” interactive signal display
“IT” information technology
“lateral LED” an LED structure that necessitates the use of wires for
electrical connections, featuring P and N metal electrodes
on the same side from which light is emitted. Its structural
composition, from top to bottom, includes P-GaN, a
light-emitting layer, N-GaN and a substrate
“‘LED+’ technologies” technologies which integrate LED technologies with
integrated circuits (ICs), electronic control, software,
sensors, optics and others, which are rapidly changing the
landscape of the high-end LED intelligent vision industry
“LCD” liquid-crystal display, a flat-panel display or other
electronically modulated optical device that uses the
light-modulating properties of liquid crystals combined
with polarizers
“leadframe” a packaging carrier in LED or IC devices that secures LED
or IC chips, offering mechanical support, electrical
connection and heat conduction. It typically comprises a
metal sheet, plastic materials, etc.
“LED” light-emitting diode, a semiconductor diode that emits light
when current flows through it
“LED device” a semiconductor device that emits light, manufactured
through the LED packaging process
“LED module” an integral unit assembled by single or multiple LED
devices, driving circuits, control circuits, etc.
“lm/W” lumen per watt
GLOSSARY OF TECHNICAL TERMS
–4 6–


--- page 58 ---
“local dimming” an LED backlight technology used in LCD display to
improve picture quality. It works by dimming the backlight
areas of the screen that need to be dark, while keeping the
backlight bright parts of the screen bright, thereby
increasing the contrast ratio and creating a better image
“L
70” a metric indicating the time (in hours) when the luminous
flux output from the LED has dropped to 70% of initial
“Micro LED” light-emitting diodes with chip size smaller than 100µm
“Mini LED” light-emitting diodes with chip size ranging from 100µm to
300µm
“MSRP” manufacturer suggested retail price
“N-GaN” N-type gallium nitride, a semiconductor material with
specific impurities to create an abundance of free electrons,
which effectively carry a negative charge
“OEE” overall equipment effectiveness, a standard for measuring
the productivity of manufacturing equipment
“OHSAS18001” the requirements for occupational health and safety
management systems developed for managing health and
safety risks associated with a business
“OTA” over-the-air, a technology that updates vehicle software and
firmware remotely through network
“PAR” photosynthetically active radiation, the wavelengths of light
(between 400nm and 700nm) that plants use for
photosynthesis
“PCB” printed circuit board
“PCBA” printed circuit board assembly, the process of mounting or
placing electronic components which give the board its
functionality on a PCB
GLOSSARY OF TECHNICAL TERMS
–4 7–


--- page 59 ---
“photoelectric conversion
efficiency”
the percentage of electrical energy that a lighting product
converts into visible light, serving as a crucial metric for
measuring performance and energy efficiency of lighting
products
“PPE” photosynthetic photon efficiency, a metric that measures the
total amount of PAR produced by a lighting system each
second per electrical power
“PPF” photosynthetic photon flux, a metric that measures the total
amount of PAR produced by a lighting system each second.
PPF is crucial in horticultural applications to understand
the effectiveness of a lighting system for plant growth
“P-GaN” P-type gallium nitride, a semiconductor material with
specific impurities to create an abundance of spaces where
there is a lack of electrons, which effectively carry a
positive charge
“Q
70” a metric indicating the time (in hours) when the photon
flux output from the LED has dropped to 70% of initial
“R&D” research and development
“SMD” surface-mounted device, an LED packaging device with
positive and negative electrodes on the package substrate,
which can be assembled onto PCB through SMT process
“SMT” surface mount technology, a method used in the assembly
of PCBs where components are directly attached onto the
designated position on the surface of the boards
“sq.m.” square meter
“substrate” a foundational material used in the manufacturing of
semiconductor components and PCBs
GLOSSARY OF TECHNICAL TERMS
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“Tier-1 supplier” a company that supplies parts or systems directly to
automotive OEMs. Other types of suppliers in the
automotive industry include Tier-2 and Tier-3 suppliers.
Tier-2 suppliers supply to Tier-1 suppliers. Tier-3 suppliers
supply to Tier-2 suppliers
“UV” ultraviolet, a type of electromagnetic radiation with
wavelength less than that of visible light, but greater than
X-rays
“UVC” ultraviolet rays with a wavelength between 200nm and
280nm
“W” watt
GLOSSARY OF TECHNICAL TERMS
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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
others, the following:
 general political and economic conditions, including those related to the jurisdictions
where we operate;
 our business prospects and 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;
 our capital expenditure plans;
 the actions and developments of our competitors;
 our financial condition and performance;
 our dividend policy;
 any changes in the laws, rules and regulations of the central and local governments in
the jurisdictions where we operate and the rules, regulations and policies of the relevant
governmental authorities relating to all aspects of our business and our business plans;
 changes or volatility in interest rates, foreign exchange rates, equity prices or other rates
or prices, including those pertaining to the jurisdictions, the industry and markets in
which we operate;
FORW ARD-LOOKING STATEMENTS
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 various business opportunities that we may pursue; and
 capital market developments, changes in the global economic conditions and material
volatility in the global financial markets.
Additional factors that could cause actual performance or achievements to differ materially
include, but are not limited to, those discussed under “Risk Factors” and elsewhere in this
prospectus. We caution you not to place undue reliance on these forward-looking statements,
which reflect our management’s view only as of the date of this prospectus. We undertake no
obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur. All forward-looking
statements contained in this prospectus are qualified by reference to the cautionary statements set
out in this section.
FORW ARD-LOOKING STATEMENTS
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You should carefully consider all of the information in this prospectus, including the risks
and uncertainties described below, before making an investment in our H Shares. The following
is a description of what we consider to be our material risks. Any of the following risks could
have a material adverse effect on our business, financial condition and results of operations. In
any such case, the market price of our H Shares could decline, and you may lose all or part of
your investment. These factors are contingencies that may or may not occur , and we are not in
a position to express a view on the likelihood of any such contingency occurring. The
information given is as of the Latest Practicable Date unless otherwise stated, will not be
updated after the date hereof and is subject to the cautionary statements in the section headed
“Forward-Looking Statements” in this prospectus.
RISKS RELATING TO OUR INDUSTRY AND BUSINESS
We face significant competition in the industry in which we operate, and if we are unable to
compete effectively, our results of operations and financial condition may be materially and
adversely affected.
The LED intelligent vision industry is intense and highly competitive with over 300 thousand
market participants. China has the world’s largest LED intelligent vision industry, with a market
size of RMB440.2 billion in 2023 in terms of revenue. Based on applications, LED intelligent
vision can be categorized into intelligent automotive vision, high-end lighting and advanced
display. In terms of revenue in 2023, the top five manufacturers took up an aggregated market
share of 49.2%, 39.3% and 66.6%, respectively, in China’s intelligent automotive vision market,
high-end lighting market and LCD TV backlight display market, respectively. See “Industry
Overview.” Many of our competitors provide products comparable to those we offer and may
further upgrade their products and optimize their services. Our competitors may have longer
operating histories, greater brand recognition, better supplier relationships, larger customer bases
or greater financial, technological or marketing resources than we do. As a result, our competitors
may be able to respond more quickly and effectively to new or changing opportunities,
technologies, standards or customer requirements than us and may have the ability to initiate or
withstand significant industry evolvement or regulatory changes. Our competitors may have more
advanced facilities or equipment, develop more advanced or efficient technologies, acquire more
customers, have more professional staff or offer more competitive prices.
If we are unable to stay competitive or compete successfully with our competitors, we may
experience decreases in market share and sales volume, and may have to reduce our prices or make
other concessions, thereby adversely affecting our profitability, business, financial condition and
results of operations.
RISK FACTORS
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We are exposed to customer concentration risk.
Revenue from our five largest customers in each period of the Track Record Period amounted
to RMB997.6 million, RMB1,033.7 million, RMB1,366.6 million and RMB649.8 million,
respectively, accounting for 71.8%, 73.2%, 73.5% and 77.1% of our total revenue, respectively.
Revenue from our largest customer in each period of the Track Record Period amounted to
RMB423.6 million, RMB350.1 million, RMB705.8 million and RMB326.7 million, respectively,
accounting for 30.5%, 24.8%, 38.0% and 38.8% of our total revenue, respectively. See “Business
— Sales and Marketing — Our Customers.” During the Track Record Period, a majority of the
sales of our intelligent automotive vision products were attributable to Geely Related Group. In
2021, 2022, 2023 and the five months ended May 31, 2024, revenue from Geely Related Group
was RMB50.6 million, RMB350.1 million, RMB705.8 million and RMB326.7 million,
respectively, accounting for 3.6%, 24.8%, 38.0% and 38.8% of our total revenue, respectively, for
the same periods. We expect that revenue from Geely Related Group will continue to increase in
the near future. Our major customers’ stable relationship with us and consistent demands are
crucial to our business. Their business conditions, liquidity and solvency may have a significant
impact on our business dealings. Any disruption in our business relationship with major customers
could have a material adverse effect on our business, financial condition and results of operations.
In the event that the existing major customers reduce or cease to purchase our products and we are
unable to find new customers with similar level of demands at comparable terms within a
reasonable period of time or at all, our business and profitability may be adversely affected.
Demand for our LED products depends on trends and developments in their corresponding
end products and end markets.
We offer a broad portfolio of LED products to be used for a wide range of end products or
targets, such as automotives and consumer electronics. As such, demand for our products depends
to a large extent on trends and developments in the markets for end products. If the end product
markets cannot maintain robust growth, our business and profitability may be adversely affected.
Furthermore, the end markets of our products are characterized and defined by rapidly
changing technology, frequent new product specifications and changing customer demands. Our
success thus depends on the ability to adequately respond and adapt to technological developments
in a timely and cost-effective manner, through continual improvement of our products and
services. Our failure to adapt to such changes may have a material adverse effect on our business,
operating results and financial condition.
RISK FACTORS
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Any adjustment in our business mix may result in fluctuations in our profitability, which may
adversely and materially affect our financial condition and results of operations.
Our results of operations are affected by changes in our business mix. During the Track
Record Period, we expanded into high-tech, high-profit margin and high-growth potential products
in high-end lighting and advanced display businesses, such as horticultural lighting products and
intelligent local dimming products, to capture a broader range of market opportunities, enhance the
diversity of our product offerings and improve our profitability. In 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, the gross profit margin of our high-end lighting business
was 19.6%, 19.2%, 23.4%, 22.6% and 24.8%, respectively, and the gross profit margin of our
advanced display business was 9.6%, 10.7%, 16.4%, 16.4% and 15.7%, respectively.
In 2021, we tapped into intelligent automotive vision and have quickly ramped up our
product offerings since then. Our revenue from intelligent automotive vision products significantly
increased over the Track Record Period, representing 5.3%, 28.3%, 41.5%, 36.1% and 43.4% of
our total revenue in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024,
respectively. We recorded a gross loss margin of 1.1% in 2021 and a gross profit margin of 17.5%,
14.9%, 10.2% and 15.3% in intelligent automotive vision in 2022, 2023 and the five months ended
May 31, 2023 and 2024, respectively. In contrast, the revenue contribution from high-end lighting
decreased over the Track Record Period, representing 74.5%, 47.5%, 35.0%, 40.6% and 30.1% of
our total revenue in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024,
respectively.
Any adjustment in business mix may result in fluctuations in our profitability. We cannot
guarantee that our business adjustments will be consistently successful, and that we will continue
to sustain our gross profit margins and profitability levels in the future. Any failure in the
adjustments of our business mix may have an adverse and material effect on our revenue, financial
condition or results of operations.
We rely on the stability of our supply chain as well as a number of key suppliers, the loss of
which could adversely affect our business.
Our purchase primarily encompasses procurement of raw materials and consumables,
property, plant and equipment, as well as services. Purchase amount from our five largest suppliers
in each period of the Track Record Period accounted for 43.0%, 26.2%, 22.1% and 21.6% of our
total purchase amount, respectively. Purchase amount from our largest supplier in each period of
the Track Record Period accounted for 25.9%, 12.8%, 9.3% and 7.5% of our total purchase
amount, respectively. We cannot assure you that there will not be any dispute between our major
suppliers and us, or that we will be able to maintain stable business relationships with our existing
suppliers.
RISK FACTORS
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If all or a significant number of our suppliers for any particular raw materials and
consumables are unable or unwilling to meet our requirements for quantity, quality or timing, we
could suffer supply shortages or procurement cost increases. Our suppliers could fail to meet our
needs for various reasons beyond our control, including fires, natural disasters, extreme weather,
manufacturing problems, epidemic, strikes, transportation interruptions or governmental regulation.
A failure of supply could also occur due to suppliers’ financial difficulties, including bankruptcy.
Changing suppliers may require a long lead time. We may not be able to locate alternative
suppliers in sufficient quantities, of suitable quality, or at an acceptable price within a reasonable
period of time, or at all. Continued supply disruptions could exert pressure on our costs, and we
cannot assure you that all or part of any increased costs can be passed along to our customers in a
timely manner or at all, which could negatively affect our business, overall profitability and
financial performance.
An increase in prices of raw materials and consumables or shortage in supply may disrupt
our supply chain, increase our production costs and delay deliveries of our products to
customers.
The primary raw materials and consumables that we use in the production of our products are
LED chips, leadframes, PCBs, automotive lamp modules, plastic particles, drivers and electronic
components, among others. Our raw material and consumable costs that constitute the cost of sales
amounted to RMB966.2 million, RMB947.9 million, RMB1,182.4 million, RMB409.8 million and
RMB563.9 million, respectively, in 2021, 2022, 2023 and the five months ended May 31, 2023 and
2024, representing 83.3%, 80.6%, 77.8%, 78.8% and 81.9%, respectively, of our total cost of sales
over the same periods. As a result, our production volume and production costs depend on our
ability to source key raw materials and consumables at competitive prices. However, the raw
materials and consumables we use are subject to price volatility caused by external factors, such as
commodity price fluctuations, changes in supply and demand, logistics and processing costs, our
bargaining power with suppliers, inflation, and governmental regulations and policies. We
generally do not enter into long-term supply agreements with fixed price arrangements, which is in
line with the industry norm. We have adopted comprehensive policies and measures to manage the
price fluctuations of raw materials. See “Business — Procurement and Supply Chain Management
— Raw Materials and Consumables.” During the Track Record Period and up to the Latest
Practicable Date, we did not experience quality issues or shortages with our raw materials and
consumables that materially affected our operations. However, we may be unable to obtain raw
materials and consumables in the quantities of a quality or at a price that we require, which may
disrupt our supply chain, increase our production costs and delay deliveries of our products to
customers.
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Our success depends to a great extent on our R&D capabilities. Failure of our technology and
R&D efforts may hurt our competitiveness and profitability.
Our R&D capabilities and facilities are critical to our success. The industry in which we
operate is subject to rapid technological changes and is evolving quickly in terms of technological
innovation. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, our research
and development costs amounted to RMB62.0 million, RMB88.7 million, RMB87.2 million,
RMB36.3 million and RMB37.6 million, respectively, representing 4.5%, 6.3%, 4.7%, 5.8% and
4.5% of our total revenue for the same periods, respectively. We may continue investing significant
resources in R&D in order to secure design wins from automotive OEMs, offer products with
desirable performance and pricing and remain competitive in the rapidly evolving industry.
However, R&D activities are inherently uncertain, generally lasting for a long time and
requiring substantial R&D expenses. Our R&D activities and investments made during design in
can not guarantee revenue generation, and we may not be able to recover costs incurred. We
cannot assure you that our R&D projects will be successful or completed within the anticipated
time frame and budget, or that our newly-developed products will have commercial success. Even
if we secured design wins or if such products can be successfully commercialized, we cannot
assure you that we will achieve their anticipated sales target or profit.
In addition, our existing or potential competitors may develop products which are similar or
superior to our products with more competitive price. Due to uncertainties in the time frame for
developing new products and the duration of the market window for these products, we may have
to abandon ongoing developments that are no longer commercially viable, even after having
invested significant resources in their R&D. If we fail in our product launch efforts, our business,
prospects, financial condition and results of operations may be materially and adversely affected.
Unsatisfactory performance of or defects in our products, or failure to maintain an effective
quality management system, may harm our reputation, lead to product returns or recalls and
materially and adversely affect our business, financial condition and results of operations.
We may offer products that are affected by substandard quality or unsatisfactory performance
due to design and manufacturing defects. We may also be exposed to potential product liabilities.
The consequences of such product defects may be severe and we may be subject to claims for
contract breaches or be liable for property damage or even bodily injuries and harms. Further, the
causes of product defects may be manifold and sometimes beyond our control. Besides errors in
the design, R&D and production of our products, defects may also be caused by defective
components or materials delivered by our suppliers and integrated in our products. As we do not
have direct control over the quality of the materials and intermediate products manufactured or
supplied by third parties, we are exposed to a risk relating to the quality of such materials and
RISK FACTORS
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intermediate products. In addition, we may manufacture particular products pursuant to
specifications and quality requirements set by our customers. If our products do not meet the
specifications and quality requirements stipulated by our customers, relevant production may be
discontinued until the cause of the product defect has been identified and remedied.
Therefore, our failure to maintain the consistent quality control throughout our production
process may result in the substandard quality or unsatisfactory performance of our products,
causing a failure to achieve or maintain automotive-grade status or other certifications, significant
damage to our market reputation and a decrease in our sales volume. If we deliver any defective
products, or if there is a perception that our products are of substandard quality or provide
unsatisfactory performance, we may incur substantial costs due to returns or replacements of our
products, and our market reputation and sales volumes may be adversely affected. In 2021, 2022,
2023 and the five months ended May 31, 2024, the value of the products returned in terms of
revenue accounted for less than 0.15% of our total revenue for the same periods. We may also
need to upgrade or rectify our production procedures or modes to meet the quality and
performance required by our customers. Such upgrade or rectification may be costly and have a
material adverse effect on our financial condition and results of operations.
In addition, as our customers may sell our products after their assembly process to end
consumers in their respective markets, we may be also exposed to potential product liability claims
from end consumers in the relevant jurisdictions in case that any safety damage results from the
use of our products even if we have no direct sales to such end consumers. During the Track
Record Period and up to the Latest Practicable Date, we had not, due to material product quality
issues, (i) received fines, product recall orders or other penalties from the PRC government or
other regulatory bodies, (ii) received any product return requests, or (iii) received complaints from
our customers that have a material adverse effect on our business, financial condition and results
of operations. However, there can be no assurance that we will not experience material product
liability losses in the future, or that we will be able to defend such claims at a contained level of
cost.
We may not be successful in executing our business plans and strategies effectively or at all,
and our business, financial condition, results of operations and growth prospects may be
materially and adversely affected.
Our business plans and strategies are based on our assumptions of future events which may
entail certain risks and are inherently subject to uncertainties. These assumptions may not be
correct, which could affect the commercial viability of our business plans and strategies. As such,
there can be no assurance that our business plans and strategies will be implemented successfully
as scheduled or at all.
RISK FACTORS
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If we fail to implement our business plans and strategies effectively and efficiently, we may
be unable to expand our operations, manage our growth, take advantage of market opportunities as
expected or remain competitive in the industry. Furthermore, even if we implement our business
plans and strategies effectively and efficiently, there may be other unexpected events or factors
beyond our control that may prevent us from achieving the desirable and profitable results, such as
the changes in local laws and regulations and governmental policies, the availability of skilled
professionals and changes in consumer demand. Moreover, our business plans and strategies may
increase our operating costs, such as higher staff costs, as well as greater depreciation for
production equipment and facilities, and increase our cash outflows for operating and investing
activities. Accordingly, if our business plans and strategies cannot be successfully implemented, or
if they do not yield ideal results, we may have significant difficulties in recovering our costs and
therefore experience a material adverse impact on our business, financial condition and results of
operations.
Our success relies on key management and other highly qualified personnel with specialized
skills.
Our future success is significantly dependent upon the continued service of our management
and highly qualified personnel with specialized skills. Our ability to compete effectively depends
on our ability to retain and motivate existing employees and attract new employees. We may need
to offer higher compensation and other benefits to attract and retain key personnel and our
compensation and benefits payments may increase unexpectedly or at a greater rate than expected.
If we lose the services of any member of management or qualified personnel, we may not be able
to locate suitable or qualified replacements in a timely manner at reasonable cost, or at all. Our
failure to attract and retain key management or qualified personnel and any increase in staffing
costs to retain such personnel could have a negative impact on our ability to maintain our
competitive position and grow our business, and may have a material adverse effect on our
financial condition, results of operations and growth prospects.
Our key management and employees are subject to confidentiality terms and noncompete
arrangements. However, we cannot assure you that such terms or arrangements can be fully and
legally enforced. If any of our management or other key personnel joins or establishes a competing
business, we may lose some of our customers, which may have a material adverse effect on our
business.
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Failure to develop and introduce new products could adversely impact our competitiveness,
performance and prospects for future growth.
We operate in an industry that is subject to rapid and unpredictable changes in customer
demand and trends. Our success depends to a large extent on our ability to provide customers with
new, attractive products tailored to their needs on a timely basis at favorable profit margins.
The commercial success of new products are subject to many factors that are not entirely
within our control, including our ability to carry out effective and efficient technology
development and manufacturing, gauge market demand, make timely delivery and offer
satisfactory after sales services for the new products. If our new products cannot achieve good
commercial results, we may be unable to achieve desired revenue and profit return, or even recoup
initial investments.
We may also sell new products to new markets, the success of which is dependent on various
factors such as market conditions, competition landscape, regulatory environment, supply chain,
customer demand, and the positioning of our new products, as well as our ability to offer such
products at competitive terms and prices. The new markets may have high entry barriers, which
may prevent new entrants to achieve market penetration. There can be no assurance that we will be
able to successfully satisfy our customer demand on a sustainable and profitable basis.
If we are unable to develop, produce and introduce new products within or beyond our
current business that meet customer demand at favorable margins, our business, financial condition
and results of operations may be materially and adversely affected.
If we fail to maintain or enhance our brand recognition, or if we incur excessive expenses in
this effort without achieving the anticipated benefits, our reputation, business, financial
condition and operating results may suffer.
We believe that maintaining and enhancing our brand is of significant importance to the
success of our business. Well-recognized brands are important to enhancing our attractiveness to
our customers. Since we operate in a highly competitive market, brand maintenance and
enhancement directly affect our ability to maintain our market position. The successful promotion
of our brand will depend on the effectiveness of our marketing efforts and word-of-mouth referrals
we receive from satisfied customers.
We incurred selling and marketing expenses of RMB20.8 million, RMB30.0 million,
RMB45.2 million, RMB16.4 million and RMB20.4 million in 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, respectively, representing 1.5%, 2.1%, 2.4%, 2.6% and
2.4% of our total revenue during the same periods, respectively. We may incur extra expenses in
RISK FACTORS
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promoting our brand. The results of such initiatives may not cover the costs of the increased
investment. We cannot guarantee that our marketing efforts will be successful, or that they will
yield significant benefits that justify the costs. Any such failure may result in our declining market
recognition and position, and materially and adversely affect our business, financial condition and
results of operations.
We have businesses in a number of different countries and jurisdictions, which are subject to
legal, regulatory, operational and other risks inherent in international and cross-border
operations.
In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, the revenue from
our overseas business represented 23.7%, 19.5%, 15.1%, 17.4% and 16.1% of our total revenue for
the same periods, respectively. We expect to expand further into international markets, and may
subject ourselves to the following risks:
 challenges in providing products, services and support, in recruiting personnel in
international markets, and in managing sales channels and distribution networks
effectively;
 revenue fluctuation from period to period in the future due to unfavorable market
conditions, intense competition, unattractive products and services, downward pressure
on our selling price and any other inherent risks associated with our international
business operations;
 challenges in commercializing our products in new markets where we have limited
experience with the local market dynamics and no existing or developed sales,
distribution and marketing infrastructure;
 difficulties in dealing with regulatory regimes, regulatory bodies and government
policies with which we may be unfamiliar, in order to obtain permits, licenses and
approvals necessary to manufacture, market and sell products in or to various
jurisdictions;
 adverse changes in, or our failure or the failure of our suppliers to comply with customs
laws, regulations, tariffs and quotas set by the local government and PRC government
when we import raw materials and consumables or export our products among the
different countries or jurisdictions where we do business;
 potentially reduced protection for our IP rights and potential breach of third-party
intellectual rights;
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 differences in accounting treatment in different countries and jurisdictions, potential
adverse tax implications and foreign exchange losses;
 inability to effectively enforce contractual or legal rights; and
 changes in laws, regulations and policies as well as political, economic and market
instability or civil unrest in the relevant countries and jurisdictions.
If we are unable to effectively avoid or mitigate these risks, our ability to expand in
international markets will be impaired, or our international business may not be able to achieve or
sustain profitability, which could have a material and adverse effect on our business, financial
condition, results of operations and prospects.
Expansion and acquisitions of or investments in our businesses, products, technologies,
production capacity or know-how could subject us to risks and uncertainties.
We established Lynway Vision together with Geely Holding in 2018. In September 2021, we
acquired the controlling interest in Lynway Vision and have consolidated its results since then. See
“History, Development and Corporate Structure — Major Acquisitions, Disposals and Mergers —
Acquisition of Lynway Vision” and Note 32 to the Accountants’ Report of the Group in Appendix
IA to this prospectus. The establishment and integration of Lynway Vision is subject to
considerable uncertainties and risks, and requires, among other things, the ability to integrate
Lynway Vision into our Group and to retain or replace certain qualified executives and other key
employees at Lynway Vision. There can be no assurance that we will be able to achieve the
anticipated effects or returns from our acquisition and consolidation of Lynway Vision in time or
at all. It is possible that we may not be in a position to realize expected revenue, synergies, growth
opportunities and/or other benefits after the acquisition and consolidation of Lynway Vision.
We may continually and actively seek strategic opportunities for acquisitions of or
investments in businesses, products, technologies, production capacity or know-how that we
believe would benefit our product development, R&D capabilities, technology, and distribution
network. There can be no assurance that we could successfully execute our expansion and
acquisition plans and complete the relevant transactions as expected. In addition, our ability to
grow through acquisitions and investments depends upon our ability to identify and integrate
suitable targets and to obtain necessary financing at reasonable terms. In particular, acquisitions
may involve significant risks and uncertainties, including, but not limited to: (i) difficulties in
integrating acquired companies, personnel or products into our business, particularly the different
quality management, customer service and other business functions; (ii) delays or failures in
realizing the benefits of acquisitions and investments; (iii) diversion of our management’s time and
attention from other business concerns; (iv) higher than anticipated costs of integration; or (v)
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difficulties in retaining key employees of acquired businesses. Furthermore, we may also discover
deficiencies in internal controls, data adequacy and integrity, product quality, and regulatory
compliance and liabilities in the businesses we have acquired which we did not uncover prior to
such acquisitions. Consequently, we may become subject to penalties, lawsuits or other liabilities.
Any difficulties in the integration of acquired businesses or products, or unexpected penalties,
lawsuits or liabilities in connection with such businesses or products could materially and
adversely affect our business, financial condition and results of operations.
Any failure to offer high-quality maintenance and support services for our customers may
harm our relationships with them and, consequently, our business.
As we continue to grow our operations and support our customer base, we need to be able to
continue to provide efficient support and effective maintenance that meets our customer demands
at scale. As of May 31, 2024, we had more than 200 quality control personnel responsible for
systematic quality management, R&D quality management, procurement quality management,
production process quality management and customer service management. See “Business —
Quality Control.” We may not be able to recruit or retain sufficient qualified support personnel
with experience in supporting customers of our products and solutions. As a result, we may be
unable to quickly respond to accommodate short-term increases in customer demand for technical
support or maintenance assistance. We may also be unable to modify the future scope of our
maintenance services and technical support to compete with changes in the technical services
provided by our competitors.
We generally provide a three-year warranty period or mileage-based warranty coverage in
compliance with applicable regulations and provisions and subject to the specific warranty
agreements for our intelligent automotive vision products, and we generally provide a one-year
warranty period for our high-end lighting products and advanced display products. The warranty
agreements will be entered into according to the customers’ templates upon request. See “Business
— Quality Control — Quality Control Measures — Customer Service Management.” If we
experience increased customer demand for support and maintenance, we may face increased costs
that might harm our results of operations. If we are unable to provide efficient customer
maintenance and support, our business may be harmed. Our ability to attract new customers is
highly dependent on our business reputation and on positive recommendations from our existing
customers. Any failure to maintain high-quality maintenance and support services, or a market
perception that we do not maintain high-quality maintenance and support services for our
customers, would harm our business.
Our policy allows products with defects to be returned and exchanged by our customers
within the warranty period. See “Business — Quality Control Measures — Customer Service
Management.” If we experience any deterioration in the quality of our products, we will incur
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higher costs associated with returns, exchanges and warranties. We may also be required by law to
adopt new or amend existing return, exchange and warranty policies from time to time. While
these policies improve customer experience and promote customer loyalty, which may in turn help
us acquire and retain customers, they also subject us to additional costs and expenses which we
may not recoup through increased revenue. We cannot assure you that our return, exchange and
warranty policy will not be misused by our customers, which may significantly increase our costs
and may materially and adversely affect our business and results of operations. If we revise these
policies to reduce our costs and expenses, our customers may be dissatisfied, which may result in
the loss of existing customers or failure to acquire new users at the pace desired, which may
materially and adversely affect our results of operations.
Failure to successfully execute our equipment maintenance and upgrades and capacity
expansion plans or to effectively utilize our production bases may have a material adverse
effect on our business, financial condition and results of operations.
Our growth prospects and future profitability depend on, among others, our ability to upgrade
and increase the production capability and capacity, either generally or with respect to demand
from customers for particular products. See “Business — Production — Production Expansion
Plan.”
To successfully upgrade and expand our production capability and capacity, we need to make
cost-effective and efficient upgrade and expansion plans, expand and construct new facilities or
equipment either by our own R&D or procurements from third parties, and hire and train
professionals necessary to operate such facilities or equipment, all of which may be affected by,
several factors including, but not limited to, the following:
 availability of working capital for purchasing facilities or equipment;
 shortages or delays in the delivery of facilities or equipment;
 difficulties or delays which may arise in installing the facilities or equipment; and
 implementation of new production processes.
We cannot guarantee that our upgrade or expansion plan, if implemented, will be
operationally or financially successful and substantiated by sufficient market demand for or profit
margin of our products. If we are unable to implement the upgrade or expansion plan
cost-effectively and efficiently, our business and profitability may be adversely affected. In
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particular, the implementation of our expansion plans may incur significant staff costs,
depreciation and amortization charges and other expenses, which may adversely affect our
financial condition.
In addition, if we do not receive sufficient orders from our customers to effectively utilize
our production bases, we may be subject to low utilization rates of production capacity,
over-capacity or high depreciation charges for our production bases, which may hurt our
profitability and results of operations. Furthermore, if market demand declines in the future, we
may not be able to recoup the costs incurred for construction of any new factories or expansion of
any existing factories and maintenance of expanded production capacity. Any delay or cancellation
of our expansion plan could also subject us to disputes with various counter-parties. As a result,
our business, financial condition, results of operations and prospects may be materially and
adversely affected.
Failure to manage our future growth or profitability effectively may materially and adversely
affect our business operations and prospects.
We experienced growth in revenue and gross profit margin during the Track Record Period.
In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, our revenue was
RMB1,388.4 million, RMB1,410.6 million, RMB1,858.0 million, RMB624.6 million and
RMB843.2 million, respectively, and our gross profit margin was 16.4%, 16.7%, 18.2%, 16.7% and
18.3%, respectively, during the same periods. However, this only reflects our historical
performance and may not be indicative of our future performance. In addition, the profitability of
our different businesses may fluctuate given different market conditions and our corresponding
pricing strategies. For example, although the gross profit margin of our intelligent automotive
vision business improved to 17.5% in 2022 from a gross loss margin of 1.1% in 2021 as we started
to benefit from the economies of scale in 2022, the gross profit margin decreased to 14.9% in 2023
as we adopted a competitive pricing strategy to gain greater market share in response to the
intense market competition.
The sustainability of our growth and profitability depends on a number of factors, many of
which are beyond our control, including competition, regulatory evolvement, evolving customer
demands and changes in economic condition. If we are not able to effectively manage our business
growth and profitability, we may not be able to successfully implement the strategies necessary to
further our business prospects on schedule or within our budget, or at all. Accordingly, we may not
be able to sustain the growth and profitability we achieved in the past. Any failure to manage our
future growth or profitability effectively may materially and adversely affect our business
operations and prospects.
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If we fail to manage our inventories effectively, our results of operations, financial condition
and liquidity may be materially and adversely affected.
Our inventories are mostly raw materials and consumables, work in progress, finished goods
and contract goods. As of December 31, 2021, 2022, 2023 and May 31, 2024, we had inventory of
RMB188.0 million, RMB211.6 million, RMB216.0 million and RMB250.7 million, respectively.
Our inventory turnover days in 2021, 2022, 2023 and the five months ended May 31, 2024 was 58,
61, 51 and 51, respectively. Our business model requires us to manage our inventories efficiently.
We depend on our demand forecasts to make purchase decisions for raw materials and
consumables and to pace our production progress to manage our inventories. Such demand,
however, can change significantly from time to time and we may not always be able to accurately
make predictions. Demand may be affected by general market conditions, end market conditions,
new product launches, pricing and discounts, and not all of them are within our control. In
addition, as we develop and market a new product, we may not be successful in establishing stable
and favorable supplier relationships or accurately forecasting demand. The acquisition of certain
types of raw materials and consumables may require significant lead time and prepayment and they
may not be returnable. Furthermore, as we plan to continue expanding our product offerings, we
expect to include a wider variety of raw materials and consumables, which will make it more
challenging for us to manage our inventory and logistics effectively.
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. 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. 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 diminished customer
base and lost of revenue, any of which could harm our business, financial condition and results of
operations.
The development cycles of our products can be long and we are subject to risks relating to
the planning and implementation of complex projects.
The planning and implementation process of our products is complex and the development
cycles of our products can be long. For example, the product development process of intelligent
automotive lamps generally can take around 12 to 18 months for the entire development cycle,
while the development process of intelligent automotive lamps for automotive OEMs with which
we cooperate for the first time can take even longer. In addition, there may be various challenges
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during the product development process, including, in particular, technical or process handling
issues. As a result, we may face additional expenses and increased quality risks. If we are unable
to resolve these issues, the development of that product may fail and our business plan and
financial condition may be adversely affected.
Further, domestic automotive OEMs generally do not commit to minimum purchase quantities
from their suppliers, even when a supplier is nominated for a certain vehicle. As such, we cannot
guarantee that we may successfully commercialize such product development results on a timely
basis at favorable margins. Any of these factors or developments could have a material adverse
effect on our business, financial condition and results of operations.
We may have limited control over the quality, availability and costs of our subcontractors.
During the Track Record Period, we engaged certain subcontractors to produce advanced
display LED modules. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, our
subcontracting costs that constitute the cost of sales amounted to RMB25.4 million, RMB21.9
million, RMB18.0 million, RMB5.8 million and RMB9.8 million, respectively, which accounted
for 2.2%, 1.9%, 1.2%, 1.1% and 1.4% of our cost of sales during the same periods. See “Business
— Procurement and Supply Chain Management — Subcontracting.” Our inability to hire qualified
subcontractors may hinder our ability to complete a project successfully. Our regularly monitor
and quality checks on the performance of subcontractors may not be effective or sufficient to
ensure their service quality. We are exposed to legal liabilities if we are not able to monitor the
performance of our subcontractors, or if our subcontractors violate any laws, rules or regulations
in connection to matters such as environmental protection, and health and safety, which may affect
their renewal of relevant registrations or license or may even lead to revocation of their
registrations or license.
In addition, the subcontracting arrangement also exposes us to risks associated with any
nonperformance, delayed performance or substandard performance by our subcontractors. In such
case, we will have to appoint replacement subcontractors and additional costs will be incurred. We
may also incur additional costs or be subject to liability due to delay in schedule or defect in the
works of our subcontractors or if there is any accident causing personal injuries or death of our
subcontractors’ employees. These events may impact our profitability, financial results and
reputation, as well as result in litigation or damages claims.
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If our logistics service providers fail to provide reliable and timely logistics services, our
business, financial condition and results of operations may be materially and adversely
affected.
We engage logistics service providers to transport products to our customers. The services
provided by our logistics service providers may be suspended, canceled or delayed for various
reasons beyond our control, including improper handling by our logistics service providers, labor
disputes or strikes, acts of war or terrorism, outbreaks of epidemics, earthquakes and other natural
disasters, which could cause interruption to the sales or delivery of our products. Disputes with or
a termination of our contractual relationships with one or more of our logistics companies could
result in delayed delivery of products or increased costs. If we are unable to maintain or develop
good relationships with logistics companies or find suitable replacements in a timely manner, it
may inhibit our ability to offer products in sufficient quantities, on a timely basis, or at prices
acceptable to our customers. In addition, any improper handling of our products by the logistics
service providers could also result in product damage, which may in turn lead to product recalls,
product liabilities, increased costs and damage to our reputation, which may in turn adversely
affect our business, financial condition and results of operations. Any increase in the service costs
of our logistics service providers may also lead to an increase to our logistic expenses, which may
in turn negatively affect our results of operations.
We rely on third-party service providers and business partners to provide products and
services to us and our customers.
We work with a broad range of third-party service providers and business partners, including
logistic service providers, subcontractors and channel partners. These third parties are subject to
risks similar to ours relating to business interruption, systems and employee failures, and
cybersecurity and data protection, and are also subject to their own legal, regulatory and market
risks.
Our third-party service providers and business partners may not fulfill their respective
commitments and responsibilities in a timely manner and in accordance with the terms agreed
upon or applicable laws. In addition, while we have procedures in place for assessing risks along
with selecting, managing and monitoring our relationships with third-party service providers,
suppliers and business partners, we do not have control over their business operations or
governance and compliance systems, practices and procedures, which may increase our financial,
legal, operational and reputational risk. If we are unable to effectively manage our relationships
with third-party service providers, suppliers and business partners, or for any reason our
third-party service providers, suppliers or business partners fail to satisfactorily fulfill their
commitments and responsibilities, our business, results of operations and financial condition could
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suffer. Upon expiry of existing contracts with third parties, we may not be able to renew such
contracts at terms commercially favorable to us, if at all, or find an appropriate substitute in a
timely manner, in which case our business may be adversely affected.
Our facilities and production are susceptible to interruption, damage or loss caused by power
outages or other events beyond our control.
We have a large number of facilities at which our products are developed and manufactured.
Our development, production and procurement processes involve many different, often interrelated
phases and are complex to manage. Even when technical and safety standards for the construction,
operation and maintenance of our facilities and equipment are observed, operational disruptions
and delays may still happen. As such, interruptions, damage or loss to our production facilities and
equipment caused by fire, severe weather, earthquakes or other acts of God or other events which
are beyond our control could harm our business, operating results and prospects.
In addition, our manufacturing processes require a stable source of electricity. The local
electricity supply may not be reliable or stable for consumption at all times. We cannot guarantee
that we will not experience blackouts or a shortage of electricity in the future. If we do not have
adequate electricity to sustain normal production, we may need to limit, delay or halt our
production, and any production downtime or stoppage can have a significant negative effect on our
reputation and general business operations and, in the case of insufficient insurance coverage, may
also have material adverse effects on our business, financial condition and results of operations.
Our performance depends on favorable labor relations with our employees, and any
deterioration in labor relations, shortage of labor or material increase in wages may have a
material adverse effect on our results of operations.
Our success depends on our ability to hire, train, retain and motivate our employees. As of
May 31, 2024, we had 2,216 full-time employees. See “Business — Employees.” We have not
experienced any material work stoppages or strikes in the past. However, we cannot guarantee that
any of such events will not arise in the future. If our employees engage in a strike or other work
stoppage, we may experience significant operational disruption and/or accept higher labor costs,
resulting in an adverse effect on our businesses, financial condition and results of operations. Our
employees are currently represented by labor unions. We regard favorable labor relations as a
significant factor that can affect our performance and any deterioration in our labor relations with
employees or the labor union could cause labor disputes, which could result in the disruption of
production and operations. In January 2024, a local people’s court ordered one of our subsidiaries
to pay a former employee of ours approximately RMB4.1 million in relation to a compensation
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dispute. See “Business — Legal Proceedings and Compliance — Legal Proceedings.” Furthermore,
certain professionals in our industry may be subject to noncompete restrictions, we may be
impacted by such agreement.
In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, our total staff costs
(including staff costs under cost of sales, selling and marketing expenses, administrative expenses
and research and development costs) amounted to RMB139.4 million, RMB166.4 million,
RMB200.7 million, RMB72.6 million and RMB90.1 million, respectively, representing 10.0%,
11.8%, 10.8%, 11.6% and 10.7% of our total revenue for the same periods, respectively. In
addition, labor costs in regions where we operate have been increasing in recent years and may
potentially continue increasing. As such, we may have to increase our total compensation to attract
and retain the experienced professionals required to achieve our business objectives. However,
these increased costs might not be able to be passed onto customers by increasing our products’
selling prices in light of market competition. In such circumstances, our profit margin may
decrease, which could have an adverse effect on our financial condition and results of operations.
Our performance may suffer from business disruptions associated with information
technology, system implementations, or catastrophic losses affecting our IT systems.
We rely on our IT systems to manage and operate our businesses, and record and process
transactions. The satisfactory performance, reliability and carrying capacity of our IT system and
servers are critical to our success and our ability to provide quality services. Consistent and
efficient operation of the IT systems is imperative to the successful sales and earnings performance
of our various businesses in many countries and jurisdictions. In addition, we rely on our systems
and network to provide high-quality products and services. However, our systems and network
operations are vulnerable to disruptions arising from human error, power failure, computer viruses,
spam attacks, unauthorized access and other similar events. Disruptions to, or instability of, our
systems and network that hinder our customers from reaching our products or prevent us from
maintaining our technical secrets could harm our business and reputation.
During the Track Record Period and up to the Latest Practicable Date, we had not been
subject to such disruptions or instabilities that had materially and adversely affected our systems
and network operations. However, there can be no assurance that we would not in the future be
subject to such disruptions or instabilities that may result in material damages or remediation
costs. Additionally, we must continue to upgrade and improve our IT system to support our
business growth, and failure to do so could impede our growth. However, we cannot assure you
that we will be successful in executing these IT system upgrades and improvement strategies. In
particular, our IT systems may experience interruptions during upgrades, and the new technologies
or infrastructures may not be fully integrated with the existing systems on a timely basis, or at all.
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If our IT system does not function properly, it could cause system disruptions and slow response
times, affecting data transmission, which, in turn, could materially and adversely affect our
business, financial condition and results of operations.
If we fail to maintain effective internal controls, our business, financial results and reputation
could be materially and adversely affected.
Our success depends on our ability to effectively utilize our standardized management
system, information systems, resources and internal controls. As we continue to expand, we will
need to modify and improve our financial and managerial controls, reporting systems and
procedures and other internal controls and compliance procedures to meet our evolving business
needs. For example, we entered into sales agreements with an individual customer, in 2021 and
2022. Our transactions with the customer were settled through third-party accounts in 2021 and
2022, relevant revenue amounting to RMB1.41 million and RMB0.69 million, respectively. The
third-party accounts were held by two of the customer’s relatives. The customer made this
arrangement primarily to facilitate funds transfer in a more flexible and convenient manner.
Starting from January 2023, we strengthened settlement management and stopped accepting
third-party settlement and had no more transaction settled by parties other than our contractual
customers. If we are unable to improve our internal controls, systems and procedures, they may
become ineffective and cause errors, information lapses or production breakdowns that may
adversely affect our business. If we are not successful in identifying and overcoming weaknesses
in our internal controls, our ability to effectively manage our business may be affected.
Negative publicity and allegations involving us, our shareholders, directors, officers,
employees and business partners may affect our reputation and, as a result, our business,
financial condition and results of operations may be negatively affected.
Negative publicity and allegations involving us, our shareholders, directors, officers,
employees and business partners, or the LED intelligent vision market as a whole may materially
and adversely harm our brand image and reputation and cause deterioration in the level of market
recognition of and trust in the products provided by us, thereby resulting in reduced sales volumes
and revenues, potential loss of business partners as well as the loss of highly qualified personnel
with specialized skills. In addition, such negative publicity may come from malicious harassment
or unfair competition acts by third parties, which are beyond our control. Such negative publicity
may also result in the diversion of management’s attention, and governmental investigations or
other forms of scrutiny, which may have a material and adverse effect on our business, financial
condition, results of operations and prospects.
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Any reduction or discontinuation of preferential tax treatment or government grants may
adversely and materially impact our financial condition and results of operations.
We benefited from preferential tax treatment and government grants during the Track Record
Period. The PRC EIT Law and its implementation rules have adopted a statutory enterprise income
tax rate of 25%. However, the income tax of an enterprise that has been determined to be a high
and new technology enterprise can be reduced to a preferential rate of 15%. Our Company and
Lynway Vision were both qualified as a High and New Technology Enterprise under the relevant
PRC laws and regulations, in December 2021 and December 2022, respectively, and such
qualification may be renewed every three years. In addition, our Company, Lynway Vision and
Linlux were subject to 100% of weighted pre-tax deduction of R&D expenses. If we cease to be
entitled to preferential tax treatment or if the relevant PRC laws and regulations change, our
income tax expenses may increase, which would adversely affect our financial condition and
results of operations.
We have also received government grants. Our government grants recognized in profit or loss
amounted to RMB29.9 million, RMB12.7 million, RMB11.2 million, RMB6.2 million and RMB1.4
million in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, respectively. See
“Financial Information — Principal Components of Our Consolidated Statements of Profit or Loss
— Other Income and Gains.” We cannot assure you that we will continue to receive and benefit
from such grants in the future.
We have granted, and may continue to grant, share options and other types of awards under
our share incentive plan, which may result in increased share-based payment expenses.
We revised the existing share incentive scheme and adopted new ones on December 4, 2023
to incentivize the management team, retain talent and promote our long-term sustainable
development. As of the Latest Practicable Date, 32,533,698 Shares were held by the employee
shareholding platforms. See “Appendix VI — Statutory and General Information — Further
Information about Our Directors, Supervisors, Management and Substantial Shareholders — Share
Incentive Schemes.” Our share-based payment expenses were RMB1.7 million, RMB1.7 million,
RMB3.2 million, RMB0.7 million and RMB3.1 million in 2021, 2022, 2023 and the five months
ended May 31, 2023 and 2024, respectively. We believe the granting of share-based compensation
benefits is of significant importance to our ability to attract and retain key personnel and
employees, and we will continue to grant share-based compensation benefits to employees in the
future. As a result, our share-based payment expenses may increase, which may have an adverse
effect on our results of operations.
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We are subject to credit risk in respect of our trade and bills receivables.
Our trade and bills receivables represent amounts due from our customers for products in the
ordinary course of business. The carrying amount of trade and bills receivables balance of
RMB509.0 million, RMB583.2 million, RMB669.5 million and RMB747.6 million, respectively, as
of December 31, 2021, 2022, 2023 and May 31, 2024, represented our maximum exposure as of
the respective dates to credit risk in relation to trade and bills receivables. As of December 31,
2021, 2022, 2023 and May 31, 2024, our impairment on trade and bills receivables amounted to
RMB10.1 million, RMB12.1 million, RMB13.4 million and RMB14.9 million, respectively.
We generally grant credit terms of 60 to 120 days to our customers. However, there can be no
assurance that the collection of amounts due from our customers will be timely. This might result
in slow turnover of our trade and bills receivables and restrict our working capital resources. As of
December 31, 2021, 2022, 2023 and May 31, 2024, the turnover days for our trade and bills
receivables amounted to 112, 144, 124 and 129, respectively. See “Financial Information —
Description of Certain Components of Our Consolidated Statements of Financial Position — Trade
and Bills Receivables.” If we fail to receive payments from our customers on a timely basis, our
cash flows and financial condition could be materially and adversely affected.
We may be exposed to risks arising from changes in financial assets at fair value through
profit or loss.
As of December 31, 2021, 2022, 2023 and May 31, 2024, we recorded financial assets at fair
value through profit or loss of RMB111.3 million, RMB98.3 million, RMB187.5 million and
RMB116.9 million, respectively. Our financial assets at fair value through profit or loss recorded
as current assets represented investments in wealth management products. Our financial assets are
measured at fair value, subject to changes beyond our control. The investment income on financial
assets at fair value through profit or loss is recorded under other income and gains. In 2021, 2022,
2023 and the five months ended May 31, 2023 and 2024, our investment income from financial
assets at fair value through profit or loss amounted to RMB1.1 million, RMB2.2 million, RMB4.0
million, RMB1.1 million and RMB1.4 million, respectively. While we recorded fair value gains on
financial assets at fair value through profit or loss of RMB0.4 million, RMB1.2 million, RMB0.5
million and RMB0.4 million in 2021, 2023 and the five months ended May 31, 2023 and 2024,
respectively, we recorded fair value loss on financial assets at fair value through profit or loss of
RMB0.1 million in 2022. Our financial assets at fair value through profit or loss may fluctuate,
which may affect our results of operations and financial condition.
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Failure to fulfill our obligations in respect of contract liabilities could adversely affect our
liquidity and financial condition.
Our contract liabilities mainly represent cash collections in advance of fulfilling performance
obligations. Our contract liabilities increased from RMB7.8 million as of December 31, 2021 to
RMB13.6 million as of December 31, 2022, to RMB14.0 million as of December 31, 2023 and
decreased to RMB13.7 million as of May 31, 2024. There is no assurance that we will be able to
fulfill our obligations in respect of contract liabilities as the fulfillment of our performance
obligations is subject to various factors that are beyond our control. If we are not able to fulfill our
obligations with respect to our contract liabilities, the amount of contract liabilities will not be
recognized as revenue, and we may have to refund advance payments made by our customers. As a
result, our liquidity and financial condition may be adversely affected.
We may not be able to obtain adequate financing on commercially reasonable terms on a
timely manner, or at all, and any debt financing may contain covenants that restrict our
business or operations.
We require significant working capital for our operations or expansion. Our total
indebtedness may continue to increase. See “Financial Information — Indebtedness.” Historically,
we have generally relied on capital contributions from shareholders, bank loans and other external
financing as well as cash generated from our operations to fund our operations and expansion.
There can be no assurance that the cash flow generated by our operations will be sufficient to fund
our future operations and expansion plans. Our ability to obtain adequate external financing
depends on various factors, including our business operations and financial performance, as well as
other factors beyond our control, such as the global and local economies, the applicable laws,
regulations and policies, and the interest rate and other conditions of the external financial
resources available. If we will not be able to procure bank loans or other external financing with
commercially reasonable terms or on a timely basis or at all, our business, financial condition,
results of operations and business prospects may be materially and adversely affected.
In addition, we may obtain bank loans with financial covenants that include certain restriction
upon our operations. Any failure by us to comply with or violate such covenants may constitute an
event of default on our loans. If any default occurs, our financial condition, results of operations
and cash flows may be materially and adversely affected.
Furthermore, if we acquire additional funding due to our future operations or market changes,
we may issue additional equity securities or securities convertible into our equity securities, issue
debt securities or obtain credit facilities to meet our capital requirements. Any future sale by us of
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our equity securities or securities convertible into our equity securities would dilute Shareholders’
interests. The incurrence of additional debt would also result in restrictive covenants limiting our
shareholding structure, business and/or operations.
We are exposed to market risk from changes in foreign currency exchange rates which could
materially and adversely impact our profitability.
We sell our products in many countries and jurisdictions throughout the world. As a result,
there is exposure to foreign currency risk as we enter into transactions and make investments
denominated in multiple currencies. For example, changes in currency exchange rates may affect
the relative prices at which we and our competitors sell products in the same market and the cost
of products and services we require for our operations. Our predominant exposures are in US
dollar and RMB. We are subject to risks arising from the translation of balance sheets and income
statements of our subsidiaries to US dollars as well as risk arising from the export of products and
sales outside the country of manufacturing. With respect to the effects on translated earnings, if the
RMB strengthens relative to local currencies, our earnings could be negatively impacted. Our gains
on foreign exchange differences were RMB0.6 million, RMB5.3 million, RMB0.2 million,
RMB0.2 million and RMB0.7 million in 2021, 2022, 2023 and the five months ended May 31,
2023 and 2024, respectively. The translational and transactional impacts will vary over time and
may be more material in the future. There can be no assurance that we can implement effective
measures to reduce or eliminate our exposure to fluctuations in foreign exchange rates.
If we determine our intangible assets to be impaired, our results of operations and financial
condition may be adversely affected.
As of December 31, 2021, 2022, 2023 and May 31, 2024, our goodwill amounted to
RMB13.5 million, RMB13.5 million, RMB13.5 million and RMB13.5 million, respectively.
Impairment is determined by assessing the recoverable amount of the cash-generating unit (group
of cash-generating units) to which the goodwill relates. Where the recoverable amount of the
cash-generating unit (group of cash-generating units) is less than the carrying amount, an
impairment loss is recognized. An impairment loss recognized for goodwill is not reversed in a
subsequent period. For details of our goodwill and the relevant impairment policies, see Note 2.3
and Note 15 to the Accountants’ Report of the Group in Appendix IA to this prospectus. If we
determine our goodwill to be impaired, our results of operations and financial condition may be
adversely affected.
As of December 31, 2021, 2022, 2023 and May 31, 2024, our other intangible assets
amounted to RMB39.4 million, RMB33.5 million, RMB26.8 million and RMB25.6 million,
respectively, which primarily consist of in-licensed trademarks and patents and office software.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets
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with finite lives are subsequently amortized over the useful economic life and assessed for
impairment whenever there is an indication that the intangible assets may be impaired. The
amortization period and the amortization method for intangible assets with a finite useful life are
reviewed at least at each financial year end. For details of our intangible assets (other than
goodwill) and the relevant impairment policies, see Note 2.3 and Note 16 to the Accountants’
Report of the Group in Appendix IA to this prospectus. If we determine our intangible assets
(other than goodwill) to be impaired, our results of operations and financial condition may be
adversely affected.
The recoverability of our deferred tax assets is subject to accounting uncertainties.
In the application of our accounting policies, our management is required to make judgments,
estimates and assumptions about the carrying amounts of certain assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be relevant. Therefore, actual results
may differ from these accounting estimates. As of December 31, 2021, 2022, 2023 and May 31,
2024, we recognized deferred tax assets of RMB9.0 million, RMB37.7 million, RMB37.0 million
and RMB37.9 million, respectively. Based on our accounting policies, deferred tax assets are
recognized for all deductible temporary differences, and the carryforward of unused tax credits and
any unused tax losses. For details of our deferred tax assets and the relevant recognition policies,
see Note 2.3 and 17 to the Accountants’ Report of the Group in Appendix IA to this prospectus.
The recognition of a deferred tax asset mainly depends on our management’s judgment as to
whether sufficient future profits or deductible temporary differences will be available in the future.
Management will continue to conduct review and additional deferred tax assets can be recognized
if it becomes probable that future taxable profits will allow the deferred tax assets to be recovered.
If sufficient profits or deductible temporary differences are not expected to be generated or are less
than expected, a material reversal of deferred tax assets may arise in the future.
We may infringe intellectual property rights of third parties, which can lead us to
time-consuming and costly intellectual property infringement claims.
We cannot be certain that our operations or any aspects of our business do not or will not
infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other IP rights
held by third parties. We may also, from time to time in the future, be subject to legal proceedings
and claims relating to the IP rights of others. In addition, there may be third-party trademarks,
patents, copyrights, know-how or other IP rights that are infringed upon by our solutions, services
or other aspects of our business without our knowledge. Holders of such IP rights may seek to
enforce such IP rights against us in the PRC or other jurisdictions. If any third-party infringement
claims are brought against us, we may be forced to divert our management’s time and other
resources from our business and operations to defend these claims, regardless of their merits.
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Additionally, the application and interpretation of the PRC laws relating to IP, the procedures
and the standards for granting trademarks, patents, copyrights, know-how or other IP rights in the
PRC are still evolving, and we cannot assure you that the PRC courts or regulatory authorities
would agree with our analysis. If we were found to have violated the IP rights of others, we may
be subject to liability for our infringement activities or may be prohibited from using such
intellectual properties, and we may incur licensing fees or be forced to develop alternatives of our
own. As a result, our business, financial condition, results of operations and prospects may be
materially and adversely affected.
We may not be able to protect our intellectual property rights, and our ability to compete
could be harmed if our intellectual property rights are infringed by third parties.
We cannot assure you that we can prevent third parties from infringing upon our IP rights.
Unauthorized use of our IP, unfair competition, defamation or other violations of our rights by our
users, employees and/or third parties may harm our brand and reputation, and the expenses
incurred in protecting our IP rights may materially and adversely affect our business. We may,
from time to time, be required to institute litigation, arbitration or other proceedings to enforce our
IP rights, which would likely be time-consuming and expensive to resolve and would divert our
management’s time and attention regardless of its outcome, materially and adversely affecting our
business, financial condition and results of operations.
Our measures to enforce or defend our IP rights may not always be successful. Preventing
any unauthorized use of our intellectual properties is difficult and costly and the steps we take may
be inadequate to prevent the misappropriation of our intellectual properties. In the event that we
resort to litigation to enforce our IP rights, such litigation could result in substantial costs and a
diversion of our managerial and financial resources. In addition, our trade secrets may be leaked or
otherwise become available to, or be independently discovered by, our competitors. Any failure in
protecting or enforcing our IP rights may have a material and adverse effect on our business,
financial condition, results of operations and prospects.
New legislation or changes in the regulatory requirements regarding the end markets of our
products may affect our business operations and prospects.
We offer a broad portfolio of LED products which can be used for a wide range of end
markets, including the intelligent automotive vision, high-end lighting and advanced display.
For example, we benefit from PRC government policies at central and local levels that
support the development of electronic products and EVs. The Several Measures for Promoting the
Consumption of Electronic Products () and the Several
Measures for Promoting Automobile Consumption () issued by
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NDRC and other PRC central departments in July 2023 detailed measures to boost the
consumption of automotive and electronic products, including supporting the construction of
supporting facilities for EVs, promoting the purchase of EVs in the public sector, increasing car
consumption credit support, creating more electronic products consumption scenarios and
improving the selling and delivering system of electronic products. Any termination or reduction
of the governmental subsidies or other supports may adversely impact the sales volume of the EVs
and domestically manufactured vehicles of our customers, which will in turn adversely impact our
results of operations, demand for our intelligent automotive vision products, financial condition
and our growth prospects.
While we may need to change or adapt our business focus from time to time in response to
new rules and regulations regarding the end markets of our products, we may not be able to do so
timely and efficiently. Any new legislation or changes in the regulatory requirements could
materially and adversely affect our business, financial condition and results of operations. See
“Regulatory Overview.”
Our employees and business partners may engage in intentional or negligent misconduct, or
violate our internal policies and laws, which could impair the quality of our service, cause us
to lose customers or subject us to liabilities.
We risk compromising the quality of our products if our employees and business partners do
not perform in accordance with our standards. We have internal policies and guidelines to monitor
and ensure the products delivered to our customers are of satisfactory standard. In addition, we
have adopted and strictly implemented a series of procedures designed to verify the integrity and
qualifications of our employees before they are engaged, and of partners prior to any cooperation.
Nevertheless, we cannot guarantee that our employees and business partners will not engage in any
intentional or negligent misconduct.
Furthermore, we may be exposed to the risks of fraud or other unlawful activities committed
by our employees and business partners. Fraud or other unlawful activities by our employees and
business partners may include making unauthorized misrepresentation to our customers,
misappropriating third-party IP and other proprietary rights, misusing sensitive customer
information and engaging in bribery or other unlawful payments. In any such event, we could
incur liability to our customers or any other third parties.
Any claims could subject us to costly litigation and affect our financial condition, and may
distract the attention of our management regardless of whether the claims have merit. Any claims
could result in complaints from our customers or other third parties, regulatory or legal liabilities
or damages to our reputation.
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We may be subject to complaints, disputes and lawsuits in the ordinary course of our
business.
We may be subject to various complaints, disputes and lawsuits arising out of the ordinary
course of our business, including, from time to time, actual or threatened litigation relating to
commercial transactions, product liability, workers’ compensation, IP claims and regulatory
actions. If any complaint is dealt with improperly, we may be subject to litigation and required to
pay substantial damages. We were involved in litigations arising out of the ordinary course of our
business during the Track Record Period and as of the Latest Practicable Date. See “Business —
Legal Proceedings and Compliance — Legal Proceedings.” Any complaints, disputes and lawsuits
filed by or against us, whether or not meritorious, could result in significant costs and diversion of
resources, and could cause serious damage to our reputation.
Specifically, we manufacture products that create exposure to product liability claims. If such
products are not properly designed, manufactured or delivered, personal injuries, property damage
or business interruptions could result, which could subject us to claims for damages. The costs in
connection with defending product liability claims and payment of damages may be substantial.
Our reputation could also be adversely affected by such claims, whether or not successful.
Furthermore, defective products could result in loss of sales volume or customers and would
consequently have a materially adverse effect on our reputation. In addition, potential damages
claimed by customers, delayed deliveries, or our failure to comply with quality requirements could
negatively affect market acceptance of our other products, which could have a material adverse
effect on our business, financial condition and results of operations. During the Track Record
Period and up to the Latest Practicable Date, we did not experience any material sales returns or
any material product liability or major legal claims due to quality control issues, and did not recall
any products.
In addition, complaints, disputes and lawsuits filed against us may result from improper or
poor quality supplies made to us, while our suppliers may not compensate us for any costs we
incur, as a result of such complaints, disputes and lawsuits, in a timely manner or at all. In that
case our business and financial condition may be negatively affected.
Our business operates under various permits, licenses, approvals and/or qualifications and
the loss of or failure to obtain or renew any or all of these permits, licenses, approvals and/or
qualifications may materially and adversely affect our business, results of operations and
financial condition.
In accordance with the laws and regulations in the jurisdictions in which we operate, we are
required to maintain various approvals, licenses, permits and certifications in order to operate our
business. See “Business — Licenses, Approvals and Permits.” Complying with such laws and
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regulations may require substantial expense and may impose a significant burden, while any
noncompliance may expose us to liability. Furthermore, with the introduction and enactment of
new laws and regulations, as well as the refinement of interpretations and applications of existing
ones, we cannot guarantee that we will be able to obtain all requisite approvals, licenses, permits
and certifications.
In addition, in the event that we are required to renew our existing licenses or permits or
acquire new ones, whether as a result of the promulgation of new laws and regulations or
otherwise, we cannot assure you that we will be able to meet the requisite conditions and
requirements, or obtain all requisite approvals, licenses, permits and certifications in a timely
manner. If we are unable to obtain, or experience material delays in obtaining, necessary
government approvals, our operations may be substantially disrupted, which could materially and
adversely affect our business, financial condition and results of operations.
We may be subject to additional contributions of social insurance premiums and housing
provident funds, and late payments and fines imposed by relevant governmental authorities.
According to the Regulation on the Administration of Housing Provident Funds (ʮጐ
၍ଣૢԷ), which was promulgated by the State Council and became effective on April 3,
1999, and subsequently amended on March 24, 2019, we are required to set up housing provident
fund accounts (ሪ˒ ) and pay the housing provident fund on time and in full for our
employees. According to the PRC Social Insurance Law (), which
was promulgated by the Standing Committee of the National People’s Congress on October 28,
2010, effective on July 1, 2011 and last amended and effective on December 29, 2018, a PRC
enterprise is required to obtain social insurance certificates for its employees and to pay the social
insurance contributions on time and in full. During the Track Record Period and up to the Latest
Practicable Date, our social insurance and housing provident fund contributions did not fully cover
all of our employees in accordance with relevant laws and regulations. The shortfall amount of
social insurance and housing provident fund contributions is estimated to be RMB12.0 million,
RMB16.3 million, RMB18.6 million and RMB9.2 million in 2021, 2022, 2023 and the five months
ended May 31, 2024, respectively. See “Business — Employees.” As advised by our PRC Legal
Advisor, an employer that has not made social insurance contributions in full and on time as
prescribed by the law, may be ordered by social insurance contributions collection institutions to
rectify the non-compliance and pay the required contributions within a stipulated deadline and be
subject to a late payment fee of up to 0.05% per day. If the employer still fails to rectify the
failure to make social insurance contributions within the stipulated deadline, it may be subject to a
fine ranging from one to three times the amount overdue. In addition, an employer that has not
made housing provident fund contributions at a rate and based on an amount prescribed by the law,
or at all, may be ordered by the housing provident fund management center to rectify the
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noncompliance and pay the required contributions within a stipulated deadline. If the employer
still fails to rectify the failure to make housing provident fund contributions within the stipulated
deadline, it may be subject to the court’s compulsory enforcement.
During the Track Record Period, we were not subject to any administrative penalties in terms
of the contribution of social insurance premium and housing provident funds pursuant to the credit
reports obtained from the provincial credit information platform and written confirmations issued
by competent government authorities. As of the Latest Practicable Date, we did not receive any
notification from the relevant PRC authorities alleging that we had not fully contributed to the
social insurance premiums and housing provident funds and demanding payment of the same
before a stipulated deadline. However, we cannot assure you that the competent government
authorities will not require us to pay the outstanding amount and impose late payment fees or fines
on us. If we are subject to investigations related to noncompliance with labor laws and are
imposed additional contributions to social insurance premiums and housing provident funds, and
late payments and fines, our labor costs could increase. Such increases could adversely affect our
business, results of operations, financial condition and prospects.
We may be subject to fines or other penalties under the PRC Labor Contract Law, which
may adversely affect our business, profitability and reputation.
During the Track Record Period, we engaged third-party employment agencies to dispatch
contract workers. On December 28, 2012, the Labor Contract Law of the PRC ( ʕശɛ͏΍ձ਷
) was amended to impose more stringent requirements on labor dispatch and such
amendments became effective on July 1, 2013. For example, the number of dispatched contract
workers that an employer hires may not exceed a certain percentage of its total number of
employees, to be decided by the Ministry of Human Resources and Social Security, and the
dispatched contract workers may only engage in temporary, auxiliary or substitutable work.
According to the Interim Provisions on Labor Dispatch () promulgated by the
Ministry of Human Resources and Social Security on January 24, 2014, which became effective on
March 1, 2014 (the “ Interim Provisions ”), the number of dispatched contract workers hired by an
employer shall not exceed 10% of the total number of its employees (including both directly hired
employees and dispatched contract workers). The Interim Provisions further require the employer
that is not in compliance with the above provisions to formulate a plan to reduce the number of its
dispatched contract workers to below 10% of the total number of its employees. In addition, an
employer is not permitted to hire any new dispatched contract worker until the number of its
dispatched contract workers has been reduced to below 10% of the total number of its employees.
The employers who fail to comply with the relevant requirements on labor dispatch shall be
ordered by the labor administrative authorities to make correction within a stipulated period.
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Where the necessary correction is not made within the stipulated period, the employers may be
subject to a penalty ranging from RMB5,000 to RMB10,000 per dispatched worker exceeding the
10% threshold.
During the Track Record Period, the total number of dispatched contract workers hired by
one of our subsidiaries exceeded 10% of its total number of employees, and it was not fully in
compliance with the relevant requirements on temporary, auxiliary and substitutable work. As of
the Latest Practicable Date, the subsidiary had proactively rectified such noncompliance incidents
by reducing the number of dispatched contract workers to below 10% and adjusting the positions
held by dispatched contract workers in compliance with the Labor Contract Law and the Interim
Provisions. Even though we had not received any notice of warning or been subject to any
administrative penalties or other disciplinary actions from relevant PRC authorities, we cannot
assure you that the relevant PRC authorities will not take actions retrospectively against us for our
past practice. Such actions may adversely affect our business, results of operations and reputation.
As the interpretation and implementation of the Labor Contract Law, the Social Insurance
Law and other labor related regulations (the “ labor-related laws and regulations ”) continually
evolve, we cannot assure you that our employment practices do not and will not violate
labor-related laws and regulations in the PRC, which may subject us to labor disputes or
government investigations. If we are deemed to have violated relevant labor-related laws and
regulations, we could be required to provide additional compensation to our employees and our
business, financial condition and results of operations could be materially and adversely affected.
We are subject to national and local environmental and health and safety directives, laws and
regulations.
We are subject to a number of environmental, fire control and health and safety laws and
regulations, including, but not limited to, the treatment and discharge of pollutants into the
environment during our business operations. In addition, our production lines can only be put into
operation after the relevant administrative authorities in charge of environmental protection, fire
control and health and safety have examined and approved the relevant facilities in China or
certain other jurisdictions. We may not be fully compliant with these requirements and may
experience several isolated immaterial incidents, and cannot assure you that we will be able to
comply with all regulations and obtain all the regulatory approvals required for our production in a
timely manner, or at all. Delays or failures in obtaining all the requisite regulatory approvals of
such facilities may affect our ability to develop, manufacture and commercialize our products in
line with our plans. As requirements imposed by such laws and regulations may change and more
stringent laws or regulations adopted, we may not be able to comply with, or accurately predict
any potential substantial cost of complying with, these laws and regulations. If we fail to comply
with relevant laws and regulations, we may be subject to rectification orders, substantial fines,
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potentially significant monetary damages, or production suspensions in our business operations. In
addition, we cannot fully eliminate the risk of accidental contamination, biological or chemical
hazards or personal injury at our facilities during the process of testing, developing and
manufacturing our products. In the event of an accident involving a breach of any of these laws
and regulations, we could be held liable for damages and clean-up costs which, to the extent not
covered by existing insurance or indemnification, could harm our business. Other adverse effects
could result from such liability, including reputational damage.
Furthermore, we may be required to incur substantial costs to comply with current or future
environmental laws and regulations. These current or future laws and regulations may impair our
R&D or production efforts, or both. Failure to comply with these laws and regulations also may
result in substantial fines, penalties or other sanctions. Any of the foregoing could materially and
adversely affect our business, financial condition, results of operations and prospects.
Failure to comply with PRC property-related laws and regulations regarding certain of our
owned and leased properties may adversely affect our business.
We lease properties mainly for offices and employee dormitories. As of the Latest Practicable
Date, with respect to our eight out of 19 leased properties in China, we have not received real
estate ownership certificates or proof of authorizations from the lessors or the property owners.
These leased properties are used as employee dormitories. Therefore, such lessors may not be
entitled to lease the relevant properties to us. As advised by our PRC Legal Advisor, without valid
real estate ownership certificates or proof of authorizations from the lessors or the property
owners, our use of these leased properties may not be valid or may be affected by third parties’
claims or challenges against the lease. As advised by our PRC Legal Advisor, in case any such
lease is deemed void and we are required to relocate, we are entitled to demand the applicable
lessor to return prepaid rent and indemnify us for damages caused by the title defect. Furthermore,
as of the Latest Practicable Date, we had not obtained real estate certificates for eight owned
properties. See “Business — Properties — Owned Properties.” If we are challenged by third
parties or government authorities upon any of the circumstances stated above, we may be subject
to fines and may be forced to relocate, as the case may be, and, as a result, our results of
operations and financial condition may be adversely affected. Furthermore, if we are not able to
find a suitable location with commercially reasonable terms or on a timely basis or at all, our
operations will be interrupted.
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We are subject to anti-corruption, anti-bribery, sanctions and similar laws, and
noncompliance with such laws can subject us to administrative, civil and criminal fines and
penalties, collateral consequences, remedial measures and legal expenses.
During the Track Record Period, our products were sold in more than 20 countries and
regions, primarily in the Asia, Europe and North America. In 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, our revenue from overseas sales amounted to RMB329.6
million, RMB274.6 million, RMB281.3 million, RMB108.8 million and RMB135.7 million,
respectively, accounting for 23.7%, 19.5%, 15.1%, 17.4% and 16.1% of our total revenue,
respectively, during the same periods. In 2021, 2022, 2023 and the five months ended May 31,
2024, our overseas suppliers amounted to three, three, five and six, respectively. We are subject to
anti-corruption, anti-bribery, sanctions and similar laws and regulations in various countries or
jurisdictions in which we conduct business. We have implemented policies and procedures
designed to ensure compliance by us and our Directors, officers, employees, representatives,
consultants, agents and business partners with laws and regulations. However, our policies and
procedures may not be sufficient, and our directors, officers, employees, representatives,
consultants, agents and business partners may engage in improper conduct for which we may be
held responsible. Specifically, exports of our products must be made in compliance with various
economic sanctions and export control laws in different jurisdictions. We take precautions to
prevent our products from being provided to any target of sanctions. However, we cannot assure
you that our products would not be resold or otherwise provided to such targets by our distributors
or customers. Any such resale or provision could subject us to potential government investigations,
penalties and reputation damage.
During the Track Record Period and up to the Latest Practicable Date, we had not been
involved in any incidents or claims due to anti-corruption, anti-bribery, sanctions and similar laws,
and noncompliance with such laws that had materially and adversely affected our business
operations. Noncompliance with anti-corruption or anti-bribery laws and regulations could subject
us to whistleblower complaints, adverse media coverage and 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, results of operations,
financial condition and reputation.
We may not have sufficient insurance to cover our business risks.
We face various risks in connection with our business, and may lack adequate insurance
coverage or have no relevant insurance coverage. As of the Latest Practicable Date, we had
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 China. As of the Latest Practicable
Date, we had not maintained product liability insurance, and do not carry any business interruption
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or litigation insurance. See “Business — Insurance.” We cannot guarantee that a product liability
claim or other litigation will not be brought against us in the future, or that we will be able to
purchase product liability insurance or other related insurance on acceptable terms. If we were to
incur substantial losses or liabilities due to fire, explosions, floods or other natural disasters,
disruption in our network infrastructure, production facilities or business operations, or any
material litigation, our results of operations could be materially and adversely affected. Our
current insurance coverage may not be sufficient to prevent us from suffering any loss and there is
no certainty that we will be able to successfully claim our losses under our current insurance
policy on a timely basis, or at all. If we were held liable for uninsured losses or amounts and
claims for insured losses exceeding the limits of our insurance coverage, our business, financial
condition and results of operations may be materially and adversely affected.
We are subject to the risks associated with international trade policies, geopolitics and trade
protection measures, and our business, financial condition and results of operations could be
adversely affected.
Our operations may also be negatively affected by any deterioration in the political and
economic relations among countries and sanctions and export controls administered by the
governmental authorities in the countries in which we operate or distribute our products, and other
geopolitical challenges, including, but not limited to, economic and labor conditions, increased
duties, taxes and other costs as well as political instability. Furthermore, concerns over inflation,
energy costs, geopolitical frictions, capital market volatility and liquidity issues may create
difficult operating conditions in the future. Sales of our products in certain countries and sales of
products that include components obtained from certain foreign suppliers could be materially and
adversely affected by international trade regulations, including duties, tariffs and antidumping
penalties. The current tension in international trade and rising political tension, particularly those
between the U.S. and China, may affect the business operations and results of operation of our
customers. This could potentially affect their demand for our LED intelligent vision products. See
“— Demand for our LED products depends on trends and developments in their corresponding end
products and end markets.” The U.S. government recently made statements and took certain
actions that may lead to changes to U.S. and international trade policies, including increasing
tariffs under Section 301 of the Trade Act of 1974 on $18 billion of imports from China. The tariff
rate on imported Chinese EVs is set to increase from 25% to 100% in 2024. Similarly, on October
4, 2024, the European Union members voted to adopt provisional countervailing duties of up to
38.1% on imports of Chinese-made BEVs. A final decision is expected to be issued by the end of
October 2024 if discussions between the authorities fail to reach an effective solution. While our
intelligent automotive vision products can be applied in both EVs and ICE vehicles, and to the
best of our knowledge, EVs that adopt our intelligent automotive vision products were primarily
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sold in China, unfavorable government policies on international trade may affect the demand for
and competitive position of our intelligent automotive vision products. See “Business — Our
Products — Intelligent Automotive Vision — Pipeline of Intelligent Automotive Vision Products.”
The international trade policies and trade protection measures are likely subject to frequent
changes, and their interpretation and enforcement involve substantial uncertainties, which may be
heightened by national security concerns or driven by political and/or other factors that are beyond
our control. These may materially and adversely affect us and our key suppliers’ and customers’
abilities to obtain technologies, systems, devices or components that may be critical to our
technology infrastructure, product offerings and business operations. If any new tariffs, legislation
and/or regulations are implemented by the U.S. or other jurisdictions in the future, or if existing
trade agreements are renegotiated, such changes could adversely affect our business, financial
condition and results of operations. It may also be difficult or costly to comply with such
legislation and/or regulations, and would subject us to regulatory investigations, fines, penalties or
other actions and reputational harm.
We face risks related to natural disasters, health epidemics and other outbreaks, which could
significantly disrupt our operations.
Our business could be materially and adversely affected by natural disasters, such as
snowstorms, earthquakes, fires or floods, outbreaks of a widespread health epidemic or pandemic
(including, without limitation, the COVID-19 pandemic), or other events such as wars, acts of
terrorism, environmental accidents, power outages or communication interruptions. The occurrence
of such a disaster or prolonged outbreak of an epidemic or pandemic illness or other adverse
public health developments in the PRC or elsewhere could materially disrupt our business and
operations. Such events may also significantly affect our industry and may even cause a temporary
closure of the facilities we or our business partners use for our operations, which would severely
disrupt our operations and have a material adverse effect on our business, financial condition and
results of operations. Our operations could be disrupted if any of our employees or employees of
our business partners were suspected of having any of the epidemic or pandemic illnesses, since
this could require us or them to quarantine some or all of such employees or disinfect the facilities
used for our operations. In addition, our revenue and profitability could be materially reduced to
the extent that a natural disaster, health epidemic or pandemic or other outbreaks harm the global
or PRC economy in general.
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RISKS RELATING TO OUR BUSINESS AND INDUSTRY IN THE PRINCIPAL PLACE OF
OUR BUSINESS
Changes in Chinese economic, political and social conditions, as well as government policies,
laws and regulations, and industry practice guidelines, could have a material and adverse
effect on our business, financial condition, results of operations and prospects.
A significant part of our business, assets and operations are located in China. Accordingly,
our business, financial condition and results of operations are subject to the economic, political,
social and regulatory environment in the PRC. Government engagement, economic development,
investment regulation, resource allocation and foreign exchange management of the PRC economy
may have an effect on our business.
Our performance has been and will continue to be affected by China’s economy, which, in
turn, is influenced by the global economy. The uncertainties relating to the global economy as well
as the political environment in various regions of the world will continue to impact China’s
economic growth. We are unable to predict all the risks and uncertainties that we face as a result
of current economic, political, social and regulatory developments, and many of these risks are
beyond our control. All such factors may materially and adversely affect our business and
operations as well as our financial performance.
Changes in currency conversion policies may adversely affect the value of your investment.
We may convert a portion of our revenue into other currencies to meet our foreign currency
obligations, such as payments of operating costs and expenses and payments of dividends declared
in respect of our H Shares, if any. Shortages in the availability of foreign currency may restrict our
ability to remit sufficient foreign currency to pay dividends, or otherwise satisfy our foreign
currency-denominated obligations. Under existing PRC foreign exchange regulations, 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 the PRC to pay capital expenses, such as the repayment of
loans denominated in foreign currencies. According to relevant foreign exchange rules, where any
material imbalance in international receipts and payments occurs or may occur, the PRC
government may implement necessary safeguards and other measures. We cannot assure you that
regulations regarding the remittance of RMB into or out of the PRC will not change in the future.
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Y ou may experience difficulties in effecting service of legal process and enforcing judgments
against us and our management.
We are a company incorporated under the laws of the PRC and substantially all of our business,
assets and operations are located in China. In addition, the majority of our Directors, Supervisors and
executive officers reside in China, and substantially all of the assets of such Directors, Supervisors and
executive officers are located in China. As a result, it may not be possible for you to directly effect
service of process within the United States or elsewhere outside China upon us or such Directors,
Supervisors or executive officers, including with respect to matters arising under U.S. federal securities
laws or applicable state securities laws. China and Hong Kong entered into 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 Pursuant to Choice of Court
Agreements between Parties Concerned which came into effect on August 1, 2008 and was abolished on
January 29, 2024, pursuant to which a party with an enforceable final court judgment rendered by any
designated people’s court of China or any designated Hong Kong court requiring payment of money in a
civil and commercial case according to a written choice of court agreement, may apply for recognition
and enforcement of the judgment in the relevant people’s court of China or Hong Kong court. China and
Hong Kong have concluded the Arrangement on Mutual Recognition and Enforcement of Civil and
Commercial Judgments between the Mainland and the Hong Kong Special Administrative Region, which
took effect on January 29, 2024. Accordingly, the scope of applicable cases for judicial assistance can be
expanded. In principle, judgments made after January 29, 2024 are subject to the provisions of the new
“Arrangement”. However, for cases where the “written jurisdiction agreement” referred to in the old
“Arrangement” was signed before January 29, 2024, the old “Arrangement” still applies regardless
of when the judgment is made. Moreover, China has not entered into a treaty for the reciprocal
recognition and enforcement of court judgments with the United States, the United Kingdom,
Japan and many other countries. In addition, Hong Kong has no arrangement with the United
States for reciprocal enforcement of judgments. 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 courts between China and the country where the judgment was made.
Holders of our H Shares may be subject to income tax obligations in China.
Under the current tax laws and regulations in China, non-Chinese resident individuals and
non-Chinese resident enterprises are subject to different tax obligations with respect to the
dividends paid to them by us and the gains realized upon the sale or other disposition of our H
Shares.
RISK FACTORS
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Non-Chinese resident individuals are required to pay individual income tax at a rate of 20%
under IIT law for the interests, dividends and bonuses they obtain from China. Accordingly, we are
required to withhold such tax from dividend payments, unless applicable tax treaties between
China and the jurisdiction in which the foreign individual resides reduce or provide an exemption
for the relevant tax obligations. Generally, in accordance with the Notice on Matters Concerning
the Levy and Administration of Individual Income Tax After the Repeal of Guo Shui Fa [1993] No.
045 issued by the SAT (਷೼೯ [1993]045੻೼ᅄ၍
), domestic non foreign-invested enterprises issuing shares in Hong Kong may, when
distributing dividends to overseas resident individuals in the jurisdiction of the tax treaty, withhold
individual income tax at the rate of 10%. When a tax rate of 10% is not applicable, the
withholding company shall: (a) return the excess tax amount pursuant to due procedures if the
applicable tax rate is lower than 10%; (b) withhold such foreign individual income tax at the
effective tax rate agreed on if the applicable tax rate is between 10% and 20%; or (c) withhold
such foreign individual income tax at a rate of 20% if no taxation treaty is applicable.
For non Chinese-resident enterprises that do not have establishments or premises in China,
and for those who have establishments or premises in China but whose income is not related to
such establishments or premises under the EIT law, dividends paid by us and gains realized by
such foreign enterprises upon the sale or other disposition of Shares are ordinarily subject to China
enterprise income tax at a rate of 20%. In accordance with the Circular on Issues Relating to the
Withholding of Enterprise Income Tax by Chinese Resident Enterprises on Dividends Paid to
Overseas Non-Chinese Resident Enterprise Shareholders of H Shares (͏ΆุΣྤ̮
H ) issued by the SAT, such tax
rate has been reduced to 10%.
If there is any change to applicable tax laws and regulations or in the interpretation or
application of such laws and regulations, the value of your investment in our H Shares may be
materially affected.
The approval, filing or other requirements of the CSRC or other PRC government authorities
may be required under PRC laws, and we cannot predict whether we will be able to complete
such procedures.
On July 6, 2021, the General Office of the Communist Party of China Central Committee and
the General Office of the State Council jointly promulgated the Opinions on Strictly Cracking
Down on Illegal Securities Activities in accordance with the Law (the “ Opinions on Securities
Activities ”). The Opinions on Securities Activities emphasized the need to strengthen the
administration over illegal securities activities and the supervision on overseas listings by
China-based companies, and proposed to take effective measures, such as promoting the
construction of relevant regulatory systems, to deal with the risks and incidents faced by
China-based overseas-listed companies.
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Furthermore, on February 17, 2023, the CSRC released Trial Administrative Measures for
Overseas Securities Offering and Listing by Domestic Companies ( ྤʫΆุྤ̮೯БᗇՎձɪ
) (the “ Overseas Listing Trial Measures ”) and five relevant guidelines, which
became effective on March 31, 2023. Pursuant to the Overseas Listing Trial Measures, PRC
domestic companies which, after the overseas offerings and listings, offers subsequent securities in
the same overseas market or conducts offering and listing in other overseas markets (the “ Future
Offerings ”), shall complete the filing procedures and report relevant information to the CSRC.
Based on the foregoing, for Future Offerings after the proposed Listing, we are required to
comply with the filing procedure of the CSRC. It is uncertain whether we can or how long it will
take us to complete filings procedures in connection with Future Offerings. We may be subject to
approval, filing or other requirements by other PRC government authorities under PRC laws in the
future. Any failure to complete the relevant procedures may have an adverse effect on a Future
Offerings.
RISKS RELATING TO THE GLOBAL OFFERING
No public market currently exists for our H Shares, and an active trading market for our H
Shares may not develop or be sustained.
Prior to completion of the Global Offering, there has been no public market for our H Shares.
We have applied to the Stock Exchange for the listing of, and permission to deal in, our H Shares.
However, there can be no assurance that an active trading market for our H Shares will develop or
be sustained after completion of the Global Offering. Pursuant to applicable PRC laws, all of the
Shares in issue as of the date of this prospectus will be subject to a lock-up period of one year
from the Listing Date. If an active public market for our H Shares does not develop following
completion of the Global Offering, the market price and liquidity of our H Shares could be
materially and adversely affected. The Offer Price is the result of negotiations between our
Company, the Sole Sponsor and the Sponsor-Overall Coordinator (for itself and on behalf of the
Underwriters), which may differ significantly from the market price at which our H Shares will be
traded following completion of the Global Offering. The market price of our H Shares may drop
below the Offer Price at any time after completion of the Global Offering.
The market price and trading volume of our H Shares may be volatile, which could result in
substantial losses for investors who purchase our H Shares in the Global Offering.
The price and trading volume of our H Shares may be subject to significant volatility in
response to various factors beyond our control, including the political uncertainties in Hong Kong
and the general market conditions of securities in Hong Kong and elsewhere in the world. In
particular, the business and performance of other companies engaging in similar business, and the
market price of their shares, may affect the price and trading volume of our H Shares. In addition
RISK FACTORS
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to market and industry factors, the price and trading volume of our H Shares may be highly
volatile for specific business reasons, such as fluctuations in our revenue, earnings, cash flows and
investments, changes in our pricing policies and expenditures, regulatory developments, demand
for our services, unexpected business interruptions resulting from natural disasters or power
outages, our ability to obtain or maintain regulatory approval for our operations, relationships with
our suppliers, movements or activities of key personnel, or actions taken by competitors.
Moreover, shares of other companies listed on the Hong Kong Stock Exchange with significant
operations and assets in China have experienced price volatility and fluctuations in trading volume
in the past, and it is possible that our H Shares may be subject to fluctuations in price and volume
not directly related to our performance but related to the overall political and economic conditions
in Hong Kong, the PRC or elsewhere in the world.
Our Controlling Shareholders have substantial influence over our Group and their interests
may not be aligned with the interests of our other Shareholders.
Our Controlling Shareholders 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 the Offer Size Adjustment Option is not exercised),
the Controlling Shareholder Group will continue to control in aggregate approximately 44.13% of
our total share capital. Therefore, they will remain as a group of our Controlling Shareholders. The
interests of our Controlling Shareholders might differ from the interests of our other Shareholders.
In the event that our Controlling Shareholders 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
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.
We cannot assure you when, whether and in what form or amount we will pay dividends in
the future.
Our ability to pay dividends will depend on whether we are able to generate sufficient
earnings. Distributions of dividends shall be decided by our Board of Directors at their discretion
and will be subject to the approval of the general meeting. A decision to declare or to pay
dividends and the amount thereof depend on various factors, including, but not limited to our
results of operations, cash flows and financial condition, operating and capital expenditure
requirements, distributable profits as determined under PRC GAAP or IFRS (whichever is lower),
our Articles of Association and other constitutional documents, the PRC Company Law and any
other applicable laws and regulations in China, market conditions, our strategy and projection for
RISK FACTORS
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our business, contractual restrictions and obligations, taxation, regulatory restrictions and any other
factors from time to time deemed by our Board of Directors as relevant to the declaration or
suspension of dividends. As a result, there can be no assurance whether, when and in what form
we will pay dividends in the future. Subject to any of the above constraints, we may not be able to
pay dividends in accordance with our dividend policy.
Purchasers of our H Shares will experience immediate dilution, and a future significant
increase or perceived significant increase in the supply of our H Shares in public markets
could cause the market price of our H Shares to decrease significantly and/or dilute
shareholdings of holders of our H Shares.
The Offer Price of the Offer Shares may be higher than the net tangible book value per Share
immediately prior to the Global Offering. As a result, you and other purchasers of the Offer Shares
in the Global Offering may experience an immediate dilution to a pro forma net tangible asset
value of HK$2.35 per H Share, based on the Offer Price of HK$3.61 per H Share.
Facts, forecasts and statistics in this prospectus may come from various sources and may not
be fully reliable.
Some of the facts, forecasts and statistics in this prospectus are derived from various
publications of governmental agencies or publicly available sources and obtained during
communications with various government agencies or independent third parties that our Directors
believe are reliable. However, there can be no guarantee of the quality or reliability of such
materials. Our Directors believe that the sources of the information are appropriate and have taken
reasonable care in extracting and reproducing such information. They do not believe that such
information is false or misleading or that any material fact has been omitted that would render
such information false or misleading. The information from official government sources has not
been independently verified by our Group, the Sole Sponsor or any other party involved in the
Global Offering and no representation is given as to its accuracy or completeness. Due to the
possibly flawed or ineffective sampling or discrepancies between published information and
market practices or other reasons, such facts and statistics may be inaccurate or may not be
comparable to official statistics. You should not place undue reliance on them. You should consider
how much weight or importance such facts or statistics carry and should not place undue reliance
on them.
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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 “believe,” “expect,” “estimate,” “predict,” “aim,” “intend,”
“will,” “may,” “plan,” “consider,” “anticipate,” “seek,” “should,” “could,” “would,” “continue,”
and other 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
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.
Y ou 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.
We strongly caution you not to rely on any information contained in press articles or other
media regarding us and the Global Offering. Prior to the publication of this prospectus, there has
been press and media coverage regarding us and the Global Offering. Such press and media
coverage may include references to certain information that does not appear in this prospectus,
including certain operating and financial information and projections, valuations and other
information. We have not authorized the disclosure of any such information in the press or media
and do not accept any responsibility for any such press or media coverage or the accuracy or
completeness of any such information or publication. We make no representation as to the
appropriateness, accuracy, completeness or reliability of any such information or publication. To
the extent that any such information is inconsistent or conflicts with the information contained in
this prospectus, we disclaim responsibility for it and you should not rely on such information.
RISK FACTORS
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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.
W AIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, our Company must have sufficient management
presence in Hong Kong, which normally means that at least two executive directors must be
ordinarily resident in Hong Kong. Rule 19A.15 of the Listing Rules further provides that the
requirement in Rule 8.12 may be waived by having regard to, among other considerations, the
applicant’s arrangements for maintaining regular communication with the Stock Exchange.
Given that (i) our core business operations are principally located, managed and conducted in
the PRC under the supervision of our executive Director and senior management; and (ii) our
executive Director and senior management principally reside in the PRC, our Company considers
that it would be more practical for the executive Director and senior management of our Company
to remain ordinarily resident in the PRC where our Group has substantial operations. For the above
reasons, we do not have, and do not contemplate in the foreseeable future that we will have
sufficient management presence in Hong Kong for the purpose of satisfying the requirement under
Rule 8.12 of the Listing Rules.
Accordingly, pursuant to Rule 19A.15 of the Listing Rules, we have applied to the Stock
Exchange for, and the Stock Exchange has granted us, a waiver from strict compliance with Rules
8.12 and 19A.15 of the Listing Rules. We will ensure that there are adequate and efficient
arrangements to achieve regular and effective communication between us and the Stock Exchange
as well as compliance with the Listing Rules by way of the following arrangements:
(a) we have appointed Mr. Xiao and Mr. ZHENG Longfeng (“ Mr. Zheng ”) as the
authorized representatives (the “ Authorized Representatives ”) for the purpose of Rule
3.05 of the Listing Rules, who will act as our principal channel of communication with
the Stock Exchange and would be readily contactable by phone, facsimile and email to
deal promptly with enquiries from the Stock Exchange. The Authorized Representatives
possess valid travel documents and are able to renew such travel documents when they
expire in order to visit Hong Kong, and accordingly, they will be available to meet with
the Stock Exchange to discuss any matters on short notice. We have also appointed Mr.
CHUNG Ming Fai, our joint company secretary and who is ordinarily resident in Hong
Kong, as an alternate to the Authorized Representatives.
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(b) to facilitate communication with the Stock Exchange, we have provided the Authorized
Representatives, the alternate authorized representative and the Stock Exchange with the
contact details of our Directors (i.e. mobile phone number, office phone number and
email address (as applicable)). In the event that any of our Directors expects to travel or
otherwise be out of office, he or she will provide the phone number of the place of
his/her accommodation to the Authorized Representatives and the alternate authorized
representative, so that the Authorized Representatives and the alternate authorized
representative would be able to contact all our Directors (including the independent
non-executive Directors) promptly at all times if and when the Stock Exchange wishes
to contact our Directors. To the best of our knowledge and information, each Director
who is not ordinarily resident 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 after requested by the Stock Exchange.
(c) we have appointed Maxa Capital Limited as our compliance advisor (the “ Compliance
Advisor ”) in compliance with Rule 3A.19 of the Listing Rules. The Compliance Advisor
will, among other things and in addition to the Authorized Representatives, provide us
with professional advice on continuing obligations under the Listing Rules and act as
additional channel of communication of our Company with the Stock Exchange during
the period from the Listing Date to the date on which our Company complies with Rule
13.46 of the Listing Rules in respect of its financial results for the first full financial
year immediately after the Listing. The Compliance Advisor will be available to answer
enquiries from the Stock Exchange and will act as an additional channel of
communication with the Stock Exchange when the Authorized Representatives are not
available.
W AIVER IN RELATION TO JOINT COMPANY SECRETARIES
Rule 8.17 of the Listing Rules provides that our Company must appoint a company secretary
who satisfies the requirements under Rule 3.28 of the Listing Rules. According to Rule 3.28 of the
Listing Rules, our Company must appoint an individual, who, by virtue of his academic or
professional qualifications or relevant experience, is, in the opinion of the Stock Exchange,
capable of discharging the functions of company secretary. Pursuant to Note 1 to Rule 3.28 of the
Listing Rules, the Stock Exchange considers the following academic or professional qualifications
to be acceptable:
(a) a member of The Hong Kong Chartered Governance Institute;
(b) a solicitor or barrister (as defined in the Legal Practitioners Ordinance (Chapter 159 of
the Laws of Hong Kong)); and
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(c) a certified public accountant (as defined in the Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong)).
In addition, pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing “relevant
experience”, the Stock Exchange will consider the individual’s:
(a) length of employment with the issuer and other issuers and the roles he played;
(b) familiarity with the Listing Rules and other relevant laws and regulations including the
Securities and Futures Ordinance, Companies Ordinance, Companies (Winding Up and
Miscellaneous Provisions) Ordinance and the Takeovers Code;
(c) relevant training taken and/or to be taken in addition to the minimum requirement under
Rule 3.29 of the Listing Rules; and
(d) professional qualifications in other jurisdictions.
Our Company considers that while it is important for the company secretaries to be familiar
with the relevant securities regulation in Hong Kong, they also need to have experience relevant to
our Company’s operations, nexus to the Board and close working relationship with the
management of our Company in order to perform the function of a company secretary and to take
necessary actions in the most effective and efficient manner. It is for the benefit of our Company
to appoint a person who has been a member of the senior management for a period of time and is
familiar with our Company’s business and affairs as company secretary.
We have appointed Mr. Zheng as one of the joint company secretaries of our Company. Mr.
Zheng currently serves as the board secretary of the Company and has substantial experience in
handling corporate, legal and regulatory compliance and administrative matters but personally does
not process any of the qualifications under Rules 3.28 and 8.17 of the Listing Rules and may not
be able to solely fulfill the requirements of the Listing Rules. Therefore, our Company has
appointed Mr. CHUNG Ming Fai (“ Mr. Chung ”), a fellow member of the Hong Kong Institute of
Certified Public Accountants, who fully meets the requirements stipulated under Rules 3.28 and
8.17 of the Listing Rules to act as one of our joint company secretaries and to provide assistance
to Mr. Zheng for an initial period of three years from the Listing Date to enable Mr. Zheng to
acquire the “relevant experience” under Note 2 to Rule 3.28 of the Listing Rules so as to fully
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comply with the requirements set forth under Rules 3.28 and 8.17 of the Listing Rules. See
“Directors, Supervisors and Senior Management” in this prospectus for further biographical details
of Mr. Zheng and Mr. Chung. The following arrangements have been, or will be, put in place to
assist Mr. Zheng in acquiring the qualifications and experience as the company secretary of our
Company required under Rule 3.28 of the Listing Rules:
(a) Mr. Zheng will endeavor to attend relevant training courses, including briefings on the
latest changes to the relevant applicable Hong Kong laws and regulations and the
Listing Rules which will be organized by our Company’s Hong Kong legal advisors on
an invitation basis and seminars organized by the Stock Exchange for listed issuers from
time to time.
(b) Both Mr. Zheng and Mr. Chung have confirmed that each of them will be attending a
total of no less than 15 hours of training courses on the Listing Rules, corporate
governance, information disclosure, investors relation as well as the functions and duties
of the company secretary of a Hong Kong listed issuer during each financial year as
required under Rule 3.29 of the Listing Rules.
(c) Mr. Chung will assist Mr. Zheng to enable him to acquire the relevant experience (as
required under Rule 3.28 of the Listing Rules) to discharge the duties and
responsibilities as the company secretary of our Company.
(d) Mr. Chung will communicate regularly with Mr. Zheng on matters relating to corporate
governance, the Listing Rules and any other laws and regulations which are relevant to
our Company and its affairs. Mr. Chung will work closely with, and provide assistance
to, Mr. Zheng in the discharge of his duties as a company secretary, including
organizing our Company’s Board meetings and Shareholders’ general meetings.
(e) Prior to the expiry of Mr. Zheng’s initial term of appointment as the company secretary
of our Company, we will evaluate his experience to determine if he has acquired the
qualifications required under Rule 3.28 of the Listing Rules, and whether on-going
assistance should be arranged so that Mr. Zheng’s appointment as the company secretary
of our Company continues to satisfy the requirements under Rules 3.28 and 8.17 of the
Listing Rules.
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(f) The Company has appointed Maxa Capital Limited as its Compliance Advisor pursuant
to Rule 3A.19 of the Listing Rules which will act as the additional communication
channel with the Stock Exchange (for a period commencing on the Listing Date and
ending on the date on which the Company complies with Rule 13.46 of the Listing
Rules in respect of its financial results for the first full financial year immediately after
the Listing Date, or until the engagement is terminated, whichever is earlier) and
provide professional guidance and advice to the Company (including Mr. Zheng) as to
the compliance with the Listing Rules and all other applicable laws and regulations.
Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange has granted
us, a waiver from strict compliance with Rules 3.28 and 8.17 of the Listing Rules. Such waiver
will be revoked immediately if and when (i) Mr. Zheng ceases to be assisted by a person with
qualifications under Rules 3.28 and 8.17 of the Listing Rules, or (ii) if there are material breaches
of the Listing Rules by our Company. Before the end of the three-year period, we shall
demonstrate to the Stock Exchange’s satisfaction and seek its confirmation that Mr. Zheng, having
had the benefit of Mr. Chung’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.
W AIVER IN RELATION TO NON-EXEMPT CONTINUING CONNECTED
TRANSACTIONS
We have entered into and are expected to continue with certain transactions after the Listing
which will constitute non-exempt continuing connected transactions under Chapter 14A of Listing
Rules. We have applied for, and the Hong Kong Stock Exchange has granted us, waivers from
strict compliance with (i) the announcement requirement under Chapter 14A of the Listing Rules
in respect of the continuing connected transactions as disclosed in the section headed “Connected
Transactions — Non-Exempt Continuing Connected Transaction (Subject to Reporting, Annual
Review and Announcement Requirements)”; and (ii) the announcement, circular and independent
Shareholders’ approval requirements under Chapter 14A of the Listing Rules in respect of the
continuing connected transaction as disclosed in “Connected Transactions — Non-exempt
Continuing Connected Transaction (Subject to Reporting, Annual Review, Announcement, Circular
and Independent Shareholders’ Approval Requirements).”
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DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors collectively and individually accept full
responsibility, includes particulars given in compliance with the Companies (Winding up and
Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules
(Chapter 571V of the Laws of Hong Kong) and the Listing Rules for the purpose of giving
information to the public with regard to us. 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 facts the omission of which would make this prospectus or any statement in this prospectus
misleading.
CSRC FILING REQUIREMENT
The CSRC issued notice of filing on June 1, 2024 for the Global Offering and for the
submission of the application to list our H Shares on the Hong Kong Stock Exchange. In granting
its notice of filing, the CSRC accepts no responsibility for our financial soundness, nor for the
accuracy of any of the statements made or opinions expressed in this prospectus.
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public Offering which
forms part of the Global Offering. For applicants 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 3,360,000 H Shares and the
International Offering of initially 30,240,000 H Shares (subject, in each case, to the Offer Size
Adjustment Option and reallocation on the basis described in the section headed “Structure of the
Global Offering” in this prospectus).
The listing of the Offer Shares on the Hong Kong Stock Exchange is sponsored by the Sole
Sponsor. Pursuant to the Hong Kong Underwriting Agreement, the Hong Kong Public Offering is
underwritten by the Hong Kong Underwriters on a conditional basis. The International Offering is
managed by the Sole Overall Coordinator and is underwritten by the International Underwriters.
The International Underwriting Agreement is expected to be entered into on or about November 6,
2024. Further details about the Underwriters and the underwriting arrangements are contained in
the section headed “Underwriting” in this prospectus.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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RESTRICTIONS ON OFFER AND SALE OF SHARES
No action has been taken to permit a Hong Kong Public Offering of the Offer Shares or the
general distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, this
prospectus may not be used for the purposes 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. The distribution of this
prospectus and the offering and sales 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. Each person acquiring the Hong Kong Offer Shares under
the Hong Kong Public Offering will be required to confirm, or be deemed by his acquisition of
Hong Kong Offer Shares to confirm, that he is aware of the restrictions on offers and sales of the
Offer Shares described in this prospectus. In particular, the Offer Shares have not been offered or
sold, and will not be offered or sold, directly or indirectly, in the PRC.
The Offer Shares are offered for subscription 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 in connection with the Global Offering to give any
information, or to make any representation not contained in this prospectus, and any information
or representation not contained in this prospectus must not be relied upon as having been
authorized by the Company, the Sole Sponsor, the Sole Overall Coordinator, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the Capital
Market Intermediaries, any of their respective directors, officers, employees, agents, affiliates or
advisors or any other persons or parties involved in the Global Offering. For further details of the
structure of the Global Offering, including its conditions, and the procedures for applying for
Hong Kong Offer Shares, see the sections headed “Structure of the Global Offering”, “How to
Apply for Hong Kong Offer Shares” in this prospectus.
APPLICATION FOR LISTING ON THE HONG KONG STOCK EXCHANGE
We have applied to the Listing Committee for the granting of listing of, and permission to
deal in, (i) our H Shares to be issued pursuant to the Global Offering, and (ii) the H Shares to be
converted from our existing Domestic Unlisted Shares. Dealings in the H Shares on the Hong
Kong Stock Exchange are expected to commence on Friday, November 8, 2024. No part of our H
Shares is listed on or dealt in on any other stock exchange, and no such listing or permission to
list is being or proposed to be sought in the near future.
The H Shares will be traded in board lot of 1,000 H Shares. The stock code of the H Shares
is 2551.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotments made in respect of any applications will be invalid if the listing of, and
permission to deal in, the Offer 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 the Company
by the Hong Kong Stock Exchange.
COMPLIANCE WITH LISTING RULES
We will comply with applicable laws and regulations in Hong Kong (including the Listing
Rules) and any other undertakings which have been given in favor of the Hong Kong Stock
Exchange from time to time. If the Listing Committee finds that there has been a breach by us of
the Listing Rules or such other undertakings which may have been given by us in favor of the
Hong Kong Stock Exchange from time to time, the Listing Committee may instigate cancellation
or disciplinary proceedings in accordance with the Listing Rules.
REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF H SHARES
We have instructed the H Share Registrar, and the H Share Registrar has agreed, not to
register the subscription, purchase or transfer of any H Shares in the name of any particular
holders unless the holder delivers a signed form to the H Share Registrar in respect of those H
Shares bearing statements to the effect that the holder:
(i) agrees with us and each of our Shareholders, and we agree with each Shareholder, to
observe and comply with the PRC Company Law, and our Articles of Association;
(ii) agrees with us, each of our Shareholders, Directors, Supervisors, managers and officers,
and we, acting for ourselves and for each of our Directors, Supervisors, managers and
officers agree with each Shareholder, to refer all differences and claims arising from our
Articles of Association or any rights or obligations conferred or imposed by the
Company Law or other relevant laws and administrative regulations concerning our
affairs to arbitration, and any reference to arbitration shall be deemed to authorize the
arbitration tribunal to conduct hearings in open session and to publish its award, which
shall be final and conclusive;
(iii) agrees with us and each of our Shareholders that our H Shares are freely transferable by
the holders of our H Shares; and
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(iv) authorizes us to enter into a contract on his or her behalf with each of our Directors,
Supervisors, managers and officers whereby such Directors, Supervisors, managers and
officers undertake to observe and comply with their obligations to our Shareholders as
stipulated in our Articles of Association. Persons applying for or purchasing H Shares
under the Global Offering are deemed, by their making of an application or purchase, to
have represented that they are not associates of any of our Directors or existing
Shareholder or a nominee of any of the foregoing.
H SHARE REGISTER AND STAMP DUTY
All H Shares issued pursuant to applications made in the Hong Kong Public Offering and the
International Offering will be registered on the Company’s H Share register of members to be
maintained by our H Share Registrar, Computershare Hong Kong Investor Services Limited, in
Hong Kong. We will maintain the Company’s principal register of members at our current
registered office in the PRC.
Dealings in our H Shares registered in the H Share register of members of the Company in
Hong Kong will be subject to Hong Kong stamp duty. For further details, please seek professional
tax advice.
H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of listing of, and permission to deal in, our H Shares on the Hong
Kong Stock Exchange and our compliance 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 date of commencement of dealings in our H Shares on the Hong
Kong Stock Exchange or any other date as HKSCC chooses. Settlement of any 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 advisors for details of the settlement
arrangements as such arrangements may affect their rights and interests. All necessary
arrangements have been made for our H Shares to be admitted into CCASS.
PROFESSIONAL TAX ADVICE RECOMMENDED
Applicants for the Offer Shares are recommended to consult their professional advisors if
they are in any doubt as to the taxation implications of subscribing for, purchasing, holding,
disposing of and dealing in our H Shares or exercising rights attached to them. None of the
Company, the Underwriters, the Sole Sponsor, the Sole Overall Coordinator, the Joint Global
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries,
any of their respective directors, supervisors, officers, employees, agents or advisors or any other
persons involved in the Global Offering accepts responsibility for any tax effects or liabilities of
holders of Shares resulting from the subscription, purchase, holding or disposal of, or dealing in,
our H Shares.
PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES
The procedures for applying for the Hong Kong Offer Shares are set out in the section headed
“How to Apply for Hong Kong Offer Shares” in this prospectus and on the relevant Applications
Forms.
STRUCTURE OF THE GLOBAL OFFERING
Details of the structure of the Global Offering, including its conditions, are set out in the
section headed “Structure of the Global Offering” in this prospectus.
LANGUAGE
The English names of the PRC nationals, entities, departments, facilities, certificates, titles,
laws, regulations and the like are translations of their Chinese names and are included herein for
identification purposes only. If there is any inconsistency, the Chinese name prevails.
ROUNDING
Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments, or have been rounded to one decimal place. Any discrepancies in any tables
or charts between the total shown and the sums of the amounts listed are due to rounding.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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CURRENCY TRANSLATIONS
Unless otherwise specified, this prospectus contains certain translations for the convenience
purpose at the following rates:
US$1.00: HK$7.7695
US$1.00: RMB7.0982
HK$1.00: RMB0.9136
None should be regarded as and be interpreted as an amount in one currency that can be on
the relevant dates or any other dates actually converted into that in another currency at the rates
above or cannot be converted at all.
Further information on exchange rates is set forth in “Appendix III — Taxation and Foreign
Exchange” in this prospectus.
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For further information on our Directors and Supervisors, see “Directors, Supervisors and
Senior Management” in this prospectus.
DIRECTORS
Name Address Nationality
Executive Director
Mr. XIAO Guowei David 15 Hainingsan Street
Huanshi Road West
Nansha District, Guangzhou
Guangdong Province, PRC
Chinese
(Hong Kong)
Non-executive Directors
Mr. CHAN Philip Ching Ho Flat 2A, Tower 10, Mayfair By The Sea II
21 Fo Chun Road
Tai Po, New Territories
Hong Kong
Chinese
(Hong Kong)
Mr. YUAN Lie Ming Peter House 12A, Headland Road
Repulse Bay
Hong Kong
Chinese
(Hong Kong)
Mr. WU Nan-Yang 5/F, No. 8, Lane 215, Section 2
Jinshan S Road
Da’an District
Taipei
Taiwan
Chinese
(Taiwan)
Mr. ZHENG Xin 919 Cuibai Road
Pudong New District
Shanghai, PRC
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Name Address Nationality
Independent non-executive
Directors
Ms. ZHANG He
(former name: ZHANG
Xiaomiao)
Room 601, Unit 1, Building 7, Section 3
33 Chang’an Middle Road
Yanta District, Xi’an
Shaanxi Province, PRC
Chinese
Ms. LIN Nan No. 3, 355 Jipu Road
Yangpu District
Shanghai, PRC
Chinese
Ms. DING Hui 9-10702, Wutong Xishe
Jiaotong University Innovation Harbor
Chang’an District, Xi’an
Shaanxi Province, PRC
Chinese
Mr. CHAN Chi Kong Flat A, 29/F, Block 2
The Waterfront
1 Austin Road West
Kowloon
Hong Kong
Chinese
(Hong Kong)
SUPERVISORS
Name Address Nationality
Mr. LI Wenhong Room 1807, Building 13
A6, Chanba Bandao
1228 Chanba Avenue
Chanba Ecological Area, Xi’an
Shaanxi Province
PRC
Chinese
Ms. LUO Xiaoyun Room 903
175 Middle Jiangnan Avenue
Haizhu District, Guangzhou
Guangdong Province, PRC
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Name Address Nationality
Mr. OU Weineng Room 303, Building 2, Lingcheng Tower
1 Huancheng East Road, Dagang Town
Nansha District, Guangzhou
Guangdong Province, PRC
Chinese
PARTIES INVOLVED IN THE GLOBAL OFFERING
Sole Sponsor CITIC Securities (Hong Kong) Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
Sponsor-Overall Coordinator,
Sole Overall Coordinator
CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
Joint Global Coordinators CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
27/F, GF Tower
81 Lockhart Road
Wan Chai
Hong Kong
Sinolink Securities (Hong Kong) Company
Limited
Unit 3501−08, 35/F, Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
Joint Bookrunners CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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GF Securities (Hong Kong) Brokerage Limited
27/F, GF Tower
81 Lockhart Road
Wan Chai
Hong Kong
Sinolink Securities (Hong Kong) Company
Limited
Unit 3501−08, 35/F, Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
BOCI Asia Limited
26/F Bank of China Tower
1 Garden Road
Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
ICBC International Securities Limited
37/F ICBC Tower
3 Garden Road
Hong Kong
China Galaxy International Securities (Hong
Kong) Co., Limited
20/F Wing On Centre
111 Connaught Road Central
Hong Kong
China Sunrise Securities (International) Limited
Unit 4502, 45/F The Center
99 Queen’s Road Central
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Futu Securities International (Hong Kong)
Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
Patrons Securities Limited
Unit 3214, 32/F., Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, 308 Central Des V oeux
308 Des V oeux Road Central
Hong Kong
Joint Lead Managers CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
27/F, GF Tower
81 Lockhart Road
Wan Chai
Hong Kong
Sinolink Securities (Hong Kong) Company
Limited
Unit 3501−08, 35/F, Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
BOCI Asia Limited
26/F Bank of China Tower
1 Garden Road
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
ICBC International Securities Limited
37/F ICBC Tower
3 Garden Road
Hong Kong
China Galaxy International Securities (Hong
Kong) Co., Limited
20/F Wing On Centre
111 Connaught Road Central
Hong Kong
China Sunrise Securities (International) Limited
Unit 4502, 45/F The Center
99 Queen’s Road Central
Central
Hong Kong
Futu Securities International (Hong Kong)
Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
Patrons Securities Limited
Unit 3214, 32/F., Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, 308 Central Des V oeux
308 Des V oeux Road Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Capital Market Intermediaries CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
27/F, GF Tower
81 Lockhart Road
Wan Chai
Hong Kong
Sinolink Securities (Hong Kong) Company
Limited
Unit 3501−08, 35/F, Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
BOCI Asia Limited
26/F Bank of China Tower
1 Garden 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
ICBC International Securities Limited
37/F ICBC Tower
3 Garden Road
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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China Galaxy International Securities (Hong
Kong) Co., Limited
20/F Wing On Centre
111 Connaught Road Central
Hong Kong
China Sunrise Securities (International) Limited
Unit 4502, 45/F The Center
99 Queen’s Road Central
Central
Hong Kong
Futu Securities International (Hong Kong)
Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
Patrons Securities Limited
Unit 3214, 32/F., Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, 308 Central Des V oeux
308 Des V oeux Road Central
Hong Kong
Auditor and Reporting Accountant Ernst & Y oung
Certified Public Accountants
Registered Public Interest Entity Auditor
27/F, One Taikoo Place
979 King’s Road, Quarry Bay
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Legal Advisors to the Company As to Hong Kong and United States laws:
Clifford Chance
27/F, Jardine House
One Connaught Place
Central
Hong Kong
As to PRC law:
AllBright Law Offices
9, 11/F−12/F, Shanghai Tower
No. 501 Yincheng Middle Road
Pudong New Area
Shanghai, PRC
Legal Advisors to the Sole Sponsor and
the Underwriters
As to Hong Kong and United States laws:
Sidley Austin
39/F, Two International Finance Centre
8 Finance Street
Central
Hong Kong
As to PRC law:
Haiwen & Partners
20/F, Fortune Financial Center
5 Dong San Huan Central Road
Chaoyang District
Beijing, PRC
Industry Consultant China Insights Industry Consultancy Limited
10F, Block B, Jing’an International Center
88 Puji Road, Jing’an District
Shanghai, PRC
Receiving Bank Bank of China (Hong Kong) Limited
1 Garden Road
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Registered Office No. 33, Huanshi Road South
Nansha District, Guangzhou
Guangdong Province, PRC
Headquarters and Principal Place of
Business in the PRC
No. 33, Huanshi Road South
Nansha District, Guangzhou
Guangdong Province, PRC
Principal Place of Business in Hong
Kong
Unit 322, 3/F
19W, Science Park West Avenue
Hong Kong Science Park
Pak Shek Kok
New Territories
Hong Kong
Company’s Website www.apt-hk.com
(The information contained in this website does not
form part of this prospectus)
Joint Company Secretaries Mr. ZHENG Longfeng
No. 33, Huanshi Road South
Nansha District, Guangzhou
Guangdong Province, PRC
Mr. CHUNG Ming Fai, FCP A, CP A (Aust.)
40/F Dah Sing Financial Centre
248 Queen’s Road East
Wanchai
Hong Kong
Authorized Representatives Mr. XIAO Guowei David
15 Hainingsan Street
Huanshi Road West
Nansha District, Guangzhou
Guangdong Province, PRC
Mr. ZHENG Longfeng
No. 33, Huanshi Road South
Nansha District, Guangzhou
Guangdong Province, PRC
CORPORATE INFORMATION
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Alternate to the Authorized
Representatives
Mr. CHUNG Ming Fai
40/F Dah Sing Financial Centre
248 Queen’s Road East
Wanchai
Hong Kong
Strategy Committee Mr. XIAO Guowei David (Chairperson)
Mr. CHAN Philip Ching Ho
Mr. YUAN Lie Ming Peter
Mr. WU Nan-Yang
Ms. LIN Nan
Audit Committee Ms. ZHANG He (Chairperson)
Ms. LIN Nan
Mr. CHAN Chi Kong
Remuneration and Appraisal
Committee
Ms. LIN Nan (Chairperson)
Mr. XIAO Guowei David
Ms. DING Hui
Nomination Committee Ms. DING Hui (Chairperson)
Mr. XIAO Guowei David
Ms. ZHANG He
Compliance Advisor Maxa Capital Limited
Unit 2602, 26/F, Golden Centre
188 Des V oeux Road
Sheung Wan
Hong Kong
H Share Registrar Computershare Hong Kong Investor Services
Limited
Shops 1712−1716
17th Floor, Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
CORPORATE INFORMATION
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Principal Banks Bank of China Nansha Jinzhou Branch
First Floor, 93 Jinling North Road
Nansha District, Guangzhou
Guangdong Province, PRC
China Merchants Bank Nansha Branch
F/5, Nanshacheng
8 Jingang Avenue
Nansha District, Guangzhou
Guangdong Province, PRC
Bank of Communications Ninghai Branch
Building 2, Financial Center
1 Xuemian Road
Ninghai County, Ningbo
Zhejiang Province, PRC
CORPORATE INFORMATION
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Certain information and statistics presented in this section and elsewhere in this document
were derived from official government publications and other publicly available sources as well
as from the CIC Report, a market research report prepared by CIC, an independent market
research and consulting company that was commissioned by us. We believe that the sources of
the information in this section and elsewhere in this document are appropriate sources for such
information and reasonable care has been taken in extracting and reproducing such
information. The information from official government sources has not been independently
verified by us or the Sole Sponsor , the Sole Overall Coordinator , the Joint Global Coordinators,
the Joint Bookrunners, the Joint Lead Managers and the Underwriters or any of our or their
respective directors, officers, or representatives, and no representation is given as to its
accuracy.
SOURCES OF INFORMATION
We commissioned CIC, an independent market research and consulting company founded in
Hong Kong and engaging in the provision of professional consulting services across multiple
industries, to conduct an analysis of and report on the LED intelligent vision market in China. The
CIC Report was prepared by CIC independent of our influence. The fee paid for the preparation of
the CIC Report was RMB580,000, which we believe reflects the market rate for such reports.
The information and data collected by CIC have been analyzed, assessed and validated using
CIC’s in-house analysis models and techniques. Primary research was conducted via interviews
with key industry experts and leading industry participants. Secondary research involved analyzing
market data obtained from several publicly available data sources. The methodology used by CIC
is based on analyzing information gathered from multiple levels and ensures that this information
is cross-referenced for reliability and accuracy.
The market projections in the CIC Report are based on the following key assumptions: (i) the
overall social, economic and political environment in China is expected to remain stable during the
forecast period; (ii) the economic and industry development in China is likely to maintain a steady
growth trajectory during the forecast period, accompanied by continuing urbanization; (iii) related
key industry drivers are likely to propel continued growth in China’s LED intelligent vision
industry throughout the forecast period; and (iv) there will be no extreme force majeure event or
unforeseen industry regulation that may significantly or fundamentally affect the relevant market
and industry.
Our Directors confirm that after taking reasonable enquiries, there had been no material
adverse change in the market information since the date of the CIC Report which may qualify,
contradict or have an impact on the information set out in this section. Except as otherwise
mentioned, all data and forecasts contained in this section are extracted from the CIC Report.
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ANALYSIS OF CHINA’S LED INTELLIGENT VISION MARKET
Definition and Categorization of the LED Intelligent Vision Market
LED intelligent vision employs LED technology to achieve intelligent lighting and display
functions. “Intelligence” refers to the ability to acquire, analyze and understand information, and
to use knowledge to solve complex problems, adapt to environmental changes and make effective
decisions. It encompasses wide range of cognitive functions including learning, comprehension and
reasoning. Based on its applications, it can be categorized into three types, including intelligent
automotive vision, high-end lighting and advanced display.
 Intelligent automotive vision refers to automotive lighting systems for vehicles,
encompassing interior lights and exterior lights. These include intelligent automotive
lamps, automotive-grade LED devices and modules. In the scenario of intelligent
automotive vision, “intelligence” refers to the automotive lamps’ ability to achieve
automated and adaptive lighting functions through the integration of advanced sensors,
control algorithms and electronic technology. This enhances road safety and driving
experience and features energy-saving and personalized settings, reflecting the high-tech
nature of automotive vision.
 High-end lighting mainly comprises high-end indoor and outdoor lighting, horticultural
lighting, and UV or IR special lighting, etc. High-end lighting encompasses a variety of
applications, including outdoor lighting, horticultural lighting, commercial lighting,
health lighting, intelligent lighting, and non-visible light applications. It excludes white
LED used for general lighting with power less than 1W, color rendering index less than
90, L
70 lifetime of at least 30,000 hours and luminous efficacy no greater than 180
lm/W. Outdoor lighting typically features power greater than or equal to 2W and an L 70
lifetime of at least 70,000 hours. Horticultural lighting commonly has power greater
than or equal to 2W, a Q
70 lifetime of at least 100,000 hours, a photoelectric conversion
efficiency of at least 80%, and includes a variety of colors such as deep red, far-red,
blue and white. Commercial lighting generally has power greater than or equal to 2W
and a color rendering index greater than 90.
 Advanced display refers to the application of LED technology, either as backlights or as
direct view LED displays, to produce visual displays. Backlight displays are mainly
used in liquid crystal display televisions (LCD TVs), personal computers (PCs),
smartphones and other devices, while direct view LED display screens are mainly
applied in outdoor advertising, stage display, etc.
With the advancement of LED technologies and the widespread application of LED products,
the industry has witnessed a shift towards “LED+” technologies. According to the Guangdong
Illuminating Engineering Society, “LED+” technologies have become the industry norm, widely
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adopted by the industry and extensively cited by organizations and entities. “LED+” technologies
refers to the integration of LED technologies with integrated circuits, electronic control, software,
sensors, optics and other related components. LED technologies combined with sensors allow LED
products to incorporate a range of sensor types, including light sensors, temperature sensors and
motion sensors. This enables LED lighting to automatically adapt their brightness and turn on or
off in response to changes in ambient light, fluctuations in temperature, or human activity. In
addition, the integration of LED technologies with electronic control can realize sophisticated
lighting scene control, dimming adjustment and color tuning, as well as energy-saving strategies.
“LED+” technologies are environmentally friendly, more energy-efficient and constantly undergo
rapid advancements.
The “+” represents additional value and functionality that goes beyond traditional LED
lighting. It signifies the incorporation of innovative technology and intelligent design to provide
more efficient, energy-saving, intelligent and interconnected lighting solutions on the basis of LED
lighting. The concept of “Internet+” also applies the “+” concept, representing a new form of
economy relying on internet information technology to integrate the internet with traditional
industries in order to optimize production, promote economic transformation and upgrading and
reconstruct business models.
Value Chain of the LED Intelligent Vision Market
The value chain of the LED intelligent vision can be categorized into three parts: (i) the
upstream that includes LED chips and other raw materials; (ii) the midstream that consists of LED
devices and modules; and (iii) the downstream that encompasses various application scenarios
mainly including intelligent automotive vision, high-end lighting and advanced display. The
following chart illustrates the value chain of the LED intelligent vision market:
Upstream Midstream Downstream
Advanced
display
High-end
lighting
Raw materials
and equipment
suppliers
LED substrates
Special gases
Metal compounds
Manufacturing
equipment
LED chip
suppliers
LED epitaxial
wafers
LED chips
LED packaging
suppliers
LED devices
LED modules
LED packaging
materials and
equipment
suppliers
Leadframes
Controllers
Packaging
equipment
Intelligent
automotive
vision
Source: CIC
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Market Size of Global and China’s LED Intelligent Vision Industry
As LED intelligent vision offers higher energy efficiency and longer life span, LED products
have effectively replaced traditional lighting and display products. With the rise of consumer
initiatives that focused on energy-saving and environmental protection, coupled with the
implementation of supportive policies and regulations, LED intelligent vision has become an
emerging industry worldwide in terms of strategic importance. According to CIC, the market size
of the global LED intelligent vision industry, in terms of revenue, reached USD192.0 billion in
2023 and is forecast to grow at a CAGR of 8.4% to reach USD287.2 billion by 2028.
China has the world’s largest LED intelligent vision industry, accounting for 34.2% of the
global market in terms of revenue in 2023. Driven by increasing consumer demand and supportive
national policies, the revenue of China’s LED intelligent vision market grew from RMB339.3
billion in 2019 to RMB440.2 billion in 2023, at a CAGR of 6.7%, and is expected to reach
RMB679.2 billion in 2028, at a CAGR of 9.1% from 2023 to 2028.
ANALYSIS OF CHINA’S INTELLIGENT AUTOMOTIVE VISION MARKET
Overview of intelligent automotive vision market
Intelligent automotive vision is one of the key application scenarios of LED intelligent
vision, and LED has emerged as the mainstream technology in the intelligent automotive vision
industry. In the intelligent automotive vision sector in China, the penetration rate of LED has
exceeded 90%. This is attributable to its higher light intensity, longer life span, lower energy
consumption and higher color gamut, compared with traditional halogen and xenon lamps.
With the development of electric vehicles (EVs) and intelligent vehicles, intelligent
automotive lamps have transitioned from being mere functional products to intelligent systems.
Based on their placement within a vehicle, intelligent automotive lamps can be categorized into
exterior lights and interior lights. Exterior lights can be further categorized into headlamps, rear
lamps and other lamps. As headlamps play a vital role in vehicle safety, driving experience and
intelligent connectivity, they command the highest price among intelligent automotive lamps.
Based on the level of intelligence and the amount of pixels, LED headlamps can be categorized
into three categories: ordinary LED headlamps, ADB headlamps and high-pixel LED headlamps.
 Ordinary LED headlamps : they mainly control the light beam through voltage or
current;
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 ADB headlamps : they adopt a cutting-edge headlamp technology that combines machine
vision, precise sensing, arrayed light sources and other advanced features, with the
process perceiving signals of road traffic information through sensors, and then utilizing
built-in algorithms to process the data. Hence, ADB headlamps can achieve segmented
brightness control and double-digit pixel level, and are expected to become the
mainstream in the automotive headlamp market;
 High-pixel headlamps : they contain over 10,000 pixels and can incorporate innovative
technology, such as DLP technology or Micro LED technology that can project
navigation, interactive and other information onto the road, for improving lighting
performance.
Rear lamps are also evolving with intelligent features, including automatic adjustment of
brightness, color, flashing frequency, etc., based on driving situations, and interaction with
surrounding vehicles or pedestrians by displaying symbols and texts. In addition, the rear lamps
have been upgraded from separated-type rear lamps to continuous rear lamps on structural design,
which can realize more functions in diverse scenarios to ensure driving safety and to show unique
characteristics.
Interior lights include ambient lights and are vital components of smart cockpit lighting
systems. These can create a more pleasant and comfortable driving environment by automatically
adjusting the light beam and offer a voice control system to align with drivers’ preferences.
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Value Chain of the Intelligent Automotive Vision Market in China
The value chain of the intelligent automotive vision market in China can be categorized into
four parts: (i) the upstream that includes LED chips; (ii) the midstream that consists of
automotive-grade LED devices and modules; (iii) the downstream that manufactures intelligent
automotive lamps; and (iv) the end-market automotive OEMs and aftermarket. As intelligent
automotive lamps are crucial in ensuring driving safety, automotive OEMs set a series of stringent
assessment and audit procedures when selecting suppliers, leading to a long product entry cycle
and significant entry barriers. Moreover, only few companies possess vertical integration
capabilities that spans from LED chips, to automotive-grade LED devices and modules, and then
to the design, development, manufacturing, and application of intelligent automotive lamps.
Companies with such vertical integration capabilities are better positioned to meet the increasing
demand for intelligent automotive vision, thereby holding a significant competitive edge in the
market. The following chart illustrates the value chain of the intelligent automotive vision market:
End-market
LED chips
Chip suppliers
Automotive
LED modules
LED devices
suppliers
LED modules
suppliers
Automotive-
grade LED
devices
Controllers
Automotive
OEMs
Automotive
aftermarket
Intelligent
automotive
lamps suppliers
Headlamps
Rear lamps
Interior
lights
Upstream DownstreamMidstream
Source: CIC
Automotive-grade LED devices and modules are integral to intelligent automotive lamps,
representing 10.8% and 40.6%, respectively, of the market size of China’s intelligent automotive
vision industry in terms of revenue in 2023. As LED lighting technology has become prevalent in
the intelligent automotive vision sector, the application of automotive-grade LED devices
significantly increased. The market size of the automotive-grade LED devices in China, in terms of
revenue, reached RMB9.6 billion in 2023. The continual expansion of the intelligent automotive
vision market presents a significant growth potential for automotive-grade LED devices. The
market size of automotive-grade LED devices in China in terms of revenue is projected to achieve
RMB19.3 billion by 2028, with a CAGR of 15.0% from 2023 to 2028.
The proportion of automotive-grade LED devices in China produced by domestic enterprises
is still relatively low. Continuous investment and innovation in LED packaging technology, along
with continual production process optimization, highly supportive regulatory policies and effective
collaboration throughout the value chain of the intelligent automotive vision industry, are
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bolstering the competitiveness of domestic enterprises in the global market. Domestic
manufacturers are expected to secure a more substantial market share in the automotive-grade LED
device sector in China.
Market Size of China’s Intelligent Automotive Vision Industry
China, being the world’s largest passenger vehicle market and the leading manufacturer of
EVs, has also become the largest intelligent automotive vision market globally. At present, LED is
the mainstream technology of automotive lighting systems because of its superiority in terms of
energy efficiency, longevity, flexibility, as well as high brightness and visibility. According to CIC,
the penetration rate of LED in China’s automotive lamps sector experienced a significant increase,
rising from 67.3% in 2019 to 93.0% in 2023. This rapid growth marks a significant development in
China’s intelligent automotive vision industry. The market size of China’s intelligent automotive
vision industry in terms of revenue was RMB88.7 billion in 2023, and the value of intelligent
automotive vision system per vehicle in China amounted to approximately RMB3,600. Factors
such as the rising adoption of intelligent automotive vision, advancements in light source
technology and lamp designs, along with growing consumer demand for customized functions, are
expected to drive the value of intelligent automotive vision system per vehicle in China to over
RMB4,700 by 2028. This surge is projected to further stimulate the revenue growth of China’s
intelligent automotive vision market, which is expected to reach RMB174.2 billion by 2028 with a
CAGR of 14.4% from 2023 to 2028. Among the several product categories of the intelligent
automotive vision market, headlamps take up the largest market portion in China in terms of
revenue, accounting for 60.1% of the total market size in 2023. Meanwhile, rear lamps and interior
lights each accounted for 28.0% and 11.8% of the market in terms of revenue in 2023. The
following chart sets forth the market size of China’s intelligent automotive vision industry, in
terms of revenue:
2.2 3.3 10.5 14.2 16.8 19.1 21.7 24.89.8 11.5 15.2 20.3 24.9 30.7 34.4 36.2 37.9 38.9
19.6 24.4
32.5
44.1
53.4
67.6
77.6
87.8
98.8
110.4
0
20
40
60
80
100
120
140
160
180
2019 2020
5.2
2021
8.0
2022 2023 2024E 2025E 2026E 2027E 2028E
31.5 39.1
52.9
72.4
88.7
112.4
128.9
143.2
158.3
174.2
Headlamps
Rear lamps
Interior lights
CAGR
2019-2023 2023-2028E
Intelligent automotive vision 29.5% 14.4%
28.5% 15.7%
26.2% 9.4%
48.3% 18.7%
Market Size of China’s Intelligent Automotive Vision Industry, in Terms of Revenue, 2019-2028E
Unit: Billion RMB
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Notes:
1 The market size here focuses on the analysis of automotive lighting systems equipped with LED technology.
2 The market size here refers to the total revenue from the intelligent automotive vision products manufactured in
China.
Source: CPCA, CIC
The growing adoption of intelligent automotive lamps will lead to a higher valuation of the
automotive lighting systems per vehicle. With the increase of the penetration rate of LED in the
automotive lamps sector in China, the value of the automotive lighting systems per vehicle in
China is projected to grow from RMB3,184.8 in 2023 to RMB4,679.4 in 2028.
Meanwhile, in the foreseeable future, with the advances of automotive intelligence and the
integration of software and hardware, the integration of external sensors and lighting systems will
be a potential development trend in the intelligent vehicles industry. This integration aims to
enhance vehicle safety and augment the practicality and reliability of autonomous driving
technologies. Integrated lighting systems can enhance sensor performance by adjusting brightness
or direction, for instance, improving the image quality of visual sensors such as cameras, radars
and LiDAR during adverse weather conditions or nighttime driving. However, the realization of
this integration still depends on further technological advancements, such as development of
sensor fusion technology.
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The intelligent automotive vision market is showing a trend toward high-end products. As
consumers increasingly seek quality and intelligent features in their vehicles, mid- to high-end
vehicles
1 become predominantly equipped with relatively advanced automotive lighting systems.
Therefore, the market share of intelligent automotive vision equipped on mid- to high-end vehicles
in the intelligent automotive vision market in China gradually increased. According to CIC, the
market size of China’s intelligent automotive vision equipped on mid- to high-end vehicles
reached RMB66.6 billion in 2023, accounting for 75.0% of the entire intelligent automotive vision
market in China. With the ongoing growth of the high-end vehicle sector, the market size of
China’s intelligent automotive vision equipped on mid- to high-end vehicles, in terms of revenue,
is expected to reach RMB132.2 billion by 2028, accounting for 75.9% of the entire intelligent
automotive vision market, with a CAGR of 14.7% from 2023 to 2028. The chart below sets forth
the market size of China’s intelligent automotive vision industry, by price range of vehicle, in
terms of revenue:
23.6 29.1 39.4 54.3 66.6
85.2 97.5 108.5 120.0 132.2
10.0
13.5
18.1
22.2
27.2
31.3
34.7
38.3
41.9
0
20
40
60
80
100
120
140
160
180
7.9
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
31.5
39.1
52.9
72.4
88.7
112.4
128.9
143.2
158.3
174.2
Entry-level vehicles
Mid to high-end vehicles
CAGR
2019-2023 2023-2028E
Intelligent automotive vision 29.5% 14.4%
29.5% 13.6%
29.6% 14.7%
Market Size of China’s Intelligent Automotive Vision Industry, by Price Range of Vehicle,
in Terms of Revenue, 2019-2028E
Unit: Billion RMB
Notes:
1 Mid- to high-end vehicles refer to vehicles with an average MSRP higher than RMB150,000.
2 The market size here refers to the total revenue from the intelligent automotive vision products manufactured in
China.
Source: CPCA, CIC
Market Drivers and Future Trends of the Intelligent Automotive Vision Market in China
 Rapid development of China’s passenger vehicle market: according to CIC, China has the
world’s largest passenger vehicle market, and the sales volume of passenger vehicles
(including EVs and ICEs) in China reached 26.4 million in 2023, accounting for 34.9% of the
global market, and the sales volume is expected to reach 30.0 million in 2028 at a CAGR of
2.5% from 2023 to 2028. The sales volume of EVs and ICEs in China reached 8.9 million
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and 16.6 million, respectively in 2023, and is expected to reach 22.8 million and 6.0 million,
respectively in 2028. This vast market size lays a solid foundation for the expansion of the
intelligent automotive vision market. Furthermore, China’s passenger vehicle market is
characterized by trends towards electrification, intelligence and connectivity. In particular,
EVs have higher requirements for the intelligence and connectivity of lighting systems, which
has facilitated the upgrading and replacement of automotive lighting systems. Despite the
increase in U.S. tariffs on Chinese EVs and the provisional countervailing duties
pre-disclosed by the European Commission on imports of BEVs, the total volume of EVs
exported from China to overseas market is expected to increase from 0.6 million in 2023 to
4.5 million in 2028, representing a CAGR of 48.9% during the period. The sales volume of
Chinese EVs exported to the Europe market is expected to increase from 0.4 million in 2023
to 1.8 million in 2028, while its share in the total export volume to overseas market will
decrease from 62.3% to 41.0%. The sales volume of Chinese EVs exported to the U.S. market
is expected to increase from 48.5 thousand in 2023 to 176.4 thousand in 2028, while its share
in the total export volume to overseas market will decrease from 7.9% to 3.9%. The
significant growth of EVs in China has propelled the intelligent advancement and
development of intelligent automotive vision. Regarding the effect of EVs on the Company’s
performance, the fluctuation in the demand for and price of EVs would not have a significant
impact on the Company’s operational and financial performance. The Company has already
established a broad customer base, covering various vehicle manufacturers and catering to all
types of vehicles, including EVs and ICEs. By addressing the needs of all types of vehicles,
the Company demonstrates its versatility and adaptability. With a solid position in the market,
the Company has been able to adapt to the evolving landscape of the automotive industry.
Therefore, while future price trends of EVs may influence the overall industry to some
extent, they are not critical factors for the Company’s operational and financial performance.
 Continual upgrades of lighting technology, intelligent configurations and structural
design: all vehicles are progressing towards intelligence, leading to a rise in the penetration
rate of intelligent automotive lamps. In response to the growing demand for intelligent
features in vehicles, OEMs are increasingly seeking intelligence features for vehicles. As a
result, OEMs are recognizing the need to integrate advanced technological capabilities into
automotive intelligent lamps to align with the broader trend in the automotive industry.
Automotive OEMs are continually enhancing the intelligent features of automotive lamps to
cater to consumer demands and comply with safety regulations. The headlamps have
experienced upgrades in light source technology and intelligent functions, enabling automatic
and precise control of various lighting parameters to enhance safety across different driving
scenarios. Similarly, rear lamps have also seen advances in light source technology and
structural design, capable of interaction and information exchange with other vehicles.
Additionally, the penetration rate of interior lights has significantly increased, driven by the
advances in vehicles’ entertainment features. Moreover, the rising competition among OEMs
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further pushes the integration of intelligent features in automotive lamps, as it becomes a way
for manufacturers to differentiate their products and enhance their competitiveness. Thus, the
penetration rate of intelligent automotive lamps is expected to continue rising as OEMs
prioritize and invest in incorporating intelligent features into automotive lamps.
 Increasing penetration rate of intelligent automotive vision: Intelligent automotive lamps
offer superior performance than traditional automotive lamps, leading to an increase in the
usage of intelligent automotive lamps. Intelligent automotive lamps are more energy-efficient,
offering longer lifespan, reduced power consumption and higher color gamut, compared to
traditional automotive lamps. Moreover, intelligent automotive lamps may be equipped with
advanced technologies such as adaptive lighting and automatic high beam control, which
enhance visibility and safety on the road. The integration of intelligent automotive lamps
with vehicle communication systems and autonomous driving technologies has further
propelled the adoption of intelligent automotive lamps. These lamps play a crucial role in
enhancing the interaction between vehicles and their surroundings, ultimately contributing to
the advancement of smart and autonomous driving capabilities. Intelligent automotive lamps
are becoming increasingly popular due to their advanced features and technological
capabilities. The penetration rate of intelligent automotive lamps is expected to rise, which
can further increase the value of the automotive lighting systems per vehicle. As the expenses
on intelligent lighting system are relatively higher than that of the traditional lighting system,
the development of intelligent automotive lighting systems will bring positive impacts on
enterprises’ operations.
 Acceleration of domestic substitution trend: domestic manufacturers of intelligent
automotive lamps possess a deeper understanding of the local market and are better
positioned to serve automotive OEMs in China. They can rapidly respond to the innovative
demands required of intelligent automotive vision. Moreover, the emergence of domestic
automotive OEMs has been creating more opportunities for their upstream suppliers in China.
By collaborating with these domestic automotive OEMs, the market share of domestic
companies is predicted to further expand from over 60% in 2023 to over 70% in 2028.
 Supportive policies and regulations: in recent years, the Chinese government has
implemented a range of policies and industrial planning standards related to vehicle safety,
intelligent automotive lamps and maintaining the stability of supply chain, such as the “ 14th
Five-Year National Road Traffic Safety Plan ”( “ɤ̬ʞ”Ό਷༸༩ʹஷτΌ஝ྌ), the
“Strategy for Innovative Development of Intelligent V ehicles ”(኷ଫ)
and the “ Standards of National Supply Chain Innovation and Creation of Application
Examples ”(ʈЪ஝ᇍ ), etc. These policies aim to create a
favorable environment for industrial development, facilitate independent innovation in
technology R&D, as well as promote the localization of supply chains to reduce reliance on
imported automotive-grade parts.
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Competitive Landscape of the Intelligent Automotive Vision Market in China
The competitive landscape of China’s intelligent automotive vision market is relatively
concentrated, with the top five manufacturers taking up an aggregated market share of 49.2% in
terms of revenue in 2023. The revenue from our intelligent automotive vision segment amounted to
RMB771.0 million and accounting for 0.9% of the total market in terms of revenue in 2023. The
table below sets forth the top five manufacturers of China’s intelligent automotive vision market
and their revenue from intelligent automotive vision for the year 2023:
Ranking of Top Five Manufacturers in China’s in Intelligent Automotive Vision Market in
Terms of Revenue, 2023
Ranking Manufacturers of intelligent automotive vision
Revenue from
intelligent
automotive
vision, 2023
(RMB million)
Market share 1,
2023
1 Company A .............................. 16,198.3 18.3%
2 Company B .............................. 9,760.9 11.0%
3 Company C .............................. 6,670.1 7.5%
4 Company D .............................. 6,000.0 6.8%
5 Company E .............................. 5,000.0 5.6%
Subtotal ................................ 43,629.3 49.2%
Note: 1 Revenue from intelligent automotive vision products manufactured in China as a percentage of the total
market size of China’s intelligent automotive vision industry in 2023.
Company A: A non-listed company founded in 1989 and headquartered in Shanghai, it’s mainly engaged in the
development of visual technology and the production and sales of automotive lighting system
components.
Company B: A company listed on the SSE, founded in 1993 and headquartered in Jiangsu Province, it’s mainly
engaged in the R&D, design, manufacturing and sales of automotive lamps.
Company C: A company listed on the FWB and LuxSE, founded in 1899 and headquartered in Germany, it’s mainly
engaged in development, production and the marketing of lighting and electronic components and systems
for vehicle manufacturers.
Company D: A non-listed company founded in 1919 and headquartered in Italy, it’s mainly engaged in the field of
electronics and powertrain, automotive lighting and motorsport.
Company E: A company listed on the Euronext-Paris, founded in 1923 and headquartered in France, it’s mainly
engaged in the areas of electrification, advanced driving assistance systems (ADAS), reinvention of the
interior experience and lighting of vehicles.
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The domestic manufacturers of intelligent automotive vision achieved a market share of more
than 60% in China’s intelligent automotive vision market as of 2023, so they play an important
role in the industry, and the top five domestic manufacturers took up an aggregated market share
of 41.0% in terms of revenue in 2023. The table below sets forth the top five Chinese
manufacturers of China’s intelligent automotive vision market and their revenue from intelligent
automotive vision for the year 2023:
Ranking of Top Five Chinese Manufacturers in China’s Intelligent Automotive Vision Market
in Terms of Revenue, 2023
Ranking Manufacturers of intelligent automotive vision
Revenue from
intelligent
automotive
vision, 2023
(RMB million)
Market share 1,
2023
1 Company A .............................. 16,198.3 18.3%
2 Company B .............................. 9,760.9 11.0%
3 Company F .............................. 4,370.2 4.9%
4 Company G .............................. 3,638.0 4.1%
5 Company H .............................. 2,371.6 2.7%
Subtotal ................................ 36,339.0 41.0%
Note: 1 Revenue from intelligent automotive vision as a percentage of the total market size of China’s intelligent
automotive vision industry in 2023.
Company F: A non-listed company founded in 1998 and headquartered in Hebei Province, it’s mainly engaged in the
business of automotive lighting, thermal management systems, electrical systems, and smart mobility.
Company G: A non-listed company founded in 1987 and headquartered in Zhejiang Province, it’s mainly engaged in
the design, development and manufacturing of automotive lighting.
Company H: A non-listed company founded in 2010 and headquartered in Anhui Province, it’s mainly engaged in the
business of LED light sources and automotive lighting systems.
Source: CIC
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Meanwhile, the mid- to high-end intelligent automotive vision market is an important
segment of the automotive intelligent vision market, with the top five manufacturers tanking up an
aggregated market share of 49.8% in terms of revenue in 2023. The revenue from our intelligent
automotive vision products equipped on mid- to high-end vehicles amounted to RMB363.2 million
and accounting for 0.5% of the total market in terms of revenue in 2023. The table below sets
forth the top five manufacturers of China’s mid- to high-end intelligent automotive vision market
and their revenue from intelligent automotive vision products equipped on mid- to high-end
vehicles for the year 2023:
Ranking of Top Five Manufacturers in China’s Mid- to High-end Intelligent Automotive
Vision Market
1 in Terms of Revenue, 2023
Ranking Manufacturers of intelligent automotive vision
Revenue from
intelligent
automotive vision
equipped on
mid- to high-end
vehicles, 2023
(RMB million)
Market share 2,
2023
1 Company A .............................. 11,819.1 17.8%
2 Company B .............................. 7,181.2 10.8%
3 Company C .............................. 5,336.1 8.0%
4 Company D .............................. 4,800.0 7.2%
5 Company E .............................. 4,000.0 6.0%
Subtotal ................................ 33,136.4 49.8%
Notes:
1 Mid- to high-end intelligent automotive vision market refers to the market of intelligent automotive vision products
for vehicles with an average MSRP higher than RMB150,000.
2 Revenue from intelligent automotive vision products that are equipped on mid- to high-end vehicles and
manufactured in China as a percentage of the total market size of China’s intelligent automotive vision products
equipped on mid- to high-end vehicle models in 2023.
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In China’s mid- to high-end intelligent automotive vision market, the market share of top five
domestic manufacturers accounted for 33.6%. And we were the fifth largest mid- to high-end
Chinese intelligent automotive vision manufacturer in 2023. The table below sets forth the top five
Chinese manufacturers of China’s mid- to high-end intelligent automotive vision market and their
revenue from intelligent automotive vision products equipped on mid- to high-end vehicles for the
year 2023:
Ranking of Top Five Chinese Manufacturers in China’s Mid- to High-end Intelligent
Automotive Vision Market in Terms of Revenue, 2023
Ranking Manufacturers of intelligent automotive vision
Revenue from
intelligent
automotive vision
equipped on
mid- to high-end
vehicles 1, 2023
(RMB million)
Market share 2,
2023
1 Company A .............................. 11,819.1 17.8%
2 Company B .............................. 7,181.2 10.8%
3 Company F .............................. 1,676.3 2.5%
4 Company G .............................. 1,309.7 2.0%
5 The Company ............................ 363.2 0.5%
Subtotal ................................ 22,349.5 33.6%
Notes:
1 Mid- to high-end vehicles refer to vehicles with an average MSRP higher than RMB150,000;
2 Revenue from intelligent automotive vision equipped on mid- to high-end vehicles as a percentage of the total
market size of China’s intelligent automotive vision products equipped on mid- to high-end vehicle models in 2023.
Entry Barriers and Key Success Factors of the Intelligent Automotive Vision Market in China
 Technological advantage: as intelligent automotive vision technology advances, intelligent
automotive vision manufacturers must diversify and enhance their technical capabilities with
respect to automotive electronics and electrical technology, as well as optoelectronic
semiconductor technology. Developing proficiency in these areas requires extensive expertise
and qualified R&D teams. Furthermore, it is crucial for these manufacturers to consistently
innovate, iterate and upgrade their technologies and products to satisfy the changing demands
and developing performance standards in the intelligent automotive vision market, and thus
maintain a leading position in the industry.
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 Advanced large-scale mass production and quality control capabilities: intelligent
automotive vision manufacturers are required to have advanced large-scale mass production
capabilities that enable them to meet market demands and deliver products in a timely
manner. Furthermore, given the stringent safety and reliability standards set by automotive
OEMs for auto parts, including intelligent automotive vision, it is crucial for intelligent
automotive vision manufacturers to maintain a robust quality control system. This system
shall effectively comply with relevant standards and meet the requirements of automotive
OEMs.
 Stable customer relationships: stable and long-term customer relationship with automotive
OEMs is vital for intelligent automotive vision suppliers as it ensures the sustainability of
purchase orders. Automotive OEMs can also provide valuable market insights and timely
feedback, enabling intelligent automotive vision manufacturers to develop products which
respond the market demand better.
 Vertical integration capabilities within the industry value chain: companies with vertical
integration capabilities are able to collaborate with automotive OEMs across different stages
of product development, such as R&D, product design and production. This collaboration
results in a shorter R&D cycle and quicker response to market demand. Meanwhile, effective
management of the entire supply chain is crucial for companies to ensure a steady supply of
raw materials and key components. In addition, the vertical integration within the industry
value chain enables companies to quickly grasp new technology development trends and
apply them to product R&D and improvements to meet the needs for upgrades of product and
technology.
 Abundant capital resources: in order to enter the intelligent automotive vision sector,
market participants need to make substantial initial investments in purchasing production
equipment and bear high costs associated with R&D and mold development. Intelligent
automotive vision manufacturers with abundant capital resources are better positioned to
engage in R&D activities, increase production capacity and broaden their market reach. These
investments enable the intelligent automotive vision suppliers to achieve economies of scale
and secure a competitive edge in this highly competitive market.
ANALYSIS OF CHINA’S HIGH-END LIGHTING AND LCD TV BACKLIGHT DISPLAY
INDUSTRIES
Overview of High-end Lighting and LCD TV Backlight Display Industries
Along with the development of LED technology, high-end LED products are superseding the
traditional lighting and display products. High-end LED products, including high-end lighting
products and LCD TV backlight displays, offer higher CRI, higher power, higher luminous efficacy
and more intelligent features, compared with low-power LED products. Hence, from the
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perspective of performance, life span, reliability, price and other parameters, high-end LED
products have a promising market potential. The high-end lighting and LCD TV backlight display
in the following sections refer to their corresponding devices and modules.
LCD TV backlight display is a pivotal component of the advanced display market. The
adoption of LED technology in LCD TV backlight displays has led to significant improvements in
uniformity of brightness, energy efficiency and slim designs. As the industry matures, it is
common for manufacturers of LCD TV backlight display devices to deliver products to TV
companies in the form of display modules.
LED packaging lies in the middle of the value chain of the high-end lighting and advanced
backlight display industries. It refers to the process of assembling LED chips, leadframes and other
components to form LED devices for various applications, which provides LED chips with
physical support and protects the chips from the external environment. As a crucial process in the
LED value chain, LED packaging primarily enhances the reliability, performance, life span and
power supply control of LEDs. It also determines the cost and final performance of LED products.
Analysis and Categorization of LED Packaging Technologies
Categorization of LED packaging technologies by the structure of LED chips
Based on the structure of LED chips, LED packaging technologies can be categorized into
flip-chip LED technology, lateral chip LED technology and vertical LED technology. The table
below sets forth the categorization of LED packaging technologies by the structure of LED chips:
Category Structure Key features
• Flip-chip LED technology has a different structure from the lateral
chip packaging technology, offering high reliability, heat dissipation
efficiency and luminous efficacy. With the development of high-end
lighting, backlight display and other sectors, flip-chip LED
technology is expected to be widely adopted in high-end scenarios,
such as Mini LED, outdoor light and automotive headlamps.
 Lateral chip technology is relatively mature with low cost, but faces
challenges related to poor heat dissipation and current block
phenomenon. It occupies the mainstream position in the low-power
LED devices.
 Vertical LED technology is not the predominant technology for LED
packaging, due to its high cost. It transfers heat efficiently for better
heat dissipation and is mainly applied in high-power LED devices.
Lateral
Chip
Flip-Chip
LED
Vertical
LED
Silicone mixed
with phosphor
Reflective
cup
LeadframeFlip-chip
LED chip
Eutectic bonding layer
Silicone mixed
with phosphor
Reflective cup
LeadframeGold wire Vertical
LED chip
Conductive
adhesive material
Silicone mixed
with phosphor
Reflective cup
LeadframeGold wire Lateral
LED chip
Die attach
material
Source: CIC
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Categorization of LED packaging technologies by device form
Based on device forms, LED packaging technologies can be categorized into SMD package,
COB package, high-power LED package and pin-type package. The table below sets forth the
categorization of LED packaging solution by device form:
Category Key features
Surface mounted devices (SMD)
LED packaging

Chip-on-board (COB) LED
packaging

High-power LED packaging
 High-power LED packaging is designed for high-power LED products, encompassing
leadframe-type packaging and ceramic-based high-power LED packages, etc. In
particular, the ceramic-based high-power LED package has become the mainstream
solution for outdoor lighting, horticultural lighting and smartphone flashlights, etc.
Pin-type packaging
 Pin-type packaging is considered to be the earliest form of all LED packages, with a
structure comprising two or more leads. It is commonly used in low-power LED devices
and applied in the instrument display.
SMD LED packaging is a packaging technology that LED chips are mounted on the
designated position on the leadframe. Bonding wires are required for electrical connection,
then silicone covers the upper portion to protect the chips. It is mainly used for the packaging
of low- to mid-power LED devices.
COB LED packaging is a packaging technology that multiple LED chips are directly
attached onto the PCB or ceramic board and wire bonding or flip-chip bonding technology is
utilized to realize the electrical connection between the chip and the board, followed by
covering the chips and bonding wires to protect them using phosphor-mixed silicone. It
serves as the major packaging solution for high-end commercial lighting.
Source: CIC
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Market Size of China’s High-end Lighting and LCD TV Backlight Display Industries
According to CIC, China is the largest LED packaging market in the world. The market size of
devices and modules for China’s high-end lighting and LCD TV backlight display industries in terms
of revenue reached RMB17.1 billion in 2023, which is attributed to the iteration of LED packaging
technologies, increasing environment protection requirements and the expansion of application
scenarios. The market size of devices and modules for China’s high-end lighting and LCD TV
backlight display industries in terms of revenue is expected to reach RMB26.2 billion in 2028, at a
CAGR of 8.9% from 2023 to 2028. The following chart sets forth the market size of devices and
modules for China’s high-end lighting and LCD TV backlight display industries, in terms of revenue:
Market Size of China’s High-end Lighting and LCD TV Backlight Display Industries, in Terms of
Revenue, 2019-2028E
3.9 4.1 3.7 4.3 4.8 5.3 5.9 6.5 7.0 7.6
8.7 9.3 10.6 11.6 12.3 13.6 14.6 15.8 17.1 18.6
0
5
10
15
20
25
30
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
12.6 13.4 14.3 15.9 17.1
18.9
20.5
22.3
24.2
26.2
Unit: Billion RMB
High-end lighting
LCD TV backlight display
CAGR
2019-2023 2023-2028E
High-end lighting and LCD TV backlight display 8.0% 8.9%
9.2% 8.5%
5.2% 9.8%
Note:
1 The market size here refers to the total revenue of devices and modules from the high-end lighting and LCD TV
backlight display products manufactured in China.
Source: NBS, CSA, CIC
Market Drivers of the High-end Lighting and LCD TV Backlight Display Market in China
 Technology innovation: the continuous enhancements in LED chip technologies, packaging
structures and advanced materials have significantly improved the performance of high-end
lighting and LCD TV backlight display devices with respect to color performance, reliability
and light efficiency, etc. These improvements have been crucial in providing more
development opportunities and application scenarios for high-end lighting and LCD TV
backlight displays, resulting in a notable increase of demand for high-end LED devices and
modules.
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 Energy efficiency and environmental protection: compared to traditional lighting
technologies, the energy efficiency of LED technologies is more closely aligned with the
requirements of environmental protection policies. Government policies and regulations
promoting energy conservation and environmental protection, coupled with increasing
societal awareness, have driven the adoption of high-performance, high CRI LED devices and
modules. These devices and modules have become the mainstream choice in the high-end
lighting and LCD TV backlight display industries.
 Accelerated expansion of downstream application scenarios: with the rapid development
and expansion of downstream application scenarios such as indoor and outdoor lighting,
horticultural lighting, intelligent lighting, special lighting, backlight display, commercial
display, etc., the demand for diverse and customized lighting and display systems is surging.
LED technology, with its advantages of high luminous efficacy and long life span, has
become the mainstream lighting technology in the high-end lighting and LCD TV backlight
display industries.
Future Trends in the High-end Lighting and LCD TV Backlight Display Market in China
 Miniaturization and high-power of LED devices and modules: the advances in electronic
products towards being lightweight, slim and compact in design has correspondingly led to
the miniaturization of LED devices and modules. This trend poses greater challenges on LED
device and module manufacturers in terms of their technical capabilities. Additionally, the
rising demand for high-power LED devices and modules has prompted such manufacturers to
refine their product designs and adopt high-quality and high-performance materials to meet
the market’s requirements.
 Increasing demand of products with higher performance: with the rapid expansion of LED
application scenarios, the consumers’ demand for LED products with enhanced performance
with respect to CRI, luminous efficacy and power output is increasing. This is particularly
evident in emerging application scenarios such as horticultural lighting and intelligent
lighting. Consequently, high-end lighting and LCD TV backlight display products are
expected to witness a higher growth rate in these application scenarios and secure an
increasing market share in the coming years.
 Development of Mini/Micro LED technologies: the emergence of Mini/Micro LED
technologies represents the future development trend in high-end LED products. These
technologies enable higher definition, increased brightness, higher color saturation, higher
power efficiency and longer life span for high-end LED products. Notably, with the abilities
of conducting precise and dynamic control of light and accurate color reproduction, Mini
LED light sources effectively improve the image quality of TVs. This has led to an
accelerated application of Mini LED technology in TVs.
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 Increasing concentration of industry landscape: as technologies continue to advance and
market demands evolve, leading companies in the high-end lighting and LCD TV backlight
display industries are expected to increase their market share through continual technological
innovations. Consequently, some small and mid-size manufacturers are likely to be phased
out due to a lack of scale effect.
Competitive Landscape of the High-end Lighting and LCD TV Backlight Display Market in
China
The competitive landscape of China’s high-end lighting market is relatively fragmented, with
the top five manufacturers taking up an aggregated market share of 39.3% in terms of revenue in
2023. Our revenue from high-end lighting segment amounted to RMB650.8 million for the year
2023, with a market share of 5.3%, ranking fifth in the industry during the period. The table below
sets forth the top five manufacturers of China’s high-end lighting and their relevant revenue for the
year 2023:
Ranking of Top Five Manufacturers in China’s High-end Lighting Market in Terms of
Revenue, 2023
Ranking Manufacturers of high-end lighting
Revenue from
high-end lighting,
2023
(RMB million)
Market share 1,
2023
1 Company I ............................... 1,512.8 12.3%
2 Company J ............................... 1,200.0 9.7%
3 Company K .............................. 816.7 6.6%
4 Company L .............................. 665.0 5.4%
5 The Company ............................ 650.8 5.3%
Subtotal ................................ 4,845.3 39.3%
Note: 1 Revenue from LED devices and modules manufactured in China for high-end lighting applications as a
percentage of the total market size of devices and modules for China’s high-end lighting industry in 2023.
Company I: A company listed on the SZSE, founded in 2004 and headquartered in Guangdong Province, it mainly
focuses on semiconductor packaging, LED automotive lighting etc.
Company J: A non-listed company founded in 2004 and headquartered in Fujian Province, it mainly focuses on
manufacturing of LED professional lighting and semiconductors package devices.
Company K: A non-listed company founded in 1999 and headquartered in the U.S., it mainly focuses on the delivery of
differentiated lighting solutions.
Company L: A non-listed company founded in 2002 and headquartered in the U.S., it mainly focuses on solid-state
lighting solutions.
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The domestic manufacturers of high-end lighting achieved a market share of more than 50%
in China’s high-end lighting market as of 2023, so they play an important role in the industry, and
the top five domestic manufacturers took up an aggregated market share of 37.4% in terms of
revenue in 2023. And we were the third largest domestic manufacturer of high-end lighting market
in 2023. The table below sets forth the top five Chinese manufacturers of China’s high-end
lighting and their relevant revenue for the year 2023:
Ranking of Top Five Chinese Manufacturers in China’s High-end Lighting Market in Terms
of Revenue, 2023
Ranking Manufacturers of high-end lighting
Revenue from
high-end lighting,
2023
(RMB million)
Market share 1,
2023
1 Company I ............................... 1,512.8 12.3%
2 Company J ............................... 1,200.0 9.7%
3 The Company ............................ 650.8 5.3%
4 Company M .............................. 634.5 5.1%
5 Company N .............................. 619.1 5.0%
Subtotal ................................ 4,617.2 37.4%
Note: 1 Revenue from LED devices and modules for high-end lighting applications as a percentage of the total
market size of devices and modules for China’s high-end lighting industry in 2023.
Company M: A company listed on the SZSE, founded in 1997 and headquartered in Guangdong Province, it mainly
focuses on LED packaging and LED application products.
Company N: A company listed on the SZSE, founded in 1969, and headquartered in Guangdong Province, it mainly
focuses on manufacturing LED packaging devices and LED application products.
Source: CIC
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The competitive landscape of China’s LCD TV backlight display market is relatively
concentrated, with the top five manufacturers taking up an aggregated market share of 66.6% in
terms of revenue in 2023, and they were all domestic manufacturers. Our revenue from LCD TV
backlight display (i.e. revenue from our advanced display business) segment amounted to
RMB436.2 million for the year 2023, with a market share of 9.1%, ranking fourth in the industry
during the period. The table below sets forth the top five manufacturers of China’s LCD TV
backlight display and their revenue for the year 2023:
Ranking of Top Five Manufacturers in China’s LCD TV Backlight Display Market in Terms
of Revenue, 2023
Ranking Manufacturers of LCD TV backlight display
Revenue from
LCD TV
backlight
display 1, 2023
(RMB million)
Market share 2,
2023
1 Company O .............................. 955.0 20.0%
2 Company P .............................. 907.5 19.0%
3 Company Q .............................. 514.0 10.7%
4 The Company ............................ 436.2 9.1%
5 Company R .............................. 373.1 7.8%
Subtotal ................................ 3,185.8 66.6%
Notes:
1 Only includes revenue from LED devices and modules for LCD TV backlight display applications, excluding small
and mid-size LED advanced backlight display applications;
2 Revenue from LED devices and modules for LCD TV backlight display applications as a percentage of the total
market size of devices and modules for China’s LCD TV backlight display industry in 2023.
Company O: A company listed on the SZSE, founded in 2005 and headquartered in Guangdong Province, it mainly
focuses on R&D, manufacturing and marketing of LED devices, optical devices, optical films and
invisible light products.
Company P: A non-listed company founded in 2011 and headquartered in Jiangxi Province, it mainly focuses on
research, production and sales of LED devices and modules.
Company Q: A company listed on the SZSE, founded in 2012 and headquartered in Anhui Province, it mainly focuses
on the R&D, production and sales of semiconductor devices, LED display devices and LED lighting.
Company R: A company listed on the SZSE, founded in 2000 and headquartered in Guangdong Province, it mainly
focuses on R&D, production and sales of LED and LED application.
Source: CIC
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Entry Barriers and Key Success Factors of the High-end Lighting and LCD TV Backlight
Display Market in China
 Advanced technology R&D capabilities and talent team: LED packaging technologies
involve multiple disciplines, including material science, thermal science and optoelectronics.
To enhance the performance of LED devices, manufacturers must conduct comprehensive
studies on materials selection, optical structures and so forth. Additionally, given the rapid
evolution of production processes and technologies, it is crucial for manufacturers to
maintain a robust R&D team dedicated to the continual development of innovative technology
and products.
 Strong quality control: the packaging process for high-end LED products necessitates
stringent quality control measures. Companies need to have a stable and comprehensive
quality control system to ensure high yield rate, luminous efficacy and quality consistency of
LED products. In addition, LED product manufacturers with strong manufacturing process
control and quality control capabilities are in better position to improve product performance
and reduce costs.
 Stable customer relationships: establishing stable cooperative relationships with top-tier
customers requires years of development and accumulation for LED product manufacturers.
To address the varied demands of consumers, manufacturers of devices and modules for
high-end lighting and LCD TV backlight need collaborate closely with their customers to
periodically upgrade their products. In turn, the manufacturers can also obtain valuable
market feedback to optimize product design and introduce competitive solutions. These can
effectively help establish their leading positions in the market.
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This section provides an overview of the major PRC laws, regulations and rules relevant to
our business. The information contained herein shall not be interpreted as a comprehensive
summary of all laws and regulations applicable to us.
PRIMARY REGULATORY AUTHORITY
Our company is mainly engaged in providing intelligent visual products and system solutions
that integrate “LED+” technology which falls under the semiconductor optoelectronics industry.
The industry’s governing body is the Ministry of Industry and Information Technology of the
People’s Republic of China (hereinafter referred to as the “ MIIT”).
The main responsibilities of the MIIT include formulating guiding industrial policies, drafting
pertinent legislative and regulatory proposals and establishing rules, among others, to guide the
development of the industry.
The industry association to which our company belongs is the China Optics and
Optoelectronics Manufacturers Association (hereinafter referred to as “ COEMA ”). The COEMA,
established with the approval of the State Council and managed by the MIIT, primarily engages in
industry research and academic exchanges, and conducts self-regulatory management of the
industry.
LA WS AND REGULATIONS ON FOREIGN INVESTMENT
Company Law of the People’s Republic of China
The Company Law of the People’s Republic of China () was
promulgated by the Standing Committee of the National People’s Congress on December 29, 1993
and implemented on July 1, 1994, amended and implemented on October 26, 2018, and last
amended on December 29, 2023 and implemented on July 1, 2024. According to the Company law
of the People’s Republic of China, companies are generally divided into two categories: limited
liability companies and joint stock companies. The Company Law of the People’s Republic of
China also applies to foreign-invested joint stock companies.
Foreign Investment Law of the People’s Republic of China and Implementation Regulation of
the Foreign Investment Law of the People’s Republic of China
The Foreign Investment Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷̮ਠҳ༟
) was promulgated by the National People’s Congress on March 15, 2019, and implemented on
January 1, 2020. The Implementation Regulation of the Foreign Investment Law of the People’s
Republic of China (ૢԷ ) was promulgated by the State
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Council on December 26, 2019, and implemented on January 1, 2020. The aforementioned law and
regulation establish the principles and measures designed to encourage foreign investments in
China and clearly stipulate that China provides legal protection for the investments, profits and
other legitimate rights and interests of foreign investors in China.
Special Administrative Measures (Negative List) for the Access of Foreign Investment
The Special Administrative Measures (Negative List) for the Access of Foreign Investment
(2021) (݄( ૶ఊ) (2021و)) was promulgated by the MOFCOM
and the NDRC on December 27, 2021, and implemented on January 1, 2022. The Special
Administrative Measures (Negative List) for the Access of Foreign Investment (2024) ( ̮ਠҳ༟
݄( ૶ఊ)(2024و)) was promulgated by the MOFCOM and NDRC on
September 6, 2024 and will be implemented on November 1, 2024. The Special Administrative
Measures (Negative List) for the Access of Foreign Investment comprehensively enumerates
restrictive measures pertaining to foreign investment access, which include equity percentage
requirements and executive qualifications, and industries where foreign investment is prohibited.
The Negative List (2021) covers 12 industries, and foreign and domestic investments are managed
uniformly under the principle of national treatment for industries not included.
Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic
Companies
The Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic
Companies ( ) (hereinafter referred to as the
“Overseas Listing Trial Measures ”) were promulgated by the CSRC on February 17, 2023, and
implemented on March 31, 2023. According to these Trial Measures, issuers seeking an initial
public offering or listing abroad must file with the CSRC within three working days following the
submission of their application documents for issuance and listing abroad. From February 17,
2023, the CSRC ceased to accept administrative license applications for overseas public offerings
and listings (including additional issues) by joint stock companies and began to accept
communication on filing applications. From March 31, 2023, the CSRC started to receive filing
applications.
Pursuant to the aforementioned regulations, issuers are prohibited from overseas offering and
listing if they fall under one of the following circumstances: (1) where such securities offering and
listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state
rules; (2) where the intended securities offering and listing may endanger national security as
reviewed and determined by competent authorities under the State Council in accordance with law;
(3) where the domestic company intending to make the securities offering and listing, or its
controlling shareholders and the actual controller, have committed crimes such as corruption,
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bribery, embezzlement, misappropriation of property or undermining the order of the socialist
market economy during the latest three years; (4) where the domestic company intending to make
the securities offering and listing is suspected of committing crimes or major violations of laws
and regulations, and is under investigation according to law, and no conclusion has yet been made
thereof; (5) where there are material ownership disputes over equity held by the domestic
company’s controlling shareholder or by other shareholders that are controlled by the controlling
shareholder and/or actual controller.
Where a domestic company seeks to directly offer and list securities in overseas markets, the
issuer shall file with the CSRC, submit a filing report, legal opinion, and other relevant materials
and provide truthful, accurate and complete information on the shareholders, among other details.
Guidelines for the Application of “Full Circulation” of Domestic Unlisted Shares of H-share
Companies (2023 Revision)
The Guidelines for the Application of “Full Circulation” of Domestic Unlisted Shares of
H-share Companies (2023 Revision) ( H΅͡ሗ “ஷ”ˏ(2023ࡌ
ࠈ)) were issued and implemented by the CSRC on August 10, 2023. According to these
guidelines, domestic unlisted joint stock companies may file with the CSRC for “full circulation”
simultaneously with their initial public offerings or listings in overseas markets.
Measures for the Administration of Overseas Investments and Measures for the
Administration of Enterprises’ Overseas Investments
The Measures for the Administration of Overseas Investments () were
issued by the MOFCOM on September 6, 2014, and implemented on October 6, 2014. The
Measures for the Administration of Enterprises’ Overseas Investments ()
were issued by the NDRC on December 26, 2017, and implemented on March 1, 2018.
According to these Measures, overseas investment refers to investment activities by domestic
enterprises, directly or through their controlled overseas enterprises, by injecting assets, equity,
providing financing, guarantees, etc., to acquire ownership, control rights, management rights and
other relevant rights abroad. The scope of approval management includes sensitive projects
undertaken directly or through their controlled overseas enterprises of the investing entities. The
MOFCOM and the commerce departments at provincial levels are responsible for the
administration and supervision of overseas investments. Depending on the different circumstances
of enterprises’ overseas investments, they either implement filing or approval management.
Enterprises’ overseas investments involving sensitive countries and regions or sensitive industries,
are subject to approval management by the NDRC. Other overseas investments by enterprises are
subject to filing management.
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The MOFCOM and the commerce departments at provincial levels manage enterprises’
overseas investments through the “Overseas Investment Management System” and issue the
Certificate of Overseas Investment by Enterprises to enterprises that have obtained filing or
approval.
LA WS AND REGULATIONS ON LABOR PROTECTION
Labor Law of the People’s Republic of China
The Labor Law of the People’s Republic of China () was
promulgated by the Standing Committee of the National People’s Congress on July 5, 1994,
implemented on January 1, 1995, and most recently revised and implemented on December 29,
2018. The Labor Law of the People’s Republic of China stipulates matters related to promoting
employment, labor contracts, working hours, rest and leave, wages, labor safety and hygiene,
special protection for female and minor workers, vocational training, social insurance and welfare,
labor disputes, supervision and inspection, as well as legal liabilities.
Labor Contract Law of the People’s Republic of China and Implementation Regulation of the
Labor Contract Law of the People’s Republic of China
The Labor Contract Law of the People’s Republic of China ()
was issued by the Standing Committee of the National People’s Congress on June 29, 2007,
implemented on January 1, 2008, and most recently revised on December 28, 2012, with the
revision taking effect on July 1, 2013. The Implementation Regulation of the Labor Contract Law
of the People’s Republic of China (ૢԷ ) were issued and
implemented by the State Council on September 18, 2008. According to the aforementioned law
and regulation, a written labor contract shall be established when forming a labor relationship.
Employers shall not force employees to work overtime and must pay overtime wages according to
national regulations if overtime is arranged. Wages must not be lower than the local minimum
wage standard and must be paid to employees promptly.
Social Insurance Law of the People’s Republic of China and Provisional Regulations on
Collection and Payment of Social Insurance Premiums
The Social Insurance Law of the People’s Republic of China (ᎈ
) was promulgated by the Standing Committee of the National People’s Congress on October
28, 2010, and most recently revised and implemented on December 29, 2018. The Provisional
Regulations on Collection and Payment of Social Insurance Premiums (ᎈ൬ᅄᖮᅲБૢ
Է) was issued and implemented by the State Council on January 22, 1999, and revised and
implemented on March 24, 2019. According to the aforementioned law and regulation, employers
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are required to pay social insurance premiums for employees in full, including pension,
unemployment, maternity, work-related injury and medical insurance. Employers who fail to
register for social insurance shall be ordered by the social insurance administrative department to
rectify it within a prescribed period. Those who fail to rectify within the prescribed period shall be
liable for a fine one to and three times the amount of the payable social insurance premiums, and
the directly responsible supervisors and other directly responsible personnel shall be liable for a
fine ranging from RMB500 to RMB3,000. Employers who fail to pay social insurance premiums in
full and on time shall be ordered by the social insurance premium collection agency to pay or
make up the payment within a prescribed period. From the date of the arrears, a late fee of 0.05%
per day will be charged; if no rectification was made upon expiry of such prescribed period, the
relevant administrative department may impose a fine of one to three times the amount of the
arrears.
Regulations on Management of Housing Provident Fund
The Regulations on Management of Housing Provident Fund (၍ଣૢԷ) was
issued by the State Council on April 3, 1999, and most recently revised and implemented on
March 24, 2019. According to the aforementioned regulation, when an employer hires an
employee, it must register for housing provident fund contributions with the housing provident
fund management center within 30 days from the date of employment and handle the establishment
or transfer of the employee’s housing provident fund account. If an employer fails to pay or
underpays the housing provident fund within the prescribed time, the housing provident fund
management center shall order the employer to pay upon expiry of such period. If the employer
still fails to pay after the deadline, the management center may apply to a people’s court for
compulsory enforcement.
Interim Provisions on Labor Dispatch
The Interim Provisions on Labor Dispatch () were issued by the
Ministry of Human Resources and Social Security on January 24, 2014, and implemented on
March 1, 2014. According to these provisions, secondment employers can only engage dispatched
workers for temporary, auxiliary or substitute job positions. Secondment employers should strictly
restrict the number of dispatched workers engaged, and the number of dispatched workers shall not
exceed 10% of the total workforce. Employers engaging workers in the form of labor dispatch
under the guise of contracting, outsourcing or other forms shall be processed in accordance with
these provisions.
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LA WS AND REGULATIONS ON TAXATION
Enterprise Income Tax Law of the People’s Republic of China, Implementing Regulations of
the Enterprise Income Tax Law of the People’s Republic of China and Measures for the
Administration of Recognition of High and New Technology Enterprises
The Enterprise Income Tax Law of the People’s Republic of China (ה
) was promulgated by the Standing Committee of the National People’s Congress on
March 16, 2007, implemented on January 1, 2008, and most recently revised and implemented on
December 29, 2018. The Implementing Regulations of the Enterprise Income Tax Law of the
People’s Republic of China (ૢԷ ) were issued by the State
Council on December 6, 2007, implemented on January 1, 2008, and most recently revised and
implemented on April 23, 2019. The Measures for the Administration of Recognition of High and
New Technology Enterprises () were issued by the Ministry of
Science and Technology, Ministry of Finance, and State Administration of Taxation on January 29,
2016, and implemented on January 1, 2016. According to these laws and regulations, both resident
and non-resident enterprises are subject to a uniform enterprise income tax rate of 25%.
Enterprises certified as High and New Technology Enterprises are subject to a tax rate of 15%,
while qualified small and low-profit enterprises are subject to a 20% rate. However, non-resident
enterprises without establishments or places of business in China, or those whose income have no
actual connection with their establishments or places of business in China, shall pay enterprise
income tax at the rate of 20% on their income sourced from within China.
Circular of the State Administration of Taxation on Issues Concerning the Implementation of
Dividend Clauses in Tax Treaties
Issued and implemented by the State Administration of Taxation on February 20, 2009, the
Circular of the State Administration of Taxation on Issues Concerning the Implementation of
Dividend Clauses in Tax Treaties ( )
stipulates that when a Chinese resident company pays dividends to a resident of a tax treaty
counterpart, and the recipient (or the beneficiary of the dividends) is the beneficial owner of the
dividends, the recipient is entitled to the preferential treatment under the tax treaty, i.e., the income
tax in China is calculated at the rate specified in the tax treaty in China. If the treaty rate is higher
than the domestic tax rate of China, the taxpayer may still be taxed according to Chinese domestic tax
laws. If the resident of a tax treaty counterpart directly owns a certain percentage of the capital
(generally 25% or 10%) of the Chinese resident company paying the dividends, the dividends received
by the resident of a tax treaty counterpart will be taxed at the treaty-specified rate.
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Announcement of the State Administration of Taxation on Issues Concerning the “Beneficial
Owner” in Tax Treaties
Published by the State Administration of Taxation on February 3, 2018, and implemented on
April 1, 2018, the Announcement of the State Administration of Taxation on Issues Concerning the
“Beneficial Owner” in Tax Treaties (ʕ “Ϟɛ ”ʮ
ѓ) defines the “beneficial owner” in the dividend, interest and royalties articles of double
taxation avoidance agreements signed by the PRC government as a person who has ownership and
control over the income or the rights or property from which the income is derived. The
determination of the status of a “beneficial owner” who is a resident of a treaty counterpart
seeking treaty benefits should be made based on the factors listed in the Announcement, combined
with a comprehensive analysis of the specific circumstances of each case.
Administrative Measures for Non-resident Taxpayers to Enjoy Treaty Benefits
Issued by the State Administration of Taxation on October 14, 2019, and implemented on
January 1, 2020, the Administrative Measures for Non-resident Taxpayers to Enjoy Treaty Benefits
( ) state that non-resident taxpayers who enjoy treaty
benefits should handle them through a process of “self-assessment, declaration of entitlement, and
retention of relevant materials for future reference.” A non-resident taxpayer who determines that
he or she meets the conditions for enjoying treaty benefits may enjoy such benefits at the time of
tax declaration or through the withholding agent at the time of withholding declaration.
Non-resident taxpayers should also collect and retain relevant materials according to the provisions
of the Administrative Measures and accept subsequent management by the tax authorities.
The Fifth Protocol of the Arrangement between 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
The Arrangement between 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 (τર ) was
issued and implemented by the State Administration of Taxation and the Government of the Hong
Kong Special Administrative Region on August 21, 2006, and the Fifth Protocol of the
Arrangement between 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 ( <τર >)
was officially signed in Beijing on July 19, 2019, and came into effect on December 6, 2019.
According to these regulations, if a Hong Kong resident enterprise directly holds at least 25% of
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the capital of a Chinese resident enterprise, the tax rate on dividends paid by the Chinese resident
enterprise to the Hong Kong resident enterprise shall be 5% of the total dividends; in other cases,
the rate shall be 10% of the total dividends.
Provisional Regulations of the People’s Republic of China on Value-Added Tax, Detailed
Rules for the Implementation of the Provisional Regulations of the People’s Republic of
China on Value-Added Tax, Circular on Adjusting Value-Added Tax Rates and Announcement
on Policies Related to Deepening Value-Added Tax Reform
The Provisional Regulations of the People’s Republic of China on Value-Added Tax ( ʕശɛ
೼ᅲБૢԷ) were issued by the State Council on December 13, 1993, implemented
on January 1, 1994, and most recently revised and implemented on November 19, 2017. The
Detailed Rules for the Implementation of the Provisional Regulations of the People’s Republic of
China on Value-Added Tax ( ) were issued by the
Ministry of Finance on December 25, 1993, and most recently revised on October 28, 2011, and
came into force on November 1, 2011. The Circular on Adjusting Value-Added Tax Rates (׵
) was issued and implemented by the Ministry of Finance and the State
Administration of Taxation on April 4, 2018, and implemented on May 1, 2018. The
Announcement on Policies Related to Deepening Value-Added Tax Reform (ࠧ
ʮѓ) was issued by the Ministry of Finance, the State Administration of Taxation,
and the General Administration of Customs on March 20, 2019, and implemented on April 1, 2019.
According to these regulations, rules, circulars and announcements, all enterprises and individuals
engaging in the sale of goods or providing processing, repair and replacement services, sales
services, intangible assets, real estate and import of goods in China are subject to value-added tax;
from April 1, 2019, the generally applicable V AT rates are 13%, 9%, 6% and 0%, with a V AT rate
of 3% applicable to small-scale taxpayers.
PRC LA WS AND REGULATIONS ON REAL ESTATE
Civil Code of the People’s Republic of China
The Civil Code of the People’s Republic of China (Պ) was
promulgated by the National People’s Congress on May 28, 2020, and implemented on January 1,
2021. According to the Civil Code, the establishment, modification, assignment and
extinguishment of real estate property rights are effective upon registration in accordance with the
law; unless the law stipulates otherwise, such establishment, modification, assignment and
extinguishment shall be ineffective without registration. Real estate registration shall be handled
by the registration authority at the location of the property.
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Land Administration Law of the People’s Republic of China
The Land Administration Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷ɺή၍ଣ
) was first issued by the Standing Committee of the National People’s Congress on June 25,
1986, most recently revised and issued on August 26, 2019, and implemented on January 1, 2020.
Pursuant to the Land Administration Law, construction entities that have obtained state-owned land
use rights through paid leasing must pay the land use right leasing fees and other fees and
expenses in accordance with the standards and methods prescribed by the State Council before
they can use the land. Construction entities using state-owned land must use the land in
accordance with the provisions of the contract for paid use of leased land use right or according to
the provisions of the documents of approval concerning the allocation of land use right. If it is
necessary to change the purpose of the land use, approval must be obtained from the competent
natural resources department of the relevant people’s government and from the people’s
government that originally approved the land use. For urban planned areas, changing land use
requires prior consent from the relevant urban planning administrative department before seeking
approval.
Regulations for the Implementation of the Land Administration Law of the People’s Republic
of China
The Regulations for the Implementation of the Land Administration Law of the People’s
Republic of China (ૢԷ ) were first issued by the State
Council on January 4, 1991, most recently revised on July 2, 2021, and implemented on September
1, 2021. According to these regulations, the use of state-owned land by the construction entities
shall be acquired by way of paid use, except for those that can be obtained through allocation as
stipulated by laws and administrative regulations. Methods of paid use of state-owned land include
(i) transfer of state-owned land use rights; (ii) leasing of state-owned land; and (iii) contribution or
equity participation in state-owned land use rights.
Interim Regulations on Real Estate Registration
The Interim Regulations on Real Estate Registration ( ʔਗପ೮াᅲБૢԷ) were first
issued by the State Council on November 24, 2014 and implemented on March 1, 2015, and most
recently revised on March 10, 2024 and implemented on May 1, 2024. According to these
regulations, real estate shall be registered based on real estate unit. Each real estate unit has a
unique code. Real estate registration authorities shall establish a unified real estate register in
accordance with the provisions of the competent department of natural resources of the State
Council. The real estate register shall record the following: (i) natural conditions of the real estate
such as location, boundaries, spatial limits, acreage and usage; (ii) property conditions of the real
estate rights such as ownership, type, content, source, term, changes in rights; (iii) matters related
to restrictions and warnings on real estate rights; and (iv) other relevant matters.
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Interim Regulations on the Granting and Assignment of Urban State-Owned Land Use Rights
of the People’s Republic of China
The Interim Regulations on the Granting and Assignment of Urban State-Owned Land Use
Rights of the People’s Republic of China (ᕄ਷ϞɺήԴ͜ᛆ̈ᜫձᔷᜫᅲБ
ૢԷ) were first issued by the State Council on May 19, 1990, and most recently revised and
implemented on November 29, 2020. According to these regulations, the assignment of land use
rights refers to the act of the state, in its capacity as the landowner, assigns the land use right for a
certain period to land users, who in turn pay fees for the assignment thereof to the state. An
assignment contract must be signed for assigning the land use rights. Land users shall develop,
utilize and manage the land in accordance with the provisions of the contract for the assignment of
land use right and the requirements of urban planning. If the land is not developed and used within
the period and conditions as stipulated in the contract, the land administration departments under
the people’s governments at the municipal and county levels shall rectify the purpose of the
situation and may impose penalties, including warnings, fines or the uncompensated reclamation of
land use rights, depending on the circumstances. If a land user needs to change the land use as
stipulated in the contract for the assignment of land use right, it shall obtain the consent of the
grantor and the approval of the land administration department and urban planning department,
sign a new contract for the assignment of land use right, adjust the amount of the assignment fee,
and complete the registration.
Measures for the Administration of Commodity Housing Leasing
The Measures for the Administration of Commodity Housing Leasing (ॡ༣၍ଣ፬
) were issued on December 1, 2010 and implemented on February 1, 2011. According to these
measures, parties to a housing lease shall enter into a lease contract in accordance with the law.
The content of the housing lease contract shall be agreed upon by both parties.
Regulations on the Approval and Filing Management of Enterprise Investment Projects and
Measures for the Approval and Filing Management of Enterprise Investment Projects
The Regulations on the Approval and Filing Management of Enterprise Investment Projects
(၍ଣૢԷ) were promulgated on November 30, 2016, and
implemented from February 1, 2017. The Measures for the Approval and Filing Management of
Enterprise Investment Projects () were issued on March 8,
2017, and implemented on April 8, 2017 and amended by the Decision of the National
Development and Reform Commission on Revision of Regulations and Administrative Normative
Documents on Investment Management (஝ᇍ
) issued on March 23, 2023 and implemented on May 1, 2023. According to these
regulations and measures, projects related to national security, significant national productivity
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layouts, strategic resource development and major public interests are subject to approval
management. The determination of specific projects and approval authority is governed by the
investment project catalog approved by the government. This catalog is proposed by the
investment authority under the State Council in conjunction with relevant departments of the State
Council, implemented following the State Council’s approval, and adjusted periodically. Except for
special provisions, other projects are subject to filing management, typically following the
principle of territoriality, with local governments stipulating the filing authorities and their powers.
Project approval and filing are primarily conducted through the national online project
monitoring platform (“ Online Platform ”), which is jointly used by approval authorities, filing
authorities and other relevant departments.
Should there be significant changes to a project after filing or if the project is given up, the
project entity shall promptly notify the filing authority through the Online Platform and update
relevant information. Projects under filing management shall also complete other procedures
stipulated by laws and regulations before commencing work.
Urban and Rural Planning Law of the People’s Republic of China
The Urban and Rural Planning Law of the People’s Republic of China (۬
) was first promulgated by the Standing Committee of the National People’s Congress
on October 28, 2007 and most recently revised and implemented on April 23, 2019. In accordance
with the aforementioned legal provisions, within urban and town planning areas where the use
rights of state-owned land are provided through transfer, the urban-rural planning departments of
the urban and county people’s government must determine the conditions such as the location,
intended use and development intensity of the land parcels based on detailed plans before the
transfer of state-owned land use rights. These conditions form part of the land transfer contract and
land parcels without planning conditions cannot be transferred. For construction projects that
acquire state-owned land use rights through transfer, the construction entity must, after obtaining
approval, authorization, filing documentation for the construction project and signing the
state-owned land use rights transfer contract, obtain a construction land planning permit from the
urban-rural planning departments of the urban and county people’s government. Planning
departments are not permitted to arbitrarily change the planning conditions stipulated in the land
transfer contract.
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For construction of buildings, roads, pipelines and other engineering projects within urban
and town planning areas, construction entities or individuals must apply for a construction project
planning permit from corresponding government planning departments and submit documents
proving the use of the land and the construction project design proposal. Projects that comply with
planning will obtain the planning permit. Relevant government departments shall publish the
overall layout of the approved detailed plan and construction project design proposal.
Construction Law of the People’s Republic of China
The Construction Law of the People’s Republic of China () was
first promulgated by the Standing Committee of the National People’s Congress on November 1,
1997, and most recently revised and implemented on April 23, 2019. According to the
Construction Law, before the commencement of construction work, the construction entity shall
apply for a construction permit from the construction administrative department of the people’s
government at or above the county level where the project is located in accordance with relevant
rules of the state, except for small-scale projects below the limit determined by the construction
administrative department of the State Council. Construction projects approved for commencement
according to the authority and procedures prescribed by the State Council are exempted from
obtaining a construction permit. Construction entities should commence construction within three
months from the date of receiving the construction permit. If the construction entity is unable to
start construction as scheduled due to unforeseen circumstances, an application for an extension
should be made to the issuing authority. The deadlines shall not be extended for more than two
times and each extension shall not exceed three months. If construction does not commence
without applying for an extension or exceeds the extension limit, the construction permit shall
become void.
Administrative Measures for Construction Permits of Building Engineering
The Administrative Measures for Construction Permits of Building Engineering (ጘʈ೻
) were first issued by the former Ministry of Construction of the PRC in 1999,
and were most recently revised and implemented by the Ministry of Housing and Urban-Rural
Development of the PRC (hereinafter referred to as the MOHURD ) on March 30, 2021. According
to these measures, construction entities engaging in the construction and renovation of various
types of buildings and their ancillary facilities, as well as the installation of corresponding lines,
pipelines, and equipment and the construction of urban municipal infrastructure projects within the
territory of the PRC, shall apply for a construction permit from the competent housing and
urban-rural construction department of the local people’s government at or above the county level
where the project is located before commencing work.
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Building projects with an investment of less than RMB300,000 or a construction area of less
than 300 sq.m. may be exempt from applying for a construction permit. The department in charge
of housing and urban-rural development under the people’s government of provinces autonomous
regions and municipalities directly under the central government may adjust the threshold
according to local conditions and report to the Ministry of Housing and Urban-Rural Development
of the State Council for record.
Construction projects approved for commencement in accordance with the authority and
procedures prescribed by the State Council are exempt from obtaining a construction permit.
Regulations on Quality Management of Construction Projects
The Regulations on Quality Management of Construction Projects (ணʈ೻ሯඎ၍ଣૢ
Է) were first issued and implemented by the State Council on January 30, 2000, and most
recently revised and implemented on April 23, 2019. According to these regulations, construction
entities must contract their projects to entities with corresponding qualification. Construction
entities shall not divide the construction project into parts for contracting. Construction entities
must legally tender the survey, design, construction, supervision, and procurement of important
equipment and materials related to construction projects.
Administrative Measures for the Record-filing of Completion Acceptance of Building
Construction and Municipal Infrastructure Projects
The Administrative Measures for the Record-filing of Completion Acceptance of Building
Construction and Municipal Infrastructure Projects (ࣩ
) were issued and implemented by the MOHURD on October 19, 2009. According to
these measures, construction entities shall file with the construction department of the local
people’s government at or above the county level where the project is located (hereinafter referred
to as the filing authority) within 15 days from the date of completion and qualified acceptance of
the project, in accordance with these measures. The filing authority, upon receiving the
record-filing documents of completion and acceptance submitted by the construction entity and
verifying the completeness of the documents, shall sign for receipt on the record-filing form of
completion and acceptance of the project. The quality supervision entity for the project shall
submit a quality supervision report to the filing authority within 5 days from the date of
completion and acceptance of the project.
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Regulations on Completion Acceptance of Housing Construction and Municipal
Infrastructure Projects
The Regulations on Completion Acceptance of Housing Construction and Municipal
Infrastructure Projects ( ) were promulgated and
implemented by the MOHURD on December 2, 2013. Under these regulations, the construction
entity is responsible for organizing and implementing the completion and acceptance of a project.
Construction projects can proceed to completion and acceptance inspection only if they meet the
following requirements: The project must complete all the contents stipulated in the design and
contract. The construction entity must verify the quality of the project, ensure compliance with
regulations and standards and submit a completion report. Supervision projects require a quality
assessment report. Survey and design entities must review documents and design changes and issue
a quality report. There must be complete technical records, construction management data, test
reports and quality data for major building materials, components and equipment. The construction
entity must make payments for the project, and the construction entity must provide a quality
warranty. Residential projects must undergo individual household acceptance inspections and issue
acceptance forms. All issues directed by the construction regulatory departments and quality
supervision institutions must be rectified, fulfilling other conditions stipulated by laws and
regulations.
Administrative Measures for the Granting and Transfer of Urban State-Owned Land Use
Rights
The Administrative Measures for the Granting and Transfer of Urban State-Owned Land Use
Rights ( ) were originally issued by the former
Ministry of Construction on December 4, 1992, and subsequently revised on January 26, 2011, by
the Decision on Abolishing and Amending Certain Regulations of the Ministry of Housing and
Urban-Rural Development ( ). According to
these measures, contracts for the granting and transfer of urban state-owned land use rights must
include planning and design conditions along with drawings. These conditions and drawings
cannot be unilaterally altered by either the grantor or the grantee. Any necessary modifications
during the granting and transfer process require approval from the urban planning administrative
department. Grantees with a land grant contract are required to apply for a construction land
planning permit from the urban planning administrative department in accordance with the law and
can only apply for the land use right certificate after obtaining this permit.
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PRC LA WS AND REGULATIONS ON INTELLECTUAL PROPERTY RIGHTS
Patent Law of the People’s Republic of China and Detailed Rules for the Implementation of
the Patent Law of the People’s Republic of China
The Patent Law of the People’s Republic of China () was enacted
by the Standing Committee of the National People’s Congress on March 12, 1984, implemented on
April 1, 1985, and most recently revised on October 17, 2020, with implementation from June 1,
2021. The Detailed Rules for the Implementation of the Patent Law of the People’s Republic of
China () were issued by the State Council on June 15, 2001,
implemented on July 1, 2001, and most recently revised on December 11, 2023, with
implementation from January 20, 2024. According to these laws, regulations and detailed rules,
patents in China are categorized into three types: invention patents, utility model patents and
design patents. The term of an invention patent right is 20 years, the term of a utility model patent
is 10 years, and the term of a design patent is 15 years, all of which are calculated from the filing
date. Any entity or individual that exploits another’s patent must conclude a licensing agreement
with the patent holder and pay royalties. Exploiting a patent without the permission of the patent
holder constitutes an infringement of their patent rights.
Trademark Law of the People’s Republic of China and Regulations for the Implementation of
the Trademark Law of the People’s Republic of China
The Trademark Law of the People’s Republic of China () was
promulgated by the Standing Committee of the National People’s Congress on August 23, 1982,
implemented on March 1, 1983, and most recently revised on April 23, 2019, with implementation
from November 1, 2019. The Regulations for the Implementation of the Trademark Law of the
People’s Republic of China (ૢԷ) were issued by the State Council
on August 3, 2002, implemented on September 15, 2002, and most recently revised on April 29,
2014, with implementation from May 1, 2014. According to these laws and regulations, the
validity period of a registered trademark is 10 years from the date of approval. To continue using a
trademark upon the expiry of its validity, renewal procedures must be completed in accordance
with the provisions within the 12 months preceding expiration. If renewal procedures are not
completed within this period, a six-month extension is allowed. Each renewal extends the validity
period for 10 years, starting from the day following the expiration of the last validity period.
Trademark registrants may authorize others to use their registered trademarks by signing trademark
licensing agreements.
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Regulations on the Protection of Layout-Designs of Integrated Circuits
The Regulations on the Protection of Layout-Designs of Integrated Circuits ( ණϓཥ༩̺ྡ
ᚐૢԷ) were issued by the State Council on April 2, 2001, and implemented on October
1, 2001. According to these regulations, natural persons, legal persons or other organizations in
China who create layout-designs have exclusive rights to their designs. Foreign persons whose
layout-designs are first commercially exploited within the territory of China are also entitled to
exclusive rights to their designs. The protection term for the exclusive right of a layout-design is
10 years, calculated from the date of the design registration application or the first date of
commercial use anywhere in the world, whichever is earlier. However, a layout-design is no longer
protected under these regulations 15 years after its creation, regardless of registration or
commercial use.
Internet Domain Name Management Measures
The Internet Domain Name Management Measures () were issued by
the MIIT on August 24, 2017, and implemented on November 1, 2017. According to these
management measures, the MIIT is the primary regulatory authority for the management of
Internet domain names in China. Domain name registration is processed through domain name root
servers and their operating institutions, domain name registration management institutions and
domain name registration service institutions established in accordance with the relevant
regulations.
PRC LA WS AND REGULATIONS ON FOREIGN EXCHANGE
Foreign Exchange Administration Regulations of the People’s Republic of China
The Foreign Exchange Administration Regulations of the People’s Republic of China ( ʕശ
ɛ͏΍ձ਷̮ි၍ଣૢԷ) were issued by the State Council on January 29, 1996, implemented
on April 1, 1996, and most recently revised and implemented on August 5, 2008. According to
these regulations, Renminbi can generally be freely exchanged for current account transactions,
such as foreign exchange transactions related to trade and services and dividend payments.
However, free exchange for capital account transactions, including capital transfers, direct
investments, securities investments, derivatives or loans, are not permitted unless prior approval is
obtained from the foreign exchange administration authorities.
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Regulations on Foreign Exchange Settlement, Sales and Payment and Notice on Reforming
the Foreign Exchange Capital Settlement Management for Foreign-Invested Enterprises
The Regulations on Foreign Exchange Settlement, Sales, and Payment ( ഐිeਯිʿ˹ි
) were issued by the People’s Bank of China on June 20, 1996, and implemented on
July 1, 1996. The Notice on Reforming the Foreign Exchange Capital Settlement Management for
Foreign-Invested Enterprises ( ) was
issued by the State Administration of Foreign Exchange (SAFE) on March 30, 2015. The Notice on
Abolishing and V oiding 5 Foreign Exchange Management Normative Documents and 7 Clauses of
Foreign Exchange Management Normative Documents (ࣖ5΁̮ි
˖΁ʿ 7) issued and implemented on December
30, 2019, repealed the provision in Article 6 stating “Foreign exchange funds in the special deposit
accounts for inward remittances from abroad and inward transfers within the country shall not be
settled and used” has been abolished. The Notice on Abolishing and V oiding 15 Foreign Exchange
Management Normative Documents and Adjusting 14 Clauses of Foreign Exchange Management
Normative Documents (ࣖ15˖΁ʿሜ዆ 14΁̮
) issued and implemented on March 23, 2023, deleted the content
under item (1) of Article 7: “For banks that seriously and maliciously violate regulations, their
foreign exchange transactions under capital accounts may be suspended according to relevant
procedures. For foreign-invested enterprises and others that seriously and maliciously violate
regulations, their eligibility for voluntary foreign exchange settlement may be revoked.
Furthermore, until they submit a written explanation and make corresponding rectifications, other
foreign exchange transactions under capital accounts shall not be processed for them.”
According to these regulations, domestic institutions must open foreign exchange accounts
with banks authorized to conduct foreign exchange business in their registration area and handle
foreign exchange settlement, purchase and payment according to these regulations. Domestic
institutions opening foreign exchange accounts in different locations or abroad must apply to
SAFE. Foreign-invested enterprises can open foreign exchange settlement accounts with banks
authorized to conduct foreign exchange business in their registration area for foreign exchange
income under current accounts with approval.
Notice of the SAFE on Optimizing Foreign Exchange Administration to Support the
Development of Foreign-Related Businesses
The Notice of the SAFE on Optimizing Foreign Exchange Administration to Support the
Development of Foreign-Related Businesses (ऒุ̮ਕ೯
) was issued and implemented by SAFE on April 10, 2020. According to this notice,
enterprises meeting certain conditions are permitted to use income under the capital accounts,
including capital funds, foreign debts and overseas listing proceeds, for domestic payments without
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needing to provide proof of authenticity to banks in advance, as long as the fund usage is genuine,
compliant and in accordance with current capital account income management regulations.
Handling banks shall manage and control relevant business risks following the principle of prudent
operation and conduct post-hoc spot checks afterwards on the payment facilitation business for
income under the capital account handled by them according to relevant requirements.
Notice of the SAFE on Further Simplifying and Improving the Foreign Exchange
Management Policy for Direct Investment
The Notice of the SAFE on Further Simplifying and Improving the Foreign Exchange
Management Policy for Direct Investment (ટҳ༟̮ි
) was issued by SAFE on February 13, 2015 and implemented on June 1, 2015,
which was partially repealed by the Notice on Abolishing and V oiding 5 Foreign Exchange
Management Normative Documents and 7 Clauses of Foreign Exchange Management Normative
Documents (ࣖ5˖΁ʿ 7˖΁
) issued and implemented on December 30, 2019. As per this notice, banks directly
review and handle foreign exchange registration under domestic direct investment and foreign
direct investment, while SAFE and its branches exercise indirect supervision over foreign
exchange registration for direct investments through banks.
PRC LA WS AND REGULATIONS ON ENVIRONMENTAL PROTECTION
Environmental Protection Law of the People’s Republic of China and Environmental Impact
Assessment Law of the People’s Republic of China
The Environmental Protection Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷ᐑྤ
) was promulgated by the Standing Committee of the National People’s Congress on
September 13, 1979, implemented on the same date, and most recently revised on April 24, 2014,
with implementation from January 1, 2015. The Environmental Impact Assessment Law of the
People’s Republic of China () was issued by the Standing
Committee of the National People’s Congress on October 28, 2002, implemented on September 1,
2003, and most recently revised and implemented on December 29, 2018. According to these laws,
the state implements classified management of environmental impact assessments for construction
projects. Construction entities are responsible for the content and conclusions of the environmental
impact assessment documents of their projects. Construction entities cannot commence
construction for projects without lawful review and approval by the relevant authorities.
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Regulations on Classified Approval of Environmental Impact Assessment Documents for
Construction Projects
The Regulations on Classified Approval of Environmental Impact Assessment Documents for
Construction Projects ( ) were initially issued by the
former State Environmental Protection Administration on November 1, 2002, and most recently
revised on January 16, 2009 and implemented on March 1, 2009. As per these regulations, for the
construction of projects that have an impact on the environment, regardless of the investment
entity, source of funds, project nature and investment scale, the classified approval authority shall
be determined based on the environmental impact assessment document. Environmental protection
departments at all levels are responsible for the approval of construction project environmental
impact assessment documents. The classified approval authority of the environmental impact
assessment documents of the construction project shall, in principle, be determined in accordance
with the approval, ratification and filing authority of the construction project and the nature and
degree of the impact of the construction project on the environment.
Regulations on the Management of Pollutant Discharge Permits and Catalogue for the
Classified Management of Fixed Pollution Source Discharge Permits (2019 Edition)
According to the Regulations on the Management of Pollutant Discharge Permits ( રϮ஢̙
၍ଣૢԷ) issued by the State Council on January 24, 2021, and implemented on March 1, 2021,
and the Catalogue for the Classified Management of Fixed Pollution Source Discharge Permits
(2019 Edition) (๕રϮ஢̙ʱᗳ၍ଣΤ፽ (2019و)) issued and implemented by the
Ministry of Ecology and Environment on December 20, 2019, enterprises, institutions and other
manufacturers subject to pollutant discharge permit management as stipulated by law must apply
for and obtain a pollutant discharge permit. Without this permit, discharging pollutants is
prohibited. Pollutant discharging entities with a significant volume of pollutant generation,
emissions or environmental impact are subject to key management of pollutant discharge permits.
Those with a smaller volume of pollutant generation, emissions and environmental impact are
subject to simplified management. Entities with minimal pollutant generation, emissions and
environmental impact are subject to pollutant discharge registration management.
PRC LA WS AND REGULATIONS ON PRODUCTION SAFETY
Work Safety Law of the People’s Republic of China
The Work Safety Law of the People’s Republic of China ()
was enacted by the Standing Committee of the National People’s Congress on June 29, 2002, most
recently revised and issued on June 10, 2021, and implemented on September 1, 2021. According
to the Work Safety Law, production and business operation entities must meet the safety
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production conditions stipulated by this law, relevant laws, administrative regulations, national
standards or industry standards. Entities that do not meet conditions for safe production shall not
engage in production and business operations.
Regulations on the Safety Facilities of Construction Projects “Three Simultaneities”
Supervision and Management
In accordance with the Regulations on the Safety Facilities of Construction Projects “Three
Simultaneities” Supervision and Management (݄“ ࣛ”),
issued by the former State Administration of Work Safety on April 2, 2015, and implemented on
May 1, 2015, safety facilities of new construction, reconstruction and expansion projects must be
designed, constructed and put into operation and use simultaneously with the main project.
Enterprises are required to conduct safety pre-evaluations for construction projects, entrust
preliminarily designed entities with the corresponding qualifications to design the safety facilities
simultaneously, prepare safety facility designs, submit them to relevant production safety
supervision and management departments for review applications and apply for the acceptance
inspection of safety facilities upon completion.
Fire Protection Law of the People’s Republic of China and Interim Regulations on Fire
Protection Design Review and Acceptance Management of Construction Projects
The Fire Protection Law of the People’s Republic of China () was
first enacted by the Standing Committee of the National People’s Congress on April 29, 1998,
implemented on September 1, 1998, and most recently revised and implemented on April 29, 2021.
The Interim Regulations on Fire Protection Design Review and Acceptance Management of
Construction Projects ( ) were first issued by the
MOHURD on April 1, 2020, most recently revised on August 21, 2023, and implemented from
October 30, 2023.
In accordance with the aforementioned laws and regulations, for construction projects that are
required to undergo fire safety acceptance inspections as stipulated by the State Council’s housing
and urban-rural development authorities, the construction entity must apply for a fire safety
acceptance inspection with the housing and urban-rural development authorities. For other
construction projects not specified in the previous provision, the construction entity must report to
the housing and urban-rural development authorities for filing after the acceptance inspection.
Construction projects that are legally required to undergo a fire safety acceptance inspection must
not be put into use if they have not undergone such an inspection or if they fail the inspection.
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PRC LA WS AND REGULATIONS ON PRODUCT QUALITY
The Product Quality Law of the People’s Republic of China
As per the Product Quality Law of the People’s Republic of China (ሯ
) enacted by the Standing Committee of the National People’s Congress on February 22,
1993, and most recently amended and implemented on December 29, 2018, producers shall be
responsible for the quality of their products. The product quality shall meet the following
requirements: (i) no unreasonable dangers endangering the safety of persons and property; where
there are national or industry standards ensuring the health and safety of persons and property,
such standards must be complied with; (ii) the product shall possess the properties it is supposed
to possess, except where the product’s flaws in their properties are explicitly stated; and (iii) the
product shall comply with the product standards stated on the product or its packaging, and meet
the quality conditions as represented in product descriptions, physical samples, etc.
PRC LA WS AND REGULATIONS ON CYBERSECURITY AND DATA SECURITY
Data Security Law of the People’s Republic of China and the Measures for Security
Assessment of Cross-Border Data Transfer
The Data Security Law of the People’s Republic of China ()
was promulgated by the Standing Committee of the National People’s Congress on June 10, 2021,
and implemented on September 1, 2021. The Measures for Security Assessment of Cross-Border
Data Transfer () were issued by the Cyberspace Administration of China
on July 7, 2022 and implemented on September 1, 2022. According to these laws and measures,
data processors providing data to overseas parties must declare a security assessment for
cross-border data transfer to the national cyberspace administration through the local provincial
cyberspace administration under any of the following circumstances: (i) where a data processor
provides critical data abroad; (ii) where a critical information infrastructure operator or a data
processor processing the personal information of more than one million people provides personal
information abroad; (iii) where a data processor has provided personal information of 100,000
people or sensitive personal information of 10,000 people in total abroad since January 1 of the
previous year; and (iv) other circumstances stipulated by the national cyberspace administration
for which a declaration for security assessment of cross-border data transfer is required.
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The Cybersecurity Law of the People’s Republic of China, Regulations on the Security
Protection of Critical Information Infrastructure and Cybersecurity Review Measures
The Cybersecurity Law of the People’s Republic of China ()
was promulgated by the Standing Committee of the National People’s Congress on November 7,
2016, and implemented on June 1, 2017. The Regulations on the Security Protection of Critical
Information Infrastructure (ᚐૢԷ) were issued by the State Council
on July 30, 2021, and implemented on September 1, 2021. The Cybersecurity Review Measures
() were deliberated and adopted by the Cyberspace Administration of China
on November 16, 2021, agreed upon by the NDRC, the MIIT, the Ministry of Public Security, the
Ministry of State Security, the Ministry of Finance, the MOFCOM, the People’s Bank of China,
the State Administration for Market Regulation, the National Radio and Television Administration,
the CSRC, the National Administration of State Secrets Protection and the State Cryptography
Administration, and implemented on February 15, 2022. According to these laws, regulations and
measures, the state implements a graded cybersecurity protection system. Network operators must
fulfill their security protection obligations in accordance with the requirements of the graded
cybersecurity protection system, ensuring the network is free from interference, destruction or
unauthorized access, and preventing network data leakage, theft or tampering. For critical
information infrastructure, in addition to the graded cybersecurity protection system, focused
protection is implemented. Operators of critical information infrastructure purchasing network
products and services and network platform operators engaging in data processing activities that
affect or may affect national security, must undergo a cybersecurity review.
PRC LA WS AND REGULATIONS ON THE IMPORT AND EXPORT OF GOODS
Foreign Trade Law of the People’s Republic of China and the Measures for the Filing and
Registration of Foreign Trade Operators
The Foreign Trade Law of the People’s Republic of China ()
was promulgated by the Standing Committee of the National People’s Congress on May 12, 1994,
implemented on July 1, 1994, and most recently issued and implemented on December 30, 2022,
and the Measures for the Filing and Registration of Foreign Trade Operators (௪
) were issued by the MOFCOM on June 25, 2004, implemented on July 1, 2004, and
most recently issued and implemented on May 10, 2021. As per these laws, regulations and
measures, the state permits the free import and export of goods and technology.
REGULATORY OVERVIEW
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Regulations on the Administration of the Filing of Customs Declaration Entities of the
People’s Republic of China
The Regulations on the Administration of the Filing of Customs Declaration Entities of the
People’s Republic of China ( ) were promulgated by
the General Administration of Customs on November 19, 2021, and implemented on January 1,
2022. According to these regulations, consignees and consignors of import and export goods and
customs declaration enterprises shall obtain the qualifications of market entities if they apply for
filing.
The Regulations on the Administration of the Import and Export of Goods of the People’s
Republic of China
In accordance with the Regulations on the Administration of the Import and Export of Goods
of the People’s Republic of China (ආ̈ɹ၍ଣૢԷ ) issued by the State
Council on December 10, 2001, implemented on January 1, 2002, and most recently revised on
March 10, 2024 and implemented on May 1, 2024, goods that are prohibited from being imported
are not allowed to be imported, and goods that are prohibited from export are not allowed to be
exported. A system of quota administration shall be implemented for goods subject to import and
export restrictions where the state has stipulated that these goods shall be subject to quantity
restrictions. A system of licence administration shall be implemented for all other goods subject to
import and export restrictions. The import or export of goods that are free for import or export
shall not be restricted.
The Import and Export Commodity Inspection Law of the People’s Republic of China and
the Implementation Regulations of the Import and Export Commodity Inspection Law of the
People’s Republic of China
According to The Import and Export Commodity Inspection Law of the People’s Republic of
China () promulgated by the Standing Committee of the
National People’s Congress on February 21, 1989, and most recently revised and implemented on
April 29, 2021, and the Implementation Regulations of the Import and Export Commodity
Inspection Law of the People’s Republic of China (ૢ
Է) issued by the former State Bureau of Import and Export Commodity Inspection on October
23, 1992 and most recently amended on March 29, 2022 and implemented on May 1, 2022 by the
State Council, consignees or consignors of import and export commodities may handle inspection
procedures themselves or entrust an agent inspection application enterprise to do so. When
consignees or consignors of import and export commodities handle inspection procedures, they
must file with the entry-exit inspection and quarantine authorities in accordance with the law.
REGULATORY OVERVIEW
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OVERVIEW
The history of our business could date back to February 2003, when Mr. Chan and Mr. Xiao,
together with researchers associated with The Hong Kong University of Science and Technology,
started the business of development of LED chips and products through Advanced Photoelectronic
in Hong Kong. Our Company was established by Advanced Photoelectronic in Guangzhou, the
PRC, in August 2006, and gradually integrated and consolidated the business operations of
Advanced Photoelectronic. Leveraging our proprietary technologies and advanced R&D
capabilities, we have since expanded our business to intelligent automotive vision, high-end
lighting and advanced display, and design, develop, produce and sell a wide range of LED
intelligent vision products and system solutions. Over the years, we have developed into a leading
enterprise in China providing intelligent vision products and systems integrating “LED+”
technologies. According to CIC, in terms of revenue in 2023, we ranked third among domestic
device and module manufacturers and fifth among all manufacturers in China’s high-end lighting
industry. We ranked fifth among domestic manufacturers and twelfth among all manufacturers in
China’s mid- to high-end intelligent automotive vision industry. We ranked fourth among domestic
and all manufacturers in China’s LCD TV backlight display industry.
OUR MILESTONES
The following is a summary of our Group’s key business development milestones:
2003 Mr. Chan and Mr. Xiao co-founded Advanced Photoelectronic at The Hong Kong
University of Science and Technology, and started the business of development of
LED chips and products. Our business commenced.
2006 Our Company was established by Advanced Photoelectronic in Guangzhou,
Guangdong Province, the PRC.
Completed the R&D of flip-chip blue LED chips and submitted the application for
invention patent.
2009 Obtained ISO9001 and ISO14001 certifications.
2010 Our 1W high-power flip-chip LED chip product was accredited as Indigenous
Innovation Product by Department of Science and Technology of Guangdong
Province (ኪҦஔᝂ ) jointly with other governmental departments.
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Ranked among the 2010-2011 Top 500 Project in Modern Industry (ତ˾ପ
ุ500੶ධͦ) by Department of Science and Technology of Guangdong Province
jointly with other governmental departments.
2011 The construction of our Nansha LED industry base was completed, and we entered
the supply chain of TCL.
Awarded the “Technological Achievement Award of the 2011 Hong Kong Awards
for Industries” by Hong Kong Science & Technology Parks and ranked among the
Top 100 Growing Small and Medium-sized Enterprise (ɢ 100੶
Άุ) by China Association for the Promotion of Business Cooperation ( ʕ਷Άุ
ආึ ) and Organizing Committee of China Enterprise International
Cooperation Annual Conference (ึ ).
Recognized as a national high-tech enterprise.
Named as the Fostered Enterprise in Strategic Emerging Industries (׌
อጳପุ੃ԃΆุ ) by The Economic and Information Commission of Guangdong
Province (ึ ) (GDEIC).
2012 Awarded the 2012 China Industry Award by SEMI.
Named as the OFweek2012 LED Industry Most Innovative Brand by GDEIC.
High-power LED devices based on ceramic-based flip-chip structure commenced
mass production.
2013 Named as the Key Enterprise in Strategic Emerging Industries (อጳ
ପุ৶฀Άุ ) by GDEIC.
2014 Entered the supply chain of Philips Lighting, and our Company was named as the
Leading Technology Enterprise in the Third LED Industry Ranking (֣LEDБ
Άุ ).
2015 Won the Second Prize of the Guangdong Province Science and Technology Award
issued by the Guangdong government.
Our engineering technology research center of LED chip devices and lighting
modules was accredited as the Guangdong provincial engineering technology
research center.
2016 Entered the supply chain of Samsung.
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Ranked among the Top 10 in International Competitiveness of China LED
Packaging Enterprises ( ʕ਷LEDɢ TOP10) by the LED
International Cooperation Promotion Association.
2017 Obtained IATF16949 certification.
Our laboratory was certified by CNAS.
Named as the Top 30 NEEQ Enterprise (ؐ30੶Άุ) in the Fourth China
LED Convention Award ( ʕ਷LED௴ᆤ), and won the Innovation Award in the
2017 Guangdong Economic Ranking (2017ථ࿮ ).
2018 Established Linlux and jointly established Lynway Vision with Geely.
Entered the supply chain of Hisense.
Ranked among “Guangzhou Forty Years, Forty Brands” Quality Brand Enterprises
(ᄿψ̹“̬ɤϋ ۜ”೐Άุ ) by the Guangzhou Municipal Quality
Strong City Work Leadership Group Office ( ᄿψ̹ሯඎ੶̹ʈЪჯኬʃଡ଼፬ʮ
܃.)
2019 Commenced mass production of our automotive-grade LED devices.
Received the Supplier Excellence Recognition from Signify (formerly known as
Philips Lighting) and awarded the Outstanding Prize in the Sixth China LED
Convention Award by China Illuminating Engineering Society.
2020 Ranked among the Top 15 Intellectual Properties Enterprises in the Seventh China
LED Convention Award by China Illuminating Engineering Society (ኪ
ึ).
2021 Our automotive-grade LED products entered the supply chain of Geely, GAC and
Changan Auto, and our Linlux production base and the Lynway Ningbo production
base commenced operation.
Commenced mass production of our Mini LED product and our first automotive
lamp product.
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Won the High Quality Development Award in China Lighting Industry (Б
ᆤ ), the 2021 Gasgoo Awards on Top 100 Chinese Novel Automotive
Supply Chains (2021፨ᆤ ), and the Bright Award —
2021 Top 10 Packaging Brand in China Lighting Industry (ᆤ — 2021ʕ
೐ ).
2022 The annual product shipment of our automotive-grade LED device products
exceeded 200 million pieces, and we expanded our production capacity of Mini
LED to meet the annual demand of 300,000 Mini LED backlit TVs (converted to
55-inch TVs).
Ranked among the 2022 Top 10 Outstanding Enterprises in China Bio-Light
Industry by Shenzhen Facility Agriculture Association.
2023 Recognized as the Technologically Advanced Small and Medium-sized Enterprises
(ਖ਼ၚतอʕʃΆุ ) by Department of Industry and Information Technology of
Guangdong Province, and awarded the Excellence and Innovation Award by
Guangzhou Semiconductor Industry Association.
2024 Won the Top 10 Health Lighting Brands (೐ ) by Guangdong
Illuminating Engineering Society (ኪึ ).
As of May 31, 2024, our standardized headlamp lens module series had been
installed and applied to more than 290,000 vehicles.
OUR MAJOR SUBSIDIARIES
As of the Latest Practicable Date, we had five wholly-owned subsidiaries. The following sets
forth information about our subsidiaries that have made a material contribution to our operating
results during the Track Record Period:
Linlux
Linlux was established with limited liability in the PRC on October 9, 2018. Since its
establishment and up to the Latest Practicable Date, Linlux had been wholly owned by our
Company. Linlux is primarily engaged in the design, R&D, production and sales of LED modules
for our intelligent automotive vision, high-end lighting, and advanced display businesses.
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Lynway Vision
Lynway Vision was established with limited liability in the PRC on October 26, 2018. Upon
establishment, Lynway Vision was owned as to (i) 49% by our Company and (ii) 51% by Zhejiang
Geely Automobile Parts & Components Stock Co., Ltd. (ʮ̡ ), a
company controlled by Geely Holding, while such interest was transferred to Yaoning Technology
in December 2020.
In September 2021, our Company subscribed for the increased registered capital of Lynway
Vision. As a result, Lynway Vision became owned as to 51% by our Company and 49% by
Yaoning Technology and hence became a non-wholly owned subsidiary of our Company. In
December 2023, our Company acquired the entire interest held by Yaoning Technology in Lynway
Vision, and Lynway Vision became a wholly-owned subsidiary of our Company. See “— Major
Acquisitions, Disposals and Mergers” below for details of our acquisition of Lynway Vision.
Lynway Vision is primarily engaged in the design, R&D, production and sales of intelligent
automotive vision products.
CORPORATE DEVELOPMENT
The following sets forth the corporate history and shareholding changes of our Company.
Establishment and Initial Investments
On August 30, 2006, our Company was established as a wholly foreign-owned enterprise
under the laws of PRC by Advanced Photoelectronic with a registered capital of HKD7,000,000.
After a series of shareholding changes and registered capital increases, our Company became
owned as to approximately 97.58% by Advanced Photoelectronic and 2.42% by Jiangyin Haohan
Photoelectric Technology Co., Ltd. (ʮ̡ )( “ Haohan Photoelectronic ”)
with a registered capital of USD27,000,000 as of January 2012.
In June 2014, the registered capital of our Company was increased in the amount of
USD7,363,648.86, among which (i) USD3,681,824.43 was subscribed for by Guangdong Yueke
Finance Investment Co., Ltd. (ʮ̡ )( “ Yueke Investment ”) at a
consideration of RMB46,000,000, and (ii) USD3,681,824.43 was subscribed for by Advanced
Photoelectronic at a consideration of USD7,500,000. The consideration was determined with
reference to the valuation of our Company agreed between the parties after arms’ length
negotiations.
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In August 2015, the registered capital of our Company was increased in the amount of
USD9,112,100, among which (i) USD1,596,400 was subscribed for by Shenzhen Guomin
Innovation Venture Capital (L.P.) ( ଉέ̹਷͏௴อ௴ุҳ༟Άุ (Υྫ)) (“ Publics Venture
Capital ”) at a consideration of RMB20,000,000, (ii) USD726,400 was subscribed for by Episky
Corporation (Xiamen) Ltd. ( ౺ρΈཥ(ژ)ʮ̡)( “ Episky ”) at a consideration of
RMB9,100,000, and (iii) USD6,789,300 was subscribed for by Advanced Photoelectronic at a
consideration of USD13,830,000. The consideration was determined with reference to the valuation
of our Company agreed between the parties after arms’ length negotiations.
Upon completion of the above shareholding changes and registered capital increases, as of
August 31, 2015, our registered capital was increased to USD43,475,748.86, and the then
shareholding structure of our Company is set forth in the table below:
Shareholder
Registered capital
subscribed for
Percentage of
shareholding
(USD) (approximate)
Advanced Photoelectronic ............................ 36,818,124.43 84.69%
Yueke Investment (1) ................................ 3,681,824.43 8.47%
Publics Venture Capital (2) ............................ 1,596,400.00 3.67%
Episky (3) ........................................ 726,400.00 1.67%
Haohan Photoelectric (4) ............................. 653,000.00 1.50%
Total ............................................ 43,475,748.86 100%
Notes:
(1) Yueke Investment is a limited liability company established in the PRC. As of the Latest Practicable Date, it was
wholly owned by Guangdong Technology Financial Group Co., Ltd. (ʮ̡ )( “ Yueke
Group ”), which was in turn owned as to 90% and 10% by the People’s Government of Guangdong Province (؇
ִ݁and the Department of Finance of Guangdong Province (ᝂ ), respectively. In connection
with its investment in our Company, Yueke Investment had been granted certain special rights including, among
others, pre-emptive right, information right, liquidation preference right and redemption right, all of which have
terminated by November 2019 prior to our submission of application for listing on STAR.
(2) Publics Venture Capital is a limited partnership established in the PRC, the general partner of which is Mr. YE
Zhixiong ( ໢қඪ), an Independent Third Party. As of the Latest Practicable Date, it was owned as to (i) 0.5% by
Mr. YE Zhixiong, and (ii) 49.5% by Mr. YE Zhiyu ( ໢қρ) and 50% by Ningbo Meishan Bonded Area Jiamu
Ronghe Investment Partnership (Limited Partnership) (೼ಥਜྗ˝ፄΥҳ༟ΥྫΆุ (Υྫ))
(“Jiamu Ronghe ”), both as limited partners and Independent Third Parties. In July 2023, Publics Venture Capital
transferred the Shares it held to each of Mr. YE Zhixiong, Mr. YE Zhiyu and Jiamu Ronghe at a total consideration
of RMB40,000,001.9, in proportion to their respective interest in Publics Venture Capital. To the best of our
Company’s knowledge, the consideration was determined with reference to the investment cost of Publics Venture
Capital and taking into account that the transferees are partners of Publics Venture Capital.
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(3) Episky is a limited liability company established in the PRC. As of the Latest Practicable Date, it was indirectly
wholly owned by Epistar Corporation, a minority shareholder of Advanced Photoelectronic and an Independent
Third Party.
(4) Haohan Photoelectronic is a limited liability company established in the PRC and an Independent Third Party. As of
the Latest Practicable Date, it was owned as to 90% and 10% by two individual shareholders respectively, both
Independent Third Parties.
Conversion into a Joint Stock Limited Company
In preparation of our application for listing on the NEEQ, on December 3, 2015, our
Company was converted from a limited liability company into a joint stock limited company, and
our Company was renamed as APT Electronics Co., Ltd. (ʮ̡ ). Upon
completion of the conversion, the share capital of our Company became RMB280,000,000 divided
into 280,000,000 Shares with a nominal value of RMB1.00 each, and the then shareholding
structure of our Company is set forth in the table below:
Shareholder Number of Shares
Percentage of
shareholding
(approximate)
Advanced Photoelectronic ............................ 237,122,480 84.69%
Yueke Investment .................................. 23,712,360 8.47%
Publics Venture Capital .............................. 10,281,320 3.67%
Episky ........................................... 4,678,240 1.67%
Haohan Photoelectric ................................ 4,205,600 1.50%
Total ............................................ 280,000,000 100%
Prior Listing on the NEEQ and the Delisting
On April 29, 2016, our Shares became quoted and listed on the NEEQ under the stock code
of 836789. During our listing on the NEEQ, our Company has undertaken a series of shareholding
changes as detailed below:
Share allotments and financings in 2016 and 2018
In June 2016 and January 2018, we concluded two rounds of financings through share
allotments as detailed below. As a result, our share capital was increased to RMB397,390,438.
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Subscriber
Shares
subscribed for Consideration (1)
(RMB)
Share allotment in 2016
Zhongbao Industrial Investment Co., Ltd. (ࠢ
ʮ̡)( “ Zhongbao Industrial ”)(2) ................... 10,000,000 23,000,000.0
Publics Venture Capital .............................. 8,695,653 20,000,001.9
Guangdong Technology Venture Capital Co., Ltd. (߅޲؇
ʮ̡ )( “ Guangdong Technology VC ”)(2) . 8,695,653 20,000,001.9
Xi’an Xijiao Science Innovation Equity Investment
Partnership (Limited Partnership) (ᛆҳ༟
ΥྫΆุ(Υྫ)) (“ Xijiao Science Innovation ”)(2) ... 4,347,827 10,000,002.1
Xinyu Guanmaoyuan Investment Management Center
(Limited Partnership) (ҳ༟၍ଣʕː (Υ
ྫ)) (“ Guanmaoyuan ”)(2) ......................... 3,351,304 7,707,999.2
Advanced Photoelectronic ............................ 2,173,914 5,000,002.2
Beijing Dehang Jiye Technology Co., Ltd. (߅
ʮ̡ )( “ Dehang Jiye ”)(2)(3) ................... 1,826,087 4,200,000.1
Share allotment in 2018
Xinyu Dingdekai Investment Management Center (Limited
Partnership) ( อቱཻᅃ௱ҳ༟၍ଣʕː (Υྫ))
(“Dingdekai ”)(2) ................................. 18,800,000 50,760,000
Beijing Guangrong Lianmeng Semiconductor Lighting
Industry Investment Center (L.P.) ( ̏ԯΈ࿲ᑌຑ̒ኬ᜗๫
ପุҳ༟ʕː (Υྫ)) (“ Guangrong Lianmeng ”)(2) . 12,000,000 32,400,000
Shenzhen Dongyi Investment Management Co., Ltd. ( ଉέ̹
ʮ̡ )( “ Dongyi Fund ”)(2) ........... 10,000,000 27,000,000
FAN Wuzhou (ݲ2) ............................ 9,000,000 24,300,000
Guangdong SME Equity Investment Fund Limited (ʕʃ
ʮ̡ )( “ SME Fund ”)(2) ......... 7,790,000 21,033,000
Xijiao Science Innovation ............................ 5,000,000 13,500,000
GAO Tao (4) ...................................... 5,000,000 13,500,000
GUI Fan (2) ....................................... 3,000,000 8,100,000
ZHOU Baiyun (5) .................................. 2,200,000 5,940,000
HE Jinchun (2) ..................................... 2,000,000 5,400,000
WANG Qi (2) ...................................... 2,000,000 5,400,000
WANG Hongying (6) ................................ 1,300,000 3,510,000
Zhuhai Hengqin Yixingbanyue Investment Partnership (L.P.)
(М˜ҳ༟ΥྫΆุ (Υྫ))
(“Yixingbanyue ”)(2) .............................. 210,000 567,000
Total ............................................ 117,390,438 301,318,007.4
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Notes:
(1) The consideration was determined in accordance with the applicable laws and regulatory requirements, after
negotiations with the relevant investors taking into account various factors such as the industry where our Company
operates, the growth of our business, the net asset value and earning per share.
(2) To the best of our Company’s knowledge, such investors are Independent Third Parties.
(3) Subsequently in January 2018, Dehang Jiye transferred 1,826,087 Shares, representing the entire interest it held in
our Company, to LAI Canwei ( ፠ᐆਃ), an Independent Third Party. To the best of our knowledge, LAI Canwei was
a controlling shareholder of Dehang Jiye at that time.
(4) Ms. GAO Tao is the spouse of Mr. HOU Yu, the president of our Company, the general manager of Linlux and the
supervisor of Lynway Vision (Guangzhou).
(5) Ms. ZHOU Baiyun is our vice president and financial controller and supervisor of Lynway Vision.
(6) Ms. WANG Hongying is the spouse of Mr. ZENG Zhaoming, our vice president.
Delisting in 2019
With a view to the adjustment of our development strategy, and in preparation for the
application of the listing of our Shares on the Science and Technology Innovation Board of the
Shanghai Stock Exchange (“ STAR”), we sought to voluntarily delist from the NEEQ in February
2019.
Our Directors confirm that, to the best of their knowledge and in respect of our business: (a)
during the period of listing on the NEEQ, (i) our Company had been in compliance in all material
respects with the applicable PRC securities laws and regulations and rules; (ii) our Company had
not been subject to any disciplinary action by relevant PRC regulators; and (b) there were no
matters in relation to our Company’s prior listing on the NEEQ and delisting that need to be
brought to the attention of the Stock Exchange and the investors. The Sole Sponsor concurs the
view of the Directors that there were no matters in relation to the Company’s prior listing on the
NEEQ and delisting that need to be brought to the attention of the Stock Exchange and the
investors.
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The shareholding structure of our Company immediately after delisting from the NEEQ is set
out as follows:
Shareholder Number of Shares
Percentage of
shareholding
(approximate)
Advanced Photoelectronic ............................ 239,296,394 60.22%
Yueke Investment .................................. 23,712,360 5.97%
Publics Venture Capital .............................. 18,976,973 4.78%
Dingdekai ........................................ 18,800,000 4.73%
Guangrong Lianmeng ............................... 12,000,000 3.02%
Dongyi Fund ...................................... 10,000,000 2.52%
Zhongbao Industrial ................................ 10,000,000 2.52%
Xijiao Science Innovation ............................ 9,347,827 2.35%
FAN Wuzhou ...................................... 9,000,000 2.26%
Guangdong Technology VC ........................... 8,695,653 2.19%
SME Fund ........................................ 7,790,000 1.96%
GAO Tao ......................................... 5,000,000 1.26%
Episky ........................................... 4,678,240 1.18%
Haohan Photoelectronic .............................. 4,205,600 1.06%
Guanmaoyuan ..................................... 3,351,304 0.84%
GUI Fan ......................................... 3,000,000 0.75%
ZHOU Baiyun ..................................... 2,200,000 0.55%
WANG Qi ........................................ 2,000,000 0.50%
HE Jinchun ....................................... 2,000,000 0.50%
LAI Canwei ...................................... 1,826,087 0.46%
WANG Hongying .................................. 1,300,000 0.33%
Yixingbanyue ..................................... 210,000 0.05%
397,390,438 100%
Subsequent Capital Increase and Share Transfers
In June 2019, Jingyu Investment subscribed for 14,105,000 Shares at a consideration of
RMB26,094,250. As a result, the total number of issued shares of our Company was increased to
411,495,438 Shares with a nominal value of RMB1.00 each. Jingyu Investment is one of our
employee shareholding platforms and is controlled by Mr. Xiao as the general partner. As of the
Latest Practicable Date, it was owned as to approximately (i) 27.79% by Mr. Xiao, (ii) 12.76% by
HOU Yu (ρ), the president of our Company, the general manager of Linlux and the supervisor
of Lynway Vision (Guangzhou), (iii) 11.27% by ZENG Zhaoming (׼vice president of our
Company, (iv) 10.99% by ZHOU Baiyun ( մͣථ), vice president and financial controller of our
Company and supervisor of Lynway Vision, (v) 3.83% by OU Weineng ( ਜਃঐ), a Supervisor of
our Company, and (vi) 33.36% by 28 limited partners, each an employee of our Group and an
Independent Third Party holding less than 5% therein.
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In June 2019 and subsequent to our voluntary withdrawal of the STAR Application in May
2020 (as detailed below). The following share transfers were effected among our then
Shareholders:
Transferor Transferee Shares transferred Consideration
(RMB)
Transfers in June 2019 (1)
Advanced
Photoelectronic .
Guangdong Zhongke Baiyun Emerging Industry
Venture Capital Fund Co., Ltd. (ͣථอ
ʮ̡ )( “ Zhongke
Baiyun ”)(2)
9,939,275 29,817,825
Advanced
Photoelectronic .
Ningbo Fengyan Equity Investment Partnership
(L.P.) (ᛆҳ༟ΥྫΆุ (Υྫ))
(“Fengyan Investment ”)(3)
1,000,000 3,000,000
Transfers in June 2021
Dongyi Fund .... Shenzhen Gossel Investment Co., Ltd. ( ଉέ̹৷෦
ʮ̡ )( “ Gossel ”)(4)
8,000,000 24,000,000
Dongyi Fund .... Shenzhen Hengzhouxin Investment Co., Ltd. ( ଉέ
ʮ̡ )( “ Hengzhouxin ”)(5)
2,000,000 6,000,000
Transfers in 2021
Advanced
Photoelectronic .
Guangzhou Yuecai Yuanhe Venture Capital
Partnership (Limited Partnership) ( ᄿψຽৌ๕Υ
௴ุҳ༟ΥྫΆุ (Υྫ)) (“ Yuecai
Yuanhe”)(4)
7,700,000 23,100,000
Advanced
Photoelectronic .
Guangdong Yuecai Emerging Industry Equity
Investment Fund Partnership (L.P.) (ຽৌอ
ΥྫΆุ (Υྫ))
(“Yuecai Emerging ”)(4)
7,667,279 23,001,837
Advanced
Photoelectronic .
Jiaoying Yihao (Jiaxing) Equity Investment
Partnership (Limited Partnership) (ఠ໮(ྗ
ጳ)ᛆҳ༟ΥྫΆุ (Υྫ)) (“ Jiaoying
Yihao”)(4)
3,000,000 9,000,000
Advanced
Photoelectronic .
GU Wenjun (ࠏ4) 2,000,000 6,000,000
Advanced
Photoelectronic .
Foshan Fengsheng Equity Investment Center
(Limited Partnership) (ᛆҳ༟ʕ
ː(Υྫ)) (“ Fengsheng Investment ”)(4)(6)
1,700,000 5,100,000
Advanced
Photoelectronic .
Guangzhou Vision Capital Management Partnership
(Limited Partnership) ( ᄿψჃԈ༟͉၍ଣΥྫΆ
ุ(Υྫ)) (“ Vision Capital ”)(4)
1,700,000 5,100,000
Advanced
Photoelectronic .
ZHOU Xiaoyang ( մወජ)(4) 1,300,000 3,900,000
Advanced
Photoelectronic .
LIU Jun (ࠏ4) 700,000 2,100,000
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Transferor Transferee Shares transferred Consideration
(RMB)
Advanced
Photoelectronic .
Yixingbanyue (3) 217,000 651,000
Advanced
Photoelectronic .
Guangzhou Chuangying Jianke Investment
Partnership (L.P.) (ҳ༟ΥྫΆุ (Ϟ
Υྫ)) (“ Chuangying Jianke ”)(4)
64,964 194,892
Transfer in May 2022
Hengzhouxin (5) ... FAN Wuzhou (4)(5) 2,000,000 6,000,000
Transfer in June 2023
Jiamu Ronghe ... Shenzhen Shidiya Investment Co., Ltd. ( ଉέ̹˻ή
ʮ̡ )( “ Shidiya ”)
(4)
7,000,000 27,230,000
Transfer in August 2023
Fengyan
Investment (3) ..
HUANG Dinghe ( රཻ൭)(3)(4) 1,000,000 3,000,000
Notes:
(1) To the best of our Company’s knowledge, the consideration was determined after commercial negotiations taking
into account various factors such as the industry where our Company operates, the growth of our business, the net
asset value per share and the price of our share allotment in 2018.
(2) Zhongke Baiyun is a limited liability company established in the PRC and an Independent Third Party.
(3) Fengyan Investment is a limited partnership established in the PRC and an Independent Third Party. In September
2023, Fengyan Investment transferred 1,000,000 Shares to HUANG Dinghe, an Independent Third Party, at a
consideration of RMB3,000,000. See “— Pre-IPO Investments — Information about Our Pre-IPO Investors” below
for further details of HUANG Dinghe.
(4) See “— Pre-IPO Investments — Information about Our Pre-IPO Investors” below for further details.
(5) Hengzhouxin is a limited liability company established in the PRC, and is controlled by Mr. FAN Wuzhou. In May
2022, Hengzhouxin transferred 2,000,000 Shares to FAN Wuzhou at a consideration of RMB6,000,000. See “—
Pre-IPO Investments — Information about Our Pre-IPO Investors” below for further details of FAN Wuzhou.
(6) Fengsheng Investment is an investment entity of DENG Zhifeng (ࢤand is a limited partnership established
in the PRC, and is controlled by DENG Zhifeng as its general partner, who owns 99% of its partnership interest. In
June 2024, Fengsheng Investment transferred 1,700,000 Shares to DENG Zhifeng.
Issue and Allotment of New Shares
In December 2023, in order to streamline the corporate structure of our Group, we acquired
from Yaoning Technology its entire interest in Lynway Vision in consideration of our issue and
allotment of 68,582,573 Shares to Yaoning Technology. See “— Major Acquisitions, Disposals and
Mergers” below for further details.
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In December 2023, Jingrui Investment subscribed for 5,279,328 Shares at a consideration of
RMB11,614,521 which was determined with reference to the valuation of our Company at that
time and the net asset value per Share of our Company in 2023. Jingrui Investment is one of our
employee shareholding platforms and is controlled by Mr. Xiao as the general partner. As of the
Latest Practicable Date, it was owned as to approximately 0.01% by Mr. Xiao and 99.99% by 40
limited partners, including (i) 11.37% by ZENG Zhaoming (׼vice president of our
Company, (ii) 7.58% by HOU Yu (ρ), president of our Company, general manager of Linlux
and supervisor of Lynway Vision (Guangzhou), (iii) 7.58% by ZHOU Baiyun ( մͣථ), vice
president and financial controller of our Company and supervisor of Lynway Vision, and (iv)
73.46% by 37 employees of our Group holding less than 10% therein, each an Independent Third
Party.
In December 2023, Jingshi Investment subscribed for 6,581,700 Shares at a consideration of
RMB14,479,740 which was determined with reference to the valuation of our Company at that
time and the net asset value per Share of our Company in 2023. Jingshi Investment is one of our
employee shareholding platforms and is controlled by Mr. Xiao as the general partner. As of the
Latest Practicable Date, it was owned as to approximately 53.18% by Mr. Xiao and 46.82% by 17
limited partners, including (i) 10.64% by ZHENG Longfeng ( ቍᎲቜ), the board secretary of our
Company, and (ii) 36.18% by 16 employees of our Group holding less than 10% therein, each an
Independent Third Party.
In December 2023, Jingling Investment subscribed for 6,567,670 Shares at a consideration of
RMB17,075,942 which was determined with reference to the valuation of our Company at that
time and the net asset value per Share of our Company in 2023. Jingling Investment is an
employee shareholding platform of Lynway Vision and is controlled by Mr. Xiao as the general
partner. As of the Latest Practicable Date, it was owned as to approximately 0.01% by Mr. Xiao
and 99.99% by 15 limited partners, including (i) 16.38% by LIU Tie ( ᄎ᚛), general manager of
Lynway Vision and the executive director and manager of Lynway Vision (Guangzhou), and (ii)
83.61% by 14 employees of Lynway Vision holding less than 15% therein, each an Independent
Third Party.
As a result of the above, the share capital of our Company was increased to 498,506,709
Shares with a nominal value of RMB1.00 each.
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CAPITALIZATION OF OUR COMPANY
As of the Latest Practicable Date and immediately after completion of the Global Offering
(assuming the Offer Size Adjustment Option is not exercised), the summary of the capitalization of
our Company is set out as follows:
Shareholder Number of Shares
Percentage of
shareholding as of
the Latest
Practicable Date
Percentage of
shareholding
immediately after
completion of the
Global Offering
(approximate) (approximate)
Advanced Photoelectronic (1) ............ 202,307,876 40.58% 38.02%
Jingyu Investment (1) (5) (8) (9) (10) ......... 14,105,000 2.83% 2.65%
Jingshi Investment (1) (5) ................ 6,581,700 1.32% 1.24%
Jingling Investment (1) (5) ............... 6,567,670 1.32% 1.23%
Jingrui Investment (1) (5) (8) (9) (10) ......... 5,279,328 1.06% 0.99%
Yaoning Technology .................. 68,582,573 13.76% 12.89%
Yueke Investment (2) ................... 23,712,360 4.76% 4.46%
Dingdekai (6) ........................ 18,800,000 3.77% 3.53%
Guangrong Lianmeng ................. 12,000,000 2.41% 2.26%
FAN Wuzhou ........................ 11,000,000 2.21% 2.07%
Zhongbao Industrial .................. 10,000,000 2.01% 1.88%
Zhongke Baiyun ..................... 9,939,275 1.99% 1.87%
YE Zhiyu (4) ......................... 9,393,602 1.88% 1.77%
Xijiao Science Innovation (7) ............ 9,347,827 1.88% 1.76%
Guangdong Technology VC (2) ........... 8,695,653 1.74% 1.63%
Gossel ............................. 8,000,000 1.60% 1.50%
SME Fund (3) ........................ 7,790,000 1.56% 1.46%
Yuecai Yuanhe (3) ..................... 7,700,000 1.54% 1.45%
Yuecai Emerging (3) ................... 7,667,279 1.54% 1.44%
Shidiya ............................ 7,000,000 1.40% 1.32%
GAO Tao (8) ......................... 5,000,000 1.00% 0.94%
Episky ............................. 4,678,240 0.94% 0.88%
Haohan Photoelectronic ................ 4,205,600 0.84% 0.79%
Guanmaoyuan (6) ..................... 3,351,304 0.67% 0.63%
GUI Fan ........................... 3,000,000 0.60% 0.56%
Jiaoying Yihao (7) ..................... 3,000,000 0.60% 0.56%
Jiamu Ronghe ....................... 2,488,486 0.50% 0.47%
ZHOU Baiyun (10) .................... 2,200,000 0.44% 0.41%
WANG Qi .......................... 2,000,000 0.40% 0.38%
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Shareholder Number of Shares
Percentage of
shareholding as of
the Latest
Practicable Date
Percentage of
shareholding
immediately after
completion of the
Global Offering
(approximate) (approximate)
HE Jinchun ......................... 2,000,000 0.40% 0.38%
GU Wenjun ......................... 2,000,000 0.40% 0.38%
LAI Canwei ........................ 1,826,087 0.37% 0.34%
DENG Zhifeng ...................... 1,700,000 0.34% 0.32%
Vision Capital ....................... 1,700,000 0.34% 0.32%
WANG Hongying (9) ................... 1,300,000 0.26% 0.24%
ZHOU Xiaoyang ..................... 1,300,000 0.26% 0.24%
HUANG Dinghe ..................... 1,000,000 0.20% 0.19%
LIU Jun ............................ 700,000 0.14% 0.13%
Yixingbanyue (3) ...................... 427,000 0.09% 0.08%
YE Zhixiong (4) ...................... 94,885 0.02% 0.02%
Chuangying Jianke (3) .................. 64,964 0.01% 0.01%
Other public Shareholders .............. 33,600,000 Nil 6.31%
532,106,709 100% 100%
Notes:
Among the existing Shareholders,
(1) Advanced Photoelectronic, Jingyu Investment, Jingshi Investment, Jingling Investment and Jingrui Investment are
concert parties. See “— The Concert Party Group” below in this section for further details.
(2) Yueke Investment was wholly owned by Yueke Group, and Guangdong Technology VC was owned as to 80% by
Yueke Group, as of the Latest Practicable Date.
(3) Yuecai Yuanhe, Yuecai Emerging, Chuangying Jianke, SME Fund and Yixingbanyue are private equity funds, the
fund managers of which are all controlled by Guangdong Yuecai Investment Holding Co., Ltd. (ٰ
ʮ̡)( “ Yuecai Holding ”). See “— Information about Our Pre-IPO Investors” below in this section for further
details.
(4) Mr. YE Zhiyu and Mr. YE Zhixiong are brothers.
(5) As of the Latest Practicable Date, Mr. Xiao was the general partner of Jingyu Investment, Jingling Investment,
Jingrui Investment and Jingshi Investment, our employee shareholding platforms. The limited partners of all four
employee shareholding platforms are the employees of the Group and partially overlap with each other. See
“Appendix VI — Statutory and General Information — Further Information about Our Directors, Supervisors,
Management and Substantial Shareholders — Share Incentive Schemes” for details.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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(6) As of the Latest Practicable Date, SU Yongchun (݆an Independent Third Party, was the general partner of
Dingdekai and Guanmaoyuan. Dingdekai has 25 limited partners, each an Independent Third Party holding less than
15% therein.
(7) Jiaoying Yihao is a limited partner of Xijiao Science Innovation.
(8) Ms. GAO Tao is the spouse of Mr. HOU Yu, the president of our Company, the general manager of Linlux and the
supervisor of Lynway Vision (Guangzhou), who is a limited partner of Jingyu Investment and Jingrui Investment.
(9) Ms. WANG Hongying is the spouse of Mr. ZENG Zhaoming, our vice president, who is a limited partner of Jingyu
Investment and Jingrui Investment.
(10) Ms. ZHOU Baiyun, our vice president and financial controller and supervisor of Lynway Vision, is a limited
partner of Jingyu Investment and Jingrui Investment.
PREVIOUS A-SHARE LISTING APPLICATION
We had historically explored the opportunity of establishing a capital market platform in the
A-share market. In December 2019, we applied for listing of our Shares on STAR (the “ STAR
Application ”). The Shanghai Stock Exchange raised certain comments to request further
information or disclosures for the purpose of STAR Application. Our Directors are of the view, and
the Sole Sponsor concurs, that none of such comments raised by the Shanghai Stock Exchange will
render the Group not suitable for Listing, and all information that is relevant to the Listing and
reasonably necessary for the potential investors to make an informed assessment of our Group has
been included in this prospectus. Subsequently, the outbreak of COVID-19 pandemic had adversely
affected our operations. Considering the relatively early stage of our high-end lighting and
intelligent automotive lighting businesses and the market fluctuation at that time and the needs to
strategically focus on business development of our Group, we voluntarily withdrew the STAR
Application in May 2020.
To the best of our Directors’ knowledge and belief, our Directors are not aware of (i) any
other matters relating to the STAR Application that might potentially affect the suitability of our
Group to be listed on the Stock Exchange, or (ii) any other matters that need to be brought to the
attention of the Stock Exchange and investors in relation to the STAR Application. The Sole
Sponsor concurs the view of the Directors that there were no other matters that need to be brought
to the attention of the Stock Exchange and investors in relation to the STAR Application.
THE CONCERT PARTY GROUP
On January 1, 2021, Mr. Xiao, APTESS Company Limited (“ APTESS ”), Mr. Yuan, Giant
Power Limited (“ Giant Power ”) and Mr. Chan (together, the “ Concert Parties ”), entered into an
acting-in-concert agreement, pursuant to which all the Concert Parties agreed to act in concert by
aligning their votes at the board and/or the shareholders’ meetings of both our Company and
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Advanced Photoelectronic in accordance with the consensus achieved between them. In the event
that they are unable to reach consensus on any matter presented, the parties shall vote in
accordance with the direction of Mr. Xiao. The agreement has a term of ten years commencing
from the date of its execution (January 1, 2021), and may be renewed upon its expiration as the
Concert Parties may mutually agree. In addition, each of (i) Ms. Loh, as spouse of Mr. Chan and a
shareholder of Advanced Photoelectronic and (ii) Jingyu Investment, Jingling Investment, Jingrui
Investment and Jingshi Investment, as our Shareholders which are controlled by Mr. Xiao as their
general partner, has been acting in concert with the Concert Parties. On December 8, 2023,
Advanced Photoelectronic, Jingyu Investment, Jingling Investment, Jingrui Investment and Jingshi
Investment entered into a concert party agreement to confirm the concert party relationship with
respect to their shareholding interests in our Company pursuant to which all the concert parties
thereunder 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 between them, and in the
event that they are unable to reach consensus on any matter presented, the vote of Advanced
Photoelectronic shall prevail. The agreement has an initial term of three years commencing from
the date of its execution (December 8, 2023), and will be automatically extended for three years if
there is no objection from the parties. Accordingly, Mr. Xiao, Mr. Chan and Mr. Yuan, APTESS,
Giant Power, Advanced Photoelectronic, Jingyu Investment, Jingling Investment, Jingrui
Investment and Jingshi Investment together with Ms. Loh (by virtue of her spousal relationship
with Mr. Chan), are parties acting in concert with respect to their interests in our Company (the
“Concert Party Group ”). As of the Latest Practicable Date, the Concert Party Group was in
aggregate directly and indirectly interested in approximately 47.11% of the total share capital of
our Company.
PRE-IPO INVESTMENTS
Overview
We concluded several Pre-IPO investments subsequent to our voluntary withdrawal of the
STAR Application. For further details, see “— Corporate Development — Subsequent Capital
Increase and Share Transfers” above in this section. The following table summarizes the key terms
of the Pre-IPO investments:
Transfers in 2021 Transfer in May 2022 Transfers in June 2023 Transfer in August 2023
Date of agreement ...... June 16, 2021
November 24, 2021
November 27, 2021
December 1, 2021
December 10, 2021
December 20, 2021
May 20, 2022 June 2, 2023 August 25, 2023
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Transfers in 2021 Transfer in May 2022 Transfers in June 2023 Transfer in August 2023
Date of settlement of
consideration ........
On or before January
19, 2022
May 31, 2022 August 24, 2023 September 8, 2023
Number of Shares acquired . 36,049,243 2,000,000 7,000,000 1,000,000
Consideration (in RMB) ... 108,147,729 6,000,000 27,230,000 3,000,000
Basis of determination of the
consideration ........
To the best of our
Company’s
knowledge, the
consideration was
determined between
the parties after
taking into
consideration various
factors including but
not limited to, the
investment cost, our
historical operating
performance, market
value and prospects of
our business.
To the best of our
Company’s
knowledge, the
consideration was
determined with
reference to the
investment cost of the
transferor,
Hengzhouxin.
To the best of our
Company’s
knowledge, the
consideration was
determined between
the parties after
taking into
consideration various
factors including but
not limited to, the
investment cost, our
historical operating
performance, market
value and prospects of
our business.
To the best of our
Company’s
knowledge, the
consideration was
determined with
reference to the
investment cost of the
transferor, Fengyan
Investment.
Cost per Share (in RMB) ... 3.00 3.00 3.89
(2) 3.00
Discount/(premium) to the
Offer Price (%) (1) .....
9.04 9.04 (17.95) 9.04
Lock-up Period ........ Pursuant to the applicable PRC law, within the 12 months following the Listing Date, all existing
Shareholders (including the Pre-IPO Investors) cannot dispose of any of the Shares held by them.
Special rights ......... No special right has been granted to the Pre-IPO Investors.
Use of proceeds from the
Pre-IPO Investments ...
As the Pre-IPO Investments were effected by way of transfer of Shares among our then existing
Shareholders, no proceeds were received by our Company.
Strategic Benefits from
Pre-IPO Investments ...
Our Pre-IPO Investors include several professional investors, including institutional fund, private investors
and investment funds of local government. Our Directors were of the view that our Company could
benefit from the Pre-IPO Investors’ knowledge and experience, and could take advantage of their
industry resources and networks, while broadening our shareholder base. And their commitment to our
Company as their investment demonstrates their confidence in the operations of our Group and serves
as an endorsement of Company’s performance, strength and prospects.
Notes:
(1) Calculated based on the assumption that the Offer Price is HK$3.61 per Offer Share.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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(2) To the best of our Company’s knowledge, the cost per share for the transfers in June 2023 is higher compared with
other Pre-IPO Investments as based on the commercial negotiations between the relevant parties, the consideration
of other Pre-IPO Investments was determined primarily with reference to the initial investment cost, while that of
the transfers in June 2023 was determined with reference to, various factors such as the initial investment cost, our
historical operating performance, market value and prospects of our business.
Information about Our Pre-IPO Investors
To the best knowledge of our Company, each of the Pre-IPO Investors is an Independent
Third Party.
Gossel
Gossel is a limited liability company established in the PRC, which is principally engaged in
equity investments in industrial companies. It is owned as to 90% by Shenzhen Huali Xinye
Trading Co., Ltd. (ʮ̡ ), a company wholly owned by WANG Aiyun ( ˮ
Ўථ), and 10% by XU Zhixi (፼), each an Independent Third Party.
Yuecai
Yuecai Yuanhe is a limited partnership established in the PRC on December 10, 2018, which
is a private equity fund managed by Yuecai Private Equity Investment (Guangdong) Co., Ltd. ( ຽ
ᛆҳ༟ (؇)ʮ̡) as the managing partner holding 5% therein, a company wholly
owned by Yuecai Holding, which is in turn controlled by the People’s Government of Guangdong
Province. Yuecai Holding is also the holding company of the fund manager of SME Fund and
directly and indirectly owns 60% of SME Fund, a Shareholder of our Company. Yuecai Yuanhe has
five other partners, each an Independent Third Party holding no more than 30% interest therein.
Yuecai Emerging is a limited partnership established in the PRC on May 7, 2019, which is a
private equity fund managed by Shenzhen Yuechuang as the general partner holding 1% therein,
which is in turn indirectly wholly owned by Yuecai Holding. Yuecai Emerging is owned as to 34%
by a private equity fund ultimately controlled by Yuecai Holding as a limited partner, and each of
the other limited partners is an Independent Third Party holding no more than 30% interest therein.
Chuangying Jianke is a limited partnership established in the PRC on December 6, 2017,
which is a private equity fund managed by Guangdong Finance Venture Capital Company Ltd. ( ᄿ
ʮ̡ ) as the general partner holding approximately 7.76% therein, which is in
turn wholly owned by Yuecai Holding. Chuangying Jianke has 49 limited partners, each an
Independent Third Party holding less than 10% therein.
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Yixingbanyue is a limited partnership established in the PRC on December 15, 2015, which is
a private equity fund managed by Yuecai Zhongyin Private Equity Fund Management (Guangdong)
Co., Ltd. (၍ଣ (؇)ʮ̡) as the general partner holding
approximately 0.0585% therein, which is in turn controlled by Yuecai Holding. Yixingbanyue has
44 limited partners, each an Independent Third Party holding less than 20% therein.
Jiaoying Yihao
Jiaoying Yihao is a limited partnership established in the PRC on September 7, 2021 and is
mainly engaged in equity investment, which is a private equity fund managed by Xi’an Xijiao
1896 Capital Management Co., Ltd. (ʮ̡ )( “ Xijiao 1896
Capital ”) as the general partner holding 2.22% therein. Xijiao 1896 Capital is principally engaged
in high-tech business incubation, equity investment and industrial cooperation. None of the
partners of Jiaoying Yihao nor the shareholders of Xijiao 1896 Capital holds more than one-third
of interest therein.
Fengsheng Investment and DENG Zhifeng
Fengsheng Investment is an investment entity of DENG Zhifeng, and is a limited partnership
established in the PRC on August 24, 2021, which is principally engaged in equity investments. It
is controlled by DENG Zhifeng, as its general partner, who owns 99% of its partnership interest.
DENG Zhifeng is an Independent Third Party and a private investor.
Vision Capital
Vision capital is a limited partnership established in the PRC on September 7, 2021, which is
principally engaged in equity investments. It is owned as 85% by YANG Dongai ( เ̆Ў), an
Independent Third Party, as the general partner and 15% by two Independent Third Parties.
Shidiya
Shidiya is a limited liability company established in the PRC on January 3, 2018, which is
principally engaged in equity investments. It is owned as to 65% by HUANG Shan ( රʆ) and
35% by LU Jie ( ௔௫), each an Independent Third Party.
Other investors
Each of FAN Wuzhou, HUANG Dinghe, GU Wenjun, ZHOU Xiaoyang and LIU Jun is a
private investor and an Independent Third Party.
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Compliance with the Pre-IPO Investment Guidance
On the basis that (i) the considerations for the Pre-IPO Investments were settled more than 28
clear days before the date of our first submission of the listing application form to the Stock
Exchange in relation to the Listing, and (ii) no special right has been granted to the Pre-IPO
Investors, the Sole Sponsor is of the view that the Pre-IPO Investments are in compliance with
Chapter 4.2 of the Guide for New Listing Applicants.
PUBLIC FLOAT
The 283,000,066 Domestic Unlisted Shares that will not be converted into H Shares,
representing approximately 53.18% of our total issued Shares upon Listing (assuming the Offer
Size Adjustment Option is not exercised), will not be considered as part of the public float as the
Domestic Unlisted Shares will not be converted into H Shares and will not be listed following the
completion of the Global Offering.
Of the 215,506,643 H Shares to be converted from Domestic Unlisted Shares and listed on
the Stock Exchange following the completion of the Global Offering:
(a) 114,838,365 of such H Shares, representing approximately 21.58% of our total issued
Shares upon Listing (assuming the Offer Size Adjustment Option is not exercised), will
not be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules
after the Listing as such shares are being held by Advanced Photoelectronic, Jingyu
Investment, Jingshi Investment, Jingling Investment, Jingrui Investment, Yaoning
Technology, Yueke Investment, Guangdong Technology VC, Yuecai Yuanhe, Yuecai
Emerging, Chuangying Jianke, SME Fund, Yixingbanyue and GAO Tao, the core
connected persons of our Company;
Note:
As of the Latest Practicable Date, (i) Yueke Investment was wholly owned by Yueke Group, and Guangdong Technology
VC was owned as to 80% by Yueke Group, which was in turn owned as to 90% and 10% by the People’s Government of
Guangdong Province and the Department of Finance of Guangdong Province, respectively; and (ii) Yuecai Yuanhe, Yuecai
Emerging, Chuangying Jianke, SME Fund and Yixingbanyue were private equity funds, the fund managers of which were
all controlled by Yuecai Holding, which was in turn controlled by the People’s Government of Guangdong Province.
Therefore, the People’s Government of Guangdong Province will be interested in over 10% of our total issued Shares
following the completion of the Global Offering, and the H Shares to be converted from Domestic Unlisted Shares held
by each of Yueke Investment, Guangdong Technology VC, Yuecai Yuanhe, Yuecai Emerging, Chuangying Jianke, SME
Fund and Yixingbanyue will not be considered as part of the public float.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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(b) 100,668,278 of such H Shares, representing approximately 18.92% of our total issued
Shares upon Listing (assuming the Offer Size Adjustment Option is not exercised), will
be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules
after the Listing as such remaining shareholders are not core connected persons of our
Company upon Listing nor accustomed to take instructions from the Company’s core
connected persons in relation to the acquisition, disposal, voting or other disposition of
their Shares and their acquisition of Shares were not financed directly or indirectly by
our Company’s core connected persons.
Taking into consideration of the H Shares to be issued pursuant to the Global Offering, the
public float of our Company will be approximately 25.23% upon Listing (assuming the Offer Size
Adjustment Option is not exercised).
MAJOR ACQUISITIONS, DISPOSALS AND MERGERS
During the Track Record Period, save as disclosed below, we have not made any acquisitions,
disposals or mergers that we consider to be material to us.
Acquisition of Lynway Vision
Lynway Vision was established in 2018 to engage in the intelligent automobile vision
business. At our initiative for a strategic transformation to an intelligent vision product and system
provider, we approached automotive OEMs to explore market opportunities, and became
acquainted with Geely Holding and subsequently reached cooperation to jointly establish Lynway
Vision.
Since the establishment of Lynway Vision in 2018, our Company has been deeply involved in
the operations and development of Lynway Vision. In line with the commercial consensus between
our Company and Yaoning Technology, we decided to acquire Lynway Vision in order to (i)
enhance operational independence of Lynway Vision separate from the Geely Related Group, an
essential step for Lynway Vision to secure additional market opportunities from other automotive
OEMs, and (ii) promote our integration in the industry value chain, which would in turn enable
Lynway to benefit from the enhanced business synergy.
On January 27, 2021, our Company entered into a capital increase agreement with Yaoning
Technology and Lynway Vision, pursuant to which we subscribed for the newly increased
registered capital of RMB4,100,000 of Lynway Vision at a consideration of RMB16,400,000,
which was determined with reference to the valuation of Lynway Vision agreed between the parties
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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after arm’s length negotiations. The consideration has been fully settled by our internal resources.
Upon completion, Lynway Vision became a subsidiary of our Company in September 2021 and
was owned as to 51% by our Company and 49% by Yaoning Technology.
To streamline our corporate structure, on November 27, 2023, our Company entered into an
agreement for asset purchase by share issue with Yaoning Technology pursuant to which our
Company acquired 49% equity interest in Lynway Vision in consideration of our issue and
allotment of 68,582,573 Shares to Yaoning Technology, which was determined with reference to
the valuation of each of Lynway Vision and our Company conducted by an independent valuer.
Upon completion, Lynway Vision became wholly owned by our Company.
Save for our acquisition of Lynway Vision, we believe that there has not been any material
change in relationships or business arrangements between the Group and Yaoning Technology prior
to and after the shareholding changes in Lynway Vision in September 2021 and November 2023,
respectively.
According to Rule 4.05A of the Listing Rules, the acquisition of Lynway Vision would have
been classified at the date of application for our listing, as a major transaction under Chapter 14 of
the Listing Rules. See the Accountants’ Report of Lynway Vision in Appendix IB to this
prospectus for details.
PRC REGULATORY REQUIREMENTS
Our PRC Legal Advisor has confirmed that we have legally and properly completed, settled,
and obtained the requisite legal approvals and completed requisite governmental registrations with
relevant governmental authorities in the PRC with respect to all the aforesaid capital increases,
share transfers, equity transfers and conversion into a joint stock limited company.
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CORPORATE AND SHAREHOLDING STRUCTURE
The following chart sets out the shareholding and corporate structure immediately prior to the
completion of the Global Offering:
Jingling Investment (1)(3)
(PRC)
Jingyu Investment (1)(2)
(PRC)
Episky (8)
(PRC)
Jingshi Investment (1)(5)
(PRC)
Jingrui Investment (1)(4)
(PRC)
Advanced
Photoelectronic (1)(6)
(Hong Kong)
Yaoning Technology (7)
(PRC)
Our Company
(PRC)
Lynway Vision
(PRC)
Linlux
(PRC)
APT (HK)
(Hong Kong)
Lynway Vision (Guangzhou)
(PRC)
100%
2.83% 1.32% 1.06% 1.32%
10.50% 17.76% 32.02% 3.78% 1.62%
100% 100%
40.58% 13.76% 0.94% 38.19%
100% 100% 100%
Guangzhou Lynway
Automotive Lighting Co., Ltd.
(PRC)
100%
Mr. Xiao (1)
APTESS
Company Limited (1)
(BVI)
Mr. Yuan (1)
Giant Power Limited (1)
(BVI) Ms. Loh (1)
34 other
Shareholders (9)
Mr. Chan (1)
Notes:
(1) Mr. Xiao, Mr. Chan, Mr. Yuan, APTESS Company Limited, Giant Power Limited, Ms. Loh, Advanced
Photoelectronic, Jingyu Investment, Jingling Investment, Jingrui Investment and Jingshi Investment are members of
the “Concert Party Group.” See “— The Concert Party Group” above for further details.
(2) Jingyu Investment is controlled by Mr. Xiao as its general partner. As of the Latest Practicable Date, it was owned
as to approximately (i) 27.79% by Mr. Xiao, (ii) 12.76% by HOU Yu, president of our Company, general manager
of Linlux and supervisor of Lynway Vision (Guangzhou), (iii) 11.27% by ZENG Zhaoming, vice president of our
Company, (iv) 10.99% by ZHOU Baiyun, vice president and financial controller of our Company and supervisor of
Lynway Vision, (v) 3.83% by OU Weineng, a Supervisor, and (vi) 33.36% by 28 other limited partners, each an
employee of our Group and an Independent Third Party holding less than 15% therein.
(3) Jingling Investment is controlled by Mr. Xiao as its general partner. As of the Latest Practicable Date, it was owned
as to approximately (i) 0.01% by Mr. Xiao, (ii) 16.38% by LIU Tie, general manager of Lynway Vision and the
executive director and manager of Lynway Vision (Guangzhou), as a limited partner, and (iii) 83.61% by 14 other
employees of Lynway Vision holding less than 15% therein, each a limited partner and an Independent Third Party.
(4) Jingrui Investment is controlled by Mr. Xiao as its general partner. As of the Latest Practicable Date, it was owned
as to approximately 0.01% by Mr. Xiao and 99.99% by 40 limited partners, including (i) 11.37% by ZENG
Zhaoming, vice president of our Company, (ii) 7.58% by HOU Yu, president of our Company, general manager of
Linlux and supervisor of Lynway Vision (Guangzhou), (iii) 7.58% by ZHOU Baiyun, vice president and financial
controller of our Company and supervisor of Lynway Vision, and (iv) 73.46% by 37 other limited partners, each an
employee of our Group and an Independent Third Party holding less than 15% therein.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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(5) Jingshi Investment is controlled by Mr. Xiao as its general partner. As of the Latest Practicable Date, it was owned
as to approximately (i) 53.18% by Mr. Xiao, (ii) 10.64% by ZHENG Longfeng, the board secretary of our
Company, as a limited partner, and (iii) 36.18% by 16 other limited partners, each an employee of our Group and
an Independent Third Party holding less than 15% therein.
(6) As of the Latest Practicable Date, Advanced Photoelectronic was owned as to approximately 65.68% by the
Controlling Shareholder Group; 21.47% by Epistar Corporation and its subsidiaries Lighting Investment
Corporation and Lighting Investment Ltd., 4.59% by Pacific Asia Partners Ltd. and Unimode Investment Co., Ltd.
which were ultimately controlled by Mr. CHEN Chih-Yuan (Ⴣ) and his relative, 3.15% by Formosa Luck
Company Limited which was wholly owned by Yang, A-Chu (࣮ڛ3.07% by Mr. WU Shaofan ( юˇɭ) and
2.04% by Grand Thrive Enterprises Ltd. which was wholly owned by Kuo, Hao-Tsun ( ெೱπ), each an
Independent Third Party.
(7) As of the Latest Practicable Date, Yaoning Technology was indirectly controlled by LI Xingxing (݋݋the
brother-in-law of ZHENG Xin, our non-executive Director.
(8) Episky is a wholly-owned subsidiary of Epistar Corporation, a shareholder of Advanced Photoelectronic.
(9) The 34 other Shareholders include Yueke Investment, Dingdekai, Guangrong Lianmeng, FAN Wuzhou, Zhongbao
Industrial, Zhongke Baiyun, YE Zhiyu, Xijiao Science Innovation, Guangdong Technology VC, Gossel, SME Fund,
Yuecai Yuanhe, Yuecai Emerging, Shidiya, GAO Tao, Haohan Photoelectronic, Guanmaoyuan, GUI Fan, Jiaoying
Yihao, Jiamu Ronghe, ZHOU Baiyun, WANG Qi, HE Jinchun, GU Wenjun, LAI Canwei, DENG Zhifeng, Vision
Capital, WANG Hongying, ZHOU Xiaoyang, HUANG Dinghe, LIU Jun, Yixingbanyue, YE Zhixiong and
Chuangying Jianke. See “— Capitalization of Our Company” above for details and shareholdings of such
Shareholders.
The following chart illustrates our corporate and shareholding structure immediately after the
completion of the Global Offering (assuming that the Offer Size Adjustment Option has not been
exercised):
Lynway Vision (Guangzhou)
(PRC)
100%
Jingyu Investment (1)(2)
(PRC)
34 other
Shareholders (9)
Episky (8)
(PRC)
Jingrui Investment (1)(4)
(PRC)
Jingshi Investment (1)(5)
(PRC)
Jingling Investment (1)(3)
(PRC)
Advanced
Photoelectronic (1)(6)
(Hong Kong)
Yaoning Technology (7)
(PRC)
Our Company
(PRC)
Lynway Vision
(PRC)
Linlux
(PRC)
100% 100% 100%
Guangzhou Lynway
Automotive Lighting Co., Ltd.
(PRC)
100%
Other public
Shareholders
Giant Power Limited (1)
(BVI)
2.65% 1.23% 0.99% 1.24% 38.02% 12.89% 0.88% 35.78% 6.31%
10.50% 17.76% 32.02% 3.78% 1.62%
100% 100%
Mr. Xiao (1) Mr. Yuan (1)
Ms. Loh (1)Mr. Chan (1)
APT (HK)
(Hong Kong)
APTESS
Company Limited (1)
(BVI)
Notes (1)-(9): See the respective notes under the shareholding and corporate structure immediately prior to the
completion of the Global Offering as set out above.
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OUR VISION
To become an industry-leading global tech company specializing in intelligent vision products
and systems.
OUR MISSION
Driving green and sustainable development with technological innovation and creating a
better and more intelligent lifestyle with “LED+” technologies.
OVERVIEW
Who We Are
We are a leading enterprise in China providing intelligent vision products and system
solutions integrating “LED+” technologies. Our areas of expertise encompass intelligent
automotive vision, high-end lighting and advanced display. Leveraging industry insights and
forward-thinking technology strategies, we house a broad array of “LED+” technologies that
integrate LED technologies with integrated circuits (ICs), electronic control, software, sensors,
optics and others. Our green, energy-efficient and rapidly evolving “LED+” technologies further
empower our intelligent vision products and systems, enabling us to penetrate high-value,
high-growth markets. According to CIC, in terms of revenue in 2023, we ranked third among
domestic device and module manufacturers in China’s high-end lighting industry and fifth among
all device and module manufacturers in the same industry. We ranked fifth among domestic
manufacturers in China’s mid- to high-end intelligent automotive vision industry and twelfth
among all manufacturers in the same industry. We ranked fourth among both domestic and all
manufacturers in China’s LCD TV backlight display industry. As of the Latest Practicable Date, we
passed all product verifications and audit procedures on our manufacturing facilities, conducted by
the majority of the top-tier domestic and international companies in intelligent automotive vision,
high-end lighting and advanced display businesses. In 2021, 2022, 2023 and the five months ended
May 31, 2023 and 2024, our revenue amounted to RMB1,388.4 million, RMB1,410.6 million,
RMB1,858.0 million, RMB624.6 million and RMB843.2 million respectively; our gross profit
amounted to RMB228.3 million, RMB235.2 million, RMB339.0 million, RMB104.3 million and
RMB154.2 million respectively; our net profit amounted to RMB78.0 million, RMB39.1 million,
RMB72.0 million, RMB7.6 million and RMB32.2 million respectively.
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The chart below illustrates the key indicators of our operating and financial performance.
5th Largest
Mid- to high-end2
intelligent automotive vision
domestic manufacturer
in China1
3rd Largest
High-end lighting
domestic device and module
manufacturer in China1
Market Leadership
Position
4th Largest
LCD TV backlight display
domestic manufacturer
in China1
70% / 40%
Coverage rate among top
ten4 domestic Tier-1
suppliers of automotive
lamps/top five7 domestic
automotive OEMs
50%
Coverage rate among
top ten4 LED lighting
companies globally
Designed
capacity in 2023
Top-tier
Customer Coverage3
100%
Coverage rate among
top five5 TV brands6
globally
376
Patents in various countries8
R&D and Production
~100 thousand
sq.m.
Production base GFA8
325.4%/465.3%
Period-on-period growth rate
in net profit/adjusted net
profit from the five months
ended May 31, 2023
to that of 2024
35.0%
Period-on-period growth
rate in revenue from the five
months ended May 31, 2023
to that of 2024
Financial Indicators
47.9%
Period-on-period growth
rate in gross profit from
the five months ended
May 31, 2023 to that of 202424 million+
devices (kpc)
145 million+
modules (bars)
373 thousand+
headlamps (sets)
291 thousand+
rear lamps (sets)
Notes:
1. Measured based on the revenue for the year ended December 31, 2023. High-end lighting products and LCD TV
backlight display products refer to devices and modules used in their respective application scenarios. Mid- to
high-end intelligent automotive vision products refer to intelligent automotive vision products equipped on mid- to
high-end vehicles.
2. Mid- to high-end vehicles refer to models with an average MSRP higher than RMB150,000, which is in line with
the industry norm. According to CIC, the categorization of the passenger vehicles relies on the consensus of
industry participants as there were no relevant regulations or standards in China as of the Latest Practicable Date.
3. The top-tier customer coverage rate is the proportion of the number of top-tier customers, with whom we
established business relationships, to the number of top-tier enterprises in the industries in which they operate,
which is in line with the industry norm. According to CIC, the determination of top-tier customers relies on the
consensus of industry participants as there were no relevant regulations or standards in China as of the Latest
Practicable Date.
4. In terms of revenue in 2023.
5. In terms of product shipment in 2023.
6. The global LCD TV industry is highly concentrated with top five LCD TV brands taking up an aggregated market
share of 61.6% in terms of TV shipments in 2023.
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7. In terms of wholesale volume in 2023.
8. As of the Latest Practicable Date.
Our Roadmap
Since our inception, driven by the vision to become an industry-leading global tech company
specializing in LED intelligent vision products and systems, we have been committed to
optimizing, innovating and developing in a green and sustainable way. The diagram below
illustrates the key stages of our development.
2003 2006 2009 2011 2014 2015 2017 2018 2020 2021 2022 2023 ···
Phase II
Path to the future
2003
2006
 APT Electronics
incorporated in Nansha
District, Guangzhou
 Completed the R&D of
flip-chip blue LED chips
2008-2009
 High-power flip-chip LED chips
commenced mass production
2010-2012
 Recognized as a national
high-tech enterprise
 High-power LED devices
based on flip-chip
structure commenced
mass production
 Nansha LED Industrial
Base commenced operation
 Entered the supply chain
of TCL
2014
2015-2016


Established Guangdong Provincial
Engineering Technology Research
Center for LED Chip Devices and
Optical Components
Entered the supply chain of
Samsung
2017
 APT Electronics
Inspection Center
became CNAS-certified
2018
 Established Linlux in Nansha,
Guangzhou; established Lynway Vision
in Ningbo, Zhejiang
 Automotive-grade LED devices
commenced mass production
 Entered the supply chain of
Hisense
2020-2021




Linlux production base and Lynway Ningbo
production base commenced operation
First automotive lamp project commenced mass
production, and Mini LED products commenced
mass production
Lynway Vision recognized as Zhejiang Digital
Factory in 2021; Lynway Vision Inspection Center
became CNAS-certified
Automotive-grade LED products entered the
supply chains of Geely, GAC and Changan Auto
2022-2023
 Annual shipment of automotive-grade
LED devices exceeded 200kk pcs
 Expanded Mini LED production line to
meet the annual demand of 300,000
Mini LED backlit TVs (converted to
55-inch TVs)
Focusing on LED devices and modules while building
competitive edge through scalability, technological
advancement and efficient production
Successful strategic transformation into an
intelligent vision product and system provider
integrating “LED+” technologies
Green and sustainable
growth with
continual innovation
Phase I
 Mr. CHAN Philip Ching Ho
and Mr. XIAO Guowei David
co-founded Advanced
Photoelectronic  at HKUST
 Entered the supply chain of
Philips Lighting
Phase I: focusing on LED devices and modules while building competitive edge through
scalability, technological advancement and efficient production
Our entrepreneurial philosophy, proprietary technology and founding team originated from
Advanced Photoelectronic, a company founded in 2003 and developed with the support of the
Hong Kong University of Science and Technology (HKUST) during its initial phase. In 2006, we
established APT Electronics in Nansha District, Guangzhou, where we later integrated the key
assets and technologies of Advanced Photoelectronic.
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We are one of the first companies in China to commence mass production of high-power
flip-chip LED products, according to CIC. From our inception to 2010, our primary focus was on
the R&D, production and sales of high-power flip-chip LED chips. From 2010, we pivoted our
business focus from LED chips to LED devices. Leveraging our previously accumulated flip-chip
LED technology, we continually iterated core technologies in flip-chip LED packaging, white LED
packaging and integrated packaging, while rapidly enhancing production capabilities.
Starting in 2014, we expanded to the R&D, production and sales of LED modules, based on
self-developed LED devices while integrating electronic design and structure as well as optical
system technologies.
During the first phase of development, we focused on rapidly expanding LED device and
module business. This phase, characterized by the development of core foundational technologies,
the enhancement of innovative capabilities and the strengthening of large-scale, efficient
production capabilities, allowed us to establish a strong competitive edge from an early stage.
Phase II: successful strategic transformation from a traditional LED manufacturer to an
intelligent vision product and system provider integrating advanced “LED+” technologies
In 2017, we commenced the second phase of our development. Leveraging our deep
understanding of the LED market as well as the self-innovation and technology iteration
capabilities of our core team, we transformed from a traditional LED manufacturer to an intelligent
vision product and system solution provider, integrating “LED+” technologies, giving us
significant early-mover advantage in our continued development. Our business spans across
intelligent automotive vision, high-end lighting and advanced display.
Notably, we identified the shifts in China’s automotive lighting industry early in 2017.
Automotive lamps have evolved beyond their traditional role as simple illumination systems,
becoming intelligent visual systems for vehicles that seamlessly integrate information perception,
interaction and driving assistance. In response to these shifts, in 2018, we established Lynway
Vision (ൖᙂ), a then joint venture with Geely Holding, thereby expanding into the field of
intelligent automotive vision. The traditional automotive lighting products centered on machining,
injection molding and optical components. Through the integration of ICs, electronic control,
software, sensors, optics and others, we transformed automotive lighting products and elevated
their intelligence level in automotive lighting.
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In addition, we achieved vertical integration in industry value chains of intelligent automotive
vision business, ranging from devices and modules to automotive lamps, setting us apart from
traditional manufacturers of LED devices and modules as well as LED automotive lamp suppliers.
This strategy enables us to swiftly adopt cutting-edge technologies in the industry and promptly
meet the cost reduction objectives and customization requirements of downstream automotive
OEMs. We can therefore offer cost-effective, one-stop and local solutions for LED intelligent
automotive vision systems, highlighting our core competitiveness in this field.
The aforementioned two phases laid a solid foundation for the up-and-coming third phase of
our development.
Path to the future: accelerating innovation in LED intelligent vision products and systems while
advocating for green and sustainable growth
As the LED intelligent vision industry in China embarks on a new development phase, our
focus is on catering to the technological innovation needs in intelligent automotive vision,
high-end lighting and advanced display applications. Particularly, with the rise of autonomous
driving and intelligent vehicles, the landscape of intelligent automotive vision products and
systems is undergoing significant transformation. We are dedicated to integrating ICs, electronic
control, software, sensors, optics and others, with LED intelligent automotive vision products. This
strategy aims to advance our products towards enhanced intelligence, integration and
systematization. Our focus therefore is on advancing products including high-pixel intelligent
headlamps (DLP/Micro LED), autonomous driving indicators and interaction systems, head-up
displays (HUD) and intelligent automotive lamp systems integrated with lidar. Through strategic
planning, we are committed to fostering the evolution of high-end lighting products and advanced
display technologies, thereby stimulating the business growth. Specifically, we plan to focus on
developing advanced display products with high contrast, high resolution and high color gamut,
which significantly enhance the display effect of LCDs.
Underpinned by our core team’s capabilities in self-innovation and technology iteration and
leveraging our profound understanding of “LED+” technologies, we aim to effectively allocate
resources to transition into a global tech company that is driven by technological innovation and
empowered by system development capabilities.
We believe that technological innovation is critical to enhancing future lifestyles. With
continual innovation in “LED+” technologies and products, we strive to promote green and
sustainable development in the industry.
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Our Industry
According to CIC, the LED intelligent vision industry has a substantial global market size of
USD192.0 billion in terms of revenue in 2023. China stands out as the world’s largest and most
comprehensive hub for automobile manufacturing, lighting and LCD TV industries. After an
extended development phase, the LED intelligent vision industry in China is consolidating rapidly.
The market for low- to mid-end products is characterized by intense competition, making cost
reduction and efficiency improvement the primary drivers for industry growth. Conversely, the
market for high-end products demands that manufacturers possess robust technical strengths and
innovation capabilities, which leads to significant technical barriers and shifts the competitive
focus towards technological leadership, as well as product quality and performance, demonstrating
room for higher profit margins. The emergence of “LED+” technologies, which integrate LED
technologies with ICs, electronic control, software, sensors, optics and others, are rapidly changing
the landscape of the high-end LED intelligent vision industry. Such technological revolutions are
now the key drivers for advancements in high-end LED products. Intelligent automotive vision,
high-end lighting and advanced display thus represent unsaturated and highly promising market
segments in the industry, with the largest room for technological advancement and the greatest
potential for development.
Intelligent Automotive Vision
Intelligent automotive vision products and systems are widely applied in both EVs and ICE
vehicles, and thus their development are influenced by the overarching trends within the
automotive industry. Specifically, the automotive industry’s evolution towards intelligence and new
energy catalyzed a transformation towards intelligent, integrated and customized automotive
lamps, which is expected to reshape the ecosystem and competitive landscape of the LED
automotive lamp industry. The robust growth of China’s passenger vehicle market established a
solid foundation for the growth of LED automotive lamp sales. Particularly, the significant growth
of EVs in China, coupled with their heightened requirements for the intelligence and connectivity
in lighting systems, boosted sales of intelligent automotive vision products and spurred
technological advancements in the intelligent automotive vision industry. The industry’s ongoing
shifts towards intelligence and new energy accelerate the evolution of LED automotive lamp
products towards greater intelligence, integration and customization. This significantly increased
both the quantity and the value of lamps on each individual vehicle, boosting the further growth of
the LED automotive lamp industry. Within this evolving landscape, emerging manufacturers have
the opportunity to quickly penetrate the market and establish competitive edges. Leveraging
innovative technology and strategic product positioning, they bring changes to the industry
competition dynamics.
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High-End Lighting
High-end lighting, including outdoor lighting, intelligent lighting and special lighting,
emerged as a high-potential market. Within the lighting industry, competition among low-end,
low-value, low- to medium-power LED devices is exceptionally intense. With the rapid
development of LED lighting, consumer demand evolved beyond basic illumination needs. As a
result, LED lighting is now progressing towards specialized solutions that also offer health
benefits, such as full-spectrum products featuring eye protection functions and intelligent solutions
that integrate functions such as dimming, color adjustments and intelligent light control. High-end
and high-performance LED devices feature high color rendering index (CRI), high luminous
efficacy and high-reliability. They are applied in outdoor lighting, horticultural lighting and
intelligent dimming solutions, and continue to iterate. While large international corporations
traditionally dominated the high-end, high-performance LED device market, in recent years, as
domestic LED manufacturers improving their product performance, they sparked a trend towards
domestic substitution, steadily capturing a larger market share.
Advanced Display
As LED technologies evolve, the advanced display sector is experiencing rapid growth,
marked by swift product iterations. In 2023, the market size of advanced display in China in terms
of revenue increased to RMB205.4 billion, and is expected to reach RMB296.2 billion in 2028.
Following years of development, the traditional backlight display market reached a stable state.
Meanwhile, there is a significant rise in consumer expectations for features such as color
saturation, color reproduction and contrast level in televisions. Advanced backlight display
products with high contrast, high resolution and high color gamut greatly promote the display
effect of LCDs. The emergence of new technologies such as local dimming and Mini LED
provides opportunities for companies with technological R&D capabilities. These technologies are
now viewed as the key drivers for the iterations of advanced display products. In the coming years,
as these technologies mature and commercial costs decrease, technological innovation is expected
to fuel the growth of the advanced display industry.
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Our Key Products and Technologies
Application
Scenarios
Intelligent headlamps, rear lamps,
interior lights, interactive applications for
smart cars, EVs and ICE vehicles
Intelligent Automotive Vision Advanced Display High-End Lighting
TVs, monitors,
smart displays
Various lighting
scenarios
 (indoor, outdoor,
horticultural,
intelligent and
special lighting)
LED  Intelligent
Vision Products
and Systems Intelligent automotive lamp system for
intelligent driving and
autonomous driving
High color gamut
backlight module
Mini LED backlight
module
High-end lighting module
(indoor, outdoor,
horticultural, intelligent
and
special lighting)
Module
Products
Automotive lighting module
Automotive control module
Intelligent interactive module
Device
Products Automotive-grade
LED device &
integrated
packaging device
Automotive
Mini LED device
Mini LED device
High color gamut
backlight device
High-end lighting
device (indoor,
outdoor, horticultural,
intelligent and
special lighting)
Application
Technologies
Automotive-grade LED device technology
Automotive LED module technology
Intelligent automotive lamp technology
Advanced display
 device and
module technology
High-end lighting
device and
module technology
Advanced LED
integrated
packaging
technology
High-end LED
 device packaging
technology
Fundamental
Technologies
Flip-chip LED
technology
Advanced white
LED packaging
 photoconversion
technology
Through years of technological development and accumulation, we established a
comprehensive technology and product matrix. This matrix, representing our core competitiveness,
demonstrates a complete system for technology development and product iteration. It ensures the
continual innovation and evolution of our technologies and products, underpinning our robust
position in the fields of intelligent automotive vision, high-end lighting and advanced display.
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We are one of the first companies in China to commence mass production of high-power
flip-chip LED products. With years of dedication to R&D and technological accumulation, we
developed a series of flip-chip LED technologies for different application scenarios. Our
fundamental technologies also include advanced white LED packaging photoconversion
technology, advanced LED integrated packaging technology and high-end LED device packaging
technology. Benefiting from the synergies in developing these technologies, our technological
capabilities remain at the forefront of global innovation.
Leveraging our advanced fundamental technologies, we focus on developing key application
technologies for LED devices, modules and intelligent automotive vision products and systems that
are specifically tailored to emerging LED application scenarios. Based on our LED technology, we
extend our focus to enhancing key application features regarding electronic design, software,
control algorithms, optics, mechanical and thermal dissipation structure design, as well as vision
and sensing integration. In terms of automotive lighting applications, we developed
automotive-grade LED device technology, automotive module technology and intelligent
automotive lamp technology. By integrating key application technologies across devices, modules
and systems, we provide reliable intelligent automotive vision products and systems including
automotive-grade LED devices, modules and intelligent lamps and systems, all designed to
enhance intelligent driving experience.
In high-end lighting, we developed device and module technologies for specialized
applications such as high-end outdoor lighting, horticultural lighting and intelligent lighting. Our
products feature high light quality, health-conscious design, high luminous efficacy, special
spectrum and intelligent dimming functions. In terms of advanced display, we developed advanced
display backlight device and module technologies, which led to further improvements in high color
gamut, high color uniformity, high light biological safety, high power and high reliability in
applications. In recent years, we have focused on the development of Mini LED backlight
technologies. According to CIC, our Mini COB technology is at an industry-leading level.
Based on the above fundamental technologies and key application technologies, our main
LED intelligent vision product and system solution offerings and development focuses are as
follow:
 Intelligent automotive vision: our intelligent automotive vision products primarily
include headlamps, rear lamps and interior lights that are integrated with electronic
components, optical parts, heat dissipation components, structural pieces and connectors,
as well as high-power LED devices and modules for headlamps (such as ADB modules)
and low- to medium-power LED devices and modules for rear lamps and interior lights.
We are developing a wide range of intelligent automotive vision products and systems,
including intelligent ADB automotive lamps with ten-thousand-level pixel capacity,
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intelligent interactive rear lamps, automatic driving indicators and interaction systems,
intelligent automotive lamp systems integrated with lidar, intelligent cockpit and
customized ambient lights, as well as HUD, among others.
 High-end lighting: our high-end lighting products primarily include high-end lighting
devices and modules. Our high-end lighting devices are distinguished by high luminous
efficacy, high light quality, high CRI and high brightness. Our high-end lighting
modules are characterized by high luminous efficacy, high color consistency, simple
assembly and intelligent dimming functions. These features make our high-end lighting
products suited for a range of applications, including indoor lighting, outdoor lighting,
horticultural lighting, intelligent lighting and special lighting.
 Advanced display: our advanced display products primarily include LED devices and
modules that are applied to direct-lit or edge-lit LED backlight for LCD TVs.
Characterized by high brightness, high color gamut, uniform light color, high power and
low thermal resistance, our advanced display products meet diverse specifications and
application needs, including slim design, narrow bezel, large size and dynamic dimming.
OUR STRENGTHS
Leading Solution Provider of LED Intelligent Vision Products and Systems in China
According to CIC, in terms of revenue in 2023, we ranked third among domestic device and
module manufacturers in China’s high-end lighting industry and fifth among all device and module
manufacturers in the same industry. We ranked fifth among domestic manufacturers in China’s
mid- to high-end intelligent automotive vision industry and twelfth among all manufacturers in the
same industry. We ranked fourth among both domestic and all manufacturers in China’s LCD TV
backlight display industry. Since our inception, we have targeted the high-value, high-growth mid-
to high-end LED market, and our comprehensive strategies encompass development in sectors such
as intelligent automotive vision, high-end lighting and advanced display, reinforcing our
industry-leading positions. Leveraging our technological prowess, production capabilities,
dedicated team, industry vertical integration strategy and customer resources, we commenced a
strategic transformation in 2017. We thus positioned ourselves at the forefront of this emerging
market and rapidly achieved a comprehensive layout across the entire supply chain. During the
Track Record Period, revenue from intelligent automotive vision experienced rapid growth,
amounting to RMB74.3 million, RMB399.7 million, RMB771.0 million, RMB225.7 million and
RMB365.4 million in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024,
respectively. Moving forward, we expect to continue focusing on intelligent automotive vision,
high-end lighting and advanced display businesses, while exploring opportunities in emerging
application fields.
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Vertical Integration of Industry Value Chain
In intelligent automotive vision, high-end lighting and advanced display, we can directly
supply our products in the form of LED devices or modules to lighting and TV brands, or in the
form of automotive lamps to automotive OEMs. This approach facilitates the vertical integration of
our product development and manufacturing processes across various application scenarios. We
acquired technological and market insights through collaborations with upstream suppliers such as
Epistar Corporation and downstream customers such as Geely Holding and its related automotive
OEMs. Such collaborations across the supply chain not only enhance transaction and
manufacturing efficiency, but also allow our products to better cater to customer needs and
accelerate product upgrades and improvements, thereby enhancing our competitive edge.
Notably, according to CIC, we are one of the first automotive lamp suppliers in China to
achieve vertical integration along the industry value chain, extending from automotive-grade LED
devices and modules to intelligent lighting systems. Our vertical integration capabilities enable us
to promptly identify customer needs and product development trends, simulate collaborative
innovation in advanced technologies and products and streamline the R&D chain of LED
devices-modules-systems. The R&D cycle for our advanced products is thereby shortened
considerably, which facilitates precise development, swift verification, rapid technology iteration
and fast mass production. For instance, through our internal collaborative development, we
designed and mass-produced the rear lamps for Geely’s “Haoyue L” (also known as “OKA V ANGO
L”) model in just six months, which significantly outpaced the industry norm of at least 12
months, showcasing our commitment to efficiency and innovation. Leveraging our in-house
developed and manufactured automotive-grade LED devices, modules and automotive lamps, we
effectively managed the cost of our products and therefore maintained their pricing
competitiveness. Moreover, intelligent automotive lamp manufacturers must pass long-term
reliability tests that generally last for 12 to 18 months for their LED products to be deemed
suitable for automotive-grade applications. They are also required to present prior cases of mass
production before qualifying as suppliers for automotive OEMs. The successful penetration of our
intelligent automotive lamps into the automotive OEM’s supply chain paved the way for the
broader application of our LED devices and modules.
In our high-end lighting and advanced display businesses, we supply LED devices and
modules tailored to customer specifications. Our venture into R&D, sales and production of LED
devices and modules is built on our advanced fundamental technologies, laying a solid foundation
for delivering one-stop solutions to the downstream lighting and TV companies. Our dedication to
the R&D of LED devices, drivers, intelligent control systems, optical design, formulations, thermal
management and production processes positioned us to supply high-end lighting customers with
tailored LED solutions directly. In the meantime, we offer systematic solutions that span from
LED placement, PCB and optical design to the packaging process, driving IC designs and local
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dimming control solutions, meeting the needs of customers in the advanced display business. Our
operational framework by integrating R&D, design and production, promotes rapid innovation,
synergistic operation and cost-efficiency.
Furthermore, the application scenarios of LED intelligent vision products and systems,
namely intelligent automotive vision, high-end lighting and advanced display, each has unique
market cycles and industry trends. Through strategic planning and operation, we are able to
establish multiple growth trajectories, which allow us to maintain a consistent level of purchase
orders and production pace overall, amidst fluctuations in any individual application market,
thereby enhancing our resilience to market risks and volatility.
Robust Technological Expertise and Advanced R&D Capabilities
We are one of the first enterprises in China that mastered the flip-chip LED technology,
according to CIC. This technology, which is central to our operations, offers many advantages,
including a broad power range, superior cost-effectiveness for high-power applications, a low
working voltage, as well as high reliability. The flip-chip LED technology encompasses a variety
of subsidiary technologies. Based on such technologies, we developed a diverse range of products,
including ceramic-based high-power LED products for streetlights, tunnel lights, and automotive
headlamps, leadframe-based flip-chip LED products for high-efficacy lighting and high-current
driven backlight products, as well as horticultural lighting LED products, Mini LED products and
other high-end application products. See “— Research and Development — Our Technologies.”
Underpinned by our core team’s capabilities in self-innovation and technology iteration and
through years of technological accumulation, we developed a series of technologies, including
fundamental technologies such as flip-chip LED technology, advanced white LED packaging
photoconversion technology, advanced LED integrated packaging technology, and high-end LED
device packaging technology, and application technologies such as automotive-grade LED device
technology, automotive module technology, intelligent automotive lamp technology, advanced
display device and module technology and high-end and special lighting device and module
technology. The technologies create strong synergies when incorporated into different applications.
As of the Latest Practicable Date, we had 376 patents in various countries, establishing a robust
technological edge.
We have been recognized as a national high-tech enterprise since 2011, and a specialized,
refined, distinctive and innovative SME in Guangdong Province in 2023. We have an R&D center
recognized at Guangdong provincial level and Guangzhou municipal level, as well as two
CNAS-certified laboratories, namely the APT Electronics Inspection Center and Lynway Vision
Inspection Center. In March 2020, our advanced flip-chip LED technology was recognized as
being at an international leading level, and advanced flip-chip LED integrated packaging
technology as well as our advanced flip-chip white LED packaging photoconversion technology
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were recognized as international advanced level by Guangdong Guoping Science & Technology
Achievement Evaluation Co., Ltd. (GSTA), an independent professional service organization
specializing in the evaluation of scientific and technological achievements.
Top-Tier Global Customer Base
With our exceptional R&D capabilities and consistent product quality, we fostered a solid
customer base. Our strong industry reputation and recognition enable us to build lasting
relationships with customers. Our customers and end users include top-tier international lighting
companies such as Signify (formerly known as Philips Lighting), Samsung, Panasonic and Toyoda
Gosei, as well as well-known TV brands such as Hisense (ڦTCL, Skyworth ( ௴ၪ),
Changhong (ࠀڗLG and Samsung. The intelligent automotive vision market has high entry
barriers, due to the rigorous technical development, significant equipment investment and high
system certification thresholds for automotive-grade devices, modules and automotive vision
products and systems. Despite the challenges, our strategic expansion enables us to collaborate
with more than 20 domestic automotive OEMs, automotive brands and Tier-1 suppliers, including
industry leaders such as Geely Auto ( Λлӛԓ) ,L y n k&C o( ჯд), ZEEKR ( ฽ὄ), Smart, Lotus
(༩त౶), GAC ( ᄿӛ), Changan Auto (τӛԓ), Li Auto ( ଣซӛԓ), Marelli and Koito.
Large-Scale Lean Manufacturing and Information Technology-Driven Production
With over 15 years of extensive and in-depth research on the materials, structures and
processes of LED products, we are committed to ensuring long-term reliability of our products and
satisfying the demands of customers for high-quality and high-end applications. Given the
commonalities in raw materials and manufacturing processes for LED devices and modules used in
intelligent automotive vision, high-end lighting and advanced display applications, we can leverage
the benefits of large-scale procurement and mass production, which allows us to achieve
economies of scale, thereby significantly reducing our production costs. During the Track Record
Period, we had three production bases, namely the APT production base, the Linlux production
base and the Lynway Ningbo production base, focusing on LED devices, modules and intelligent
automotive lamps, respectively, offering robust capacity.
Through our effective and comprehensive IT systems such as ERP, MES, PLM, SRM and
WMS, we achieved a high degree of informatization and digitalization in management. This has
not only ensured the smooth operation of our daily business activities but also enhanced the
efficiency and reliability of our products. Our commitment to maintaining high standards in our
operations is evidenced by a series of certifications including ISO9001 Quality Management,
ISO14001 Environmental Management, OHSAS18001 Occupational Health and Safety
Management and IATF16949 Automotive Industry Quality Management. This commitment to
excellence led to Lynway Vision’s recognition as a “Zhejiang Digital Factory” by the Zhejiang
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provincial government, further solidifying our reputation in the industry. Our robust mass
production technology and processes, together with a comprehensive quality management system,
help ensure product yield, efficiency, consistency and reliability. This strong foundation enables us
to position our products effectively in the mid- to high-end market and to provide long-term
service to our customers.
Insightful, Dedicated and Experienced Management
Our co-founder, chairperson of the Board and chief strategic officer, Mr. XIAO Guowei
David, a professorate senior researcher in optoelectronic technology, has more than 25 years of
professional experience in advanced semiconductor packaging, microelectronics manufacturing
process, optoelectronic semiconductors, materials and reliability analysis. He serves as the vice
president of the China Solid State Lighting Alliance and the president of the Guangdong
Illuminating Engineering Society. In addition, he was awarded the title of Honorary Citizen of
Guangzhou in 2021. Mr. CHAN Philip Ching Ho, our co-founder and Director, is a distinguished
leader in the semiconductor field with more than 50 years of academic research and industrial
application experience. He is a fellow of the Institute of Electrical and Electronics Engineering and
serves as a member of the Committee on Innovation, Technology and Re-industrialization of the
Government of Hong Kong as well as a professor emeritus at the Hong Kong Polytechnic
University. Mr. Chan’s illustrious career includes positions he held as the dean of the School of
Engineering at the HKUST and the deputy president and provost of the Hong Kong Polytechnic
University, a director of the Hong Kong Applied Science and Technology Research Institute. He
was qualified as a fellow of the Hong Kong Academy of Engineering Sciences and was awarded
the Bronze Bauhinia Star by the Hong Kong Government in Hong Kong in 2013.
Our president, Mr. HOU Yu, and vice president, Mr. ZENG Zhaoming both have more than
20 years of experience in the semiconductor and optoelectronic industries and were selected for
the Guangzhou High-end Foreign (Overseas) Expert Recruitment Program and recognized as
Industrial Leading Talent (leading talent in innovation) and Guangzhou High-Caliber Talent
(Excellent Expert), respectively. Their extensive expertise encompasses R&D, manufacturing and
operation management, providing a wealth of knowledge and leadership to our organization. We
have a robust and stable management team, strengthened by an R&D team of 337 highly educated
professionals with doctorates and master’s degree holders at its core. Our core management team,
known for its pragmatic and diligent approach, possesses a profound comprehension of the LED
industry and technology and a discerning understanding of market demand.
The insight of our management has been decisive in our development. Led by our core
management team, we have strategically transformed from a traditional LED manufacturer to an
intelligent vision product and system provider that integrates advanced “LED+” technologies,
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giving us significant early-mover advantage in our continued development. By generating
substantial value for our customers and fostering better development prospects for our employees,
we laid a solid foundation for our sustainable growth in the future.
OUR STRATEGIES
Expand into High-Growth Sectors through Technological Innovations
We are committed to the continual innovation in LED intelligent vision products and system
solutions, including intelligent automotive vision, high-end lighting and advanced display products
and systems, to maintain our industry-leading positions. Our focus is on the development of
intelligent automotive vision products and systems, targeting mainstream automotive OEMs both
domestically and internationally, while expanding our market shares in the high-end lighting and
advanced display markets. We believe that our profound industry knowledge and technological
development will enable us to further penetrate the high-growth LED intelligent vision product and
system market. Leveraging our proprietary technologies, products and service advantages, we plan
to continue to explore new product applications.
Prioritize “LED+” Innovation to Drive Technological Breakthroughs
We remain dedicated to building the “LED+” core technology system as we continue to
accelerate the R&D of cutting-edge technologies, ensuring we stay at the forefront of technological
advancement. We believe that autonomous driving and intelligent vehicles will revolutionize the
LED intelligent automotive vision industry. As a result, we will continue to integrate LED
intelligent automotive vision products and systems with ICs, sensors, electronic control, software
and optics for a more intelligent, integrated and systematic development. By staying attuned to
market demand, we plan to strategically deploy technologies of sensors, lidars and controllers. Our
continual investment in the R&D of pioneering technologies and products are expected to help
ensure we maintain our competitive edge.
Enhance Vertical Integration of Industry Value Chain
We plan to continue to focus on enhancing our vertical integration capabilities and streamline
the R&D chain of “LED devices-modules-systems.” Our commitment to precise product
positioning, efficient R&D, swift verification, rapid iteration of technologies and products and
accelerated mass production will streamline the development cycle for cutting-edge products and
expedite product verification. By minimizing intermediary steps in the production of devices and
modules, we aim to further enhance product competitiveness. This strategy is also expected to
strengthen our resilience against market volatility by creating diversified growth trajectories.
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Improve Lean Manufacturing and Intelligent Production System
Dedicated to a “quality first” strategy, we aim to establish a leaner, larger-scale, more
automated and digitalized production control system to enhance our scale effect. We plan to
strengthen our quality control and management systems, striving towards the comprehensive
development of digital intelligent production bases. This strategy is expected to elevate our quality
management standards and boost the level of digitalization in our operations and production
processes.
Adapt to Market Dynamics and Expand Production Capacity
During the Track Record Period, our intelligent automotive vision business experienced
significant growth. Looking forward, we plan to bolster this business by expanding our product
lines and corresponding production capacity to meet customer demands, and to increase market
share. We also plan to expand the production capacity of our high-end lighting and advanced
display businesses promptly based on changes in market demand.
OUR PRODUCTS
We design, develop and manufacture a wide range of LED intelligent vision products and
system solutions, namely, LED products and system solutions, covering functions of lighting,
illumination, display, sensing, decoration and interaction, with intelligent features. Specifically, our
LED intelligent vision products encompass:
 intelligent automotive vision products, primarily including intelligent automotive lamps
and automotive-grade LED devices and modules;
 high-end lighting products, primarily including high-end lighting devices and high-end
lighting modules; and
 advanced display products, primarily including LED devices and modules that are
applied to direct-lit or edge-lit LED backlight for LCD TVs.
In 2023, we sold 568 types of intelligent automotive vision products, 2,937 types of high-end
lighting products and 1,009 types of advanced display products. During the five months ended
May 31, 2024, we sold 415 types of intelligent automotive vision products, 1,656 types of
high-end lighting products and 771 types of advanced display products. In 2021, 2022, 2023 and
the five months ended May 31, 2023 and 2024, we introduced 1,220, 1,144, 1,653, 625 and 590
new products, respectively.
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The table below sets forth the details of our main products by category.
Main category Sub-Category Characteristics
Intelligent
automotive vision
Intelligent automotive
lamps
Intelligent automotive lamps integrate
electronic components, optical parts, heat
dissipation components, structural pieces and
connectors. These components, based on
specific forms and functions, can be further
assembled into various types of intelligent
automotive lamps, including headlamps, rear
lamps and interior lights.
Automotive-grade LED
devices and modules
Automotive-grade LED devices and modules
primarily include high-power LED devices
and modules for headlamps and low- to
medium-power LED devices and modules for
rear lamps and interior lights. The high-power
LED devices and modules for headlamps are
known for high brightness and reliability, and
the low- to medium-power LED devices and
modules for rear lamps and interior lights are
known for high reliability and flexibility in
design and application. Our automotive LED
modules mainly include PCBA modules that
integrate LED devices, connectors and
electronic components and lens modules for
automotive headlamps that consist of light
source, drivers and control circuits, lenses and
reflectors.
High-end lighting High-end lighting devices High-end lighting devices are incorporated
into a variety of lighting applications such as
tubes, bulbs, spotlights and panel lights.
Featuring high luminous efficacy, high light
quality, high CRI and high brightness, our
high-end lighting devices are primarily
applied in specialized lighting scenarios such
as indoor lighting, outdoor lighting,
horticultural lighting, intelligent lighting and
special lighting.
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Main category Sub-Category Characteristics
High-end lighting
modules
High-end lighting modules integrate LED
devices, optical components, electronic
drivers, circuit control and protection, PCBs
and connectors, forming module products
featured high luminous efficacy, high color
consistency, simple assembly and the
functions of intelligent dimming, thus meeting
the needs for intelligent and specialized
lighting applications.
Advanced display Advanced display products mainly include
LED devices and modules that can be applied
to direct-lit or edge-lit backlight products,
such as LCD televisions and monitors.
Specifically, our advanced display modules
integrate LED devices or LED chips, driver
ICs, optical lenses and electric components on
the PCBs, forming PCBAs that combine
optical, thermal and electrical designs.
Characterized by high brightness, high color
gamut, uniform light color, high power and
low thermal resistance, our advanced display
products meet diverse specifications and
application needs, including slim design,
narrow bezel, large size and dynamic
dimming.
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The tables below set out a breakdown of our revenue, gross profit/(loss) and gross margin by
product category for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except for percentages)
(unaudited)
Intelligent automotive vision ..... 74,251 5.3 399,674 28.3 770,973 41.5 225,676 36.1 365,445 43.4
Intelligent automotive lamps ...... 50,732 3.7 351,792 24.9 707,945 38.1 211,550 33.9 331,355 39.3
Automotive-grade LED devices and
modules .............. 23,519 1.6 47,882 3.4 63,028 3.4 14,126 2.2 34,090 4.1
High-end lighting .......... 1,033,857 74.5 670,242 47.5 650,821 35.0 253,630 40.6 254,103 30.1
High-end lighting devices ....... 849,273 61.2 494,608 35.1 469,971 25.3 175,302 28.1 177,117 21.0
High-end lighting modules ...... 184,584 13.3 175,634 12.4 180,850 9.7 78,328 12.5 76,986 9.1
Advanced display .......... 280,272 20.2 340,716 24.2 436,238 23.5 145,311 23.3 223,645 26.5
Total ................ 1,388,380 100.0 1,410,632 100.0 1,858,032 100.0 624,617 100.0 843,193 100.0
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Gross
profit/(loss)
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin
(RMB in thousands, except for percentages)
(unaudited)
Intelligent automotive vision ..... (846) (1.1) 70,061 17.5 115,240 14.9 23,077 10.2 56,084 15.3
Intelligent automotive lamps ...... (1,210) (2.4) 60,026 17.1 97,446 13.8 19,121 9.0 43,216 13.0
Automotive-grade LED devices and
modules .............. 364 1.5 10,035 21.0 17,794 28.2 3,956 28.0 12,868 37.7
High-end lighting .......... 202,348 19.6 128,768 19.2 152,429 23.4 57,400 22.6 62,973 24.8
High-end lighting devices ....... 178,753 21.0 103,066 20.8 110,918 23.6 38,738 22.1 45,158 25.5
High-end lighting modules ...... 23,595 12.8 25,702 14.6 41,511 23.0 18,702 23.9 17,815 23.1
Advanced display .......... 26,776 9.6 36,356 10.7 71,342 16.4 23,793 16.4 35,189 15.7
Total ................ 228,278 16.4 235,185 16.7 339,011 18.2 104,310 16.7 154,246 18.3
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Intelligent Automotive Vision
Intelligent automotive vision is our fastest-growing business in terms of revenue and has
become a strategic focus of our LED intelligent vision business. In 2017, we obtained the
IATF16949 certification, which is a certification required for all manufacturers and associated
enterprises of automotive-grade products to ensure their reliability. During the Track Record
Period, our revenue from intelligent automotive vision increased significantly from RMB74.3
million in 2021 by 438.0% to RMB399.7 million in 2022, further increased by 92.9% to
RMB771.0 million in 2023, and increased by 61.9% from RMB225.7 million in the five months
ended May 31, 2023 to RMB365.4 million in the five months ended May 31, 2024. Our intelligent
automotive vision products are further categorized into intelligent automotive lamps and
automotive-grade LED devices and modules, where intelligent automotive lamps were the key
driver for the robust growth of intelligent automotive vision during the Track Record Period. In
2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, revenue from intelligent
automotive lamps accounted for 68.3%, 88.0%, 91.8%, 93.7% and 90.7%, respectively, of our total
revenues from intelligent automotive vision.
We have maintained a strategic business relationship with Geely Holding and many of its
related automotive OEMs since the establishment of Lynway Vision in 2018. See “— Sales and
Marketing — Relationship with Geely Related Group.” During the Track Record Period, a majority
of the sales of our intelligent automotive vision products were attributable to Geely Related Group.
In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, revenue from Geely
Related Group was RMB50.6 million, RMB350.1 million, RMB705.8 million, RMB211.4 million
and RMB326.7 million, respectively, accounting for 3.6%, 24.8%, 38.0%, 33.8% and 38.8% of our
total revenue, respectively, for the same periods. We expect that revenue from Geely Related
Group will continue to increase in the near future. See “Risk Factors — Risks Relating to Our
Industry and Business — We are exposed to customer concentration risk” and “Connected
Transactions — Non-Exempt Continuing Connected Transaction (Subject to Reporting, Annual
Review, Announcement and Independent Shareholders’ Approval Requirements).”
Benefiting from our robust technical capabilities, vertical integration of the industry value
chain and the experience in the LED intelligent vision industry and intelligent automotive vision
projects, we carry out efficient design and production processes and respond swiftly to customer
requirements. As a result, in addition to supplying to Geely Holding and its related automotive
OEMs, we are a qualified supplier for more than 20 automotive OEMs and Tier-1 suppliers,
including GAC, Changan Auto and Li Auto, to provide them with our automotive-grade LED
devices and modules. As the functionality of intelligent automotive lamps depends substantially on
the performance and reliability of automotive-grade LED devices and modules, the certifications
and approvals obtained from these automotive OEMs and Tier-1 suppliers greatly enhanced our
prospects for capturing more market opportunities. Pursuant to our strategic development plan, we
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are vigorously expanding our customer base by engaging in negotiations with multiple leading
domestic and international automotive OEMs and by participating in their supplier qualification
audits. Notably, Lynway Vision passed the supplier qualification audits conducted by a leading
smart EV brand and a top automobile brand in South China in 2021 and 2022, respectively,
followed by another top automobile brand in East China in 2023. These milestones set a solid
foundation of securing intelligent automotive lamp projects in the following years. We aim to
secure one design win from the top automobile brand in South China in the second half of 2024
and another design win from the top automobile brand in East China in late 2024 or early 2025. As
of the Latest Practicable Date, we made steady progress in accordance with our plan. We engaged
in detailed discussions for a specific project prior to securing design win with the top automobile
brand in South China. Additionally, we were in frequent communication with the top automobile
brand in East China to identify the target project.
Intelligent Automotive Lamps
The intelligent automotive lamps designed, developed, produced and sold by Lynway Vision
are the centerpiece of our intelligent automotive vision product matrix. Intelligent automotive
lamps, based on functions and applications, mainly include headlamps, rear lamps and interior
lights. Our intelligent automotive lamps can be applied in both EVs and ICE vehicles, and thus
their development are influenced by the overarching trends within the automotive industry. In line
with the growing trend of automotive intelligence, intelligent automotive lamps are evolving
towards higher-end, smarter and more customized solutions. This evolution is manifested in the
iterative improvements in the form and light source of headlamps and rear lamps as well as the
broader coverage and enhanced smart features of interior lights. As a result, the overall value of
intelligent automotive vision products increased significantly, and we developed our intelligent
automotive lamp product matrix in line with such trends.
Manufacturers of intelligent automotive lamps undergo complicated procedures in their
project acquisition phase. Automotive OEMs inspect the qualifications of supplier candidates and
select their suppliers for individual automotive lamp projects through a bidding process, where
supplier candidates are typically scrutinized for their R&D, manufacturing and quality control
capabilities. Automotive-grade products, due to their critical role in vehicle safety, are governed by
stringent regulations established by government agencies, industry regulators and automotive
OEMs. As a result, automotive-grade products are subject to more stringent standards across R&D,
manufacturing and sales compared to their non-automotive-grade counterparts. For automotive
lamps, supplier candidates are expected to have sufficient R&D technical resources to conduct
automotive lamp development alongside the new vehicle model development phase. Supplier
candidates actively engage in the R&D stage of automotive lamp projects by performing a
comprehensive feasibility analysis on the lamp designs provided by automotive OEMs. This
analysis should thoroughly evaluate the manufacturability of the automotive lamps, the
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implementation of customized lighting functions and display features as well as compliance with
the regulations applicable in various regions, ensuring seamless integration with the vehicle and
satisfaction of customer requirements. According to CIC, it is rare in the industry for automotive
OEMs to switch automotive lamp manufacturers when commencing mass production, due to the
extensive involvement of the manufacturers in the overall vehicle development phase. As a result,
supplier candidates are expected to have comprehensive control over the production process,
ensuring product quality, traceability and steady supply throughout the life cycle of the vehicle
model. They should also be able to respond quickly, meeting demands in a timely manner with
adequate personnel, qualified suppliers and working environment.
As of May 31, 2024, Lynway Vision secured 22 intelligent automotive lamp projects. In
2021, 2022 and 2023, our tender success rates for intelligent automotive lamp projects from Geely
Related Group were 80.0%, 53.3% and 40.0%, respectively. Our tender success rate decreased
from 2021 to 2022 primarily because we engaged in a limited number of project tenders to ensure
stable and high-quality delivery during the initial development stage of our intelligent automotive
lamp business in 2021. Our tender success rate decreased in 2023 primarily because (i) we reduced
our engagement in bidding processes to focus on projects commencing mass production, which
required significant R&D resources, and (ii) we strategically participated in the bidding processes
of projects with higher profit margins, which were inherently more competitive.
The following table sets forth a breakdown of revenue and gross margin by intelligent
automotive lamp for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Revenue
%o f
Revenue
Gross
Margin Revenue
%o f
Revenue
Gross
Margin Revenue
%o f
Revenue
Gross
Margin Revenue
%o f
Revenue
Gross
Margin Revenue
%o f
Revenue
Gross
Margin
(RMB in thousands, except percentage)
(unaudited)
Intelligent automotive lamps
Headlamps ........ 15,822 31.2 (4.9) 250,023 71.1 19.7 535,311 75.6 14.7 168,819 79.8 9.6 202,397 61.1 16.5
Rear lamps ........ 34,910 68.8 (1.3) 101,770 28.9 10.7 172,634 24.4 11.7 42,732 20.2 7.0 128,958 38.9 7.7
Total.......... 50,732 100.0 (2.4) 351,792 100.0 17.1 707,945 100.0 13.9 211,551 100.0 9.0 331,355 100.0 13.0
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The following table sets forth a breakdown of the sales volume and average selling price by
intelligent automotive lamp for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Sales
Volume
Average
Selling
Price
Sales
Volume
Average
Selling
Price
Sales
Volume
Average
Selling
Price
Sales
Volume
Average
Selling
Price
Sales
Volume
Average
Selling
Price
(set) (RMB) (set) (RMB) (set) (RMB) (set) (RMB) (set) (RMB)
Intelligent
automotive lamps
Headlamps ....... 9,848 1,606.6 151,603 1,649.2 302,766 1,768.1 104,612 1,613.8 124,187 1,629.8
Rear lamps ....... 31,874 1,095.3 91,478 1,112.5 152,283 1,133.6 42,590 1,003.3 98,441 1,310.0
Total........... 41,722 1,216.0 243,081 1,447.2 455,049 1,555.8 147,202 1,437.1 222,628 1,488.4
During the Track Record Period, the sales volume of our intelligent automotive lamps
increased from 41,722 sets in 2021, 243,081 sets in 2022 to 455,049 sets in 2023, and increased
from 147,202 sets in the five months ended May 31, 2023 to 222,628 sets in the five months ended
May 31, 2024. The average selling price increased from RMB1,216.0 per set in 2021, RMB1,447.2
per set in 2022 to RMB1,555.8 per set in 2023, and increased from RMB1,437.1 per set in the five
months ended May 31, 2023 to RMB1,488.4 per set in the five months ended May 31, 2024. The
increase in average selling prices was primarily due to the transformation towards intelligent,
integrated and customized features of our intelligent automotive visions products. According to
CIC, the value of intelligent automotive vision systems per vehicle in China is expected to
experience further increase from approximately RMB3,600 in 2023 to approximately RMB4,700
by 2028, due to the advancements in LED technologies and the growing consumer demand for
customized features. Meanwhile, since the value of intelligent automotive lamps accounts for a
relatively small portion of the value of automobile vehicles, the general decrease in automobile
prices does not have a material impact on the selling prices of our intelligent automotive vision
products. When facing price decreases in automobile models, the increased automobile vehicle
sales will drive up our revenue from the intelligent automotive business and grant us more
opportunities to collaborate with more automotive OEMs and Tier-1 suppliers through our
enhanced price competitiveness. In addition, automotive OEMs increasingly opt for domestic
automotive lamp suppliers, which also facilitates our capitalization on market dynamics in the
intelligent automotive vision business, boosting our revenue from intelligent automotive lamps.
See “Risk Factors — Risks Relating to Our Industry and Business — Demand for our LED
products depends on trends and developments in their corresponding end products and end
markets.”
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Headlamps
Headlamps, a key component in enhancing driving safety and experience, is the most
valuable among all intelligent automotive lamps. Our headlamp development strategies are tailored
to various vehicle model pricing tiers. We developed a universally applicable ultra-narrow module
series, specifically, a high and low beam lighting module series characterized by its extremely
narrow light-emitting area. These universal modules are designed to cater to the prevalent
headlamp visual requirements in today’s vehicles while enhancing the aesthetic appeal of
headlamps. We are focused on the development of intelligent ADB and interactive projection
headlamp systems that range from hundreds to tens of thousands of pixels. Equipped with our
intelligent automotive lamp technologies, the intelligent high-pixel ADB headlamps enable a
longer illumination distance and feature intelligent anti-glare functions through the integration of
cameras and LiDAR. Our ADB headlamps determine the location and proximity of oncoming
vehicles and automatically adjust the light beam height to reduce the glare caused by the
headlights to the oncoming drivers. In addition, our ADB headlamps include a cornering lamp
function that illuminates areas to the side of the vehicles when they make turns, facilitating the
drivers’ prompt detection of nearby objects and enhancing safety. See “— Research and
Development — Our Technologies — Product-Specific Technologies — Intelligent Automotive
Lamp Technology.”
In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, we had two, four,
ten, seven and ten headlamp projects under production, respectively, and our revenue from
headlamps accounted for 31.2%, 71.1%, 75.6%, 79.8% and 61.1% of our revenue from intelligent
automotive lamps during the same periods. During the Track Record Period, revenue from our
headlamp projects significantly increased, reflecting our strategic emphasis on intelligent
automotive lamp products bearing higher value and application importance. The average selling
price of our headlamps showed steady growth during the Track Record Period. In 2021, 2022,
2023 and the five months ended May 31, 2023 and 2024, the average selling price amounted to
RMB1,606.6, RMB1,649.2, RMB1,768.1, RMB1,613.8 and RMB1,629.8 per set, respectively.
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The table below sets forth some of our key headlamps and their features.
Product Features
Xingyue L (൳L) Headlamps
The matrix-style headlamps we developed for Xingyue L offer
strong light penetration and unique aesthetic appeal. Each
headlamp incorporates a two-row, three-section design,
seamlessly integrating daytime running lights, position lights,
high and low beam lights, as well as turn signals. Its high
beam module enables a maximum illumination distance of up
to 178 meters.
Smart Headlamps
The intelligent headlamps we developed for Smart incorporate
32-pixel ADB modules and a variety of lighting models. One
of its key features is the cornering lamp function, an auxiliary
light source designed to illuminate turning areas. The
cornering lamps automatically activate in response to steering
wheel movements or turn signal indications. This enables
drivers to promptly detect pedestrians, thereby enhancing
safety and reducing accident rates.
Lynk & Co 09 Headlamps
The headlamps we developed for Lynk & Co 09 are equipped
with 84-pixel high-resolution ADB modules and paired with
the electronic adaptive front lighting systems. The adaptive
front lighting system offers fast reaction and adeptly adjusts
the headlamp angles in response to steering wheel movement
and under complex road conditions, which help expand the
driver’s field of vision, ensuring optimal illumination and
enhancing driving safety.
Lynk & Co 06 EM-P
Headlamps
The headlamps we developed for Lynk & Co 06 EM-P represent
significant advancements in lighting module integration and
product process design. Each headlamp features two
dual-beam modules, seamlessly complementing its high and
low beam modules. In addition, it employs a high draft angle
in its process design that exceeded industry norms through
advanced molding and refined gluing techniques, achieving
optimal sealing effect.
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Case Study — Lynk & Co 06 EM-P Headlamps
We undertook the Lynk & Co 06 EM-P headlamps development project and participated in
styling analysis and prototype production in the product design phase in March 2022. The below
sets forth some of the details regarding this joint development.
 Customer requirements : the customer asked for unique styling with a customized size
requirement, in order to cater to its requirements for the inner space of the lamp and the
bespoke appearance of the vehicle with integrated signal lights and headlamps that
deviates from Lynk & Co’s traditional approach. In terms of the design of high and low
beam modules, the customer required the modules to achieve a five-star evaluation in
the automobile safety index and level 2 of the road lighting evaluation, which is
manifested by various tests results, including a national safety assessment program and
an illumination distance test.
 Our R&D focus : upon fulfillment of the design of high and low beam modules, we
further developed an innovative design featuring two dual-beam modules with one of
them increasing the distance of low beams and the other increasing the width of low
beams, while both modules light up simultaneously when the low beam is activated. The
dual-beam modules can greatly expand the illumination distance and width, achieve
wider near-field illumination and more extensive far-field illumination, providing the
driver with a brighter driving vision while enabling improved night driving safety. In
terms of process design, we adopted a 37° draft angle for the external lamp cover,
allowing higher flexibility in vehicle exterior design. The draft direction of the external
lamp cover in the industry generally adopts an angular deviation smaller than or equal
to 15° from the gluing and pressing direction. Our adoption of the 37° draft angle
exceeded the industry norms through advanced molding and refined gluing techniques,
achieving optimal sealing effect.
 Timeline : we initiated the development in March 2022. The mass production of Lynk &
Co 06 EM-P started in September 2023.
Rear Lamps
Aside from headlamps, we also offer LED rear lamps for automotive OEMs. The rear lamps
we develop have a series of intelligent features, including dynamic effects of sequential turn
signals (where the turn signal light moves across the car in the direction of intended travel),
breathing light effects (where the brightness of the light changes smoothly between dark and
bright), welcome and farewell light effects and custom light effect. We develop and produce both
separate and continuous rear lamps for automotive OEMs. Separate rear lamps have two sets of
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lamps on both sides of a vehicle, while continuous rear lamps form an end-to-end light strip across
the rear of a vehicle. As the evolution of automotive rear lamps, particularly in intelligent cars,
transitions from a separate design to a continuous design, we actively respond to this trend by
shifting our development focus towards continuous rear lamps. Accordingly, the sales contribution
of continuous rear lamps experienced a consistent growth, with its revenue contribution to the
revenue from rear lamps increasing from nil in 2021 to over 5% in 2022, to over 36% in 2023, and
further increasing to over 50% in the five months ended May 31, 2024. In 2021, 2022, 2023, and
the five months ended May 31, 2023 and 2024, we had two, three, seven, four and eight rear lamp
projects under production, respectively, and our revenue from rear lamps accounted for 68.8%,
28.9%, 24.4%, 20.2% and 38.9% of our revenue from intelligent automotive lamps during the
same periods. The average selling price of our rear lamps gradually increased during the Track
Record Period. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, the
average selling price amounted to RMB1,095.3, RMB1,112.5, RMB1,133.6, RMB1,003.3 and
RMB1,310.0 per set, respectively.
The table below sets forth some of our key rear lamps and their features.
Product Features
ZEEKR 007 Rear Lamps
The rear lamps we developed for ZEEKR 007 utilize a single
piece of thick-walled side-emitting light for the rear lamp on
each side. The lamps’ compact and slender design is
accentuated by the black edges. When activated, the super-red
light provides a balanced and visually appealing illumination.
The thick-walled side-emitting light highlights the body lines
of the vehicle, adding an artistic touch. The rear lamps also
support the vehicle’s OTA light effect upgrades.
Preface (๿) Rear Lamps
The rear lamps we developed for Preface are compatible with the
Geely 2.0T power platform. The rear lamps feature nine
dynamic and powerful crystal line position lights on each side
of the vehicle. Since its launch in the market, the Preface
model has quickly gained popularity among comparable
sedans.
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Product Features
L y n k&C o
06 EM-P Rear Lamps
The rear lamps we developed for Lynk & Co 06 EM-P adopt a
succinct design, providing an enhanced visual experience.
Each continuous rear lamp consists of 84 energy crystal
blocks, grouped into twelve sets on both sides. The lamp strip
in the middle incorporates the Lynk & Co brand logo, creating
a vibrant and lively ambience with aesthetics.
Our Intelligent Automotive Lamp Projects
During the Track Record Period and up to the Latest Practicable Date, our intelligent
automotive lamp projects were secured through competitive bidding processes from Geely Related
Group. The following table sets forth the number of our intelligent automotive lamp projects
started design in, secured design win and commenced mass production during each period of the
Track Record Period and up to the Latest Practicable Date:
For the year ended
December 31,
For the five
months
ended May
31, 2024
From June
1, 2024 until
the Latest
Practicable
DateNumber of projects Product 2021 2022 2023
Started design in (1) ... Headlamps 1 16 1 151
Rear lamps 51 21 3 6 1
Total .............. 15(3) 18 24 11 2
Secured design win (2) . Headlamps 7 3———
Rear lamps 2511 —
Total .............. 8(3) 811 —
Commenced mass
production ........ Headlamps 2 2 6——
Rear lamps 2141 —
Total .............. 43 9 (3) 1—
Note:
(1) “Design in” is a process where automotive OEMs engage supplier candidates of intelligent automotive lamps to
propose innovative designs of automotive lamps for integration into their new automobile models.
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(2) “Design win” is a formal confirmation by automotive OEMs that confirms the selection of a specific supplier’s
intelligent automotive lamps for integration into their new automobile models.
(3) Included an intelligent automotive lamp project that encompassed both headlamps and rear lamps.
The projects we secured during the Track Record Period typically progressed from starting
design in to securing design win within a span of three to six months. Subsequently, the
advancement from securing design win to the commencement of mass production usually took a
further nine to twelve months. The time needed during each stage may vary depending on the
complexity of the project design and specific requirements of the automotive OEMs. According to
CIC, the typical life cycle of automobile models after mass production ranges from two to five
years.
Automotive-Grade LED Devices and Modules
As part of our intelligent automotive vision product matrix, we also offer automotive-grade
LED device and module solutions. Automotive-grade LED devices and modules are the core
components of automotive lamps, and their functionality and performance are highly correlated
with driving safety. Consequently, automotive OEMs’ supplier qualification audits for LED devices
and modules typically go beyond the level of Tier-1 direct suppliers, to Tier-2 or even Tier-3
automotive lamp suppliers. Only those who pass the audit procedures can attain the supplier
qualification from the automotive OEMs and become their Tier-2 or Tier-3 suppliers. We are a
qualified supplier for more than 20 automotive OEMs or Tier-1 suppliers to provide them with our
automotive-grade LED devices and modules. Automotive-grade LED devices and modules are
required to be significantly more reliable than standard lighting counterparts, given their prolonged
outdoor exposure and critical importance to the drivers’ visibility during vehicle operation. The
automotive industry typically requires that LED products used in vehicle lighting are made from
high-quality raw materials with enhanced heat dissipation, extended operational lifespan and robust
safety-centric designs. They are also subject to rigorous testing protocols, such as compliance with
the AEC-Q102 standard, which is a qualification granted to automotive-grade optoelectronic
devices in the automotive industry only after their completion of long-term reliability tests under
stringent environmental conditions. As of May 31, 2024, 87 of our automotive-grade LED devices
were recognized as AEC-Q102 qualified.
We developed a broad range of automotive-grade LED devices and modules specifically for
intelligent automotive lamps and solutions. These products are characterized by their high
brightness, high power, robust corrosion resistance and durability. In addition, we are one of the
first companies in China to develop flip-chip high-power automotive-grade LED technology and
products, and to adopt this technology in automotive headlamps, according to CIC. During the
Track Record Period, our revenue from our automotive-grade LED devices and modules increased
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from RMB23.5 million in 2021 by 103.6% to RMB47.9 million in 2022, increased by 31.6% to
RMB63.0 million in 2023, and increased from RMB14.1 million in the five months ended May 31,
2023 by 141.3% to RMB34.1 million in the five months ended May 31, 2024.
Our automotive-grade LED devices mainly include high-power devices for headlamps and
low- to medium-power devices for rear lamps and interior light. The high-power devices are based
on ceramic-based flip-chip or vertical structures, which enable high brightness and reliability. The
low- to medium-power devices, featuring small size and high corrosion resistance, employ
advanced automotive-grade SMD packaging technology. In 2021, 2022, 2023 and the five months
ended May 31, 2023 and 2024, we sold 114.1 million, 207.6 million, 172.0 million, 62.2 million
and 80.4 million pieces of automotive-grade LED devices, respectively. The average selling price
of our automotive-grade LED devices remained relatively stable at RMB0.19 and RMB0.17 per
piece in 2021 and 2022, and increased to RMB0.27 per piece in 2023. The average selling price
increased from RMB0.14 per piece in the five months ended May 31, 2023 to RMB0.32 per piece
in the five months ended May 31, 2024. The increase was primarily due to our product
advancements towards higher power and enhanced performance.
The pictures below set forth some of our key automotive-grade LED devices.
High-power devices for
headlamps
Low- to medium-power
devices for rear lamps
and interior light
As the critical light-emitting units of intelligent automotive lamps, automotive LED modules
are further assembled into both headlamps and rear lamps. See “— Production — Production
Process.” These modules control the LED light source and intensity, color and other properties of
the emitted light.
Our automotive LED modules mainly include PCBA modules and lens modules for
automotive headlamps. PCBA modules are optoelectronic modules with optical, mechanical,
electrical and other functions, which integrate LED devices, connectors and electronic components
such as resistors, capacitors, diodes and ICs, onto a PCB by utilizing surface mount equipment.
PCBs are designed based on the size, space and photoelectric function requirements of the
automotive lamps as well as in accordance with the regulations on automotive lamp signals and
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lighting. Our PCBA modules are characterized by optical uniformity, simple assembly,
photoelectric integration, and they are widely applied to automotive lamps, including rear lamps,
headlamps and interior lights.
Our lens modules for automotive headlamps primarily consist of light source, drivers and
control circuits, lenses and reflectors. These modules achieve different lighting effects and
functions by controlling the light source through drivers and control circuits. Through the
integration of lenses and reflectors, our automotive LED modules provide high brightness
nighttime illumination with low power consumption and diverse functions. These products not only
improve safety and visibility during night driving, but also offer greater room and flexibility for
creative automobile exterior design. Our automotive LED modules encompass a range of features,
including low beam, high beam, dual beam and ADB.
The sales volume of our automotive LED modules increased significantly during the Track
Record Period. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, we sold
63.8 thousand, 531.8 thousand, 1,133.8 thousand, 449.6 thousand and 483.8 thousand bars,
respectively. The average selling price of our automotive LED modules was RMB20.81,
RMB23.62, RMB14.85, RMB11.87 and RMB16.88 per bar, respectively, in 2021, 2022, 2023 and
the five months ended May 31, 2023 and 2024. The fluctuations during the Track Record Period
were primarily because of the customized nature of module products, with their design and cost
varying in accordance with the unique specifications of each customer’s vehicle model.
The pictures below set forth some of our key automotive LED modules.
PCBA
Lens modules
for automotive
headlamps
Standardized Headlamp Lens Module Series
The standardized headlamp lens module series adopts our self-developed high-brightness,
high-reliability and high-power ceramic-based flip-chip LED light source. This series offers strong
compatibility with varied automotive lamp models in accordance with difference sizes of
automotive headlamp models and the mainstream light emitting area requirements in the industry,
while featuring a streamlined design. Its lens structure and pattern design contribute to optimal
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illumination effect, at the same time enhancing light uniformity, reducing glare and expanding
drivers’ field of vision. The use of laser welding in the assembly process further bolsters
production stability. Our standardized headlamp lens module series that were mass-produced
include the 30mm series high beam, low beam and ADB products and the 20mm series bifocal lens
module products, both series were named after their advanced ultra-narrow design. These module
products were incorporated into the intelligent automotive lamps we developed for Smart #3,
Xingyue L and Lynk & Co 06 EM-P, among which, Smart #3 adopted lens module products with
ADB functions. As of May 31, 2024, the headlamp lens module series had been installed and
applied to more than 290,000 vehicles, driven by the increasing automobile vehicle sales of our
customers. For example, Xingyue L, since its launch in 2021, has seen robust sales growth, with
sales volume exceeding 69,000 in the five months ended May 31, 2024, ranking among the top ten
compact SUV models in terms of sales volume in the corresponding period in China, according to
CIC.
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Pipeline of Intelligent Automotive Vision Products
We will continue to introduce new products to expand our product offerings and customer
base. The following diagram illustrates the product development plan with the expected time of
mass production of our future intelligent automotive vision products.
Mid-to high-end
vehicles
Product 2024 2025 2026
Intelligent
automotive lamps
Headlamps Mid-to high-end
vehicles • ZEEKR
Rear lamps •Z E E K R
• Lynk & Co
• ZEEKR
• ZEEKR
Mid-to high-end
vehicles
Automotive LED
modules
• Rear lamps of Lynk
& Co
• Headlamps of Brand
A
• Headlamps of Brand
B
• Rear lamps of
ZEEKR
Entry-level
vehicles
Mid-to high-end
vehicles
Automotive-grade
LED devices
• Headlamps of Brand
D
• Grille lights of Brand
E
• Rear lamps of Brand
F
• Rear lamps of Brand
C
• Headlamps of Geely
Emgrand
• Headlamps and rear
lamps of Li Auto
• Headlamps and rear
lamps of Lynk & Co
• Rear lamps of
ZEEKR
• Rear lamps of
Changan Auto
• Rear lamps of Brand
G
• Headlamps and rear
lamps of Brand H
• Headlamps and rear
lamps of Brand I
• Rear lamps of Brand
J
Brand A: A prominent automotive brand in the renewable energy sector, renowned for its innovation in electric
vehicles and battery technology.
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Brand B: A leading smart EV brand recognized for its cutting-edge approach to autonomous driving technology and
smart, connected features in its vehicles.
Brand C: An automotive brand known for its pioneering electric vehicles that blend sustainable technology with
innovative design.
Brand D: An automotive brand recognized for its expansive range of commercial vehicles that cater to both utility
and passenger transport needs with a focus on innovation and reliability.
Brand E: A key automotive brand offering a diverse portfolio that includes passenger cars, commercial vehicles and
auto components, with a reputation for quality and innovation.
Brand F: An automotive brand noted for its development of passenger vehicles, with a focus on integrating modern
design and technology to meet the evolving demands of the global market.
Brand G: An automotive brand renowned for its extensive range of vehicles, including luxury cars, commercial
trucks and buses, all underscored by a heritage of innovation and a commitment to quality.
Brand H: A leading automotive brand known for its extensive range of vehicles and significant global market
presence.
Brand I: An automotive brand with a comprehensive portfolio of commercial and passenger vehicles, exhibiting a
robust expansion into international markets.
Brand J: A well known automotive brand merging global expertise with a deep understanding of the local market,
delivering a diverse portfolio of vehicles to cater to a wide-ranging clientele.
We have a broad customer base and our intelligent automotive vision products are widely
applied in both EVs and ICE vehicles. During the Track Record Period, our intelligent automotive
lamp products were applied to 12 EV models and seven ICE vehicle models. Based on our
pipeline, we expect four more EV models scheduled to commence mass production in 2024 and
2025 to adopt our intelligent automotive lamp products. The development of our intelligent
automotive vision business is, therefore, influenced by the overarching trends within the overall
automotive industry. Fluctuations in either the ICE vehicle market or the EV market individually
are unlikely to materially affect our business prospect, operations and financial performance.
According to CIC, China is the world’s largest passenger vehicle market and the leading
manufacturer of EVs and has become the largest intelligent automotive vision market. The market
size of China’s intelligent automotive vision is expected to reach RMB174.2 billion by 2028 with
a CAGR of 14.4% from 2023 to 2028. In addition, the automotive industry is witnessing a
transformation towards intelligent, integrated and customized automotive lamps, which is expected
to further drive up the overall value of intelligent automotive vision products in both EVs and ICE
vehicles. To the best of our knowledge, EVs that adopt our intelligent automotive vision products
were primarily sold in China. In 2021, 2022, 2023 and the five months ended May 31, 2023 and
2024, overseas revenue from intelligent automotive vision business were RMB0.2 million, RMB0.8
million, RMB5.9 million, RMB2.5 million and RMB3.9 thousand, respectively. As a result, given
that (i) we are an upstream supplier of automobile production, (ii) the diverse application area of
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our intelligent automotive vision products encompassing both ICE vehicles and EVs, and (iii) the
relatively small overseas revenue contribution from the intelligent automotive vision business
during the Track Record Period, our Directors are of the view, which the Sole Sponsor concurs,
that the sales of our intelligent automotive vision products would not be materially and adversely
affected if the US and/or Europe increases tariffs on EVs manufactured in China. Furthermore,
CIC is of the view, which our Directors and the Sole Sponsor concur, that the potential impact of
tariffs levied on the end products of our intelligent automotive business has been duly considered
in the projections for the future expansion of the intelligent automotive vision market. Although
the tariff increase recently announced by the U.S. government is likely to influence the growth rate
of EV exports from China to the U.S., the U.S. market has not yet become a significant export
destination for Chinese automotive OEMs, accounting for a mere 8% of China’s total EV exports
in 2023. Consequently, such an increase in tariffs is not expected to exert a material adverse effect
on the growth rate of China’s EV exports. In terms of the level of provisional countervailing duties
pre-disclosed by the European Commission on imports of BEVs, based on information currently
available, our Directors are of the view, which the Sole Sponsor concurs, that such duties would
not materially and adversely affect the sales of our intelligent automotive vision products, since,
according to CIC, only one of the corresponding models of our 22 secured intelligent automotive
lamp projects as of May 31, 2024, other than being sold in China, was exported to Europe. See
“Risk Factors — Risks Relating to Our Industry and Business — We are subject to the risks
associated with international trade policies, geopolitics and trade protection measures, and our
business, financial condition and results of operations could be adversely affected.”
High-End Lighting
High-end lighting products are specialized, high-performance solutions developed to meet the
unique demands of various application scenarios. Each scenario necessitates distinct performance
characteristics to ensure optimal functionality and efficiency. In 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, the revenue from high-end lighting was RMB1,033.9
million, RMB670.2 million, RMB650.8 million, RMB253.6 million and RMB254.1 million,
respectively, accounting for 74.5%, 47.5%, 35.0%, 40.6% and 30.1% of our total revenue during
the same periods, respectively. Our high-end lighting products are further categorized into
high-end lighting devices and high-end lighting modules. Due to the adverse impact of the
COVID-19 pandemic in 2020 on market demand and the intensification of competition in the
high-end lighting market, revenue from our high-end lighting business experienced a downward
trend. In 2021, we shifted our focus towards the R&D and production of high-end products with
enhanced performance and higher gross profit margins, such as horticultural lighting and outdoor
lighting products. For example, in the five months ended May 31, 2024, the gross profit margin for
a flagship series of outdoor lighting products was approximately 14.7% higher than the overall
gross profit margin for our high-end lighting products during the same period. The product
shipment of our high-power horticultural lighting products in 2022 increased by 12.0% compared
with 2021.
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Our robust technical capabilities fostered strong growth in the horticultural lighting and
outdoor lighting products which contributed to the gross profit margin improvement of our
high-end lighting business. Horticultural lighting and outdoor lighting markets are increasingly
seeking improvements in product performance, specifically in terms of exceptional brightness,
power, photoelectric conversion efficiency and reliability. Critical performance indicators for
outdoor lighting products are power, product lifetime and reliability, whereas for horticultural
lighting, they include power, light efficiency and product lifetime. We employ the technologies of
power ceramic substrate design, high-brightness anti-reflective coating and high-brightness optical
lens design and packaging to achieve devices with low thermal resistance, high power and superior
reliability. The adoption of such technologies not only enhances brightness and photoelectric
conversion efficiency and reliability, but also meets customer requirements and elevates product
competitiveness. We developed high-reliability outdoor lighting products that offer high
temperature resistance and strong resistance to humidity and sulphurization, featuring power levels
exceeding 2W and an L
70 lifetime of over 70,000 hours. Our horticultural lighting products feature
power levels exceeding 2W, high light efficiency with a wall plug efficiency (WPE) greater than
80% and a Q
70 lifetime exceeding 100,000 hours. Despite the decrease in revenue from high-end
lighting in 2021, 2022 and 2023, the gross profit margin of high-end lighting remained relatively
stable at 19.6% and 19.2% in 2021 and 2022, respectively, and increased to 23.4% in 2023 and
24.8% in the five months ended May 31, 2024.
High-End Lighting Devices
Our high-end lighting devices mainly adopt SMD packaging technology and ceramic-based
packaging technology. The devices are incorporated into a variety of lighting applications,
including tubes, bulbs, spotlights and panel lights, as well as a diverse range of high-end and
high-value solutions, including horticultural lighting, special lighting, intelligent lighting, indoor
lighting and outdoor lighting. Our horticultural lighting devices facilitate plant growth by
providing suitable spectra, light intensity and lighting cycles, which can serve as a supplement or
replacement of natural sunlight. They are particularly suitable for use in emerging agricultural
sectors such as indoor, vertical and urban farming. Notably, the technology and product
performance of our 660nm horticultural lighting device are at the industry leading level in terms of
PPE and PPF. In special lighting, our UV LED devices can be applied to industries covering
biomedicine, counterfeit detection and air purification and our IR LED devices can be applied in
areas including mobile phones, automobiles, security monitoring, facial recognition and IR medical
treatment. In intelligent lighting, our high-end lighting devices enable the synthesis of any color of
light in nature, catering to the needs of application scenarios that require dimming, color
adjustments and intelligent light control.
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We employ ceramic-based or metal-based flip-chip or lateral-chip COB packaging technology
and high-power COB integrated packaging technology for our indoor commercial lighting
products. Highlighted by uniform color distribution and superior product performance, our
high-end lighting devices satisfy the higher light quality requirements of shopping malls,
supermarkets and exhibition halls on color, uniformity and the illumination effect on specific
objects. In terms of outdoor lighting, we developed high-power ceramic-based white light devices
characterized by high luminous efficacy and reliability as well as high-efficiency, high-power EMC
products that feature multiple integrated chips. These advancements provide superior solutions for
outdoor lighting applications such as streetlights.
In response to the growing demand for energy-efficient and environmentally friendly lighting
solutions, we enhanced the energy efficiency of our high-end lighting products in recent years.
Through our continual technological innovation and refined product design, we improved the
photoelectric conversion efficiency of our products, enhanced brightness output and reduced power
consumption. The luminous efficacy of our leadframe flip-chip devices reaches 240lm/W. The
photoelectric conversion efficiency of our 660nm device for horticultural lighting and UVC
devices is 83.9% and 11.7%, respectively. According to CIC, the luminous efficacy and
photoelectric conversion efficiency of our high-end lighting products are on par with that of the
leading products from internationally renowned companies.
In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, we sold 7,961.8
million, 3,567.3 million, 3,239.5 million, 1,399.5 million and 1,320.5 million pieces of high-end
lighting devices, respectively, due to the adverse impact of the COVID-19 pandemic in 2020 on
market demand and the intensification of competition in the high-end lighting market. The average
selling price of our high-end lighting devices increased from RMB0.11 per piece in 2021 to
RMB0.14 in 2022, and further to RMB0.15 in 2023, which was in line with our product strategy
towards high-end products with enhanced performance and higher gross profit margins. The
average selling price remained relatively stable at RMB0.13 per piece in the five months ended
May 31, 2023 and 2024.
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The pictures below set forth some of our key high-end lighting device products as well as
their application scenarios.
High-End Lighting Devices Our Products Application Scenarios
Indoor lighting .........
Outdoor lighting .......
Horticultural lighting ....
Intelligent lighting ......
Special lighting ........
High-End Lighting Modules
High-end lighting modules are module products that integrate LED devices, optical
components, driver and control circuits, PCBs, connectors and surface coating materials through
SMT technology and assembly processes to meet the needs of lighting applications such as indoor
lighting, outdoor lighting and horticultural lighting. Our high-end lighting modules include
driver-on-board (DOB) series and LED lamp board series, among which the DOB series integrate
driver and control ICs on PCB light boards. Our high-end lighting modules applied in indoor
lighting feature high luminous efficacy, high brightness, high CRI, high color consistency and
simple assembly. Depending on the application scenarios, such as offices, shopping malls and
hotels, we customarily design lighting solutions to provide desired lighting effects. In terms of
outdoor lighting, our high-end lighting modules integrate light distribution, heat dissipation and
protection level structure. Characterized by high brightness, high light efficiency, waterproof,
dustproof and corrosion-resistant features, our high-end lighting modules applied in outdoor
lighting are able to adapt to various extreme environments and provide reliable solutions for
outdoor places such as highways, streets, squares and parks. For horticultural lighting, our
high-end lighting modules employ an advanced nano-level coating technology to coat and protect
LED devices and other key electronic devices, providing a safe, reliable and long-lasting guarantee
for horticultural lighting users in humid and saline environments.
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In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, we sold 15.6
million, 13.4 million, 12.4 million, 4.8 million and 6.2 million bars of high-end lighting modules,
respectively. The average selling price of our high-end lighting modules was RMB11.82,
RMB13.09, RMB14.57, RMB16.46 and RMB12.51 per bar, respectively, in 2021, 2022, 2023 and
the five months ended May 31, 2023 and 2024. The fluctuations during the Track Record Period
were primarily due to the customized nature of module products and adjustments of product
portfolio corresponding to customer demand.
The below pictures set forth some of our key high-end module products.
High-End Lighting Modules DOB Series Lamp Board Series
Indoor lighting .........
Outdoor
lighting/Horticultural
lighting ............
DOB Series
The DOB modules, distinct from traditional switching power supplies, improve the power
supply by streamlining the circuit design and reducing the module size. A DOB module integrates
LED devices and drivers onto a single PCB board using SMT technology, offering high power and
high luminous efficacy. DOB modules can modify color and brightness parameters via their
built-in dimming ICs and can interface with various sensors, including radar, infrared, voice
control modules, Wi-Fi and Bluetooth. The high integration level of DOB modules provides costs
benefits, helping our customers in reducing inventory and increasing turnover. Our DOB series,
primarily supplied to leading LED companies such as Signify and Samsung, can be applied in
different lighting scenarios, such as indoor lighting and horticultural lighting.
Advanced Display
Our advanced display device and module products are categorized into direct-lit and edge-lit,
and they are mainly designed for backlight displays. Backlight displays, which use LEDs to
illuminate LCD panels, are applied to LCD TVs, computer monitors and other electronic products.
The efficacy of these devices and modules significantly contributes to achieving high definition,
high brightness, high color gamut, high contrast, high dynamic range (HDR), high light efficiency,
slim design and low blue light, which is also the development trend in the advanced display
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industry. Our advanced display devices and modules, with such features, gained significant market
recognition. According to CIC, the end customers of our advanced display products cover all of
the top five TV brands globally in terms of product shipment in 2022. During the Track Record
Period, our advanced display business witnessed substantial growth. Our revenue from advanced
display increased from RMB280.3 million in 2021 by 21.5% to RMB340.7 million in 2022 and
further increased by 28.0% to RMB436.2 million in 2023. Our revenue from advanced display
increased from RMB145.3 million in five months ended May 31, 2023 by 53.9% to RMB223.6
million in the five months ended May 31, 2024.
We are among the first companies in China that accomplished the packaging technology and
product development of leadframe-type flip-chip LED high color gamut devices, according to CIC. In
line with the development trends in the advanced display industry, leveraging our advanced backlight
display technologies, we developed advanced display backlight devices with high color gamut, high
brightness, high power, uniform light color and high reliability. Our direct-lit high-power devices have
a maximum driving power exceeding 3W, effectively reducing module costs. Our high-gamut devices
can be applied to LCD TVs with a color gamut of nearly 100%. Furthermore, our edge-lit devices
provide independent control of brightness and color temperature, enabling precise dimming and color
temperature control. The sales volume of our advanced display devices was 426.2 million, 240.3
million, 368.2 million, 152.8 million and 255.2 million in 2021, 2022, 2023 and the five months
ended May 31, 2023 and 2024, respectively, and the fluctuation was primarily due to changes in
customer demand. The average selling price of our advanced display devices remained relatively
stable at RMB0.15 per piece in 2021 and 2022, and slightly decreased to RMB0.12 per piece in 2023.
The decrease in 2023 was primarily due to the growing trend of televisions with local dimming
function, which led to an increase in the deployment of low- to medium-power devices, as the number
of devices used in each TV increased. The average selling price remained relatively stable at
RMB0.12 and RMB0.13 per piece in the five months ended May 31, 2023 and 2024, respectively.
Leveraging our advanced display devices, we engineered advanced display modules for
backlight applications, offering uniform color and luminance, cost-effectiveness, high brightness
and high color gamut, to cater to diverse application requirements concerning size, slimness and
brightness. Our advanced display modules can also achieve high dynamic range and high contrast
through multi-zone driving control and local dimming. Our advanced display module products with
local dimming function include Mini LED backlight module and LED products integrating ICs.
Our Mini LED backlight modules, which integrate Mini LED chips, driver ICs, optical lens
packaging and electronic components on the PCBs, are characterized by their multi-zone fine
dynamic dimming, flexible and slim design. Our LED products integrating ICs, distinguished by
cost-effectiveness, integrate LED driver ICs onto standard LED lamp boards to form integrated
module products with local dimming function. The average size of global TV panel shipments
increased from 48.3 inches in 2021 to 51.1 inches in the five months ended May 31, 2024.
Notably, in the five months ended May 31, 2024, LCD TV over 75 inches saw a significant
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period-on-period increase of approximately 34.5%. This market trend, coupled with the superior
performance of our advanced display products, led to a significant surge in their application in
LCD TVs over 75 inches. The contribution of these products to revenue from advanced display
modules increased from just over 10% in 2021 to over 60% in the five months ended May 31,
2024. Our LED module products with local dimming function achieved strong sales growth, with
the revenue generated as a percentage of revenue from advanced display modules increasing from
over 5% in 2022 to over 25% in the five months ended May 31, 2024. As a result of the foregoing,
during the Track Record Period, the sales volume of our advanced display modules steadily
increased from 32.3 million bars in 2021, 42.7 million bars in 2022, to 55.0 million bars in 2023,
and from 18.7 million bars in the five months ended May 31, 2023 to 23.1 million bars in the five
months ended May 31, 2024. The average selling price of our advanced display modules also
increased from RMB6.69 per bar in 2021 to RMB7.12 in 2022, remained relatively stable at
RMB7.10 in 2023, and increased from RMB6.76 per bar in the five months ended May 31, 2023 to
RMB8.25 in the five months ended May 31, 2024.
The table below set forth the details of our advanced display product matrix by application
scenario.
Categorization Our Products Key Features Application Scenarios
Direct-lit ........
 Our direct-lit products are
characterized by high power, high
reliability, uniform light color and
high color gamut.
LCD TVs and monitors
Mini
LED
Our Mini LED products are
characterized by high brightness,
slim design and superior reliability.
Combined with the local dimming
technology, they are able to attain an
ultra-high contrast ratio of one
million to one. When paired with
QD quantum film, our Mini LED
products can achieve a color gamut
that exceeds 100%.
Edge-lit .........
Our edge-lit products are characterized
by high brightness, high light
efficiency, thinness and high color
gamut.
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High-Power Direct-Lit High-Gamut Backlight LED Series
Our high-power direct-lit high-gamut backlight LED device and module products are
characterized by high-power driver, superior brightness, exceptional reliability and high color
gamut. Our products adopt a range of advanced technologies including high color gamut backlight
technologies and high-power and high-reliability backlight device technologies. Through the
systematic study of the phosphor materials, and by leveraging advanced packaging technologies
such as sedimentation process, anti-corrosion and anti-moisture coating, we developed high-power
direct-lit high-gamut backlight devices with low thermal resistance, high temperature and humidity
resistance and small color drift. We went on to develop high-power direct-lit high-gamut backlight
modules by optimizing module heat dissipation, module arrangement, light mixing arrangement
and the secondary optics, i.e. optics outside of the LED packages. By increasing their unit power,
we reduced the number of LED devices needed in a single module, thereby achieving
cost-effectiveness while improving efficiency. During the Track Record Period, product shipment
volume of the high-power direct-lit high-gamut backlight LED series increased significantly by
129.4% from 6.7 million bars in 2021 to 15.3 million bars in 2022, by another 24.1% to 19.0
million bars in 2023 as compared to 2022, and increased by 23.2% from 6.3 million bars in the
five months ended May 31, 2023 to 7.7 million bars in the five months ended May 31, 2024.
Mini LED Series
Mini LED represents a significant advancement in LED display technology and is widely
expected to be one of the most promising high-end LED technologies, according to CIC. Mini
LED is characterized by its high brightness, high color saturation and contrast, low power
consumption and strong durability. In response to this technology trajectory and leveraging our
flip-chip LED technology and advanced integrated packaging technology, we developed and
introduced Mini LED backlight module solutions integrating electrical, optical, and thermal design
for uniform light color and local dimming. Through the dense arrangement of Mini LED chips, and
combined with the local dimming technology, the image contrast and energy efficiency are
enhanced by dimming or switching off certain areas. Our R&D focused on the design and
manufacturing processes to produce high-yield rate, high-quality Mini LED backlight module
products. We established a Mini LED COB backlight module production line in 2021 and
commenced mass production in 2022, meeting the production needs of 300,000 Mini LED-backlit
TVs per year. In the five months ended May 31, 2024, the yield rate of our Mini LED COB
backlight modules reached 99.59%. According to CIC, this places us at the forefront of the
industry, surpassing the industry average yield rate of over 95%. Multiple models of our Mini LED
products were adopted by well-known international and domestic TV and monitor companies.
Sales of Mini LED products are expected to grow significantly as global Mini LED TV shipment
reached 3.1 million units in 2022 and are expected to reach 9.07 million units by 2027 with a
CAGR of 24.0%.
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RESEARCH AND DEVELOPMENT
We are committed to R&D and innovation. Driven by our goal to meet the evolving needs of
our customers, we invest substantial resources into this pursuit, thereby facilitating the creation
and delivery of new premium LED products with enhanced performance. We recorded research and
development costs of RMB62.0 million, RMB88.7 million, RMB87.2 million, RMB36.3 million
and RMB37.6 million in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024,
respectively. In addition, we aim to advance in our fundamental and product-specific technologies
that improve the performance, reliability, durability and customer experience of our LED products.
Our endeavors in R&D resulted in significant technical accomplishments, evidenced by a proven
track record of generating IP and industry expertise. As of the Latest Practicable Date, we had 376
patents globally, covering key areas such as design and manufacturing of LED devices and
modules, design of electronic control circuit for automobiles, automotive lamp structure and
optical design, and process equipment and intelligent manufacturing. See “— Intellectual
Property.”
As a result of our robust R&D capabilities, we continually innovate, develop and introduce
new products to the market. In 2023, we sold 568 types of intelligent automotive vision products,
2,937 types of high-end lighting products and 1,009 types of advanced display products. During
the five months ended May 31, 2024, we sold 415 types of intelligent automotive vision products,
1,656 types of high-end lighting products and 771 types of advanced display products. In 2021,
2022, 2023 and the five months ended May 31, 2023 and 2024, we introduced 1,220, 1,144, 1,653,
625 and 590 new products, respectively.
R&D Team
As of May 31, 2024, our R&D team comprised of 337 dedicated employees, including
distinguished graduates from premier domestic and overseas universities, specializing in various
disciplines, such as materials engineering, optical engineering, electronic engineering,
microelectronics, physics and chemistry. As of May 31, 2024, we had 11 R&D heads, with over
half of them holding a master’s or doctoral degree. We established comprehensive internal talent
cultivation mechanisms, including training camps for new employees, a rotation mentoring system
and an R&D knowledge sharing base, designed for employees at all levels, from new employees,
front-line operators, mid- to senior-level managers. Our positive, efficient, honest and innovative
organizational culture further attracts and retains a large number of outstanding talents. Our R&D
team possesses practical industry experience in upstream chip design and manufacturing, which
provides the team with an in-depth understanding of chip selection and packaging design in the
downstream packaging stages. The team also demonstrates robust capabilities in industrialization
of our products, enabling us to swiftly address technical issues during the transition from
small-scale to large-scale production and ensuring a stable mass production process.
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Our R&D team is categorized into a device R&D unit, a module R&D unit and an intelligent
automotive lamp R&D unit. Below is a summary of these three R&D units and their core
capabilities:
 Device R&D unit . Our device R&D unit specializes in the optical, electrical and thermal
design and development of LED devices as well as their mass production and
manufacturing techniques. It focuses on various areas including lighting, backlight
display, the development of automotive-grade LED, UV and IR devices. It also manages
our R&D sample production line, which involves the prototyping of new products and
technologies. It operates a CNAS-certified laboratory for reliability and photoelectric
performance testing. In addition, under the device R&D unit, there is a dedicated team
for process R&D, mainly responsible for developing new production processes and
optimizing existing production processes.
 Module R&D unit . Our module R&D unit is primarily responsible for the development
of module products including automotive LED modules, high-end lighting and advanced
display modules. It specializes in electrical design of PCB, drivers and control circuits,
optical design such as lens and optical distribution design, as well as mechanical
structure design such as PCB dimensions, connectors and heat sink. In addition, we also
have a specialized software team under our module R&D unit, which is mainly
responsible for the intelligent automotive vision product matrix.
 Intelligent automotive lamp R&D unit . Our intelligent automotive lamp R&D unit is
dedicated to the development of intelligent automotive vision products and systems with
a focus on automotive lamps. As our product lines cover the field of lens modules,
headlamps, rear lamps and other automotive lamps, the intelligent automotive lamp
R&D team specializes in structural, electronic, optical design and software as well as
simulation for our products. This unit is equipped with a CNAS-certified laboratory for
reliability tests and photoelectric tests. In addition, it also has a dedicated team for
process development and mold design, primarily tasked with molding development and
optimization.
Product Development Process
In the product establishment phase, we comprehensively analyze customer needs and the
competitive environment, and then form a new product R&D proposal, which allows us to identify
opportunities and potential economic returns based on industry insights and professional
knowledge and to determine project establishment. Once an opportunity is identified and a project
is established, our multi-disciplinary R&D team initiates the product and process design and
evaluation. This phase requires collaboration among multiple departments, including product
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engineering, quality assurance, safety, IP and procurement. During the subsequent verification
phase, we prepare a product development plan considering factors such as function, costs,
manufacturability and market positioning. The product is thoroughly examined for its reliability
and manufacturability. When the project progresses to completion phase, we conduct pilot
production and evaluate the manufacturing processes based on the R&D and verification results to
enhance production efficiency. Once pilot production is passed, we compile a project summary and
transition the product to our manufacturing department for mass production.
The below chart illustrates the key steps of our product development process.
Establishment
Phase R&D Phase Verification Phase Completion Phase
Pilot Production
Project Summary
Mass Production
Reliability Evaluation
Preliminary Verification Approval
Verification Evaluation
Product Design
Process Design
Design Evaluation
Market Research
Development Proposal
Project Initiation
Throughout the entire product development process, we foster strong partnership with our
customers. When a customer identifies new market opportunities or needs, they collaborate with
our team to define the product’s specifications and intended performance. This partnership then
extends from the R&D phase to product verification and mass production. Such close-knit
collaboration ensures that our product development aligns seamlessly with the customers’ needs,
facilitating swift product upgrades and iterations to meet the customers’ requirements. After the
completion of product development, we continually upgrade our products and refine our designs
based on customer feedback during product development and after product launch.
Collaboration with Research Institutions
We collaborate with universities and research institutions, enabling us to delve into industry
trends, understand consumer preferences across diverse markets and keep up with emerging
technologies. During the Track Record Period, we carried out cutting-edge key technology research
in the fields of UVC devices, Micro LED and automotive lighting with well-known universities,
research institutions and enterprises. For example, back in 2019, we initiated a cooperation with
Guangdong Institute of Semiconductor Industrial Technology (Ӻ৫ )o n
research on key technologies and innovative applications of UVC solid-state light sources. We
designed and developed UVC LED packaging devices through researching the packaging structure,
material, process and reliability of UVC LED device. The project was applied for acceptance in
September 2023 and it was conducted as part of the Guangdong Key Area R&D Programs, which
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had a total of 35 Science Citation Index-indexed papers published, one Patent Cooperation Treaty
patent, 40 invention patents and five utility model patent filed for application. The project also
participated in two standard formulations.
The salient terms of our agreements with universities or research institutions are set forth
below:
 Scope of collaboration. The agreements specify the research purpose of the projects and
the specific obligations of each party.
 Intellectual property rights . The parties typically jointly own any IP rights developed in
the joint R&D under the agreements. IP rights that arise prior to the agreement or
independent from the other party belong to their original owners.
 Project funding. Each party contributes to an agreed portion of the project funding, in
addition to funds granted by local government departments.
 Confidentiality . The parties are responsible for maintaining strict confidentiality of all
confidential information provided by the other parties.
 Termination. The agreements can be terminated upon failure to achieve project
objectives with all parties’ consent, and the parties shall bear their own losses.
Our Technologies
We effectively leveraged our early accumulation and achievements in LED chips and
packaging technology to develop a broad range of technologies. Our technologies include (i)
fundamental technologies covering flip-chip LED technologies and advanced photoelectric
semi-conductor packaging technologies and (ii) product-specific technologies developed for
specific fields of application. Anchoring our success in our proprietary technologies, we are
committed to independent R&D and formed a comprehensive system to protect our IP rights. See
“— Intellectual Property.”
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Fundamental Technologies
Flip-Chip LED Technology
We are one of the leading companies in the industry to engage in the development of
flip-chip LED technology from an early stage. This technology, which is central to our operations,
offers many advantages, including a broad power range, superior cost-effectiveness for high-power
applications, a low working voltage, as well as high reliability. Our flip-chip LED technology
encompasses several subsidiary technologies, including flip-chip LED chip technology, substrate
technology, flip-chip bonding technology and advanced packaging technology based on flip-chip
LEDs. Flip-chip LED packaging technology is an advanced packaging technology. By placing and
bonding the LED chip down on a heat-dissipating substrate or leadframe, reliable mechanical and
electrical connections are facilitated. Our LED products, which are based on flip-chip structures,
offer superior heat dissipation, durability, reliability and luminous efficacy. We leveraged flip-chip
LED technology to develop a diverse range of products, including ceramic-based high-power LED
products used in streetlights, tunnel lights and headlamps, leadframe-based flip-chip LED products
for high-efficacy lighting and high-current driven backlight products, as well as horticultural
lighting LED products, Mini LED products and other high-end application products. We are one of
a few companies possessing the requisite expertise in flip-chip LED technology. Our flip-chip
LED products consistently demonstrate superior performance, high production yield rate and high
quality within the industry. For example, our high-efficacy leadframe-based flip-chip 3030
packaging products lead the industry in terms of photoelectric performance, featuring high
reliability and high production yield rate, according to CIC.
The below pictures and table illustrate the structures of lateral packaging and flip-chip
packaging, their features and characteristics and application scenarios.
Lateral Packaging Flip-Chip Packaging
Structure
Chart
Silicone mixed
with phosphor
Reﬂec/g415ve cup
Leadframe
Gold wire Lateral
LED chip
Die bonding
material
Silicone mixed
with phosphor
Reﬂec/g415ve cup
LeadframeFlip-chip
LED chip
Eutec/g415c bonding
layer
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Lateral Packaging Flip-Chip Packaging
Features and
Characteristics
 Bonding wires are required for
electrical connection, which
carries a risk of disconnection
and thus offers lower
reliability;
 Electrical connections can be
achieved without wire
bonding, effectively
eliminating the risk of product
failure from disconnection of
bonding wires;
 Insulating glue is needed for
die bonding, resulting in a
lower heat dissipation
efficiency;
 The LED chip is directly
connected to the leadframe or
substrate through a large metal
electrode, which enhances heat
dissipation and increases
reliability;
 The electrode in the front
obstructs light, leading to a
decrease in light output
efficiency; and
 The absence of electrodes on
the light-emitting surface leads
to higher light output; and
 Higher working voltage due to
current block issues.
 Lower working voltage due to
more uniform current
distribution.
Application
Scenarios
SMD low- to medium-power
packaged devices, such as general
lighting tubes, bulbs, downlights,
etc.
High-power and high-end
application fields with high
reliability requirements, such as
outdoor lighting, automotive
lighting, special lighting,
Mini/Micro LED, etc.
Advanced Photoelectric Semi-Conductor Packaging Technologies
In the LED lighting industry, packaging technology is of paramount importance as it directly
influences the luminous efficacy, heat dissipation efficiency and reliability of LED products. We
mastered several core technologies within advanced photoelectric semi-conductor packaging
technologies. These include advanced white LED packaging photoconversion technology, advanced
LED integrated packaging technology and high-end LED device packaging technology.
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(i) Advanced White LED Packaging Photoconversion Technology
With more than a decade of dedicated research, our white LED packaging photoconversion
technology leads as one of our core technologies. This technology encapsulates blue LEDs into
white LED devices with customized colors and characteristics through photoconversion materials
such as phosphors. Based on the advanced white LED packaging photoconversion technology, we
developed three sub-technologies, namely, the advanced phosphor formulation technology, the
narrow emission-based photoconversion material encapsulation technology and the phosphor sheet
photoconversion technology. The advanced phosphor formulation technology is an optical formula
packaging technology with high brightness, high color gamut and adjustable color temperature and
CRI, which lays the foundation for the application of white LED devices in high-end application
fields. Through our research on the characteristics of narrow emission photoconversion materials,
we broke through the limitations of material properties and developed high-end lighting products
with high CRI with higher luminous efficacy as well as backlight products with higher color
gamut. The phosphor sheet photoconversion technology helped us develop a packaging structure
and process based on ceramic phosphor sheet, silicone phosphor film and glass phosphor sheet
with uniform light color, high color concentration, high temperature resistance and high reliability,
which ensures the performance and quality of high-power LED products in high-end applications
such as automotive lighting and outdoor lighting.
(ii) Advanced LED Integrated Packaging Technology
Advanced LED integrated packaging technology is a technology that integrates multiple LED
chips or integrates LED chips and silicon ICs into a single device. We are one of the first
companies in China to develop LED integrated packaging technology based on flip-chip LED
technology, according to CIC. Our integrated packaging technology facilitates the integrated
packaging of multiple LED chips, the integrated packaging of LED and IC on the same substrate
and the integrated packaging of LED on the silicon substrate with integrated IC. In 2020, our
advanced flip-chip LED integrated packaging technology was recognized by GSTA as being at an
international advanced level. In recent years, integrated packaging technology continued to evolve,
which led to significant improvements in integration level, packaging precision and systemization
when compared to previous generations of technology and promoted the development of
Mini/Micro LED display technology. We closely follow the trend of the advanced LED integrated
packaging technology development and are among one of a few companies that possess the
requisite expertise of advanced LED integrated packaging technology.
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(iii) High-End LED Device Packaging Technology
Our high-end LED device packaging technology encompasses high-precision packaging
processes tailored for large-scale manufacturing settings, and application technology of packaging
structure design and material selection. The high-reliability anti-corrosion coating technology, the
high-precision and high-consistency wire bonding technology and the thin glue die bonding
technology help ensure the efficiency of mass production and at the same time maintain the
consistent quality of high-end LED devices. Furthermore, we struck a balance between cost and
performance by utilizing cutting-edge SMD packaging device structures and superior packaging
material selection techniques, which effectively enhanced the light output efficacy and
cost-effectiveness of our packaged products.
Product-Specific Technologies
Over the past few years, building on our advanced fundamental technologies, we have been
focusing on the development of key technologies for LED applications, encompassing intelligent
automotive vision, high-end lighting and advanced display. This focus has led to the successful
creation of multiple product-specific technologies, tailored for intelligent automotive lamps,
automotive-grade LED devices and modules, high-end LED lighting and advanced display.
Intelligent Automotive Lamp Technology
As intelligent automotive lamps are more widely adopted, the development of automotive
lamps in general is increasingly focused on enhancing road safety through improved illumination
and providing more sophisticated light interaction. Our intelligent automotive lamp technology
primarily includes optical and thermal structure precision design and process, LED driver control
technology, intelligent electronic control technology and vehicle communication protocol and
software control technology. Through the application of these technologies, we developed
intelligent high-pixel ADB headlamps with a longer illumination distance and intelligent anti-glare
functions. ADB headlamps represent a cutting-edge headlamp technology that combines advanced
features such as machine vision, precise sensing and array light sources. By perceiving road traffic
information signals through sensors, as well as processing, inferring and analyzing this data using
their built-in algorithms, ADB headlamps can determine the location and proximity of approaching
vehicles and automatically adjust the light beam areas, to achieve segmented brightness control.
The intelligent high-pixel ADB headlamps implement the three-in-one design of low beam, high
beam and high-pixel ADB, and integrate a number of industry-leading technologies such as
composite optics, matrix control and array light source, reducing space taken up by headlamps and
providing high-definition lighting. In addition, we developed continuous rear lamp technology to
achieve more intelligent safety indications and richer light effects.
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Automotive-Grade LED Device and Module Technology
Designed for automotive applications, our comprehensive range of automotive-grade LED
devices and modules are characterized by their high brightness, high power, strong corrosion
resistance and durability. For example, we developed technologies that led to the creation of
compact, high-brightness, high-power LED devices suitable for ADB headlamps. We also
developed low- to medium-power automotive-grade LED devices with strong corrosion resistance,
high brightness, high durability and superior optical quality, suitable for rear lamps and interior
lighting. We are among one of the first companies in China to develop flip-chip high-power LED
technology and products, and to adopt this technology to automotive headlamps. In terms of
automotive LED module technology, we developed LED electronic driver platform technology,
headlamp lens module technology and electronic control and software control technology,
providing key photoelectric control technologies for intelligent vehicle lighting systems.
High-End Lighting Technology
Our high-end lighting device and module technology is designed for applications such as
indoor lighting, intelligent lighting, horticultural lighting and other professional lighting venues.
Our products are distinguished by their high light quality and high luminous efficacy and can
fulfill the requirements of special spectrums. In the field of indoor commercial lighting, we
employ flip-chip LED technology and multi-chip integrated packaging technology and align such
technologies with the specific characteristics and requirements of indoor commercial lighting. We
developed high-density integrated multi-chip COB devices, which can cater to the high-quality
lighting needs of upscale commercial venues and deliver superior lighting and color rendering
effects. Our COB commercial lighting devices, which offer uniform color distribution, are
recognized for their industry-leading technology and performance. In the field of special lighting
devices, we achieved high light power output, superior heat dissipation and high reliability for our
IR/UV and horticultural lighting devices. Our horticultural lighting technology, specifically the
660nm devices, is at the forefront of the industry in terms of PPE and PPF, with its photoelectric
conversion efficiency standing at international leading level, according to CIC.
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Advanced Display Technology
Our advanced display device and module technology enables our products to deliver high
color gamut, uniform light color, high photobiological safety and high-power reliability
performance when incorporated into specific applications. For slim backlight direct-lit or edge-lit
module applications, we focus on designing and optimizing the optical uniformity of our packaged
devices, by meticulously selecting and design packaging materials and structures as well as
incorporating secondary optics, i.e. optics outside of the LED packages, to ensure the optical
uniformity of the backlight modules. In addition, we mastered the latest Mini LED backlight
technology. Utilizing Mini LED chips, we design the arrangement of LED chips, driver and optics,
and employ high-precision packaging equipment and processes to package a substantial number of
LED chips, which enable us to develop advanced display modules for various display applications.
Our advanced display device and module products are primarily used in mid- to high-end TVs and
monitors. Our high color gamut LED products and Mini LED COB products and their
corresponding technologies are all at an industry-leading level.
R&D Programs
We plan to continue to advance in intelligent automotive vision, high-end lighting and
advanced display in the near future. The below sets forth some of the key R&D programs for our
business.
Intelligent Automotive Vision R&D Programs
 Technology and product development of intelligent projection headlamps with
ten-thousand-level pixel capacity : the intelligent projection headlamp technology, featuring
ten-thousand-level pixel high definition (HD) capacity, is a high-end industry innovation with
substantial market potential. This technology is one of the primary focuses of our
development strategy, emphasizing two technological pathways: Micro LED and DLP
projection. Leveraging our vertical integration capabilities from LED light sources and
modules to the intelligent automotive lamp systems, we aim to swiftly develop and
implement intelligent HD headlamp products.
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 Technology and product development of interactive signal display for automotive
applications : the interactive signal display (ISD) technology and products mainly include
intelligent interactive rear lamps, HUD, autonomous driving indication and interaction, etc.
We analyze the application needs of future autonomous vehicles from the perspectives of the
vehicle, driver and owner of the vehicle, to study and define interactive display application
patterns and scenarios. Our R&D efforts encompass high-performance array LED, HD Mini
LED displays and software control, alongside driving and intelligent control systems. We aim
to realize system integration and deliver automotive-grade intelligent interactive products,
thereby facilitating the adoption of such products in the automotive lighting industry.
 High-power , high-brightness LED devices and modules for automotive headlamp applications :
we intend to continually apply our proprietary flip-chip LED technology to create
high-power, high-brightness and high-reliability LED packaging solutions. Our goal is to
explore LED packaging materials improvements for headlamp applications. Through the use
of high-power ceramic LED packaging, we aim to produce high-power and high-brightness
automotive-grade LED devices. In accordance with the lighting needs and related
requirements of headlamps, we will study light distribution and heat dissipation at the module
level, which involves designing LED-compatible circuit boards, module structures, optical
components and heat dissipation units, to produce automotive LED modules.
High-End Lighting R&D Programs
 High-reliability, high-brightness, high-power LED packaging devices for outdoor and special
lighting applications : the outdoor and special lighting sectors continually elevate their
standards for brightness, photoelectric conversion efficiency and reliability. In response, we
focus on the development of superior materials and structures which involves extensive
research of LED chips, packaging materials, substrate/leadframe structures and light
emission. We are committed to enhancing product performance and surpassing industry
benchmarks for brightness, photoelectric conversion efficiency and reliability of high-power
LED packaging devices.
 LED modules and application solutions for special lighting and intelligent lighting :
leveraging our leading R&D technology, advanced packaging techniques, professional design
capabilities and innovative design concepts, we will continue to develop in the high-end
lighting module field. For instance, in the horticultural lighting sector, we aim to cater to
various horticulture application needs, optimize the opto-thermal design of horticultural
lighting modules and develop systematic module products. In the intelligent lighting sector,
we plan to integrate spectrum sensors, Wi-Fi, Bluetooth and other controllers and software to
sample and analyze ambient light, achieving controllable and adjustable lighting effects such
as color mixing, brightness adjustment, pulse lighting and dynamic dimming.
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Advanced Display R&D Programs
 Mini LED backlight advanced display products and application solutions : Mini LED
backlight products have become a focus in the advanced display industry, offering substantial
market growth potential. Our focus in the Mini LED sector will be on cost reduction and
dynamic dimming performance improvement. We aim to reduce costs by increasing the
luminous angles of Mini LEDs in low dimming zone (hundred-pixel level) applications, thus
decreasing the quantity required. For high dimming zone (thousand-pixel level) applications,
our research will focus on achieving more refined and superior quality dimming effects.
 LED backlight devices and module products with dynamic dimming function : while dynamic
dimming LED backlight modules may not match Mini LED products in contrast, color range
and brightness, their affordability has earned them a significant market share. As
cost-effectiveness becomes increasingly important for many companies, we aim to enhance
the brightness, reliability, and power efficiency of our dynamic dimming backlight devices
through research on LED chips materials and packaging. Through local dimming driving IC
designs and secondary optical lens designs, we aim to develop cost-effective backlight
modules with dynamic dimming functions.
PRODUCTION
Our production process is designed to promote high standards of quality while simultaneously
providing the agility to expedite production to meet customers’ demands in a timely manner. Our
design and manufacturing capabilities also facilitate the introduction of a diverse spectrum of LED
products into the markets.
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Production Process
We are committed to the continual development of production process techniques to enhance
our manufacturing and production management capabilities and to accelerate the automation and
digitalization of our production lines. The length of production cycle is typically calculated from
the start of production to the storage of the finished products, based on a batch of products
specified in a purchase order. The duration of production varies by product model and the
production quantity. Generally, headlamp production requires three to eight days, rear lamp
production requires two to six days and LED module production requires two to three days.
Automotive-grade LED device production usually requires eight to ten days, whereas other LED
devices can be produced within three to six days. The diagram below illustrates key steps of the
production process of our intelligent automotive lamps, LED devices and modules.
Bumper bracket installation
ƷInjection molding
Headlamps Rear lamps LED devices LED modules
▲Surface treatment/
Laser marking
▲Pre-function inspection
▲Gluing and fastening
▲Function and leakage testing
Quality inspection, packing
and storage
▲Function and leakage testing
▲Injection molding
▲Surface treatment/
Laser marking
Leadframe installation
▲Pre-function inspection
▲Welding
▲Annealing
Quality inspection, packing
and storage
Online testing
Material preparation
Wafer expansion
▲Die bonding
▲Wire bonding/Reflow
▲Phosphor mixing
▲Silicone dispensing
Curing,
cutting/trimming
▲Testing and sorting
Taping, vacuum packing,
quality inspection and storage
▲Light performance
testing
Packing, quality
inspection and storage
▲Lens mounting
Material preparation
Loading
▲Solder paste printing
and inspection
▲Mounting
▲Reflow
▲Glue dispensing
Curing and
visual inspection
Installation of decorative frame
and lamp shell
Loading screw installation
Lamp shell pre-assembly
Wire harness motor installation
Installation of reflector and
decorative frame
Note:
·: key steps in the production processes.
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 Key steps in manufacturing intelligent automotive lamps : during the injection molding
process, plastic particles are dried and transported to the screw rod of the injection
molding machine, where they are heated to a molten state and pushed into the mold
cavity for molding and cooling afterwards. Surface treatment can serve to prevent aging,
scratching and fogging, and we provide two types of surface treatment, including
surface spraying and vacuum aluminizing. We can also employ laser marking based on
requests from our customers. Automotive LED modules are assembled into the
headlamps and rear lamps during the phase of installation of reflector and decorative
frame and the phase of installation of decorative frame and lamp shell, respectively. We
perform optical inspections on lamp semi-assemblies during the pre-function inspection
process to identify possible optical path defects or assembly issues in advance. The
gluing and fastening process in headlamp production refers to the process of evenly
applying glue to the glue tank of the lamp shell and fastening and assembling the
semi-finished lamp cover and lamp shell. The welding process of the rear lamp
solidifies the lamp body and the lamp cover, and the annealing process serves to
destress the lamp cover in order to avoid cracking. During the function and leakage
testing process, we conduct optical inspections and gas tightness tests on the assembled
automotive lamps.
 Key steps in manufacturing LED devices : die bonding is the process of fixing LED chips
to a packaging carrier. In the wire bonding process adopted for lateral LED chips,
conductive wires are used to realize the electrical connection between the LEDs chip or
Zener diode and the packaging carrier, so that the packaging body is electrically
connected to the outside. Reflow process is adopted for flip-chip LED chips to achieve
electrical connection. The phosphor mixing process mixes phosphor and silicone
materials evenly. Then, in the silicone dispensing process, the silicone with high heat
resistance and high air tightness along with the mixed phosphor material are dispensed
into the reflective cup of the packaging carrier to protect the packaged chip, metal lead
and packaged body. We test the photoelectric performance of LED devices through
high-speed automated testing machines, which also automatically sort and collect
devices with the same optoelectronic properties.
 Key steps in manufacturing LED modules : solder paste printing is a process of printing
and coating solder paste on the surface of PCBs, enabling subsequent bonding of LED
or electronic devices and PCBs. Then, with a surface mounting machine, the devices are
accurately placed on the PCBs. The reflow process connects the LEDs and other devices
with PCBs mechanically and electrically. Polymer adhesive glue is applied to PCBs to
enable the mounting of secondary optical lenses. In the lens mounting process, the
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optical lens is precisely placed on top of the LED device to realize the function of LED
secondary optics. Light performance testing is conducted by lighting up the assembled
LED modules.
Production Equipment and Machinery
Our advanced manufacturing facilities are essential for enhancing product quality and
improving cost competitiveness. Many of our machines and much of our equipment are highly
automated with limited human operations only in the loading and unloading stages, which allows
us to enhance manufacturing efficiency and reduce labor costs. We design, customize and integrate
a variety of advanced techniques into our production processes. Some of our critical production
equipment was manufactured by top-tier brands in countries such as Japan, Germany and the
United States. Set forth below are details of the key machinery and equipment applied in our
production processes.
 For intelligent automotive lamp production : our intelligent automotive lamp production
line incorporates a range of world-leading production equipment and machinery as well
as domestically leading assembly lines. Our world-leading intelligent automotive lamp
cover molding machines enable us to manufacture different sizes of headlamps and rear
lamps with high precision. Our production process incorporates robotic automation for
the efficient selection and transportation of parts. In addition, our intelligent automotive
lamp cover painting line utilizes an advanced painting system and professional painting
robots, capable of rapid painting using environmentally friendly materials. The
production technology of our laser beam welding equipment is also at the global
forefront, offering high precision, stability, durability and energy-efficient technical
support for a wide range of sizes of products.
 For device production : we utilize wire bonding machines from top-tier global brands to
guarantee the quality of the connection between chip electrodes and
leadframes/substrates. We adopted a range of automated machinery, including fully
automatic phosphor mixing equipment, to ensure efficiency, precision and high
production yield rate of LED packaging. Our testing and visual inspection equipment
integrates AI technology, high-precision mechanical structures and thermal imaging
technology, among other advanced techniques, to help uphold the quality of our
products.
 For module production : our laser marking machines, glue dispensing machines,
high-speed high-precision SMT machines and other machinery used in the production
process of modules are globally or domestically leading in their fields, offering fast and
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reliable support for our product manufacturing. Our advanced vacuum reflow machines
could ensure a low void ratio and high quality for high power LED applications such as
outdoor lighting, horticulture lighting and automotive headlamps.
Set forth below are examples of our production lines and equipment.
Headlamp Cover Bicolor Injection Molding
Equipment
Automatic Headlamp Gluing and Cover
Fastening Equipment
Synchronous Laser Welding Equipment High-Speed High-Precision SMT Machine
Production Bases
During the Track Record Period, we had three production bases, namely the APT production
base, the Linlux production base and the Lynway Ningbo production base. The table below sets
forth some information regarding our production bases as of May 31, 2024.
Production Bases Location
Gross Floor
Area Primary Products
Construction
Completion
Y ear
(sq.m.)
APT production base ..... Guangzhou 30,848.7 LED devices 2012
Linlux production base .... Guangzhou 43,032.7 LED modules 2021
Lynway Ningbo production
base ................
Ningbo 29,354.1 Intelligent
automotive lamps
2021
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Our production capabilities are designed to align with our customers’ demands, ensuring a
consistent and reliable supply of products. Set forth below are some of the key features and
capabilities of our production bases.
 APT production base : our APT production base is located in Nansha District,
Guangzhou. It includes a cleanroom level manufacturing facility with an area of
approximately 12,000 square meters. The production base is mainly used for the design,
development, production and sales of LED devices that are applied to our intelligent
automotive vision, high-end lighting and advanced display products.
 Linlux production base : our Linlux production base is located in Nansha District,
Guangzhou. The production base is used for the design, development, production and
sales of automotive modules, high-end lighting modules and advanced display modules
that include Mini LED modules.
 Lynway Ningbo production base : our Lynway Ningbo production base is located in
Ningbo. The production base is mainly used for the design, development, production
and sales of our intelligent automotive lamp products, including headlamps represented
by pixel-level ADB functions, separate and continuous rear lamps and interior lights,
and other types of intelligent automotive vision products, such as automotive HUD
products and accessories, automotive electronic and electrical control products, among
others. The production lines of our intelligent automotive vision products are well
equipped to fulfill the diverse requirements from different automotive OEMs for both
EVs and ICE vehicles.
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Set forth below are aerial and interior views of our production bases.
APT production base Linlux production base Lynway Ningbo production
base
Production Capacity and Utilization Rates
Set forth below are the details of the designed production capacity and utilization rates for
our production bases for the periods indicated.
Y ear Ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Designed
Capacity
Actual
Production (3)
Utilization
Rate
(%)(4)
Designed
Capacity
Actual
Production (3)
Utilization
Rate
(%)(4)
Designed
Capacity
Actual
Production (3)
Utilization
Rate
(%)(4)
Designed
Capacity
Actual
Production (3)
Utilization
Rate
(%)(4)
Designed
Capacity
Actual
Production (3)
Utilization
Rate
(%)(4)
APT production base (kkpcs) (2)(5) .. 21,950.0 20,403.6 93.0 24,195.0 12,549.9 51.9 24,845.5 13,572.1 54.6 10,352.3 5,024.7 48.5 10,594.2 6,296.1 59.4
Linlux production base
(’000 bars) (2)(6) ....... 86,320.7 56,616.4 65.6 128,862.5 80,831.1 62.7 145,637.8 114,726.5 78.8 57,548.8 35,815.0 62.2 69,307.2 60,282.6 87.0
Lynway Ningbo production base (2)(7)
Headlamps (’000 sets) ..... 86.4 28.1 32.5 241.0 170.7 70.9 373.8 284.5 76.1 115.8 89.5 77.3 195.8 110.3 56.3
Rear lamps (’000 sets) ..... 127.5 64.0 50.2 159.0 96.9 61.0 291.0 141.3 48.6 66.3 34.6 52.2 226.3 125.8 55.6
Notes:
(1) Our production capacity is measured in different units due to different forms of our products. See “— Production
Bases.”
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(2) The designed capacity of the period is calculated based on the following assumptions: (i) the production base
operates 20 hours per day; (ii) the production base operates 25 days in a month; and (iii) we maintain an overall
equipment effective (OEE) score of 80%. In accordance with industry norms, we generally reserve 20% of our
production capacity to accommodate potential surges in purchase orders and expand production capacity in advance
to ensure the satisfaction of the needs of new customers, the launch of new products and the increased demand
overall.
(3) The actual production refers to actual output for the relevant period.
(4) The utilization rate during the period is calculated by dividing the actual production by the designed capacity for
the same period.
(5) The utilization rate of our APT production base decreased from 93.0% in 2021 to 51.9% in 2022, as our customers
stocked up on LED devices in the first half of 2021 due to concerns about potential disruptions to their supply
chains caused by COVID-19 and thus prioritized depleting their existing inventory in 2022. The utilization rate of
our APT production base remained relatively stable at 54.6% in 2023. The utilization rate of our APT production
base increased from 48.5% in the five months ended May 31, 2023 to 59.4% in the five months ended May 31,
2024, primarily due to customers’ increased demand for our device products as we continually introduced new
products and enhanced product performance.
(6) The designed capacity of our Linlux production base increased during the Track Record Period, primarily because
we established new production lines and purchased production equipment in response to our business development
needs and the increase in customer demand.
The utilization rate of our Linlux production base remained relatively stable at 65.6% and 62.7% in 2021 and 2022,
respectively, and increased to 78.8% in 2023. The utilization rate of our Linlux production base increased from
62.2% in the five months ended May 31, 2023 to 87.0% in the five months ended May 31, 2024. Such increases
were primarily due to (i) the growth of our advanced display business, and (ii) an increase in the supply of
automotive LED modules.
(7) The production lines of our intelligent automotive vision products are well equipped to fulfill the diverse
requirements from different automotive OEMs for both EVs and ICE vehicles.
The designed capacity of our Lynway Ningbo production base increased during the Track Record Period, primarily
because we established new production lines and purchased production equipment in response to our business
development needs and the increase in customer demand. As of May 31, 2024, the annualized designed capacity of
our Lynway Ningbo production base reached 469.9 thousand sets for headlamps and 543.1 thousand sets for rear
lamps.
The utilization rate of our Lynway Ningbo production base in terms of headlamps increased from 32.5% in 2021 to
70.9% in 2022, and further increased to 76.1% in 2023, primarily due to the increase in headlamp projects that
commenced mass production. The utilization rate of our Lynway Ningbo production base in terms of headlamps
decreased from 77.3% in the five months ended May 31, 2023 to 56.3% in the five months ended May 31, 2024,
primarily because we expanded our production capacity and are currently in the ramp up stage.
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The utilization rate of our Lynway Ningbo production base in terms of rear lamps increased from 50.2% in 2021 to
61.0% in 2022, primarily due to the increase in rear lamp projects that commenced mass production. The utilization
rate of our Lynway Ningbo production base in terms of rear lamps decreased from 61.0% in 2022 to 48.6% in 2023,
primarily due to the significant increase in the designed capacity in 2023. As we build up more production capacity
in advance and continue securing intelligent automotive lamp projects, we are able to expand our customer base
and secure more projects. We expect such trend to continue, and the increased number of projects along with
improved production efficiency will drive up the utilization rate of the Lnyway Ningbo production base. The
utilization rate of our Lynway Ningbo production base in terms of rear lamps increased from 52.2% in the five
months ended May 31, 2023 to 55.6% in the five months ended May 31, 2024, as we commenced mass-production
for a number of rear lamp projects.
Production Expansion Plan
We plan to focus on the development and increasing the production of our intelligent
automotive vision products by constructing new production bases, expanding existing production
bases and building new production lines. In response to evolving market demands, we also plan to
strategically increase the production of our devices and modules for our business in a timely
manner. We develop production expansion plans primarily based on (i) the anticipated supply and
demand for the relevant products, (ii) the current and anticipated prices for these products, (iii) the
utilization of the existing production facilities and the feasibility of their expansion, (iv) the
estimated cost of development and (v) capital resources.
The table below sets forth certain details of our production expansion plans.
Production Base/Production Line Location Gross Floor Area Primary Products
Additional
Planned Annual
Production
Capacity
Estimated
Capital
Expenditure
Expected
Timeline of
Commencing
Operation
(sq.m.) (RMB in millions)
Production Base
Lynway Guangdong
production base ......
Guangdong
Province
100,000 Intelligent automotive
lamps
1,400,000 sets 450.0-550.0 The second
half of 2025
Lynway Ningbo production
base expansion .......
Ningbo,
Zhejiang
Province
26,000 Headlamps 400,000 sets 235.0-285.0 The first half
of 2026
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Production Base/Production Line Location Gross Floor Area Primary Products
Additional
Planned Annual
Production
Capacity
Estimated
Capital
Expenditure
Expected
Timeline of
Commencing
Operation
(sq.m.) (RMB in millions)
Production Line
Automotive modules
production line I (1) .....
Guangzhou,
Guangdong
Province
110 Automotive LED modules 1,440,000 pcs 9.0-11.0 The second
half of 2024
Automotive modules
production line II
(1) ....
Guangzhou,
Guangdong
Province
130 Automotive LED modules 2,400,000 pcs 8.5-10.5 The second
half of 2024
Automotive modules
production line III .....
Guangzhou,
Guangdong
Province
110 Automotive LED modules 280,000 pcs 11.0-13.0 The second
half of 2024
Note:
(1) As of the Latest Practicable Date, the automotive modules production line I had passed our acceptance and was
undergoing testing; the automotive modules production line II was in the acceptance stage.
Maintenance
We conduct thorough and timely maintenance of production equipment and machinery. We
conduct regular servicing and maintenance for our major production equipment and power
machinery according to predefined schedules. We have established and continually update internal
procedures tailored to the unique characteristics and requirements of each piece of production
equipment and power machinery. During the Track Record Period and up to the Latest Practicable
Date, we did not experience any material or prolonged suspensions of operations due to
equipment, machinery or other mechanical failures.
Delivery and Transportation
We engage independent third-party logistics service providers for our domestic and
international product transportation and delivery. Our logistics service providers employ different
transportation methods to ensure efficient delivery, including road, air and sea transport, based on
the specific requirements and location of our customers. We select and assess our logistics service
providers based on a multitude of factors, including, among other things, frequency of on-time
delivery, transportation capability, service coverage, pricing and overall service quality. See “Risk
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Factors — Risks Relating to Our Industry and Business — If our logistics service providers fail to
provide reliable and timely logistics services, our business, financial condition and results of
operations may be materially and adversely affected.”
SALES AND MARKETING
During the Track Record Period, our products were sold in more than 20 countries and
regions, primarily in the Asia, Europe and North America. In 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, our revenue from overseas sales amounted to RMB329.6
million, RMB274.6 million, RMB281.3 million, RMB108.8 million and RMB135.7 million,
respectively, accounting for 23.7%, 19.5%, 15.1%, 17.4% and 16.1% of our total revenue,
respectively, during the same periods. As of the Latest Practicable Date, our sales overseas were
not subject to any specific licensing requirements or regulatory approvals. During the Track
Record Period, we did not experience significant seasonality in our sales and orders.
Sales Channels
We have an experienced and highly trained sales and marketing team, consisting of 85
personnel as of May 31, 2024, who proactively identify market opportunities and design sales
strategies. Our products are primarily sold through direct sales, such as direct orders from
automotive OEMs, TV and lighting companies. During the Track Record Period, we also engaged
three channel partners for the sales of our automotive-grade devices and advanced display
products. The table below sets out a breakdown of our revenue for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentage)
(unaudited)
Direct sales .... 1,220,663 87.9 1,261,897 89.5 1,718,451 92.5 585,254 93.7 780,251 92.5
Channel partners . 167,717 12.1 148,735 10.5 139,581 7.5 39,363 6.3 62,942 7.5
Total ....... 1,388,380 100.0 1,410,632 100.0 1,858,032 100.0 624,617 100.0 843,193 100.0
Direct Sales
During the Track Record Period, the majority of our revenue was from direct sales. In 2021,
2022, 2023 and the five months ended May 31, 2023 and 2024, the revenue from direct sales
amounted to RMB1,220.7 million, RMB1,261.9 million, RMB 1,718.5 million, RMB585.3 million
and RMB780.3 million, respectively, representing 87.9%, 89.5%, 92.5%, 93.7% and 92.5% of the
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total revenue for the same periods. We acquire direct sales customers primarily through our
well-established brand reputation and broad product portfolio as well as our marketing and
promotion efforts, such as participation in exhibitions and collaboration with industry media to
regularly disseminate information about our latest technologies, products and developments.
The salient terms of our direct sales agreements during the Track Record Period are set out
below:
 Duration. The duration of the direct sales agreements with our direct sales customers is
typically one year.
 Pricing policy. We sell our products to direct sales customers at price levels that have
been agreed with the direct sales customers.
 Payment. The payment is done when customers confirm receipt of products. We
generally grant credit terms of 60 to 120 days to our customers.
 Logistics. We are responsible for delivering our products to locations agreed with our
direct sales customers.
 Transfer of risks . The risks transfer to direct sales customers after they complete the
inspection and confirm the receipt of our products.
 Return arrangements. We typically do not allow our direct sales customers to return
products to us except for limited reasons, such as product design defects or quality
issues.
 Termination. Our direct sales customers are typically entitled to terminate the agreement
with 60 days’ prior written notice.
Channel Partners
During the Track Record Period, we engaged three channel partners, including two
distributors for the sales of automotive-grade devices, and Shenzhen MPEG for the sales of
advanced display products.
The engagement of distributors helps expedite and enhance our penetration into the
automotive-grade LED lighting markets. The supply chain of the automotive industry is highly
selective and competitive, and partnering with distributors who are already on lists of the certified
suppliers of automotive OEMs allows us to save the costs and effort relating to the supplier
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approval process and supplier qualification maintenance. We commenced cooperation with one of
the two distributors in 2023. In 2021, 2022, 2023 and the five months ended May 31, 2023 and
2024, the revenue from the two distributors amounted to RMB18.9 million, RMB35.3 million,
RMB35.3 million and RMB13.2 million, respectively, representing 1.4%, 2.5%, 1.9% and 1.6% of
the total revenue for the same periods. During the Track Record Period and up to the Latest
Practicable Date, we had no material unresolved disputes or lawsuits with these two distributors.
We select distributors for the sales of our automotive-grade devices based on a number of
criteria, including, among others, their experience, relationships with automotive OEMs and Tier 1
suppliers, technical capabilities and financial condition. We manage these distributors and
determine whether to continue our contractual relationships with them based on their performance,
and then enter into distribution agreements with them. They directly purchase products from us
and are our customers, onselling our products to Tier-1 or Tier-2 suppliers. The distributors
purchase automotive-grade devices from us and maintain their own inventories. We control channel
stuffing risks through the distribution agreements and measures including (i) keeping track of the
information of end customers, (ii) monitoring levels of inventories held by distributors and (iii)
establishing an end customer registration system which prohibits any distributer to approach end
customers registered by other distributor(s), and thus preventing cannibalization. To mitigate
potential stuffing in the channel, upon placing orders, our distributors are required to record the
downstream customer information, including project details from automotive OEMs. We can thus
monitor our products’ usage utilizing such information. We generally do not allow product returns
for reasons other than product quality issues. We also generally do not buy back our products
except in limited circumstances such as bankruptcies or liquidations of the distributors’ business,
or termination of distribution agreements with the distributors. We generally provide
recommendations on pricing policies as well as support on sales and marketing to our distributors.
If we identify any instances of pricing that are deemed too high or too low, we will engage with
the distributors to propose and implement appropriate price adjustments.
The salient terms of our distribution agreements with distributors for the sales of our
automotive-grade devices during the Track Record Period are set out below:
 Duration. The duration of the distribution agreements ranges from one to three years.
 Credit limits and terms. We determine credit terms and limits based on the
creditworthiness of the distributors. We generally provide a credit term of 120 days to
them.
 Minimum pricing. Distributors shall follow our minimum guidance prices unless
otherwise authorized by us.
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 Sub-distribution. We do not allow sub-distribution. Distributors are required to sell our
products to end customers who have been pre-approved by us.
 Warranty. We provide a warranty period for our products based on product category and
the requirements set by automotive OEMs. We are liable for all damage caused by
quality issues during the warranty period.
 Product returns . Unless for reasons attributable to the distributors, we are generally
required to bear the losses and liabilities caused by product returns.
 Prohibition on goods-fleeing. Distributors are authorized to sell our products within a
designated scope or to end customers pre-approved pursuant to our report system.
 Termination. Subject to limitations imposed by laws, we can terminate the distribution
agreements immediately if we discover any breach of obligations by the distributors as
stipulated by the provisions.
To the best of our knowledge, all of our distributors are Independent Third Parties. The
distributors are not connected to any of the Company, its subsidiaries, their shareholders, directors,
senior management or any of their respective associates. To the best of our knowledge, besides the
ordinary course distribution arrangement with us, there is no other relationship between the
distributors and each of our Company, our subsidiaries, our shareholders, directors or senior
management or any of their respective associates. Our distributors place orders with us when and
to the extent they deem appropriate. In general, our relationships with distributors remained stable.
In addition, during the Track Record Period, we strategically collaborated with one channel
partner, Shenzhen MPEG, one of our five largest customers in each period of the Track Record
Period, in the advanced display business. With over 20 years of experience in the advanced display
industry, Shenzhen MPEG primarily operates in Guangdong province and engages in TV LED
backlight modules, as well as digital audio and video products. In addition, Shenzhen MPEG is a
designated supplier of two major domestic TV brands, and has long-standing relationships with
them. In 2011, with the aim of entering the supply chain of such TV brands, we took the initiative
to establish contact and collaboration with Shenzhen MPEG. The collaboration is a strategic move
for us and is also a common practice in the industry as it simplifies supplier management for the
TV brands. Initially, we primarily supplied LED devices to Shenzhen MPEG who onsold TV LED
backlight modules to TV companies upon further manufacturing and assembly. As we achieved
vertical integration of our product offerings and demonstrated our technological capabilities along
with product cost-efficiency, Shenzhen MPEG opted to procure our advanced display modules
directly. Contrary to typical distributors who onsell products to a diverse customer base and
actively seek new customers, the procurements made by Shenzhen MPEG were for the fulfillment
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of specific purchase requests from the two major TV brands. It also facilitates customer
relationship management and routine after-sale services, thereby allowing us to concentrate on
product R&D and delivery. We recognize revenue for the sales to Shenzhen MPEG when the TV
brands confirm receipt of our products. In 2021, 2022, 2023 and the five months ended May 31,
2024, the revenue from Shenzhen MPEG amounted to RMB148.8 million, RMB113.4 million,
RMB104.3 million and RMB49.8 million, respectively, representing 10.7%, 8.0%, 5.6% and 5.9%
of the total revenue for the same periods. Our revenue from Shenzhen MPEG for each period
during the Track Record Period was significantly more than that in the two years prior to 2021,
primarily due to a shift in the type of products supplied, from devices to modules, with the average
selling price of modules being considerably higher than that of devices.
We have a uniform pricing policy for all our customers, with the selling prices fluctuating
based on the product specifications and design solutions requested by the TV brands and various
other factors. See “— Pricing Policy.” During the Track Record Period, the selling prices of our
top three products supplied to Shenzhen MPEG, accounting for over 60% of our revenue from it,
were substantially aligned with the prices of similar products offered to other customers. For
advanced display products tailored to specific TV sizes, such as 32-inch and 65-inch models, there
was a price disparity of around one-third, attributable to differences in the customers’ final
products and PCB board designs. These differences resulted in variations in the number of light
bars, as well as the quantity of LED chips and lenses deployed per light bar, which in turn affected
the cost of the raw materials used. During the Track Record Period and up to the Latest Practicable
Date, we maintained a stable relationship and had no material unresolved disputes or lawsuits with
Shenzhen MPEG.
The salient terms of our framework agreement with Shenzhen MPEG for the sales of our
advanced display products during the Track Record Period are set out below:
 Duration . The framework agreement does not have a fixed term.
 Credit terms . The credit term we granted to Shenzhen MPEG was in line with the credit
terms we generally grant to our other customers.
 Minimum purchase target . There is no minimum purchase target set for Shenzhen
MPEG.
 Warranty . We provide a warranty period of three years as requested by Shenzhen
MPEG, during which we are responsible for the repair and replacement of any products
with quality or manufacturing defects.
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 Product returns . Unless for reasons attributable to Shenzhen MPEG, we are generally
required to bear the losses and liabilities caused by product returns.
 Termination . Either party may terminate the agreement should the other fail to rectify a
breach of contract following due notice.
We believe that channel stuffing risks, cannibalization risks and account receivables’
recoverability risks are low in connection with the collaboration with Shenzhen MPEG in the
advanced display business. In the agreement with Shenzhen MPEG, we specify the product return
and warranty policies. We provide a warranty period of three years, during which we are
responsible for the repair and replacement of any products with quality or manufacturing defects.
In addition, different TV companies usually have different specification requirements for their
procured LED devices and modules, so we manufacture the advanced display devices and modules
based on the requirements of the end customers. As a result, the related channel stuffing or
inventory risks of the collaboration with our channel partner are low. The credit term we granted
to Shenzhen MPEG during the Track Record Period was in line with the credit terms we generally
grant to our other customers, and, as such, the risks of account receivables’ recoverability are also
low.
During the Track Record Period, Shenzhen MPEG was also our supplier. Shenzhen MPEG is
a company that engages in TV LED backlight modules and digital audio and video products.
Leveraging its industry expertise, market insights and familiarity with our products, it provides
services such as customer relationship management, routine after-sale services and market
condition and R&D trend analysis for a service fee. Negotiations of the terms of our sales to and
purchases from Shenzhen MPEG were conducted on an individual basis and the sales and
purchases were neither inter-connected nor inter-conditional with each other. Our Directors
confirmed that all of our sales to and purchases from Shenzhen MPEG were conducted in the
ordinary course of business under normal commercial terms and on an arm’s-length basis. The
service fee attributable to Shenzhen MPEG in 2021, 2022, 2023 and the five months ended May
31, 2024 was RMB3.4 million, RMB6.5 million, RMB9.2 million and RMB5.1 million,
respectively.
Save as disclosed above, there was no past or present relationship (including business,
employment, financing, family, trust or otherwise) between Shenzhen MPEG and us, our Directors,
shareholders or senior management, or any of their respective associates during the Track Record
Period and up to the Latest Practicable Date.
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Our Customers
Our customers in the intelligent automotive vision business primarily consist of leading
automotive OEMs and their Tier-1 suppliers. In 2018, we jointly established a joint venture,
Lynway Vision, with Geely Holding to expand our business to cover intelligent automotive lamps,
thereby forming an in-depth strategic partnership with Geely. Our products are well recognized by
our customers, with intelligent automotive vision products widely applied to various automotive
brands such as Lynk & Co, ZEEKR, Lotus and Smart under Geely, and Li Auto, GAC and
Changan Auto.
We maintain long-term business relationships with our customers in the high-end lighting
business. Due to the different features of our high-end lighting products, we provide our high-end
lighting devices and modules to customers across multiple industries. During the Track Record
Period, our main customers included well-known companies such as Signify, Samsung, Panasonic
and Toyoda Gosei.
Our customers in the advanced display business primarily consist of internationally renowned
companies and first-tier domestic TV brands, including Hisense, TCL, Skyworth and Changhong.
Our advanced display devices and modules are also applied to the products of LG and Samsung.
During the Track Record Period and up to the Latest Practicable Date, we did not have any
disputes or a termination of our contractual relationships with our major customers.
Relationship with Geely Related Group
Since the establishment of Lynway Vision in 2018, we have maintained a strategic business
relationship with Geely Holding and many of its related automotive OEMs. See “History,
Development and corporate Structure — Major Acquisitions, Disposals and Mergers.”
Headquartered in Hangzhou, Geely Holding is a globally competitive and influential smart electric
mobility technology enterprise and energy service provider, engaged in automotive, upstream and
downstream industry value chains, intelligent travel services, green transportation capacity, digital
technology, etc. Geely Holding owns and manages various leading innovative automotive OEMs,
which collectively form a strong ecosystem. Members of the Geely ecosystem include Geely Auto,
Lynk & Co, ZEEKR, V olvo, Smart, Lotus and certain other automotive OEMs, several of which
have adopted new energy-related intelligent technologies. Leveraging this globally innovative
automobile ecosystem, Geely Holding is developing new automobile models that adopt a variety of
advanced intelligent technologies. As such, it has substantial and ongoing needs for intelligent
automotive vision products. Our swift response to the needs of Geely Holding and its related
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automotive OEMs shortens the R&D cycle for intelligent automotive lamp projects, while our
innovative products and services support Geely Holding and its related automotive OEMs in
developing competitive new automobile models that appeal to the evolving demands of consumers.
Our robust and stable strategic partnership with Geely Holding and its related automotive
OEMs is rooted in our strong technological capabilities and reliable production capacity. The
collaboration with Geely Holding and its related OEMs helps us better understand the trends in the
intelligent automotive vision market. In addition, it also facilitates a more precise design and
production process, ensuring that the intelligent automotive lamps we develop are tailored to the
specific demands of new automobile models, which not only enhances the functionality and
efficiency of our products but also help ensure they are optimized to meet customer’s
requirements. We were selected as a supplier candidate and secured intelligent automotive lamps
projects from Geely Holding and its related OEMs through competitive bidding processes,
benefiting from our extensive project experience and our ability to swiftly respond to customers’
needs. Leveraging our integration of the industry value chain, our products offerings encompass
devices, modules and intelligent automotive lamps. This not only serves to consolidate our
long-term strategic cooperation with Geely Related Group but also facilitates the establishment of
substantial market presence and the penetration into the supply chains of a diverse customer base.
See “— Our Products — Intelligent Automotive Vision” and “— Our Products — Intelligent
Automotive Vision — Pipeline of Intelligent Automotive Vision Products.”
During the Track Record Period, we purchased general auxiliary services from subsidiaries of
Geely Related Group, one of our five largest customers during the Track Record Period. The
auxiliary services we purchased primarily include warehousing services that facilitated our storage
and delivery efficiency. According to CIC, it is common in the industry for OEM parts providers to
acquire auxiliary services from the OEM related group. Negotiations of the terms of our sales to
and purchases from Geely Related Group and its subsidiaries were conducted on an individual
basis and the sales and purchases were neither inter-connected nor inter-conditional with each
other. Our Directors confirmed that all of our sales to and purchases from Geely Related Group
were conducted in the ordinary course of business under normal commercial terms and on an
arm’s-length basis. The revenue from Geely Related Group in 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024 was RMB50.6 million, RMB350.1 million, RMB705.8
million, RMB211.4 million and RMB326.7 million, respectively, accounting for 3.6%, 24.8%,
38.0%, 33.8% and 38.8% of our total revenue, respectively, for the same periods. Specifically,
revenue from Geely Group was RMB50.6 million, RMB349.9 million, RMB686.2 million,
RMB206.2 million and RMB324.5 million in 2021, 2022, 2023 and the five months ended May 31,
2023 and 2024, respectively. Meanwhile, revenue from Geely Related Group (excluding Geely
Group) was nil, RMB0.2 million, RMB19.6 million, RMB5.2 million and RMB2.2 million in 2021,
2022, 2023 and the five months ended May 31, 2023 and 2024, respectively. The service fee
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attributable to Geely Related Group in 2021, 2022, 2023 and the five months ended May 31, 2023
and 2024 was RMB3.4 million, RMB3.6 million, RMB3.8 million, RMB1.2 million and RMB2.1
million, respectively.
Our Directors are of the view that our cooperation with Geely Related Group is in line with
industry practice. We maintain a stable and strategic partnership with Geely Related Group. We do
not anticipate any adverse changes to the relationship and consider such changes to be unlikely.
However, in the unlikely event that our relationship with Geely Related Group deteriorates, we
believe that by leveraging our integration of industry value chain and expanding customer base, we
are able to continue increasing sales and maintaining and growing market share.
Major Customers
During the Track Record Period, our major customers were primarily automotive OEMs,
lighting companies and TV brands located in China. Revenue from our five largest customers in
each period of the Track Record Period accounted for 71.8%, 73.2%, 73.5% and 77.1% of our total
revenue, respectively. Revenue from our largest customer in each period of the Track Record
Period accounted for 30.5%, 24.8%, 38.0% and 38.8% of our total revenue, respectively. See “Risk
Factors — Risks Relating to Our Industry and Business — We are exposed to customer
concentration risk.” Among our five largest customers during the Track Record Period, Customer
A, Customer B, Customer D and Geely Related Group were top-tier enterprises in the industries in
which they operate, according to CIC. As of May 31, 2024, we had maintained business
relationships with our five largest customers for four to nine years.
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The tables below set forth information about our five largest customers for each period
during the Track Record Period:
Y ear ended December 31, 2021
No. Customers Background Products sold Revenue % of total revenue
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
1. Customer A ... Founded in 1969, headquartered in the South
Korea and listed on Korea Exchange,
Customer A is primarily specializing in the
manufacture, wholesale and retail of
electronic components and the manufacture
of semiconductor lighting devices, etc.
High-end lighting and
advanced display
devices and modules
423,585 30.5 2016
2. Customer B ... Founded in 2016, headquartered in the
Netherlands and listed on Amsterdam’s
Euronext Stock Exchange, Customer B is
primarily engaged in the R&D and
associated services of electronic and
electrical products, lighting products,
industrial and household appliances, etc.
High-end lighting devices
and modules
255,095 18.4 2015
3. Shenzhen MPEG . Founded in 2000 and headquartered in
Shenzhen, Shenzhen MPEG is primarily
specializing in the R&D and sales of LED
and optoelectronic devices, electronic
products, and the sales of display devices,
optoelectronic devices and new optical
materials, etc.
Advanced display devices
and modules
148,784 10.7 2015
4. Customer C ... Founded in 1986 and headquartered in Poland,
Customer C is an EMS provider of
end-to-end solutions for engineering and
manufacturing leaders worldwide
High-end lighting devices 96,367 6.9 2018
5. Customer D ... Founded in 1969, headquartered in Shandong
and serving as the parent company to four
listed companies, Customer D is primarily
specializing in the R&D, manufacturing and
sales of household appliances, and the R&D,
design and sales of LED large-screen
displays, interactive intelligent tablets, etc.
Advanced display devices
and modules
73,732 5.3 2018
Total ...... 997,563 71.8
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Y ear ended December 31, 2022
No. Customers Background Products sold Revenue % of total revenue
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
1. Geely Related
Group .....
Grouped by (i) Geely Group, (ii) LI Shufu and
his majority-controlled companies other than
Geely Group, and (iii) Yaoning Technology,
Geely Related Group is primarily
specializing in the sales of automobiles, and
the manufacturing, wholesale and retail of
auto parts and accessories.
Intelligent automotive
lamps
350,129 24.8 2020
2. Customer A ... Please see above. High-end lighting and
advanced display
devices and modules
288,982 20.5 2016
3. Customer B ... Please see above. High-end lighting devices
and modules
140,924 10.0 2015
4. Customer D ... Please see above. Advanced display devices
and modules
140,250 9.9 2018
5. Shenzhen MPEG . Please see above. Advanced display devices
and modules
113,442 8.0 2015
Total ...... 1,033,727 73.2
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Y ear ended December 31, 2023
No. Customers Background Products sold Revenue % of total revenue
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
1. Geely Related
Group .....
Please see above. Intelligent automotive
lamps
705,774 38.0 2020
2. Customer A ... Please see above. High-end lighting and
advanced display
devices and modules
229,076 12.3 2016
3. Customer D ... Please see above. Advanced display devices
and modules
192,211 10.3 2018
4. Customer B ... Please see above. High-end lighting devices
and modules
135,306 7.3 2015
5. Shenzhen MPEG . Please see above. Advanced display devices
and modules
104,250 5.6 2015
Total ...... 1,366,617 73.5
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Five months ended May 31, 2024
No. Customers Background Products sold Revenue % of total revenue
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
1. Geely Related
Group .....
Please see above. Intelligent automotive
lamps
326,739 38.8 2020
2. Customer D ... Please see above. Advanced display devices
and modules
100,022 11.9 2018
3. Customer A .... Please see above. High-end lighting and
advanced display
devices and modules
98,588 11.7 2016
4. Customer B .... Please see above. High-end lighting devices
and modules
74,646 8.8 2015
5. Shenzhen MPEG . Please see above. Advanced display devices
and modules
49,767 5.9 2015
Total ...... 649,762 77.1
Note:
(1) Geely Related Group (excluding Geely Group) refers to (i) LI Shufu and his related companies other than Geely
Group and (ii) Yaoning Technology and its associates.
LI Shufu and his related companies other than Geely Group include Smart Automobile Sales (Nanning) Co., Ltd.,
Chongqing LIV AN Auto Research Institute Co., Ltd., Chongqing Livan Automotive Manufacturing Company
Limited and Smart Automobile Co., Ltd. Smart Automobile Sales (Nanning) Co., Ltd. primarily engages in the
R&D and sales of automobiles and auto parts, and we provided product samples, spares and development services
to the company during the Track Record Period. Chongqing LIV AN Auto Research Institute Co., Ltd. primarily
engages in the R&D and sales of auto parts, and we provided product samples and development services to the
company during the Track Record Period. Chongqing Livan Automotive Manufacturing Company Limited primarily
engages in the manufacture and sales of automobiles, and the revenue from the company were attributable to the
sales of our intelligent automotive lamps during the Track Record Period. Smart Automobile Co., Ltd. primarily
engages in the sales of EVs as well as the development and sales of auto parts, and we provided development
services to the company during the Track Record Period.
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Yaoning Technology and its associates refers to Ningbo Jining Auto Parts Co., Ltd. Ningbo Jining Auto Parts Co.,
Ltd. primarily engages in the development, manufacture and sales of precision auto parts formed through hot
stamping and hydraulic forming as well as auxiliary assembly components, and the revenue from the company were
attributable to utility settlements.
As of the Latest Practicable Date, none of our Directors, their respective close 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.
Marketing
We conduct comprehensive research on the future capacity of the relevant markets, predict
prevailing and possible trends of technology and products in the industry, and analyze applicable
market and policy opportunities and risks while considering our strengths and weaknesses, to
formulate our market strategies and plans.
We seek to promote brand awareness and product recognition through multiple marketing
channels including trade fairs, media intermediaries, recommendations of industry associations,
industry forums, telemarketing, sales agents and our own website and social media handles.
Benefiting from our effective marketing strategies, we have been able to generate significant media
coverage of our brand and products.
Pricing Policy
We price our products based on factors including prices of competing products, costs of raw
materials and consumables, cost of production, market position of the product as well as expected
purchase orders. For products to be sold overseas, we also consider the direct competition with
overseas competitors and the need for maintaining the premium status of our brands and high-end
products. Our final quotation is determined based on the reasonable range of gross profit margin
generated by the pricing process.
We provide guide prices for our products. Distributors are not permitted to set prices lower
than our guide prices unless otherwise authorized by us.
PROCUREMENT AND SUPPLY CHAIN MANAGEMENT
We procure certain raw materials and consumables from qualified suppliers to maintain
quality standards, optimize our cost structure and achieve desired scale of production. We have a
dedicated team of supply chain experts that focuses on establishing and deepening our supplier
relationships, enforcing our quality control standards, increasing our bargaining power in the
pricing of raw materials and consumables, and implementing comprehensive risk management
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measures throughout the procurement process. Our supply chain management system, with its data
and analytical capabilities, reduces procurement costs, improves our quality control
implementation and enhances overall operating efficiency.
Raw Materials and Consumables
The key raw materials and consumables for our operations primarily include LED chips,
leadframes, PCBs, automotive lamp modules, plastic particles, drivers and electronic components.
During the Track Record Period, we sourced raw materials and consumables from both domestic
and international suppliers. In addition, benefited from our vertical integration capabilities, we use
self-produced LED devices as key components of our LED modules and advanced display
products.
We generally do not enter into long-term supply agreements with fixed price arrangements,
which is in line with the industry norm, according to CIC. We have adopted comprehensive
policies and measures to manage the price fluctuations of raw materials, including, among others:
(i) we routinely engage in price discussions with our suppliers on a quarterly, semiannual or
annual basis; (ii) we monitor and manage the impact of price fluctuations by keeping safety stock,
entering into framework agreements with our suppliers and timely securing the price of subsequent
orders through advance payments when the market price fluctuates excessively; and (iii) we
regularly monitor the market prices of commodities, such as gold, silver and copper, to anticipate
and manage the price volatility of raw materials, and timely adjust our procurement bidding and
price comparison processes, so as to mitigate the impact of price fluctuations.
During the Track Record Period and up to the Latest Practicable Date, we did not experience
quality issues or shortages with our raw materials and consumables that materially affected our
operations.
Supplier Management
Selection and Engagement of Suppliers
We develop our procurement strategy based on our need for raw materials and consumables,
the stability of supplies and the availability of qualified suppliers. We generally select suppliers
that can offer quality products, cost efficiency, timely delivery, production capacity and valuable
customer services. We also consider our needs for technological development and security.
Therefore, we have adopted a series of supplier management system to stipulate the selection and
engagement process, quality standards and regular evaluation and assessment.
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During the initial assessment, we examine the basic information of supplier candidates
including registered address, share capital, production capacities and capabilities and system
certification. Upon these being satisfied, we review the overall operation system, production
process and product qualities. Supplier candidates are required to provide test batches of their
products, and our R&D team proceeds to conduct the verification and evaluation process to
determine their qualification. Price comparison is conducted when materials or components present
similar capabilities and qualities. Qualified suppliers are admitted to our list of approved suppliers
and are subject to constant monitoring and monthly evaluation and assessment in terms of
procurement, product quality and R&D according to our internal guidelines.
Engagement of suppliers for strategic cooperation or specific projects requires
cross-department participation to ensure satisfaction of all technical details. We require written
confirmation from our suppliers for guarantees of product quality and compliance with social
responsibility requirements for various aspects including environment and safety, health, safety &
fire (HSF) compliance, nonuse of conflict minerals, IP and anti-commercial bribery.
Apart from careful evaluation of the capabilities and capacity of existing suppliers, we have
also strategically developed in-house manufacturing capabilities with respect to LED devices and
PCBA. We dynamically adjust the proportion of in-house manufacturing versus sourcing for
components (i) to fulfill production volume requirements and (ii) to maintain the competitiveness
of the components that are sourced internally in terms of quality and price.
Payment and Credit Terms
Our stable network of qualified suppliers provides us with the flexibility to mobilize
resources effectively and achieve the desired procurement scale. Our comprehensive supply chain
management system further bolsters our capacity to deliver superior products at competitive prices,
thereby enhancing our efficiency and profitability. We typically seek to enter into long-term
agreements with our suppliers. Qualified suppliers are subject to annual evaluation and assessment
on their performance, and we generally review and negotiate with our suppliers on an as-needed
basis for modification of certain terms of the agreements. Our payment methods include wire
transfers, bank acceptance draft and commercial acceptance draft, among others. Our credit terms
for procurement are generally between 60 to 120 days, and we typically conduct monthly
settlements with our suppliers.
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Salient Terms of Agreements with Suppliers
The salient terms of the typical agreements with our suppliers are set forth below:
 Duration . We typically enter into framework agreements without a fixed term with our
suppliers.
 Principal rights and obligations of parties involved . We specify the product type,
product specifications, quantity, delivery timeline and others in each purchase order we
place with our suppliers. Our suppliers are obligated to produce the specified type and
quantities of qualified products for storage according to the purchase orders and arrange
for delivery and shipment based on our needs.
 Payment and delivery . We are responsible for timely payment for the purchases to our
suppliers, who are responsible for delivering qualifying products at our designated
warehouses.
 Quality assurance . The materials, process used and performance indicators of the
products provided by our suppliers must be completely consistent with the samples
submitted or the requirements of contracts. Our suppliers are responsible for the rework,
repair or replacement at their own expense once quality issues are detected within 48
hours after receiving our notice.
 Termination. We have the right to terminate purchase orders in instances such as late
delivery and nonconforming delivery. Either party is entitled to terminate the agreement
when the other fails to perform the contract terms with notification.
Subcontracting
During the Track Record Period, we engaged certain subcontractors to produce advanced
display LED modules. Demand in the TV market may fluctuate from time to time, often peaking
during holiday seasons, promotional activities and major sports events. In addition, the production
of advanced display modules requires dedicated production lines. As a result, the production
capacity of our advanced display LED modules at times faces challenges in fulfilling the increased
customer orders during peak production periods. To manage such fluctuations in the TV market,
we engage qualified and reliable subcontractors when we experience high order demands. This
approach helps us ensure a smooth transition between peak and off-peak production periods for our
advanced display business and better control the production capacity planning. Before placing any
purchase orders with our subcontractors, we ensure to seek and obtain our customers’ prior
approval, as generally required for the engagement of subcontractors. In 2021, 2022, 2023 and the
five months ended May 31, 2023 and 2024, our subcontracting costs that constitute the cost of
sales amounted to RMB25.4 million, RMB21.9 million, RMB18.0 million, RMB5.8 million and
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RMB9.8 million, respectively, which accounted for 2.2%, 1.9%, 1.2%, 1.1% and 1.4% of our cost
of sales during the same periods. Costs incurred by subcontracting showed a year-on-year decrease
in 2021, 2022 and 2023 as we increased our own production capacity for advanced display
products by adding our SMT production lines. The increase in subcontracting costs in the five
months ended May 31, 2024 as compared to that of the same period in 2023 was primarily due to
the increased customer demand for our advanced display modules. See “Risk Factors — Risks
Relating to Our Industry and Business — We may have limited control over the quality,
availability and costs of our subcontractors.”
We carefully select subcontractors from a pool of reputable candidates. We evaluate the
potential subcontractors in terms of, among other aspects, qualifications, technical skills, product
quality, workplace safety and delivery commitments. We require our subcontractors to comply with
our internal policies and closely monitor their performance. In the event of any failure by
subcontractors to meet our internal policies, we may cease to work with them or claim damages.
We apply testing to ensure that the sourced products meet our product specifications, quality
standards and customers’ expectations. We have generally maintained long-term relationships with
our subcontractors, and all of our subcontractors are independent third parties.
The salient terms of the agreements with our subcontractors are set forth below:
 Duration . We typically enter into framework agreements without a fixed term with our
subcontractors.
 Principal rights and obligations of parties involved . We specify the product type,
product specifications, quantity, delivery timeline and others in each purchase order we
place with our subcontractors. They are obligated to produce the specified type and
quantities of qualifying products for storage according to the purchase orders and
arrange for delivery and shipment based on our needs.
 Minimum purchase . Typically, no minimum purchase is stipulated.
 Payment and delivery . We are responsible for timely payment of the processing fees to
our subcontractors, who are responsible for delivering qualifying products to our
designated warehouses.
 Further subcontracting . Further subcontracting is not allowed without our authorization.
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 Quality assurance . Product acceptance shall be carried out in accordance with the
samples, drawings, inspection standards and specifications confirmed by both parties.
Subcontractors are responsible for quality checking, analysis and replacement free of
charge if a quality issue arises.
 Termination. We have the right to terminate the purchase orders in instances such as late
delivery and nonconforming delivery. Either party is entitled to terminate the agreement
when the other fails to perform the contract terms with notification.
Major Suppliers
During the Track Record Period, our major suppliers primarily include manufacturers of LED
chips, leadframes, LED devices and bonding wires. Purchase amount from our five largest
suppliers in each period of the Track Record Period accounted for 43.0%, 26.2%, 22.1% and
21.6% of our total purchase amount, respectively. Purchase amount from our largest supplier in
each period of the Track Record Period accounted for 25.9%, 12.8%, 9.3% and 7.5% of our total
purchase amount, respectively. Our key suppliers are primarily located in China and we purchase
LED chips from both domestic and international suppliers. See “Risk Factors — Risks Relating to
Our Industry and Business — We rely on the stability of our supply chain as well as a number of
key suppliers, the loss of which could adversely affect our business.” As of May 31, 2024, we had
maintained business relationships with our five largest suppliers for three to over years.
The tables below set forth information about our five largest suppliers for each period during
the Track Record Period:
Y ear ended December 31, 2021
No. Suppliers Background
Products provided
to us Purchase amount
% of total purchase
amount
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
1. Epistar
Corporation ...
Founded in 1996, headquartered in Taiwan and
a subsidiary of a company listed on Taiwan
Stock Exchange, Epistar Corporation is
primarily engaged in the manufacture and
sales of LED epitaxy and chips.
LED chips 300,432 25.9 2008
2. Supplier B .... Founded in 2012 and headquartered in Jiangsu,
Supplier B is primarily engaged in the
manufacture and sales of LED chips.
LED chips 110,564 9.5 2015
3. Supplier C .... Founded in 2013 and headquartered in
Guangdong, Supplier C is primarily engaged
in the manufacture and sales of LED
leadframes and lenses.
Leadframes 37,339 3.2 2012
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No. Suppliers Background
Products provided
to us Purchase amount
% of total purchase
amount
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
4. Supplier D .... Founded in 2008 and headquartered in
Guangdong, Supplier D is primarily engaged
in the sale of electronic components.
LED devices 26,942 2.3 2017
5. Supplier E .... Founded in 2002 and headquartered in
Shandong, Supplier E is primarily engaged
in the manufacture and sales of
semiconductor bonding materials.
Bonding wires 23,146 2.0 2019
Total ...... 498,423 43.0
Y ear ended December 31, 2022
No. Suppliers Background
Products provided
to us Purchase amount
% of total purchase
amount
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
1. Epistar
Corporation ...
Please see above. LED chips 140,407 12.8 2008
2. Supplier B .... Please see above. LED chips 56,897 5.2 2015
3. Supplier F .... Founded in 2015 and headquartered in Fujian,
Supplier F is primarily engaged in the
manufacture and sales of LED chips.
LED chips 32,457 3.0 2018
4. Supplier D .... Please see above. LED devices 29,825 2.7 2017
5. Supplier C .... Please see above. Leadframes 27,483 2.5 2012
Total ...... 287,069 26.2
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Y ear ended December 31, 2023
No. Suppliers Background
Products provided
to us Purchase amount
% of total purchase
amount
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
1. Epistar
Corporation ...
Please see above. LED chips 138,657 9.3 2008
2. Supplier G .... Founded in 1995 and headquartered in Jilin,
Supplier G is primarily engaged in the
manufacture and sales of drivers.
Electronic components 62,160 4.2 2021
3. Supplier H .... Founded in 2003, headquartered in Jiangxi and
listed on Shenzhen Stock Exchange, Supplier
H is primarily engaged in the manufacture
and sales of PCB.
PCB board material 43,758 3.0 2021
4. Supplier B .... Please see above. LED chips 42,215 2.8 2015
5. Supplier I .... Founded in 2006 and headquartered in
Zhejiang, Supplier I is primarily engaged in
the manufacture and sales of lamps, molds
and electronic components.
Plastic parts 41,406 2.8 2019
Total ...... 328,196 22.1
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Five months ended May 31, 2024
No. Suppliers Background
Products provided
to us Purchase amount
% of total purchase
amount
Y ear of
commencement of
business
relationship with us
(RMB in thousands)
1. Epistar
Corporation ...
Please see above. LED chips 48,958 7.5 2008
2. Supplier J .... Founded in 2011 and headquartered in Jiangsu,
Supplier J is primarily engaged in the
manufacture and sales of LED products and
electronic components.
Automotive LED modules 28,358 4.3 2020
3. Supplier G .... Please see above. Electronic components 23,455 3.6 2021
4. Supplier B .... Please see above. LED chips 20,437 3.1 2015
5. Supplier H .... Please see above. PCB board material 20,239 3.1 2021
Total ...... 141,447 21.6
As of the Latest Practicable Date, none of our Directors, their respective close associates or
any of our shareholders (who owned or to the knowledge of the Directors had owned more than
5% of our issued share capital) had any interest in any of our five largest suppliers.
Epistar Corporation, one of our five largest suppliers during the Track Record Period,
engages in the R&D, production and sales of LED epitaxy and chips. As of December 31, 2023,
Epistar Corporation recorded total assets of NTD42,542.9 million, operating revenue of
NTD11,207.2 million and operating loss of NTD2,376.7 million. Following its acquisition of our
LED epitaxy supplier, Epistar Corporation assumed the role of one of our suppliers in 2007. As
our business collaboration evolved, we established a strategic partnership with Epistar Corporation
in order to maintain our product quality and the stability of supply chain. In 2010, Epistar
Corporation became a shareholder of Advanced Photoelectronic, a member of our Controlling
Shareholder Group. As of the Latest Practicable Date, Epistar Corporation and its subsidiaries,
Lighting Investment Corporation and Lighting Investment Ltd., owned approximately 21.47% of
Advanced Photoelectronic.
We entered into standard framework agreements with all our suppliers including Epistar
Corporation, with a few provisions subject to negotiation and modification based on mutual
consent, such as credit terms. We generally select suppliers based on various factors, including but
not limited to the supplier’s ability to offer quality products, cost efficiency, timely delivery,
production capacity and valuable customer services. During the Track Record Period, the purchase
prices of raw materials from Epistar Corporation generally aligned with those of similar raw
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materials from other manufacturers in the PRC. Certain raw materials such as LED chips from
Epistar Corporation have higher prices, primarily due to their superior product quality, the
protection of intellectual property rights and the limited availability of substitutes in the market.
The procurement of such raw materials is either stipulated by our customers in recognition of the
brand influence of Epistar Corporation or driven by our commitment to maintaining high product
quality. Since 2021, we have implemented proactive strategies to ensure the diversification and
stabilization of our supply chain. During the Track Record Period, purchase amount from Epistar
Corporation decreased from RMB300.4 million in 2021 to RMB140.4 million in 2022, and further
to RMB138.7 million in 2023, and amounted to RMB49.0 million in the five months ended May
31, 2024. As domestic LED chip manufacturers continue to improve their product quality and
cost-effectiveness, during the Track Record Period, the purchase amount of LED chips from
domestic chip suppliers as a percentage of total LED chip purchase amount increased from 29.7%
in 2021 to 45.3% in 2022, 57.9% in 2023, and further to 85.3% in the five months ended May 31,
2024. In light of their nature and application scenarios, our supply of LED chips was not affected
by the international export control regime governing the trade of advanced computing and
semiconductor products during the Track Record Period and up to the Latest Practicable Date.
During the Track Record Period, we generated revenue from two affiliates of Epistar
Corporation, namely Yenrich Technology Corp. (“ Y enrich”) and Lextar Electronics (Chuzhou)
Corp. (“ Lextar ”), both of which are controlled by the ultimate controlling shareholder of Epistar
Corporation. According to CIC, it is not uncommon for group companies operating across various
segments of the LED intelligent vision industry to have one subsidiary supply LED chips to an
entity, while other subsidiaries purchase LED devices or modules from the same entity, given the
different business operations of each subsidiary. We provided high-end lighting devices to Yenrich
and advance display products to Lextar during the Track Record Period. Negotiations of the terms
of our sales to Yenrich and Lextar and purchases from Epistar Corporation were conducted on an
individual basis and the sales and purchases were neither inter-connected nor inter-conditional with
each other. In 2021, 2022, 2023 and the five months ended May 31, 2024, revenue from Yenrich
amounted to RMB88,000, RMB20,000, nil and nil, respectively. The decrease was primarily due to
the shift in Yenrich’s business focus. Revenue from Lextar amounted to RMB7.2 million, RMB9.1
million, RMB48.9 million and RMB25.6 million in 2021, 2022, 2023 and the five months ended
May 31, 2024, respectively. The significant increase in 2023 and the five months ended May 31,
2024 was primarily due to the increasing number of advanced display module projects with Lextar
that commenced mass production in 2023. We expect that revenue from Lextar will continue to
increase in the near future, as we continue to deepen our cooperation with Lextar in the advanced
display business.
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Save as disclosed in this prospectus, there was no past or present relationship (including
business, employment, financing, family, trust or otherwise) between Epistar Corporation and us,
our Directors, shareholders or senior management, or any of their respective associates during the
Track Record Period and up to the Latest Practicable Date.
INVENTORY MANAGEMENT
Our inventory primarily includes raw materials and consumables, work in progress, finished
products and contract costs. Our inventories amounted to RMB188.0 million, RMB211.6 million,
RMB216.0 million and RMB250.7 million as of December 31, 2021, 2022, 2023 and May 31,
2024, respectively.
Our inventory management is closely linked with our production plans and benefits from our
strong relationships with customers and suppliers, which enable us to effectively manage the level
of in-progress inventories, mitigate inventory-related risks and enhance our overall operational
efficiency. To monitor our inventory levels and minimize obsolete inventory, we have established a
strict inventory management system implemented through our ERP system, which also sets out the
roles and responsibilities of inventory management personnel. We regularly conduct inventory
checks and designate dedicated personnel to safeguard key raw materials and consumables and
high-risk chemicals to implement dynamic and static supervision over our inventories. In
December 31, 2021, 2022, 2023 and the five months ended May 31, 2024, our inventory turnover
days were 58, 61, 51 and 51 days, respectively. See “Financial Information — Description of
Certain Components of Our Consolidated Statements of Financial Position — Inventory.”
QUALITY CONTROL
We have devoted substantial resources to quality control since the inception of our business.
In 2009, we obtained our first ISO9001 certification for our quality management system, and
obtained our first IATF16949 certification for our quality management system in automotive
industry in 2017. We established our proprietary quality control system based on the ISO9001 and
IATF16949 standards. Our quality policy targets customer satisfaction and comprehensive quality
control throughout our operation.
Our comprehensive quality control encompasses all aspects of our operations. It comprises of
three major processes: (i) management process (MP), (ii) customer-oriented process (COP), and
(iii) support process (SP). Pursuant to ISO9001 and IATF16949 standards, we designate a
person-in-charge for each process to guide and supervise the implementation of our quality control
measures. We also appoint a quality management representative (QMR) who has the responsibility
and authority to take corrective measures when products or processes do not meet our
requirements and has the right to order cessation of production and shipments. We established a
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dedicated team with expertise in quality control in 2011. Our quality control team is responsible
for the overall quality management of our operations which mainly covers the formation and
implementation of various policies and standards, quality inspections, resolution of accidents and
disputes, internal reviews and continuous quality improvement. The team is further divided into
five functional segments, including systematic quality management, R&D quality management,
procurement quality management, production process quality management and customer service
management to cover the key procedures of each of the three major processes. As of May 31,
2024, we had more than 200 quality control personnel.
In addition to our internal reviews, we are also subject to external reviews as requested by
our customers, which involve both comprehensive and target reviews of our quality control system,
product certification and production facilities. Through both internal and external reviews, we
pinpoint areas for enhancement and address concerns based on a closed-loop process.
Given that our products are marketed globally and must adhere to varying safety standards
and quality prerequisites based on their selling locations, we implement applicable quality control
systems to ensure compliance and competitiveness. Additionally, we engage independent product
testing and certification organizations to ensure our products meet the specific standards of each
intended market. For example, we entrust professional third-party testing agencies to conduct
safety testing on finished products to ensure that the products meet the requirements of domestic
and foreign laws and regulations on hazardous substances. We also engage professional third-party
testing agencies to carry out testing of our automotive-grade LED devices to ensure such products
meet the relevant automotive-grade certification and qualification standards.
As a result of our commitment to quality control, we did not experience any material sales
returns or any material product liability or major legal claims due to quality control issues, and did
not recall any products during the Track Record Period and up to the Latest Practicable Date.
Quality Control Measures
Set forth below are our quality control measures as categorized by the five functional
segments.
Systematic Quality Management
Systematic quality management is fundamental to our overall quality control process. At the
policy level, we have developed the quality and environmental safety manual, the chemical
management manual, and various procedures and regulations in accordance with the requirements
of IATF16949, ISO9001, ISO14001 and ISO45001. These policies set the basis for implementation
throughout our operations, based on which: (i) we formulate and continually update testing
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methods and quality standards for raw materials and consumables procured, work in progress,
finished products and contract costs; (ii) supervision over quality control processes are conducted
through the persons-in-charge, QMR and our quality control team; and (iii) the accountability
system of quality management objectives is established to ensure steady improvement in our
product quality.
R&D Quality Management
Our quality control over R&D continues to improve and evolve based on our rigorous product
development process, technology innovations, advanced IT systems and a dedicated quality control
team. We designed our R&D process in accordance with leading industry practices and strict
quality control measures. For example, we established Advanced Product Quality Planning (APQP)
in accordance with ISO9001 and IATF16949 to create a quality planning process from the research
stage to mass production. We also introduced the PLM system to ensure that each stage of the
product R&D complies with the APQP process. See “— Information Technology Systems.”
We invested in an advanced optical laboratory which is equipped with sophisticated,
high-precision optical testing equipment. The laboratory was awarded the Advanced Optoelectronic
Semiconductor Engineering Laboratory in Guangdong Province in 2019. Furthermore, our
inspection center was certified by CNAS in 2017.
Procurement Quality Management
Our procurement quality management streamlines the entire procurement process and further
extends to warehousing and production. We adhere to both domestic and international standards for
quality inspection and have established a comprehensive execution process that includes
introduction, recognition, inspection and the resolution of abnormalities of raw materials and
consumables. We apply Incoming Quality Control (“ IQC”) measures to ensure that we only use
raw materials and consumables that meet our quality standards, and request product credentials
such as sample acknowledgment and the production part approval process (PPAP) certificates of
materials procured from our suppliers before mass production. We engage qualified third-party
organizations on an annual basis to conduct tests on our products regarding environmental
sustainability and functional efficiency to ensure that our products are in compliance with
applicable international and national standards and quality requirements of our customers.
Suppliers are generally subject to monthly gradings. We also conduct annual reviews of key
suppliers and increase the frequency of reviews based on product quality and production volume.
We closely monitor the sourced materials after mass production and urge suppliers to improve
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product quality in case of noncompliance or major quality incidents. Meanwhile, we conduct
on-site reviews at our suppliers’ premises to oversee the implementation of our procurement
quality management measures.
Production Process Quality Management
We have established a comprehensive production and operation management system, a quality
management system and an information management system and platforms to cover the entire
process of production process quality management.
Production is conducted pursuant to production guidelines. Our quality testing process
includes in-process quality control (IPQC), final quality control (FQC), outgoing quality control
(OQC) and ongoing reliability test (ORT) which serve to maintain close control over each key
parameter during the production process and, based on quality-related feedback, improve and
promote the quality of finished products. We use statistical process control (SPC), measurement
systems analysis (MSA) and other tools to regularly monitor product quality and quality changes
in real time and to eliminate any defects in the production process.
During the Track Record Period and up to the Latest Practicable Date, we did not receive any
written notice or sanction from government authorities for material noncompliance, violation, or
recommendation for improvement with respect to our production operations.
Warehousing, Packaging and Logistics
Finished products are packed and stored in our warehouses before being shipped and
delivered to our customers. In China, we operate two warehouses in Guangzhou and one
warehouse in Ningbo. We have established a standard set of warehousing and transportation
processes that enable us to provide products that meet our customers’ packaging requirements
within the time required. We conduct regular inventory checks on our warehousing status in
accordance with internal guidelines. For products to be exported, we have also established a
comprehensive process to ensure the timely customs clearance and safety of our products. We have
a dedicated team of systematically trained staff to ensure the proper condition and operations of
our warehouses and to minimize fire hazards and other similar risks associated with our products.
We engage independent third-party logistics service providers to take responsibility for our
domestic and international product transportation and delivery. See “— Production — Delivery and
Transportation.”
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Customer Service Management
The warranty periods we provide vary depending on the characteristics of the products sold
and are typically specified in the warranty agreements. For our intelligent automotive vision
products, we generally provide a three-year warranty period or mileage-based warranty coverage in
compliance with applicable regulations and provisions and subject to the specific warranty
agreements. For our high-end lighting products and advanced display products, we generally
provide a one-year warranty period. The warranty agreements will be entered into according to the
customers’ templates upon request.
We believe that high-quality after-sales services are critical to our business development as it
extends the value chain of our products and promotes customer satisfaction. For LED products, we
send our personnel to customers’ site to provide customers with user guidance when requested.
When we receive customer complaints, our quality control team acts quickly to analyze, determine
accountability and conduct risk screening of inventories. Relevant departments will convene
meetings to analyze the cause of the defect, formulate improvement measures and undertake
precautions to prevent repetitive occurrence. Execution of improvement measures and verification
of improvement results is compiled a report to be submitted to the customer. See “Risk Factors —
Risks Relating to Our Industry and Business — Any failure to offer high-quality maintenance and
support services for our customers may harm our relationships with them and, consequently, our
business.” We also offer rework services to address any minor discrepancies between the
specifications provided by our customers and their production needs. After examining the products,
our quality control team formulates rework plans, which our production department then
implements. Products will be reexamined by our quality control team to ensure compliance and
customer satisfaction before delivery.
We have developed a standard product return procedure which is detailed in our customer
complaint handling procedure. When a customer requests return of nonconforming products, the
customer needs to provide us with a nonconforming sample and our quality control team shall
accept the return request upon determination of any nonconformity. In 2021, 2022, 2023 and the
five months ended May 31, 2024, the value of the products returned in terms of revenue accounted
for less than 0.15% of our total revenue for the same periods, which were in line with the industry
average, according to CIC.
During the Track Record Period and up to the Latest Practicable Date, (i) we had not
received any material complaints relating to product quality; and (ii) we had not experienced any
product recalls or accidents due to product defects.
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INFORMATION TECHNOLOGY SYSTEMS
IT is fundamental to our competitiveness and efficient operation. We utilize and maintain IT
systems which are in line with our business expansion to cater to our diverse operational needs and
support various critical functions covering sales, R&D, supply chain, production and after-sales
services. We strive to continue optimizing our IT systems. Set forth are our main IT systems:
 ERP system . We utilize the enterprise resource planning (ERP) system to effectively
facilitate and manage, among others, our operation targets, supply chain, financial
management, presales, sales and distribution, procurement, quality control, export
management, product structure management, work order management and equipment
management. For example, our ERP system enables us to monitor the status of purchase
orders from our customers, from acceptance of the orders to completion of their
delivery.
 MES system . Our production process is supported by the manufacturing execution
system (MES), which facilitates real-time tracking of the progress of the whole process
from raw material and consumable warehousing, production line to finished product
shipment. The system enhances production efficiency across our manufacturing
facilities, provides reliable process control and strengthens quality traceability.
 PLM system . To ensure the standardization of the R&D process, in 2021, we adopted the
product lifetime management (PLM) system. The system helps relevant personnel gain
instant access to accurate R&D project progress and data, enabling comprehensive
collaboration between our R&D team and other departments.
 SRM system . We manage our suppliers through our supplier relationship management
system (SRM). The system improves communication efficiency by synchronizing our
procurement targets and order information with suppliers, which optimizes the
procurement process, reduces procurement costs and risks, promotes supply chain
collaboration and improves the efficiency of our supply chain management.
 WMS system . We developed our proprietary warehouse management system (WMS) that
is more in line with our own business operations. The system tracks the inbound and
outbound movements of our products, manages our inventory and enables customer
management by label, which caters to our own needs. As a result, it helps solve the
problems of system instability and difficulty in matching customer labels with
customized shipping requirements, and greatly improves the efficiency of our warehouse
operations.
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During the Track Record Period and up to the Latest Practicable Date, we had not
experienced any material IT system failure or downtime that had a material adverse effect on our
business operations. See “Risk Factors — Risks Relating to Our Industry and Business — Our
performance may suffer from business disruptions associated with information technology, system
implementations, or catastrophic losses affecting our IT systems.”
COMPETITION
We compete in a large yet highly competitive market. China has the world’s largest LED
intelligent vision industry, with a market size of RMB440.2 billion in 2023 in terms of revenue.
China’s LED intelligent vision market grew at a CAGR of 6.7% from 2019 to 2023 and is
expected to grow at a CAGR of 9.1% from 2023 to 2028, reaching RMB679.2 billion in 2028.
Driven by increasing consumer focus on energy conservation and environmental protection, as well
as supportive government policies, LED intelligent vision products and systems have become
widely adopted for their energy efficiency and longevity, especially in the automotive intelligent
vision market and high-end lighting and LCD TV backlight display market in China.
We compete with both solution providers of intelligent automotive vision products and
systems and LED product manufacturers. For the intelligent automotive vision sector, the ongoing
shifts towards intelligence and new energy present great opportunities for emerging manufacturers
with innovative technology and strategic product positioning. We compete with solution providers
of intelligent automotive vision products and systems on key factors such as technological
advantages, large-scale mass production and quality control capabilities as well as vertical
integration capabilities. For the high-end lighting and LCD TV backlight display market, the
emergence of new technologies and product iteration became key drivers for domestic LED
product manufacturers to capture a larger market share. Leveraging our profound understanding of
“LED+” technologies, we are committed to expanding our market share with LED products with
enhanced performance catering to the evolving customer expectations. To remain competitive in
the market, we will continue to integrate ICs, electronic control, software, sensors, optics and
others, with LED intelligent automotive vision products, focus on product development and expand
product categories, persistently expanding into high-growth sectors within the LED intelligent
vision industry.
In terms of revenue in 2023, we ranked third among domestic device and module
manufacturers in China’s high-end lighting industry and fifth among all device and module
manufacturers in the same industry. We ranked fifth among domestic manufacturers in China’s
mid- to high-end intelligent automotive vision industry and twelfth among all manufacturers in the
same industry. We ranked fourth among both domestic and all manufacturers in China’s LCD TV
backlight display industry. See “Industry Overview.”
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Leveraging our profound understanding of “LED+” technologies, we are committed to
expanding our market share with LED products with enhanced performance catering to the
evolving customer expectations. However, we operate in a highly competitive industry. Failure to
compete effectively could adversely affect our market share, growth and profitability. See “Risk
Factors — Risks Relating to Our Industry and Business — We face significant competition in the
industry in which we operate, and if we are unable to compete effectively, our results of operations
and financial condition may be materially and adversely affected.”
INTELLECTUAL PROPERTY
Our IP rights are key to our success and competitiveness. Our IP rights primarily consist of
patents, trademarks, domain names and layout-designs of ICs. As of the Latest Practicable Date,
we held 376 patents and 50 trademarks in various countries, of which 369 patents and 28
trademarks are registered in the PRC. In addition, as of the Latest Practicable Date, we had 156
applications for patents in the PRC, 16 domain names and four layout-designs of ICs. As of the
Latest Practicable Date, we also had certain in-licensed patents under three licensing agreements
with respect to (i) the white LED photoconversion technology primarily used in LED backlight
devices, (ii) the potassium fluorosilicate phosphor high color gamut white LED photoconversion
primarily used in LED backlight devices and modules, and (iii) the CASN phosphor technology
used in LED devices. We consider such in-licensed patents important to our business operations.
We also protect our IP rights through a series of confidentiality agreements or provisions with our
key employees.
We undertake a proactive approach to managing our IP portfolio. We designate dedicated
personnel to handle IP-related issues, whose daily work includes monitoring the application status
of IP rights and performing routine checks on the public trademark registration platform to prevent
and identify any third-party infringement of our IP rights. We have also engaged IP experts and
legal consultants to assist our IP rights protection.
We have implemented various measures to detect potential IP infringements, including market
visits by our sales team and hotlines to collect customer complaints and reports. After discovering
incidents of infringements, we will require infringers to stop producing and selling related
products by delivering notices with the support of our legal consultants, and file industrial and
commercial complaints and reports with regulatory authorities with the support of IP experts or
legal consultants, if needed.
During the Track Record Period and up to the Latest Practicable Date, we had not
experienced any threatened or pending disputes relating to the infringement of IP rights that
would have a material adverse effect on our business. See “Risk Factors — Risks Relating to
Our Industry and Business — We may infringe intellectual property rights of third parties,
which can lead us to time-consuming and costly intellectual property infringement claims” and
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“Risk Factors — Risks Relating to Our Industry and Business — We may not be able to
protect our intellectual property rights, and our ability to compete could be harmed if our
intellectual property rights are infringed by third parties.”
EMPLOYEES
As of May 31, 2024, we had 2,216 full-time employees, the majority of whom are based in
Guangzhou, China. The table below sets forth the number of our employees by function as of May
31, 2024:
As of May 31, 2024
Number of
employees
% of total
employees
Function
Production and supply chain management ................ 1,663 75.0
Product and process R&D ............................ 337 15.2
General and administration ........................... 131 5.9
Sales and marketing ................................ 85 3.8
Total ............................................ 2,216 100.0
We place great emphasis on attracting, retaining, training and developing qualified
employees. We recruited employees primarily through employment websites, on-campus
recruitment and internal referrals during the Track Record Period. Committed to providing fair and
equal opportunities to our employees, we formulated career development and promotion path plans
covering all levels of our staff and conduct performance evaluations regularly.
As part of our retention strategy, we offer competitive remuneration packages to employees,
including salary and allowances, performance-based bonuses and long-term incentive programs,
including but not limited to a employee stock ownership plan for managers, high-potential talent
and key technical professionals. We have established an annual review system to assess the
performance of employees, which forms the basis of our decisions with respect to salary increases
and promotions.
We emphasize the importance of training for our employees to enhance their technical skills
and overall performance. We provide induction training to new joiners on our culture, business and
industry to help them to fit in. We also provide tailored, continuing training sessions by internal
and external experts to employees to improve technical skills in their practice areas and
management skills training programs, including leadership training, to cadres in key positions.
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We enter into standard labor contracts with our employees and confidentiality and
noncompete agreements with key management and professionals.
During the Track Record Period, the total number of dispatched contract workers hired by
one of our subsidiaries exceeded 10% of its total number of employees, and it was not fully in
compliance with the relevant requirements on temporary, auxiliary and substitutable work. As of
the Latest Practicable Date, the subsidiary had proactively rectified such noncompliance incidents
by reducing the number of dispatched contract workers to below 10% and adjusting the positions
held by dispatched contract workers in compliance with the Labor Contract Law of the PRC and
the Interim Provisions on Labor Dispatch. The Interim Provisions provide that employers who
violate the relevant provisions of the Labor Contract Law and the Regulation on the
Implementation of the Labor Contract Law on labor dispatch shall be subject to the consequences
outlined in the Labor Contract Law. As stipulated by the Labor Contract Law, the employers who
fail to comply with the relevant requirements on labor dispatch shall be ordered by the labor
administrative authorities to make correction within a stipulated period. Where the necessary
correction is not made within the stipulated period, the employers may be subject to a penalty
ranging from RMB5,000 to RMB10,000 per dispatched worker exceeding the 10% threshold. See
“Risk Factors — Risks Relating to Our Industry and Business — We may be subject to fines or
other penalties under the PRC Labor Contract Law, which may adversely affect our business,
profitability and reputation.” Our PRC Legal Advisor is of the view that we will not be subject to
any fines in relation to such noncompliance as (i) an employer will only be fined when it fails to
rectify within the stipulated period, according to the provisions of the Labor Contract Law, and (ii)
the subsidiary made adequate rectifications in compliance with the Labor Contract Law and the
Interim Provisions, as of the Latest Practicable Date.
During the Track Record Period and up to the Latest Practicable Date, our social insurance
and housing provident fund contributions did not fully cover all of our employees in accordance
with relevant laws and regulations, because, among other factors, (i) some newly-employed staff
were in the process of social insurance and housing provident fund transfer, (ii) no contribution
was required for the retirees we re-employed, (iii) some employees have requested us not to
participate in certain contributions to social insurance and housing provident funds due to personal
reasons, and (iv) the implementation and interpretation of the relevant PRC laws and regulations
among different local government authorities vary. The shortfall amount of social insurance and
housing provident fund contributions is estimated to be RMB12.0 million, RMB16.3 million,
RMB18.6 million and RMB9.2 million in 2021, 2022, 2023 and the five months ended May 31,
2024, respectively. Pursuant to relevant PRC laws and regulations, if we fail to pay the full amount
of social insurance contributions as required within the stipulated period, we may be subject to
fines and late payments. See “Risk Factors — Risks Relating to Our Industry and Business — We
may be subject to additional contributions of social insurance premiums and housing provident
funds, and late payments and fines imposed by relevant governmental authorities.”
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We obtained credit reports from the provincial credit information platform (the unified
platform for credit information collection and query authorized by the government) and written
confirmation letters issued by the relevant competent social insurance and housing provident fund
authorities confirming that there is no record of any member of our Group being imposed
administrative disposition or penalties by the relevant authorities for violation of the laws and
regulations in relation to social insurance and housing provident fund contributions. Such written
confirmations covering the Company and all of our PRC subsidiaries were issued by (1) in respect
of social insurance: (i) Credit China (Guangdong), the provincial credit information platform (the
unified platform for credit information collection and query authorized by the government) on
November 21, 2023, February 22, 2024 and July 15, 2024, (ii) Ninghai Human Resources and
Social Security Bureau (ღ҅ ) on February 23, 2024, and (iii) Credit
China (Zhejiang), the provincial credit information platform, on June 28, 2024; and (2) in respect
of housing provident fund: (i) Credit China (Guangdong) on November 21, 2023, February 22,
2024 and July 15, 2024, and (ii) Ningbo Housing Provident Fund Management Center Ninghai
Branch (၍ଣʕːྐྵऎʱʕː ) on November 20, 2023 and February 27, 2024,
and (iii) Credit China (Zhejiang) on June 28, 2024.
In addition, with respect to social insurance, we obtained written confirmation letters issued
by the First Taxation Office of the Taxation Bureau of Nansha District (ה)
dated March 21, 2024 and Liyang Taxation Office of the Taxation Bureau of Ninghai County ( ྐྵऎ
הdated March 26, 2024, which confirm that no member of our Group had any
arrears. In terms of housing provident fund contributions, our PRC Legal Advisor confirmed with
Nansha Sub-center of the Guangzhou Municipal Housing Provident Fund Management Center ( ᄿ
Ӎʱʕː ) that it does not expect to initiate any proactive regulatory
actions on the overall contribution of employers, and we obtained written confirmation letter from
Ningbo Housing Provident Fund Management Center Ninghai Branch dated March 26, 2024,
confirming we were not subject to any retroactive contributions.
Pursuant to the Urgent Notice on Enforcing the Requirement of the General Meeting of the
State Council and Stabilizing the Levy of Social Insurance Payment (஫࿏ໝྼ਷ਕ৫੬ਕึ
 ) promulgated in September 2018 by the
Ministry of Human Resources and Social Security, administrative enforcement authorities are
prohibited from organizing and conducting centralized collection of enterprises’ historical social
insurance arrears. We undertake to make timely payments for the deficient amount and overdue
charges, as soon as requested by the competent government authorities.
Based on (i) the credit reports obtained from the provincial credit information platform and
the written confirmations from local social insurance and housing provident fund authorities as
stated above; (ii) the written confirmation letters from relevant tax authorities and housing
provident fund authorities stated above confirming no arrears or retroactive contributions; (iii)
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assessment of various factors including the nature and amount of the noncompliance; (iv) that as
of the Latest Practicable Date, we did not receive any notification from the relevant PRC
authorities alleging that we had not fully contributed to the social insurance premiums and housing
provident funds and demanding payment of the same before a stipulated deadline; and (v) that as
of the Latest Practicable Date, we were also not aware of any employee’s complaints or demands
for payment of social insurance premiums and housing provident fund contributions, nor had we
received any legal documentation from the labor arbitration tribunals or the PRC courts regarding
disputes in this regard, our PRC Legal Advisor is of the view that the risk of us being subject to
retroactive contributions by relevant authorities in relation to our social insurance and housing
provident fund contributions during the Track Record Period is remote.
In addition, as advised by our PRC Legal Advisor, (i) pursuant to the Social Insurance Law,
employers will only be subject to administrative penalties if they fail to rectify the noncompliance
and pay the required contributions within the stipulated deadline ordered by the social insurance
contributions collection institution, and (ii) that employers will be subject to enforcement, rather
than penalties, upon failure to make timely payments. Our PRC Legal Advisor is of the view that
we will not be subject to any penalties for failure to make timely payments of social insurance and
housing provident funds, as we undertook to make full contributions or pay any shortfall within a
prescribed time period if demanded by the relevant government authorities. Our PRC Legal
Advisor advised that (i) we have not been subject to any administrative penalty in relation to
social insurance and housing provident fund contributions during the Track Record Period, and (ii)
there was no pending litigation against us in relation to social insurance and housing provident
fund contributions as of the Latest Practicable Date. Therefore, the aforementioned issue does not
constitute a material legal obstacle for the Listing.
As such, our Directors are of the view that the abovementioned issues in relation to the
contributions of social insurance and housing provident funds would not have a material adverse
effect on our business, results of operations or financial condition and the risk for any relevant
competent authorities imposing administrative penalty or seeking recovery from the Company in
relation to any outstanding social insurance and housing provident fund contributions incurred
during the Track Record Period is low.
Going forward, we will review our social insurance and housing provident fund contributions
on a regular basis and will make social insurance and housing provident plan contributions in
accordance with applicable legal requirements. We have reviewed our practice and adopted or plan
to adopt the following measures to comply with the regulatory requirements:
 We enhanced our human resources management policies, which explicitly require social
insurance and housing provident fund contributions to be made in full in accordance
with applicable local requirements;
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 We adopted internal policies governing social insurance and housing provident fund
arrangements and contributions according to the requirements of the Labor Law of the
PRC and applicable regulations, for the purpose of monitoring and ensuring our
compliance with such laws and regulations;
 We designated our human resources department to review and monitor the reporting and
contributions of social insurance and housing provident fund on a monthly basis;
 We are in the process of communicating with our employees with a view to seek their
understanding and cooperation in complying with the applicable payment base, which
also requires additional contributions from our employees. Pursuant to notices issued by
the relevant government authorities, the adjustment of payment base is usually made in
a designated time each year and such times varies in different regions. Therefore, with
our employees’ understanding and cooperation, we aim to rectify such noncompliance
by 2025;
 Trainings will be provided to the relevant personnel of our human resources department
on the social insurance and housing provident fund contributions requirements under the
relevant PRC laws and regulations;
 We will consult our PRC legal counsel on a regular basis for advice on relevant PRC
laws and regulations to keep us abreast of relevant regulatory developments; and
 We will actively communicate with relevant social insurance and housing fund local
authorities to ensure we have the most updated information about the relevant laws and
regulations concerning social insurance and housing provident fund. If the relevant
authorities order us to pay the outstanding social insurance and/or housing provident
funds or take any rectification measures in accordance with applicable laws and
regulations, we undertake to make such payments or take such rectification measures
promptly within the specified period.
We believe that we generally maintain a good working relationship with our employees, and
save as disclosed in the prospectus, we did not experience any significant labor disputes or any
difficulty in recruiting staff for our operations during the Track Record Period. See “— Legal
Proceedings and Compliance — Legal Proceedings.”
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INSURANCE
As of the Latest Practicable Date, we believe that our insurance coverage is in line with the
industry practice and adequate to cover our key assets, facilities and liabilities, including but not
limited to property all risks insurance, comprehensive property insurance, safe production liability
insurance, employer liability insurance and cargo transportation insurance (cargo import and export
included). We procure insurance policies by type and amount that we consider sufficient and
evaluated such insurance policies from time to time based on past experience, changes in
production and industry developments. We are committed to minimizing the risks of product
liability claims and warranty claims through stringent quality control. However, we may not be
able to obtain/purchase adequate insurance for losses and liabilities arising from various
operational risks and hazards to which we are exposed. See “Risk Factors — Risks Relating to Our
Industry and Business — We may not have sufficient insurance to cover our business risks.”
OCCUPATIONAL HEALTH AND SAFETY
Internal Policies on Occupational Health and Safety
Our operations are subject to relevant laws and regulations relating to employees’ health and
safety. For example, in China, we are obligated to comply with a variety of regulatory
requirements related to workplace safety, such as the Work Safety Law of the Peoples’ Republic of
China (). To prevent and reduce risks that may cause workplace
damage to employees’ health or company property, we have formulated comprehensive internal
policies and measures on environmental, occupational health and safety according to ISO45001,
such as the performance monitoring and evaluation management procedures for environmental and
occupational health and safety, the environmental health and safety control management procedure
and the occupational health surveillance and file management system for workers. We passed the
certification review conducted by SGS for our occupational health and safety management system,
and thus continue to hold the certificate for the occupational health and safety management
system. We undertook self-assessments for the safety production standardization of enterprises as
required. During the Track Record Period, we did not have any significant accidents during our
operations, and we are not aware of any material personal or property damage claim related to
health and occupational safety.
We conduct prejob trainings, environmental safety trainings and a safety awareness test for
all new employees. Level III safety education is a key part of the induction process and new
employees must pass safety education training before they can begin working. All front-line
operation platforms are equipped with safety guidance, and all on-site operators are trained and
assessed at least once every six months. As of the Latest Practicable Date, we organized EHS
training for more than 4,500 person-times.
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Safety Management Measures
We instituted a dedicated safety management team, tasked with the crucial responsibility of
addressing production safety incidents and maintaining records. As of May 31, 2024, our safety
management team comprised eight members. The following is a list of key safety management
measures we implemented to reduce occupational risks and enhance workplace safety:
 Comprehensive work safety system . We have comprehensive safety management system
and safety operation procedures in place to satisfy applicable occupational health and
safety-related laws and regulations, as well as the relevant requirements of local
government regulatory departments. Investigations and management activities are
routinely conducted to identify potential hazards, and we implement risk management
and control measures at various levels.
 Work environment examination . We post occupational hazard notifications and warning
signs in the workplace, conduct annual tests on occupational hazards and engage
professional institutions on an annual basis to monitor and evaluate environment
indicators on wastewater, waste gas, noise, etc.. To ensure satisfactory implementation
of our work safety system, we conduct internal evaluations on the effect of occupational
hazard control every three years.
 Equipment inspection and upgrade. We actively introduce new equipment, processes and
materials, and improve existing equipment, processes and materials to reduce or
eliminate the impact of occupational hazards.
 Regular employee training . New employees are required to undergo the three-level
safety education training, and regularly organize trainings related to occupational health,
safety and personal protective equipment.
During the Track Record Period and up to the Latest Practicable Date, we did not have any
material incidents of work-related injuries or casualties or been penalized for any material
noncompliance relating to work safety laws and regulations.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Governance
We are committed to fostering enduring and positive impacts on the environmental, social
and governance (“ ESG”) aspects for our customers, suppliers, and the communities influenced by
our operations and are committed to operating our business in a lawful, ethical and responsible
way. Our management places significant emphasis on ESG issues and has established and enforced
pertinent operational mechanisms.
We believe that the development and execution of robust ESG principles and practices will
help in accomplishing our mission and strategic goals. We acknowledge that our business will be
affected by relevant environmental and social risks. Therefore, we have adopted comprehensive
ESG policies, the Board has clear roles and responsibilities for directly overseeing the Group’s
environmental, social and governance performance. Our Board and management are primarily in
charge of assessing and evaluating ESG and climate related risks and opportunities, as well as
reviewing existing strategies in order to monitor the ESG aspects in the day-to-day business
operations of our Group, including implementation of necessary measures to mitigate the potential
and relevant risks.
We established a set of internal policies with respect to ESG issues. For environmental
matters, we adopted comprehensive policies and procedures related to (i) conservation of energy,
(ii) carbon emission reduction, and (iii) treatment of exhaust gas, sewage and solid waste, among
other aspects. For social matters, we adopted policies related to (i) production safety, (ii) product
quality, (iii) employee health, promotion, compensation, benefits and training, and (iv) community
support, donation and volunteer services, among other aspects. For governance matters, we
adopted a comprehensive Code of Conduct that encompasses policies on conflict of interest,
anti-corruption, etc., and provided regular compliance training for employees to enhance internal
regulatory compliance and ethical business practices. We conduct periodic reviews to monitor our
compliance with the above policies and procedures.
We formulated a top-down regulatory enforcement mechanism for monitoring and enforcing
ESG-related objectives. Our Board reviews ESG and climate related matters, as well as the
progress of ESG-related goals at least once a year. Our management reviews the goals, sets and
implements policies for improving the Group’s performance regarding ESG and reports to our
Board. Our management established policies where various departments of the Group are assigned
with ESG-related tasks and responsibilities, including setting goals for reducing carbon emissions,
enhancing resource conservation and promoting environmental protection. Such policies are kept in
place to maximize the expertise of different departments for yielding the best results by various
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measures. Each department establishes a target implementation mechanism with respect to policy
implementation, sets up ESG work plans annually, formulates target responsibility statements,
designates relevant persons in charge, and reviews the assigned ESG-related tasks on a quarterly
basis.
Our Board is responsible for assessing the risks associated with ESG and climate change, and
provides guidance for the management to execute relevant ESG strategies and policies accordingly.
The management takes part in encouraging different departments to seek for improvements in ESG
strategies, in order to reduce the possible negative impacts on the business operation. The progress
of the execution of ESG policies, potential ESG risks that arise from the operation and other
material issues are reported to our Board by the relevant management and supervisors of the
departments on an annual basis or when necessary.
In addition, we will publish ESG report on an annual basis pursuant to the reporting
requirements under the Listing Rules. This will allow our Board to analyze and disclose important
ESG matters, risk management, accomplishment and performance of the objectives of the Group.
To ensure regular and effective communication between the Group and the major
stakeholders, such as investors, the government, the public and employees of the Group, our
management established various communication channels. Our management also ensures internal
communication within the Group amongst different departments as well as our Board through
Board meetings, investor meetings, monthly meetings, dedicated reports and social media
platforms. This allows our Board to evaluate and assess the effectiveness of the abovementioned
policies and measures, and to better manage ESG-related issues of the Group.
ESG Risk Management and Strategy
Material ESG-related issues assessment is a three-step process, including:
 Step 1. Identification of material issues
Based on the industry research, the materiality maps of MSCI and SASB and
comparative industry analysis, we identified a series of sustainability issues relevant to
our environment and social impact and performance.
 Step 2. Ranking of material issues
We prepared questionnaires to conduct the stakeholder survey, and we ranked the
material issues based on the survey results.
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 Step 3. Verification and establishment of materiality matrix
We collected and analyzed the survey results and assigned priority levels to the
identified issues based on their potential impact. This approach led to the creation of a
two-dimensional matrix that clearly demonstrates the importance of each issue to our
stakeholders as well as to the business. The results were reviewed by our management
and external experts.
These material issues have been thoroughly discussed and managed by the Board. The
table below sets forth the six material ESG-related issues we identified that have
significant impact on our business.
Material Issues Impact Period Potential Impacts and Our Strategies Targets
Occupational
Health and
Safety ......
Long-Term Injuries resulting from accidents, fatigue and improper
machinery operation could obstruct our operations to various
extents. Preserving the welfare of our workforce is the key to
our smooth operation. The Group implements an occupational
safety management system that meets ISO 45001:2018
requirements. We develop an annual work plan for
occupational safety and health, set annual safety management
objectives, and enhance our team’s health and efficiency
through the identification and mitigation of hazards,
emergency drills, safety training and health screening. During
the Track Record Period, we did not have any material
non-compliance issues with regard to occupational health and
safety. For further details related to our occupational health
and workplace safety, please see the paragraph headed
“Occupational Health and Safety” in this section.
We take the health and
safety of every employee
as our primary
responsibility, and we
strive to ensure that
there are no major safety
accidents (fatal
accidents) and no
personal safety accidents
with a direct economic
loss of RMB3,000 or
more.
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Material Issues Impact Period Potential Impacts and Our Strategies Targets
Information
Security .....
Long-Term The integrity of our core business and the protection of our
customers’ data are essential, as data leakage can lead to
time-consuming and costly consequences, resulting in
economic losses and diminished competitive edge for
enterprises. As of May 31, 2024, we did not suffer from any
financial losses as a result of leakage of confidential company
information or customer information. To prevent such
incidents, we formulated the Confidential Data Management
Regulations and Information System Disaster Recovery Plans
to reduce the risk of data leakage in the generation,
transmission, processing, storage and destruction of data, and
to ensure the confidentiality, integrity and availability of data.
We enter into confidentiality agreements with employees
handling sensitive information to ensure the security of
important company data.
We will strictly enforce the
Confidential Data
Management Regulations
and Information System
Disaster Recovery Plans
to prevent any leakage
of confidential company
information or customer
information.
Employees’
Remuneration
and Benefits ..
Long-Term Fair compensation is crucial for employee retention and
performance. In addition, a comprehensive benefits package is
crucial to boosting job satisfaction, supporting the well-being
of our employees, and enhancing our competitive edge. In
2021, 2022, 2023 and the five months ended May 31, 2024,
employee remuneration and benefits was RMB181 million,
RMB247 million, RMB274 million and RMB132 million,
respectively. We adhere to a detailed wage and benefits
management program to ensure the protection of employee
rights. We promulgated the Welfare and Remuneration
Management Regulations to establish a uniform welfare and
remuneration system to attract, motivate and retain the talents
required for the our business development, and to ensure the
compliance of benefits and remuneration payments. We will
continue to carry out welfare activities, including all kinds of
team building and recreational activities, to enhance the
cohesion of the workforce.
We will continue to
increase our investment
in employee benefits,
and we set a target of
investing more than
RMB5,000 per capita in
benefits each year.
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Material Issues Impact Period Potential Impacts and Our Strategies Targets
Energy
Consumption ..
Long-Term As a manufacturer of LED products, energy, especially
electricity, is critical to our ordinary production and
operations. Against the backdrop of China’s carbon neutrality
target and the policy of energy saving and emission reduction,
fossil energy sources, energy-consuming equipment and
high-carbon products are at risk of being phased out. If we do
not take proactive actions, we are likely to incur higher
compliance and operating costs and face policy, technical and
market risks. We actively increased the proportion of
renewable energy used in our operations. For example, we
leased our own rooftops to establish a photovoltaic power
station in 2022. In pursuit of minimizing energy consumption,
we advocate the development of high-efficiency LED products
to help our customers realize their energy-saving and
emission reduction commitments. We also reduce energy
consumption through strategic deployment of the Energy
Conservation and Consumption Reduction Management
System and the Implementation Rules.
We set an energy
consumption target to
reduce energy intensity
to 217.66 MWh/RMB
ten million revenue by
2025.
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Material Issues Impact Period Potential Impacts and Our Strategies Targets
Operational
Compliance ...
Long-Term Compliance with laws and regulations underpins our operations
and reputation. Risks of noncompliance include legal fines,
operational setbacks, and reputational damage, which can
affect our profits and market presence. In 2021, 2022, 2023
and the five months ended May 31, 2024, our financial
investment in meeting operational compliance requirements
was RMB334,507, RMB429,591.63, RMB442,604 and
RMB261,746, respectively, the cost of meeting operational
compliance includes but is not limited to the fee for disposal
of hazardous waste, protective equipment and fire
extinguishers. We established comprehensive procurement and
supplier management procedures as well as a supplier
admission and performance review system, giving preference
to suppliers with internationally recognized certifications,
requiring suppliers to comply with environmental protection
laws and purchasing materials in a responsible and sustainable
manner. We have a well-established product quality
management system that meets the requirements of IATF
16949:2016 and ISO9001:2015. We also provide training on
product quality control and management to enhance
employees’ awareness of compliance. During the Track
Record Period, we did not have any material non-compliances
with ESG laws and regulations.
We strictly comply with
environmental and social
related laws and
regulations of the PRC
to ensure that:
 No breaches of the
laws at the operational
level and no penalties
imposed by regulatory
authorities.
 There are no negative
news exposures
throughout the year.
Waste
Management ..
Long-Term Solid waste are environmental pollutants that we generate
during our operations. If we do not dispose of them properly,
it may result in environmental violations and negative impacts
on the environment. In 2021, 2022, 2023 and the five months
ended May 31, 2024, our investment in waste treatment and
measures to reduce waste generation was RMB93,180,
RMB143,412, RMB191,064 and RMB66,290, respectively. We
strictly comply with the “Solid Waste Pollution Prevention
and Control Law of the People’s Republic of China.”
Internally, we have waste management procedures in place to
ensure responsible disposal of hazardous and non-hazardous
waste. On the non-hazardous waste side, we are committed to
minimizing the generation of such waste and enhancing waste
resource utilization through better inventory management and
avoiding overstocking. On the hazardous waste side, we
engage certified third parties to collect and process.
We set a waste reduction
target to reduce waste
generation intensity to
4.43 tonnes/RMB ten
million revenue by 2025.
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For more details related to the overall risk management and internal control framework,
policies, procedures and measures, please see the section headed “Risk Management and Internal
Control.”
Environmental Protection
Responsible environmental management can lead to economic and environmental coexistence.
We have been complying with the relevant laws and regulations of the country and formulated our
internal environmental management documents based thereon, so as to carry out environmental
management more efficiently and achieve sustainable development. The main laws and regulations
that we abide by include, but are not limited to, the Constitution of the People’s Republic of
China, the Environmental Protection Law of the People’s Republic of China, the Law of the
People’s Republic of China on the Prevention and Control of Atmospheric Pollution, the Water
Pollution Prevention and Control Law of the People’s Republic of China and the Law of the
People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid
Waste.
Our production bases have established and implemented an environmental management
system that meets the requirements of ISO 14001:2015 with certification by a third-party. In order
to improve the level of environmental management, we establish an annual environmental
management program that specifies objectives, measures, budgets, executive departments and
responsible persons for important environmental issues and conducts regular review to monitor the
progress of the program.
As LED products offer higher energy efficiency and longer life span, the development of
LED products and technologies are strongly supported and encouraged by national energy-saving
policies. Since the inception of the Company, we have been dedicated to the R&D of LED
products to improve luminous efficacy, product reliability and stability. This dedication not only
serves to improve our product qualities, but also reflects our strong commitment to environmental
protection. Compared with T8 tubes, the saved electricity consumption of LED products we sold in
2021, 2022, 2023 and the five months ended May 31, 2024 were 15,501.77 million kWh, 7,075.84
million kWh, 6,306.28 million kWh and 2,570.50 million kWh, respectively. The corresponding
CO
2 emission reductions were 8,840.66 thousand tons, 4,035.35 thousand tons, 3,596.47 thousand
tons and 1,465.96 thousand tons.
Our manufacturing processes for LED products generate (i) exhaust gas, sewage and solid
waste that if left untreated would have a negative impact on the environment, and (ii) greenhouse
gas that may lead to climate-related risks. We are committed to sustainability and environmental
protection as we pursue revenue growth and production expansion.
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Metrics and Targets
We monitor the following metrics to assess and manage the environmental and climate-related
risks arising from our manufacturing processes:
Climate Change
Global warming poses a wide range of risks to business operations. We actively identify and
monitor climate-related risks and opportunities that may affect our business, strategy and financial
performance.
For climate-related physical risks, increased severity of extreme weather due to climate
change may cause delay in project planning authorization and implementation, transportation
difficulties, supply chain disruptions and negative impacts on workforce, which may result in
reduction in our production capacity. Two of our three production bases are located in coastal area
which may be vulnerable during extreme weather events. We have developed crisis and emergency
management plans to address the increased severity of extreme weather events driven by climate
change, thereby reinforcing our operational resilience and commitment to employee health and
safety. Furthermore, we closely monitor daily observatory predictions and will promptly notify our
employees and other personnel of any related measures in case of extreme weather.
For climate-related transition risks, one of the transition risks is the growing trend for
switching to lower-emissions technologies which requires us to increase capital expenditure on
low-carbon technologies and product investment. Besides, with evolving policies and regulations,
we may be exposed to litigation risks if we fail to address climate change and comply with the
relevant policies or regulations. These risks could lead to increased capital expenditures due to the
need to construct new facilities and purchase energy-saving equipment, as well as to conduct
training on policies and regulations. We will continue to pay attention to national and industry
policies as well as consumer preferences, and will adjust our product strategy to cope with the
potential transition risks.
For climate-related opportunities, we have observed an increasing demand from customers
and a growing regulatory emphasis on the transition to low-carbon products. All our LED products
are low carbon emission products and we will seize the opportunity to develop and expand low
emission product portfolio. We have increased our R&D investment in more energy-efficient and
intelligent products. We are committed to strategically updating our existing products and services
to ensure that our business is adaptable to this changing legal and market environment while
minimizing our environmental impact.
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The capital expenditures on climate-related risks include investment in energy efficient
equipment and renewable energy, as well as operating costs for asset repairs and inventory
replacement, etc. The capital expenditures on climate-related opportunities mainly include research
and development expenses on low-carbon products. In 2021, 2022, 2023 and the five months
ended May 31, 2024, our capital expenditures on climate-related risks and opportunities was
RMB24.60 million, RMB22.80 million, RMB31.02 million and RMB13.02 million, respectively.
Under our ESG policy, we have set our goals to optimize our energy utilization and support
the national “30-60” carbon peak and neutrality targets to reduce the GHG Emissions. The
following table sets forth our greenhouse gas emissions in 2021, 2022, 2023 and the five months
ended May 31, 2024, respectively:
GHG Emissions 2021 2022 2023
Five months
ended May 31,
2024
Total GHG Emissions (tonnes CO 2
equivalent) ................... 19,323 21,800 22,651 9,746
Scope 1 — Direct GHG Emission
(tonnes CO 2 equivalent) ........ 59 44 115 19
Scope 2 — Indirect Energy
Emission (tonnes CO 2
equivalent) .................. 19,072 21,586 22,284 9,606
Scope 3 — Other Indirect Emission
(tonnes CO 2 equivalent) ........ 192 170 252 121
Notes:
1. The calculation scope of greenhouse gas emissions (Scope 1) includes the refrigeration use in air-conditioning
equipment, the trees planted and fuel use of vehicles.
2. The calculation scope of greenhouse gas emissions (Scope 2) includes the indirect emission caused in the
production process through purchased electricity.
3. The calculation scope of greenhouse gas emissions (Scope 3) includes the emissions generated from the business air
travel, treatment of waste paper and electricity used for fresh water and sewage processing.
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Resource consumption
 Electricity consumption. We monitor our electricity consumption levels at the production
bases and implement measures such as increasing the use of solar power and equipment
modifications to improve energy efficiency. In 2021, 2022, 2023 and the five months ended
May 31, 2024, our electricity consumption levels were 34.132 million kWh, 38.578 million
kWh, 40.022 million kWh and 17.252 million kWh, respectively. We have set an energy
consumption target to reduce energy intensity to 217.66 MWh/RMB ten million revenue by
2025.
 Water consumption. We monitor our water consumption levels at the production bases and
implement measures such as recycling of water for all equipment and promoting water
conservation among employees. In 2021, 2022, 2023 and the five months ended May 31,
2024, our water consumption levels were 214.315 thousand tons, 188.961 thousand tons,
173.254 thousand tons and 80.491 thousand tons, respectively. We have set it as our target to
strengthen the promotion of water-saving measures and reduce water consumption.
Pollutant management
 Exhaust gas discharge. We monitor our exhaust gas discharge levels on a periodic basis. In
2021, 2022, 2023 and the five months ended May 31, 2024, our exhaust gas discharge levels
were 4.83 tons, 4.63 tons, 3.94 tons and 2.03 tons, respectively, and such exhaust gas was
properly treated prior to discharge.
 Sewage discharge. We monitor our sewage discharge levels on a periodic basis. In 2021,
2022, 2023 and the five months ended May 31, 2024, our sewage discharge levels were
192.88 thousand tons, 170.06 thousand tons, 155.58 thousand tons and 67.85 thousand tons,
respectively, and such sewage was properly treated prior to discharge. We have set it as our
target to discharge and manage sewage in compliance with national and local regulations.
 Hazardous waste discharge. We monitor our hazardous waste discharge levels on a periodic
basis. In 2021, 2022, 2023 and the five months ended May 31, 2024, our hazardous waste
discharge levels were 18.66 tons, 26.24 tons, 45.76 tons and 19.09 tons, respectively, and
such waste was disposed of by qualified third parties. We have set a waste reduction target to
reduce waste generation intensity to 4.43 tonnes/RMB ten million revenue by 2025.
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Energy Conservation Initiatives
We actively engage in energy conservation initiatives as part of our commitment to
contributing to societal environmental preservation efforts:
Streetlight refurbishment projects under the Energy Management contract Model
We have undertaken two streetlight renovation projects under the energy management
contract model since 2013, being (i) the energy-saving refurbishment project of municipal roads in
Nansha District, Guangzhou, and (ii) the streetlight refurbishment project of Jingang Avenue and
Gangqian Avenue of Nansha District.
Under the energy management contract model, we supply LED streetlights, with a total
number of 1,721 units that include lighting fixtures, smart electronic ballasts, and high-luminous
light sources to facilitate the realization of our customers’ energy-saving goals. Revenue is
regularly recognized over a ten-year period based on the energy saved.
Solar Rooftop Leasing
To support the implementation of national policies related to energy conservation, emission
reduction, and carbon neutrality, we leased our own rooftops in 2022 to establish a distributed
photovoltaic power station with an expected installed capacity of 1.1MW (1.1 megawatts), and it
features approximately 1,970 crystalline silicon solar panels. The duration of the lease agreement
is 20 years, throughout which we enjoy the benefit of availing electricity at reduced rates.
Air-conditioner Replacements
To further promote energy conservation, we embraced the “Air Conditioner Energy-Saving
Solution”, which upgrade air-conditioners and develop digital automated control systems. This
innovative approach not only enhances air conditioning efficiency but also contributes significantly
to the overall energy reduction strategy. The average annual electricity consumption decreased
from 3.73 million kWh into the current 2.74 million kWh.
Social Responsibility
Labor Practice
We commits to promoting fairness and equality in the workplace and adheres to a policy of
transparency and fairness in recruitment and promotion, ensuring that all employees are provided
with equal opportunities in matters including recruitment, promotion, welfare protection, and
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career development. Our employment procedures prohibit hiring individuals under sixteen and
ensure strict age checks during recruitment to prevent child labor. Special provisions during
pregnancy and postnatal periods, with restrictions on heavy labor, overtime, and allowances for
breastfeeding.
Employee Information
Number of Employees 2021 2022 2023
Five months
ended May 31,
2024
Total .......................... 1,727 1,697 1,915 2,216
By Gender
Male ........................ 1,004 938 1,044 1,228
Female ...................... 723 759 871 988
By Employment Type
Permanent .................... 1,282 1,507 1,740 2,097
Temporary .................... 445 190 175 119
By Age Group
Aged Below 30 ................ 964 722 765 908
Aged 30 to 50 ................. 749 955 1,129 1,283
Aged Above 50 ................ 14 20 21 25
By geographical region
PRC ......................... 1,719 1,689 1,907 2,208
Hong Kong ................... 8888
Employee Turnover Rate 2021 2022 2023
Five months
ended May 31,
2024
Total .......................... 55% 58% 30% 22%
By Gender
Male ........................ 57% 66% 31% 26%
Female ...................... 52% 49% 29% 18%
By Age Group
Aged below 30 ................ 64% 87% 44% 33%
Aged 30 to 50 ................ 45% 31% 21% 15%
Aged above 50 ................ 9% 18% 15% 17%
By Geographical Region
PRC ........................ 55% 59% 30% 22%
Hong Kong ................... 0% 0% 0% 0%
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Employees’ Remuneration and Benefits
We have established a wage and benefits management procedure to ensure the protection of
employee rights. Employee benefits are mainly comprised of statutory benefits and company
benefits, covering social insurance, paid annual leave, statutory holidays, holiday and birthday
benefits, travelling leave and medical check-up benefits. We will adjust the welfare structure based
on the operating results and the market welfare level so as to ensure the stability of existing
employees and employee engagement. We have also compiled a union management system to
regulate the reasonable use of union funds, devised a list of union-related benefits, and a schedule
of activities to promote the physical and mental well-being of employees.
Product Responsibility
Ensuring excellence in products stands at the forefront of our commitment. We have
established a comprehensive quality management system to maintain rigorous testing of products
before market release, and we also enforce a strict quality control policy, detailed in procedures for
incoming inspection management, in-process inspection management and finished product
inspection management. We have attained certification in health, safety and service management
systems which include, but are not limited to IATF16949:2016 and ISO9001:2015, reflecting our
dedication to high quality standards. During the Track Record Period, there were no product
recalls due to safety and health reasons, and there were no material complaints related to product
quality.
Data Security and Privacy Protection
We communicate to our employees about the handling of customer information, ensuring that
access to such information is granted only under sufficiently justifiable reasons. Policies such as
Data Confidentiality Management Regulation, and the Disaster Recovery Plan, are in place to
secure the company’s computer databases and safeguard customer information.
For the protection of employee and job applicant data, we strictly enforce the internal Data
Confidentiality Management Regulation, ensuring all personal data is respected and secured.
Access to restricted areas, such as financial offices, is prohibited for unauthorized individuals,
reinforcing the protection of employee salaries and other confidential information.
Operational Compliance
In the pursuit of upholding the highest standards of ethical conduct and integrity in the
operations, we have established a comprehensive Code of Conduct that encompasses policies on
conflict of interest, confidentiality, bribery, anti-corruption, and equal opportunity. All violations of
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the Code of Conduct and Business Ethics will be addressed and could lead to termination of the
business relationship or employment. To reinforce the principles stated, we have developed an
anti-corruption policy and implemented a reporting system to allow for the confidential submission
of any instances of perceived or potential misconduct. We have established different reporting
channels, including reporting hotline and email, as well as suggestion box, etc. We encourage
employees and relevant parties to report any internal violations of discipline or law, fraud and
behaviors that damage the Group’s interests and image, in an orderly manner. In addition, we
conduct anti-corruption training for new employees, introducing the Code of Conduct and
anti-corruption laws and regulations to raise their awareness of anti-corruption.
Supply Chain Management
We establish a clear supplier recruitment process and stringent supplier risk management
process, with potential suppliers being evaluated on factors including but not limited to product
quality, delivery, working capacity, and compliance, also emphasizing the selection of suppliers
with internationally acknowledged certifications in environmental and social risk management.
Suppliers with energy and environmental management certifications, such as ISO 50001 and ISO
14001, are given preference, reinforcing our commitment to sustainability. We also monitor
suppliers through questionnaires and inspection of relevant records on-site when necessary to
ensure that our suppliers use environmentally-friendly materials and processes. Local sourcing is
preferred to decrease transportation emissions, and supplier engagement and training programs
reinforce our commitment to environmental and social responsibility.
In 2021, 2022, 2023 and the five months ended May 31, 2024, our local suppliers amounted
to 197, 235, 295 and 306, respectively, and overseas suppliers amounted to three, three, five and
six, respectively.
Contribution to Community
We endeavor to undertake our responsibilities as a corporate entity in the society and our
communities. We actively participate in social activities encompassing a range of short-term and
long-term projects executed in collaboration with local communities and nonprofit organizations.
In July 2021, we donated RMB165,000 to Guangzhou Nansha Charity Association (Ӎਜ
ฉഛึ) as a poverty alleviation initiative. During the COVID-19 pandemic in 2022, we
volunteered to provide services such as conducting nucleic acid testing and distributing
anti-epidemic supplies in our neighborhoods. We signed up for the Nansha Fun Sports Meeting (ی
Ӎ൑༸Άุሳբ༶ਗึ ) in April 2023 to encourage our employees to exercise for health, while
also supporting our social welfare undertakings. In June 2023, we raised supplies for the Caring
Market instituted by the “Gulf Community and Party Partners Project (ਜᙣ໊Υྫɛධͦ )”
to promote the harmonious development of the community and assume corporate social
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responsibility. In December 2023, we donated HK$1.0 million to the Federation of Hong Kong
And Guangzhou Associations Charitable Fund (ږand RMB100,000 to
the earthquake-stricken areas in Gansu Province.
Industry Social or Policy Trends
Tightening Reporting Obligation on ESG
As standards of regulatory requirements for ESG and climate related issues evolve, we expect
that new regulatory requirements on ESG matters will raise our operational and compliance costs.
As a solution provider of LED intelligent vision products and systems, we anticipate that the
energy saving standards in the PRC will become stricter and the climate-related disclosures aligned
with the Task Force on Climate-Related Financial Disclosures (TCFD) will be compulsory after
listing, which will increase our costs for meeting the new standards. Under the backdrop of the
PRC’s commitments to reach peak carbon emissions and carbon neutrality, we noticed the
prevailing customer preference for products and companies that are more eco-friendly and have
sustainable business operations. Therefore, it is essential that we incorporate sustainability into our
business operations and enhance our investment in clean technology in order to retain our
customer base, uphold our competitive advantage and effectively deal with the transitional risks.
Investing in energy-efficient equipment and spending on technology development may also lead to
higher capital costs. The transitional risks may also lead to an increase in cost and expenditure on
the R&D of clean technology as well as a potential reduction in revenue due to changes we made.
To mitigate such risks, we have set up an ESG governance structure to comply with regulatory
requirements and conducted an internal evaluation to measure costs in relation to ESG matters
material to us. This ESG governance structure diligently tracks the most recent ESG-related laws
and regulations, updating our ESG initiatives as necessary to ensure compliance with the latest
regulatory laws and regulations.
Shift in Customer Preference
We have observed an increasing demand from customers and a growing regulatory emphasis
on the transition to sustainable products.
To cater to the shift in customer preference, we increased our R&D investment in more
energy-efficient and intelligent products, thereby enhancing photovoltaic conversion efficiency and
satisfying the growing demand for a more intelligent product experience. In 2021, 2022, 2023 and
the five months ended May 31, 2024, our R&D investments in energy-efficient products totaled
RMB24.6 million, RMB22.8 million, RMB30.4 million and RMB13.0 million, respectively, while
investments in intelligent products amounted to RMB36.9 million, RMB47.1 million, RMB50.3
million and RMB31.9 million.
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We continue to enhance the photoelectric conversion efficiency of our energy-efficient
products through technological innovation and product design, thereby reducing power
consumption. For example, our flagship energy-efficient product, the high-end LED device “3030”,
consumes less power while maintaining the same brightness, thereby offering customers greater
energy saving.
Parameters
Average LED
Products
LED device
“3030”
LED device luminous efficiency (Lm/W) ................ 160 240
LED luminous efficiency (Lm/W) ...................... 112 168
LED luminaire brightness (Lm) ........................ 1,750 1,750
Power (W) ....................................... 15.6 10.4
As living standards improve, customer demand for intelligent product experience gradually
increased. We keep increasing our investment in intelligent products. For example, our intelligent
high-pixel ADB headlamps enable a longer illumination distance. They also feature intelligent
anti-glare and cornering lamp functions, facilitating the drivers’ prompt detection of nearby objects
and enhancing safety. With the increasing customer demand for intelligent product experience,
intelligent ADB headlamps will gradually achieve market penetration in the next few years.
PROPERTIES
We own and lease properties in China. As of the Latest Practicable Date, all of our
production bases were located in China. Our corporate headquarters are located in Guangzhou,
China.
As of the Latest Practicable Date, none of the properties held or leased by us had a carrying
amount of 15% or more of our consolidated total assets. According to section 6(2) of the
Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice,
this document is 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.
Owned Properties
As of the Latest Practicable Date, we owned three parcels of land with an aggregate site area
of approximately 217,818 sq.m. and 21 properties with a total aggregate gross floor area of
approximately 103,576.1 sq.m. in China, which were primarily used for production, warehousing
and office purposes.
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As of the Latest Practicable Date, we did not obtain the real estate certificates for eight
properties with a total aggregate gross floor area of approximately 29,788.6 sq.m. We did not
obtain the real estate certificate for one land parcel with a total site area of approximately 137,741
sq.m. These properties and land parcel have not been involved in any disputes, arbitrations or
litigations over ownership. As of May 31, 2024:
i. we did not obtain real estate certificates for one land parcel and the six properties on
this land parcel we used for the Lynway Ningbo production base.
Among the above-mentioned six properties, four properties with a total gross floor area
of approximately 29,354.1 sq.m. obtained construction completion and acceptance as
confirmed by Ninghai Natural Resources and Planning Bureau ( ྐྵऎጤІ್༟๕ձ஝ྌ
҅). We completed part of the construction of the Lynway Ningbo production base as
stipulated in the investment contract with the Management Committee of Ninghai
Economic Development Zone (ึ ). According to the written
confirmation issued by Ninghai Natural Resources and Planning Bureau, we may apply
for the real estate certificate in accordance with relevant laws and regulations after
completing the construction of all planned buildings as stipulated in the investment
contract, and completing procedures such as joint acceptance and preparing necessary
materials for the certificate. Based on the confirmation above, our PRC Legal Advisor is
of the view that there is no material legal impediment for us to obtain the real estate
certificates provided that we complete the construction of all planned buildings as
stipulated in the investment contract, and procedures such as joint acceptance and
preparing necessary materials for the real estate certificates are completed.
Among the above-mentioned six properties, two properties are temporary structures used
for temporary canteen and smoking booth with a gross floor area of 295.6 sq.m. and
45.0 sq.m., respectively. As we did not obtain the planning and construction permits for
the construction or the acceptance of the construction, according to our PRC Legal
Advisor, we may be subject to monetary penalties or be ordered to demolish the
structures. We obtained a written confirmation issued by the Management Committee of
Ningbo Southern Binhai Economic Development Zone (௅Ᏽऎ຾᏶ක೯ਜ၍։
ึ) and the People’s Government of Chayuan Township, Ninghai County ( ྐྵऎጤ঩৫ඊ
ִ݁confirming that such temporary structures could be retained temporarily and
shall be demolished once the building for R&D (one of the planned buildings stipulated
in the investment contract) is completed and put into use, and that the demolition shall
be no later than December 31, 2025. We also obtained written confirmations from the
Ninghai Municipal Bureau of Housing and Urban-Rural Development (۬
ண҅) and the Ninghai Natural Resources and Planning Bureau confirming that we
were not subject to any administrative penalty due to violation of any law and
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regulation regarding housing and urban-rural development and land management. We
believe that the defects of such owned property would not materially and adversely
affect our business, results of operations or financial condition even if we were ordered
to demolish the structure, primarily because: (i) the two temporary structures are used
for auxiliary purposes and not for production purposes and (ii) the book value of the
two temporary structures is relatively low, amounting to approximately RMB0.3 million
in total, and the gross floor area of the two temporary structures represents a minor
percentage of the total gross floor area of our owned properties. Based on the written
confirmations above, our PRC Legal Advisor is of the view that prior to December 31,
2025 the risk of us being subject to penalties or administrative measures with respect to
our failure to obtain the relevant permits is remote.
ii. we did not obtain real estate certificates for the two properties we owned and used for
auxiliary purpose as guardrooms in Nansha District, Guangzhou. The two properties
with a total gross floor area of 93.9 sq.m. obtained construction completion and
acceptance as confirmed by the Administrative Examination and Approval Bureau of
Nansha District, Guangzhou (ᄲҭ҅ ). According to the written
confirmation issued by Nansha District Branch of Guangzhou Municipal Bureau of
Planning and Natural Resources (Ӎਜʱ҅ ), we were not in
violation of laws and regulations in terms of land transfer, real estate registration and
construction application. We believe that the defects of such owned properties would not
materially and adversely affect our business, results of operations or financial condition
even if we were ordered to demolish the buildings, primarily because: (i) the properties
are used for auxiliary purpose as guardrooms and not for production purpose and (ii) the
book value of the properties is relatively low, and the gross floor area of the properties
represents a minor percentage of the total gross floor area of our owned properties.
Based on the communication and written confirmation above, our PRC Legal Advisor is
of the view that the risk of us being subject to penalties or administrative measures with
respect to our failure to obtain the relevant real estate certificates is remote.
Leased Properties
As of the Latest Practicable Date, we leased 19 properties in the PRC, which were primarily
used for office and dormitory purposes.
As of the Latest Practicable Date, among our 19 leased properties, eight lessors failed to
provide us with their real estate ownership certificates or proof of authorizations from the property
owners. These properties were used for employee dormitories. We believe that the reasons that the
lessors failed to provide us with the relevant real estate ownership certificates or proof of
authorizations are beyond our control. As advised by our PRC Legal Advisor, without valid real
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estate ownership certificates or proof of authorizations from the property owners, our use of these
leased properties may not be valid. In addition, if the lessors do not have the requisite rights to
lease these properties, we may be required to vacate these leased properties and relocate our
employee dormitories. As advised by our PRC Legal Advisor, in case any such lease is deemed
void and we are required to relocate, we are entitled to demand the applicable lessor to return
prepaid rent and indemnify us for damages caused by the title defect. In the unlikely event that we
are required to relocate due to such title defects, we believe we will be able to easily find
alternative properties. In the event that we are required to relocate from the leased properties, we
expect that the relocation cost will be less than RMB0.1 million.
Potential Legal Consequences
According to the Urban and Rural Planning Law of the PRC, in the event that a construction
project proceeds without securing the requisite planning permit, yet the potential exists for
remedial action to negate any adverse effects on the execution of the plan, such rectification must
be effected within a designated timeframe. A penalty ranging from a minimum of 5% to a
maximum of 10% of the cost of the construction project shall be imposed. Should it prove
impracticable to implement corrective measures to mitigate the impact, the construction must be
dismantled within a stipulated period. In circumstances where dismantlement is unfeasible, the
property or any unlawful gains shall be seized. A penalty not exceeding 10% of the cost of the
construction project may be applied concurrently. Should a construction entity undertake temporary
construction without the requisite approval, or fail to dismantle the temporary buildings and
structures subsequent to the expiration of the approved duration, the local urban and rural planning
department is mandated to issue a demolition order to be executed within a specified timeframe. A
penalty up to an amount equivalent to the cost of the temporary construction project can be
imposed. According to the Measures for the Administration of Construction Permits for
Construction Projects, should a construction permit not be secured, the relevant issuing authority is
obliged to issue a cessation order on the construction activities. The construction entity must then
rectify the situation within a prescribed period, and the authority is entitled to impose a penalty
ranging from 1% to 2% of the project’s contracted price. Furthermore, pursuant to the Regulation
on the Quality Management of Construction Projects, should a construction entity fail to conduct
the requisite completion and acceptance procedures for a construction project and proceed to
deliver, it shall undertake corrective measures. A penalty ranging from 2% to 4% of the project’s
contracted price shall be imposed, and compensations shall be made if there were any losses.
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In terms of the two temporary structures used for auxiliary purposes at our Lynway Ningbo
production base, we obtained a written confirmation issued by the Management Committee of
Ningbo Southern Binhai Economic Development Zone and the People’ Government of Chayuan
Township, Ninghai County, confirming that such temporary structures could be retained
temporarily and shall be demolished once the building for R&D (one of the planned buildings
stipulated in the investment contract) is completed and put into use, and that the demolition shall
be no later than December 31, 2025. Our PRC Legal Advisor is of the view that prior to December
31, 2025, the risk of us being subject to penalties or administrative measures with respect to our
failure to obtain the relevant permits is remote, and the maximum aggregate amount of potential
penalties for such noncompliance is approximately less than RMB0.5 million.
In terms of the leased properties for which eight lessors failed to provide us with their real
estate ownership certificates or proof of authorizations from the property owners, our PRC Legal
Advisor is of the view, and the Sole Sponsor concurs that we, as the tenant, will not be subject to
any administrative punishment or penalties from the real estate authorities in this regard.
Our PRC legal Adviser is of the view, and the Sole Sponsor concurs that the Group has taken
all practicable and reasonable steps to rectify the title defects of the relevant owned and leased
properties.
As advised by our PRC Legal Advisor, since we do not fall within the high fire risk category
according to the Implementation Measures for the Fire Safety Responsibility System, the
establishment of a fire safety assessment mechanism is not required, and the Sole Sponsor concurs
such view. During the Track Record Period, we did not engage any third party consultant to
inspect and evaluate the fire safety risks of the properties with title defects. During the Track
Record Period and up to the Latest Practicable Date, we had not been subject to any administrative
penalties with respect to fire safety in relation to the above mentioned two temporary structures
used for auxiliary purposes at our Lynway Ningbo production base and the leased properties for
which eight lessors failed to provide us with their real estate ownership certificates or proof of
authorizations from the property owners.
LICENSES, APPROV ALS AND PERMITS
As advised by our PRC Legal Advisor, as of the Latest Practicable Date, we had obtained all
requisite certificates, licenses, permits and approvals from the relevant authorities that are material
for our operations in the PRC and such certificates, licenses, permits and approvals are valid and
effective.
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LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
We may from time to time become a party to various litigation, arbitration or administrative
proceedings arising in the ordinary course of our business. See “Risk Factors — Risks Relating to
Our Industry and Business — We may be subject to complaints, disputes and lawsuits in the
ordinary course of our business.”
In 2022, a former employee with Lynway Vision lodged a labor arbitration case with the local
labor arbitration committee against Lynway Vision, demanding payment of unpaid annual bonus,
equity incentive compensation, wages, compensation for arrears of wages and economic
compensation for arrears of wages, amounting to approximately RMB5.0 million. In 2023, the
arbitration committee issued an arbitral decision dismissing all these claims. Subsequently, the
plaintiff brought a lawsuit to the local people’s court. In January 2024, the court ordered the
subsidiary to pay the plaintiff a pre-tax total of approximately RMB4.1 million, covering the
annual bonus and equity incentive compensation. As of December 31, 2023, we had made
provisions of RMB4.1 million for such judgment. We appealed with the appellate court in January
2024. The court conducted a trial in March 2024 and rejected our appeal in April 2024. We made
the payment in accordance with the judgment in May 2024.
Our Directors and our PRC Legal Advisor are of the view that the above-mentioned litigation
would not have a material impact on our operations or financial conditions, since the monetary
amount involved in the litigation was relatively small.
To the knowledge of our Directors, there was no litigation, arbitration or administrative
proceeding pending or threatened against us or any of our Directors that could cause a material
and adverse effect on our business, financial conditions or results of operations during the Track
Record Period and up to the Latest Practicable Date.
Compliance
During the Track Record Period and up to the Latest Practicable Date, we had not been and
were not involved in any material incidents of noncompliance. Our Directors are of the view that
we had complied, in all material respects, with all relevant laws and regulations in China during
the Track Record Period and up to the Latest Practicable Date.
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RISK MANAGEMENT AND INTERNAL CONTROL
We have formulated and implemented comprehensive risk management and internal control
policies that span various aspects of our business operations to oversee and address a spectrum of
operational, financial, legal and market risks that may be or have been identified in connection
with our operations. These comprehensive risk management and internal control are supported by
our specific monitoring and reporting procedures and systems as outlined in the relevant policies.
Our Board bears the responsibility for overseeing our overall risk management, ensuring that our
risk management policies are not only implemented but also regularly reviewed and updated to
reflect the changing business environment.
We established a dedicated risk management and internal control team which takes
responsibility for establishing risk management and internal control policies, conducting internal
audit, providing internal control consultation and guiding any rectification.
Business Operational Risk Management
We have established a series of internal procedures to manage business operational risks
including risks related to incomplete or problematic internal processes, personnel mistakes, IT
system failures and external events. We take a comprehensive approach to operational risk
management and implement a mechanism with detailed and decentralized responsibilities, clear
rewards and penalty systems. Our business operations, finance, IT and human resources
departments are collectively responsible in ensuring that our business operations comply and
conform with internal procedures. On the occurrence of a major adverse event the matter will be
escalated to our senior management and the Board of Directors may need to take appropriate
measures. Through effective business operational risk management, we expect to control
operational risks within a reasonable range by identifying, measuring, monitoring and containing
operational risks to reduce potential losses.
Financial Reporting Risk Management
We have in place a set of accounting policies in connection with our financial reporting risk
management including financial report management policies, budget management policies,
financial statements preparation policies and financial department and staff management policies.
We have various procedures in place to implement accounting policies and our financial
department reviews our management accounts based on such procedures. We also provide regular
training to our financial department staff to ensure that they understand financial management and
accounting policies and implement them in our daily operations. As of May 31, 2024, our finance
department comprised 23 employees.
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Intellectual Property Risk Management
See “— Intellectual Property.”
Human Resources Risk Management
We provide regular and specialized training tailored to the needs of our employees in
different departments. Our human resources department regularly organizes internal training
sessions conducted by internal or external experts on topics of interest. Our human resource
department schedules online training sessions, reviews the content of the training programs and
follows up with employees to evaluate the impact of such training. Through these trainings, we
ensure that our staff’s skill sets remain up-to-date, enabling them to better discover and meet
consumers’ needs.
We have in place an employee handbook approved by our management and distributed to all
of our employees, which contains internal rules and guidelines regarding best commercial
practices, work ethics, fraud prevention mechanism, negligence and corruption. We provide
employees with regular trainings and resources to explain the guidelines contained in the employee
handbook.
We also have in place an anti-corruption policy to safeguard against any corruption within
our Company. The policy explains potential corruption conducts and our anti-corruption measures.
We make our internal reporting channel available for our staff to report any corruption acts and
our staff can also make anonymous reports to our internal audit department. Our internal audit
department is responsible for investigating any reported incidents and taking appropriate measures.
We also have regular training for employees regarding the anti-bribery policy to facilitate
implementation of the policy. During the Track Record Period and up to the Latest Practicable
Date, we were not aware of any anti-bribery incident by our employees in relation to our
customers.
Investment Risk Management
Our investment strategy is grounded in the principles of compliance, prudence, safety and
effectiveness. We consider the following criteria in making investment decisions:
 size, expected returns and associated risks;
 compliance with applicable laws and regulations;
 consistency with our growth strategy;
BUSINESS
–3 1 1–


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 appropriateness of enterprise resource allocation; and
 optimization of our portfolio.
We set up investment plans in line with our business strategies with inputs from various
business departments. An investment budget is set up based on our business strategies every year.
We generally intend to hold our investments for the long term. With surplus cash on hand, we may
also make investments in cash management products to generate finance income at a yield higher
than the current bank deposit interest rates, with an emphasis on capital preservation. Each
investment decision is made based on internal vetting and discussions, considering factors such as
market dynamics, expected returns and risks involved.
We believe that our internal strategy and policies regarding investments and the related risk
management mechanisms are adequate, and that our investment decisions have been in full
compliance with our investment strategy and policies.
A W ARDS AND RECOGNITIONS
During the Track Record Period, we received awards and recognitions with respect to our
products, intellectual properties and R&D capabilities, including but not limited to the following:
Award/Recognition Award Y ear Awarding Institution/Authority
Top 10 Health Lighting Brands
(೐ ) ................
2024 Guangdong Illuminating Engineering
Society (ኪึ )
Excellence and Innovation Award of the
Guangzhou Semiconductor Industry
Association
(ᄿψ̹̒ኬ᜗՘ึՙ൳௴อᆤ ) .......
2023 Guangzhou Semiconductor Industry
Association
(ᄿψ̹̒ኬ᜗՘ึ )
Enterprises with outstanding contributions
to advanced manufacturing industry
(Year 2022)
(্̈ᘠΆุ (2022ܓ))..
2023 Guangzhou Nansha District Enterprise
and Enterpriser Confederation
(ᑌΥ
ึ)
Innovation Award of the 11th China
Information Technology Expo
(௹ᚎึ௴อᆤ ) ..
2023 The organizing committee of the 11th
China Information Technology Expo
(௹ᚎึ )
BUSINESS
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Award/Recognition Award Y ear Awarding Institution/Authority
Specialized, Refined, Distinctive and
Innovative SME (APT)
(ਖ਼ၚतอʕʃΆุ (߅))............
2023 Department of Industry and
Information Technology of
Guangdong Province
(ʷᝂ )
The 9th China LED Convention Award —
2021 Top 50 Enterprises in China’s LED
Industry in respect of Intellectual
Property
(ʕ਷ LED௴ᆤ — 2021ʕ
਷LEDᗆପᛆ 50੶Άุ) ........
2022 The organizing committee of the
China LED Convention
(ʕ਷LED௴ɽึ)
2021 Provincial Digitized Workshop
(Lynway Vision)
(2021ॴᅰοʷԓග (ൖᙂ)) ..
2022 Ningbo Municipal Economic and
Information Technology Bureau
(ʷ҅ )
2021 Gasgoo Awards on Top 100 Chinese
Novel Automotive Supply Chains
(2021፨ᆤ ) ....
2021 Gasgoo
(ႊ˰ӛԓ)
High Quality Development Award in
China’s Lighting Industry
(ᆤ ) .........
2021 Guangdong Technology Innovation
Alliance of Light Environment
Industry
(ΈᐑྤପุҦஔ௴อᑌຑ )
Guangdong Advanced Optoelectronic
Semiconductor Engineering Laboratory
(New Generation Information
Technology)
(܃( อɓ
Ҧஔ )) ......................
2021 Guangdong Provincial Development
and Reform Commission
(ึ )
Guangdong Intellectual Property
Demonstration Enterprise
(ᗆପᛆͪᇍΆุ ) ...........
2021 Guangdong IP Protection Association
(ᚐ՘ึ )
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OUR CONTROLLING SHAREHOLDERS
As of the Latest Practicable Date, the Controlling Shareholder Group, including Mr. Xiao,
Mr. Chan, Mr. Yuan, APTESS Company Limited, Giant Power Limited, Ms. Loh, Advanced
Photoelectronic, Jingyu Investment, Jingling Investment, Jingrui Investment and Jingshi
Investment by virtue of the acting-in-concert arrangement among them, was collectively interested
in approximately 47.11% of our total share capital. See “History, Development and Corporate
Structure — The Concert Party Group” in this prospectus for details. Each of APTESS Company
Limited, Giant Power Limited, Advanced Photoelectronic, Jingyu Investment, Jingling Investment,
Jingrui Investment and Jingshi Investment is an investment holding entity.
Immediately following the completion of the Global Offering (assuming the Offer Size
Adjustment Option is not exercised), the Controlling Shareholder Group will continue to control in
aggregate approximately 44.13% of our total share capital. Therefore, they will remain as a group
of our Controlling Shareholders.
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
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 nine Directors, including one executive Director, four non-executive
Directors and four independent non-executive Directors. Mr. Xiao (our executive Director,
chairperson and chief strategic officer) and Mr. Chan and Mr. Yuan, both non-executive Directors,
are members of the Controlling Shareholder Group. Four of our Directors, namely Mr. Xiao, Mr.
Chan, Mr. Yuan and Mr. WU Nan-Yang, are also directors of Advanced Photoelectronic, which is
an investment holding company with no substantial business activities. Save as disclosed in this
prospectus, none of our Directors or members of our senior management team holds any position
in our Controlling Shareholders or their respective close associates.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER GROUP
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Our Directors consider that we are capable of maintaining management independence for the
following reasons:
(a) 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;
(b) 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;
(c) 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
(d) 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. 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.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER GROUP
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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.
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 Controlling Shareholders and 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 as well as the proceeds from the Global Offering.
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.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER GROUP
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--- page 328 ---
INTERESTS OF OUR CONTROLLING SHAREHOLDERS 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.
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:
(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;
(b) where a Shareholders’ meeting is to be held for considering proposed transactions in
which our Controlling Shareholders or any of their respective associates has a material
interest, our Controlling Shareholders or 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
our Controlling Shareholders or any of their respective associates, our Company will
comply with the applicable Listing Rules;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER GROUP
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(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 advisors, the appointment of such independent professionals will be made at
our Company’s expenses; and
(g) we have appointed Maxa Capital Limited as our Compliance Advisor 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, and to protect minority Shareholders’ interests after the Listing.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER GROUP
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--- page 330 ---
OVERVIEW
Our Board consists of nine Directors, comprising one executive Director, four non-executive
Directors and four independent non-executive Directors. All Directors are elected by the general
meeting for a term of three years which is renewable upon re-election. The major powers and
functions of the Board include, but are not limited to, convening the general meetings, presenting
reports to the general meetings, implementing the resolutions passed at the general meetings,
determining the operational plans and investment plans of the Group, determining the annual
financial budgets and final accounts of the Group, determining the fundamental management
systems of the Group, formulating profit distribution plans and loss recovery plans of the Group,
and exercising other powers and functions as conferred by the Articles of Association.
Our Supervisory Committee consists of three Supervisors, comprising two Supervisors
appointed by shareholders’ general meeting, and one employee representative Supervisor. The
Supervisory Committee is responsible for supervising the performance of duty of the Board and
the senior management of the Company and overseeing the financial conditions of the Company.
The employee representative Supervisor is elected by our employees, while shareholder
representative Supervisors are elected at the Shareholders’ general meetings. Our Supervisors are
appointed for a term of three years and are eligible for re-election upon expiry of their term of
office.
Our senior management is responsible for the management of day-to-day operations of the
Group.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
The following table sets forth certain information of our Directors:
Name Age Position Principal roles and responsibilities
Date of joining
our Group
Date of
appointment as
Director
Relationship
with other
Directors,
Supervisors and
senior
management
Mr. XIAO Guowei
David .......
56 Chairperson of the Board,
executive Director and
chief strategic officer
Responsible for the
management of the Board
and the overall development
strategies, business plans
and major operational
decisions of our Group
August
2006
August
2006
None
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 331 ---
Name Age Position Principal roles and responsibilities
Date of joining
our Group
Date of
appointment as
Director
Relationship
with other
Directors,
Supervisors and
senior
management
Mr. CHAN Philip
Ching Ho ....
75 Non-executive Director Providing professional opinion
and judgment to the Board
August 2006 April
2014
None
Mr. YUAN Lie
Ming Peter ....
75 Non-executive Director Providing professional opinion
and judgment to the Board
December
2009
December
2009
None
Mr. WU Nan-Yang . 65 Non-executive Director Providing professional opinion
and judgment to the Board
April 2010 April 2010 None
Mr. ZHENG Xin .. 42 Non-executive Director Providing professional opinion
and judgment to the Board
December
2023
December
2023
None
Ms. ZHANG He .. 60 Independent
non-executive Director
Supervising and providing
independent judgment to the
Board
August 2019 August
2019
None
Ms. LIN Nan .... 52 Independent
non-executive Director
Supervising and providing
independent judgment to the
Board
February 2022 February 2022 None
Ms. DING Hui ... 55 Independent
non-executive Director
Supervising and providing
independent judgment to the
Board
August 2019 August
2019
None
Mr. CHAN Chi
Kong .......
57 Independent
non-executive Director
Supervising and providing
independent judgment to the
Board
January 2024 January 2024 None
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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DIRECTORS
Executive Director
Mr. XIAO Guowei David ( ӽ਷ਃ), aged 56, is an executive Director, the chairperson of the
Board and the chief strategic officer of our Company. Mr. Xiao co-founded Advanced
Photoelectronic and our Group. He served as the chairperson of the board and general manager of
our Company from August 2006 to October 2015, and the chairperson of the board and president
of our Company from October 2015 to March 2023. Mr. Xiao currently holds directorship at other
subsidiaries within our Group.
Mr. Xiao has more than 25 years of professional experience in advanced semiconductor
packaging, microelectronics manufacturing process, optoelectronic semiconductors, materials and
reliability analysis. Prior to establishment of our Company, he founded Advanced Photoelectronic
in February 2003 and has since served as a director of Advanced Photoelectronic. Before that, he
taught at the Faculty of Electronic and Information Engineering (ኪ௅ ) (formerly
known as the Department of Electronic Engineering ( ཥɿʈ೻ӻ )) of Xi’an Jiaotong University
(Гτʹஷɽኪ ) from July 1990 to February 1998, with his last position as a lecturer, and served
as a senior technology officer in the Department of Electronic and Computer Engineering at the
Hong Kong University of Science and Technology from March 2002 to August 2004. He currently
also serves as the chairperson of the board of AccoPower Semiconductor Co., Ltd. (ၳঐ̒
ʮ̡ )( “ AccoPower ”)
(Note) and AscenPower Semiconductor Co., Ltd. (ຽঐ̒ኬ
ʮ̡ )( “ AscenPower ”) (Note) , both silicon carbide (SiC) and power semiconductor
developers and manufacturers.
Mr. Xiao obtained his bachelor’s degree in electronic engineering in 1990 and his master’s
degree of engineering in June 1997 from Xi’an Jiaotong University in the PRC, and obtained his
doctorate degree of philosophy in electronical and electronic engineering from the Hong Kong
University of Science and Technology in November 2002 in Hong Kong. He was certified as a
professorate senior researcher (ࡰin optoelectronic technology by the Human
Note:
As of the Latest Practicable Date, (i) AccoPower was owned as to approximately 41.68% by Mr. Xiao indirectly through
his controlled entities, 7.45% by Geely Holding indirectly through its subsidiaries, 50.87% by 28 institutional and/or
private investors, each an Independent Third Party holding less than 10% therein; and (ii) AscenPower was owned as to
40% by AccoPower, 40% by Viridi E-Mobility Technology (Ningbo) Co., Ltd. (ြཥਗӛԓҦஔ (ت)ʮ̡), a
member of Geely Group, and 20% by an entity controlled by Mr. Xiao. To the best of our knowledge and belief, other
than the directorship and shareholdings of Mr. Xiao held in these companies and the historical leasing transaction (for
details of which, see Note 36 to the Accountants’ Report of the Group in Appendix IA to this prospectus) entered in the
ordinary course of business on normal commercial terms, there is not any past or present relationship (including family,
employment, business, financing or otherwise) between the Group and AccoPower and AscenPower.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 333 ---
Resources and Social Security Department of Guangdong Province in December 2020. He is
currently a member of the Guangzhou Municipal People’s Political Consultative Conference, the
vice president of the China Solid State Lighting Alliance (೯ʿପุᑌຑ ),
and the president and a society expert (࢕of Guangdong Illuminating Engineering Society.
He has been selected for the Quality Migrant Admission Scheme (ྌ )b yt h e
Immigration Department of the Government of Hong Kong in December 2002, and for the first
batch of Leading Talents in Innovation and Entrepreneurship in Guangzhou (ࠏ
ɛʑ) by the Guangzhou Liaising Group for Talents ( ᄿψ̹ɛʑʈЪ՘ሜʃଡ଼ ) in February 2011.
He has also been recognized as an Innovative Talent of the Overseas Chinese Contribution Award
(্ᘠᆤ௴อɛʑ ) by the All-China Federation of Returned Overseas Chinese ( ʕശΌ਷
ᓥ਷ശ྆ᑌΥึ ) in September 2016, as a Guangzhou High-caliber Talent (Distinguished Expert)
(ᄿψ̹৷ᄴϣɛʑ (࢕by the Guangzhou Steering Group for Talents ( ᄿψ̹ɛʑʈЪჯ
ኬʃଡ଼) in August 2019, and as an Honorary Citizen ( ࿲ᚑ̹͏) by the 15th Standing Committee
of the Guangzhou City People’s Congress in November 2021. He was awarded the Second Prize of
the Guangdong Province Science and Technology Award (ኪҦஔᆤ ) by the Guangdong
government in February 2015, the Third Prize of the Guangdong Provincial Science and
Technology Award by the Guangdong government in April 2014, and the Second Prize of the
Guangzhou Municipal Science and Technology Award (ኪҦஔᆤ ) by the Guangzhou
government in May 2015.
Non-executive Directors
Mr. CHAN Philip Ching Ho ( ௓͍Ⴔ), aged 75, is a non-executive Director of our Company.
He served as a Supervisor of our Company from August 2006 to April 2014. Mr. Chan co-founded
Advanced Photoelectronic and our Group, and has served as a director of Advanced
Photoelectronic since June 2004.
Mr. Chan is a distinguished leader in the semiconductor industry with more than 50 years of
academic research and industrial application experience. He commenced his career in University of
Illinois, Urbana-Champaign and served as a visiting assistant professor from 1978 to 1981. From
March 1990 to March 1991, he worked at Intel Corporation, a company listed on the NASDAQ
Stock Market (ticker symbol: INTC), where he last served as a principal engineer and senior
project manager. Mr. Chan joined the Hong Kong University of Science and Technology in April
1991 and served as a professor and the head of the Department of Electronic and Computer
Engineering, the director of Nanoelectronics Fabrication Facility and the dean of the School of
Engineering. From March 2010 to February 2020, he served as a deputy president and provost at
the Hong Kong Polytechnic University. From his retirement in March 2020 to August 2021, he
served as a senior advisor to the president and provost of the Hong Kong Polytechnic University
and has served as a senior advisor to the deputy president and provost of the Hong Kong
Polytechnic University since September 2021. From April 2023 to August 2024, he served as a
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 334 ---
team leader (special duty) at the Innovation and Technology Commission of the Hong Kong
Government. Since September 2024, he has been a chairman of board of Microelectronics
Research and Development Institute of the Hong Kong Government. Mr. Chan has served as an
independent non-executive director of Solomon Systech (International) Limited, a company listed
on the Main Board of the Hong Kong Stock Exchange (stock code: 2878), since December 2020.
Mr. Chan obtained his bachelor of science in electrical engineering from University of
California at Davis in June 1973 in the United States, his master of science in electrical
engineering and doctor in electrical engineering both from University of Illinois at
Urbana-Champaign in the United States in October 1975 and October 1978, respectively. He has
been a fellow member of the Hong Kong Institution of Engineers since December 1995. He was
qualified as a fellow of the Institute of Electrical and Electronics Engineering in January 2007 and
a fellow of the Hong Kong Academy of Engineering Sciences in December 2013. He was awarded
the Bronze Bauhinia Star by the Hong Kong Government in Hong Kong in July 2013. From
October 2008 to October 2016, Mr. Chan served as a director of the Hong Kong Applied Science
and Technology Research Institute. He currently also serves as a member of the Committee on
Innovation, Technology and Re-industrialization of the Government of Hong Kong as well as a
professor emeritus at the Hong Kong Polytechnic University.
Mr. YUAN Lie Ming Peter (׼)aged 75, is a non-executive Director of our Company.
Mr. Yuan has served as a director of Advanced Photoelectronic and of our Company since
December 2009.
Mr. Yuan has extensive experience in financial investment. He has been a private investor and
invested in Advanced Photoelectronic in June 2006, and has principally invested in monetary and
financial futures, private equity and real estate in Hong Kong.
Mr. Yuan graduated from Pui Ching Middle School (ಥ੃͍ʕኪ ) in July 1968 in Hong
Kong.
Mr. WU Nan-Y ang (ජ), aged 65, is a non-executive Director of our Company. He has
served as a director of Advanced Photoelectronic since March 2010.
Mr. Wu has more than 40 years of experience in technologies and investment. From March
1984 to July 1986, he served as an associate engineer (ࢪat Yulon Motor Co., Ltd. ( ༃ඤ
ʮ̡ ), a company listed on the Taiwan Stock Exchange (stock code: 2201). He
worked at the Opto-Electronic and Systems Laboratory of Industrial Technologies Research
Institute (הin Taiwan from October 1987 to July 1997, with his
last position as an engineer (ࢪHe served as an executive vice president of Fortune
Consultant Group, Inc. (ʮ̡ ) in Taiwan from July 1997 to October 2001. He
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 323 –


--- page 335 ---
has served as a non-executive director of Edison Opto Corporation (ʮ̡ ), a
company listed on the Taiwan Stock Exchange (stock code: 3591), since June 2013, and a
non-executive director of Wafer Works Corporation (ʮ̡ ), a company listed on
the Taiwan Stock Exchange (stock code: 6182), since March 2017.
Mr. Wu obtained his bachelor’s degree in mechanical engineering from National Taiwan
University ( ਷̨ͭᝄɽኪ ) in June 1981 in Taiwan, and his master of science in Mechanical
Engineering from Stanford University in June 1987 in the United States.
Mr. ZHENG Xin ( ቍ㒥), aged 42, is a non-executive Director of our Company.
Mr. Zheng has served as the general manager of Yaoning Technology since December 2020,
the chairman of the board of Jiangxi Anchi New Energy Technology Co., Ltd. (߅
ʮ̡ ) since January 2022, the director of Jiangsu ChengXing Phosph-Chemicals Co., Ltd.
(ʮ̡ ), a company listed on the Shanghai Stock Exchange (stock code:
600078.SH), since November 2022, and a vice president and the chief strategy officer of Geely
Holding since August 2024.
Independent Non-executive Directors
Ms. ZHANG He ( ੵͫ) (with former name as ZHANG Xiaomiao (ߴaged 60, is an
independent non-executive Director of our Company.
Ms. Zhang has worked at Xi’an Jiaotong University since July 1985 and has been an
associate professor in accounting since June 2001. She served as an independent director and the
chairperson of audit committee of Xi’an Typical Industries Co., Ltd. (ʮ
̡), a company listed on the Shanghai Stock Exchange (stock code: 600302.SH), from March 2014
to July 2020, an independent director of Shaanxi Tongyuan Natural Gas Co., Ltd. ( ৯Гஷ๕˂್
ʮ̡ ), a company listed on the NEEQ (stock code: 838687), from December 2021 to
December 2022. She has served as an independent director and the chairperson of audit committee
of Autobio Diagnostics Co., Ltd. (ʮ̡ ), a company listed on the
Shanghai Stock Exchange (stock code: 603658.SH), since October 2018, an independent director
of Xi’an Kaitian Railway Electric Co., Ltd. (ʮ̡ ), a company listed
on the NEEQ (stock code: 835196), since December 2020, an independent director of Xi’an Tianli
Clad Metal Materials Co., Ltd. (ʮ̡ ), a company listed on the
Beijing Stock Exchange (stock code: 873576.BJ), since September 2022, and an independent
director and the chairperson of audit committee of Kontour (Xi’an) Medical Technology Co., Ltd.
(ʮ̡ ), a company listed on the Shanghai Stock Exchange (stock code:
688314.SH), since September 2022.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 336 ---
Ms. Zhang obtained her bachelor’s degree in mechanical manufacturing process equipment
and automation in July 1985, her master’s degree in law in June 1991 and her doctorate degree in
business administration in March 2009, all from Xi’an Jiaotong University in the PRC.
Ms. LIN Nan ( ᘺ฻), aged 52, is an independent non-executive Director of our Company.
Ms. Lin was a visiting student to the University of Sydney from September 2002 to
December 2002. From April 2004 to June 2006, Ms. Lin conducted her postdoctoral research at the
School of Public Policy & Management of Tsinghua University ( ૶ശɽኪʮ΍၍ଣኪ৫ ). She
joined the Shanghai University of Finance and Economics ( ɪऎৌ຾ɽኪ ) as an associate
professor of the College of International Business Administration (currently known as the College
of Business) in July 2006, and has served as a professor of the College of Business since June
2012. From March 2009 to March 2010, Ms. Lin was also a visiting scholar to Harvard Business
School. Ms. Lin has also served as an independent director of Shanghai Film Co., Ltd. ( ɪऎཥᅂ
ʮ̡ ), a company listed on the Shanghai Stock Exchange (stock code: 601595.SH), since
October 2024.
Ms. Lin obtained her bachelor’s degree in industrial electrical automation in July 1994, her
master’s degree in management science and engineering in June 1999, and her doctorate degree in
management in December 2004, all from Xi’an Jiaotong University in the PRC.
Ms. Lin served as an independent director of Bright Oceans Inter-Telecom Corporation
(“Bright Oceans ”) (ʮ̡ ), a company listed on the Shanghai Stock Exchange
(stock code: 600289.SH), from March 2015 to March 2017. In December 2019, the Shanghai Stock
Exchange issued a discipline decision (the “ Discipline Decision ”) against Bright Oceans, its
controlling shareholder and several then directors and officers of Bright Oceans, including a public
criticism against Ms. Lin who was an independent director at the time of the incident. The
Discipline Decision cites a series of violations by Bright Oceans, its controlling shareholder and
actual controller: (i) the controlling shareholder of Bright Oceans illegally occupied vast amount of
funds of Bright Oceans, (ii) Bright Oceans failed to comply with the regulatory procedures and to
timely disclose the connected guarantees provided in favor of its controlling shareholder and its
related parties, (iii) Bright Oceans issued inaccurate 2017 results estimate, and (iv) there were
material deficiencies in the internal control of Bright Oceans and the reporting accountant issued
qualified opinion on 2017 financial report of Bright Oceans (the “ Incidents ”).
Notwithstanding the Discipline Decision involving Ms. Lin, the Directors (other than Ms.
Lin) are of the view, the Sole Sponsor concurs, that Ms. Lin has the experience, knowledge and
skills required for a director of a listed company and is therefore suitable to be a Director pursuant
to Rules 3.08 and 3.09 of the Listing Rules having considered: (i) the public criticism was not an
administrative penalty, but a disciplinary action imposed by the Shanghai Stock Exchange which
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was of a relatively minor nature; (ii) according to the Discipline Decision, there is no finding of
fraud or dishonesty against Ms. Lin herself, nor does it raise any concern on the integrity of Ms.
Lin, which would affect her suitability as a director of a listed company. The Discipline Decision
was issued against Ms. Lin mainly due to her director responsibility for supervising the operations
of Bright Oceans rather than her personal dishonesty; (iii) Ms. Lin has not been disqualified from
acting as a director of listed company as a result of the Incident; (iv) to the best knowledge of our
Company and as confirmed by Ms. Lin, she does not have any other non-compliance record; (v)
Ms. Lin as an independent director of Bright Oceans was not involved in the day-to-day
management of Bright Oceans and was not directly involved in the Incidents. In addition, as
confirmed by Ms. Lin, as she resigned in March 2017, she was not involved in the reviewing and
approval of either the 2016 annual report or the 2017 annual report, which were published in or
after March 2017; and (vi) Ms. Lin has received directors’ training in connection with, among
other things, the duties of directors under the Listing Rules.
Ms. DING Hui ( ɕฯ), aged 55, is an independent non-executive Director of our Company.
Ms. Ding has taught at the School of Electrical Engineering at Xi’an Jiaotong University
since 1996 and has served as a professor and doctoral advisor since March 2010.
Ms. Ding obtained her bachelor’s degree of engineering from Xi’an University of Technology
(Гτଣʈɽኪ ) (formerly known as Shaanxi Institute of Mechanical Engineering ( ৯Гዚ૛ኪ৫ ))
in July 1991 in the PRC, and her master’s degree of engineering in June 1996 and her doctorate
degree of engineering in June 2004, both from Xi’an Jiaotong University in the PRC.
Mr. CHAN Chi Kong ( ௓қΈ), aged 57, is an independent non-executive Director of our
Company.
Mr. Chan has substantial experience in auditing, accounting, corporate finance, investment,
company secretarial practice, business development and general management. He commenced his
career by serving as a staff accountant and audit senior of PricewaterhouseCoopers (formerly
known as Price Waterhouse) from July 1989 to March 1993. His other major experience includes
serving as an executive and an assistant manager successively of the listing division of the Hong
Kong Stock Exchange from July 1993 to July 1995, an investment analyst of Morgan Grenfell
Investment Management (HK) Limited from July 1995 to June 1996, the financial controller of
Vitasoy International Holdings Ltd., a company listed on the Main Board of the Hong Kong Stock
Exchange (stock code: 345), from June 2000 to January 2006, the chief financial officer and the
vice president (China) of MMG Limited (formerly known as Minmetals Resources Limited), a
company listed on the Main Board of the Hong Kong Stock Exchange (stock code: 1208), from
January 2008 to December 2010 and from January 2011 to March 2012, respectively, the deputy
general manager — corporate planning of Chow Tai Fook Jewellery Group Limited, a company
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listed on the Main Board of the Hong Kong Stock Exchange (stock code: 1929), from May 2012 to
August 2017, and the chief financial officer and company secretary of Chow Sang Sang Holdings
International Limited, a company listed on the Main Board of the Hong Kong Stock Exchange
(stock code: 116), from February 2020 to July 2023. Mr. Chan co-founded Impacts Technology
Limited, a company principally engaged in development and provision of interactive e-learning
solutions to corporates in February 2018. He has also served as an independent non-executive
director of Solomon Systech (International) Limited, a company listed on the Main Board of the
Hong Kong Stock Exchange (stock code: 2878), since November 2023.
Mr. Chan is actively engaged in public and community services. He served as the president of
the Association of Chartered Certified Accountants (ACCA) Hong Kong from 2007 to 2008, an
honorary advisor to Hong Kong Internet Registration Corporation Limited from 2007 to 2008, a
member of the advisory board on business studies of Lingnan University from March 2002 to
August 2012, an adjudicator of the Immigration Tribunal of the Hong Kong Government from
October 2007 to September 2013, a member of the Financial Reporting Review Panel of the
Accounting and Financial Reporting Council (formerly known as the Financial Reporting Council)
from July 2010 to July 2015 and a member of the Accountancy Training Board under the
V ocational Training Council from April 2017 to March 2023. He has also served as a member of
the advisory committee for the College of Professional and Continuing Education (CPCE) of Hong
Kong Polytechnic University since June 2023, and the convenor of Working Party on Seminars of
the Accountancy Training Board since June 2023.
Mr. Chan obtained a professional diploma in accountancy in November 1989 and his bachelor
of arts in accountancy in November 1994 from Hong Kong Polytechnic University (formerly
known as Hong Kong Polytechnic) in Hong Kong, respectively. He also obtained a master of
business administration in December 1996 from City University of Hong Kong in Hong Kong. He
is a fellow member of each of ACCA, the Hong Kong Institute of Certified Public Accountants,
the Institute of Chartered Accountants in England and Wales, the Chartered Governance Institute
and the Hong Kong Chartered Governance Institute, and a Chartered Financial Analyst (CFA) of
the CFA Institute.
Each of our 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 or her appointments.
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Each of our Directors has confirmed that he or she (i) has obtained the legal advice referred
to under Rule 3.09D of the Listing Rules in January 2024, and (ii) understands his or her
obligations as a director of a listed issuer under the Listing Rules.
BOARD OF SUPERVISORS
The following table sets forth certain information of our Supervisors:
Name Age Position Principal roles and responsibilities
Date of joining
our Group
Date of
appointment as
Supervisor
Relationship
with other
Directors,
Supervisors and
senior
management
Mr. LI Wenhong .. 57 Chairperson of the
Supervisory Committee
Supervising the Board and
senior management as well
as operation and financial
activities of our Company
October 2018 October 2018 None
Ms. LUO Xiaoyun . 51 Supervisor Supervising the Board and
senior management as well
as operation and financial
activities of our Company
April 2020 April 2020 None
Mr. OU Weineng .. 42 Employee representative
Supervisor
Supervising the Board and
senior management as well
as operation and financial
activities of our Company
March 2008 October 2015 None
Mr. LI Wenhong (ߎ)aged 57, is the chairperson of our Supervisory Committee.
Mr. Li founded Shenzhen Goldstone Technology Co., Ltd. (ʮ̡ ), a
company listed on the NEEQ (stock code: 833069) and formerly known as Shenzhen Goldstone
Technology Ltd. (ʮ̡ ), in February 2005. He has served as an executive
director since then and as the chairperson of the board since February 2015. He has also served as
its general manager from February 2005 to December 2015 and since April 2017.
Mr. Li obtained his bachelor’s degree in engineering in July 1988 from Xi’an Jiaotong
University in the PRC. He was qualified as a senior engineer (ࢪby the Human
Resources and Social Security Bureau of Shenzhen Municipality (ღ҅ )
in June 2023. He was awarded the First Prize of Guangdong Province Science and Technology
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Award by the Guangdong Government (ִ݁in February 2015, and the 2022 China
Patent Excellence Award ( ʕ਷ਖ਼лᎴӸᆤ ) by China National Intellectual Property Administration
in July 2022.
Ms. LUO Xiaoyun ( ᖯወථ), aged 51, is a Supervisor of our Company.
From July 1997 to June 2002, Ms. Luo was employed at Guangzhou Foreign Economic
Trading Affiance Investment Company (ҳ༟ʮ̡ ). She worked at Guangdong
Technology Venture Capital Co., Ltd. (ʮ̡ ) from June 2002 to April
2009, and at Guangdong Yueke Venture Capital Co., Ltd. (ʮ̡ ),
formerly known as Guangdong Keying Investment Management Co., Ltd. (ࠢ
ʮ̡), from May 2009 to July 2017. Since July 2018, she has served as a senior manager of
Guangdong Yueke Venture Capital Management Co., Ltd. (ʮ̡ ). Ms.
Luo has also served as a director of Zhuhai Speedbird PVC Film Laminated METAL Sheet Co.,
Ltd. (ʮ̡ ), a company listed on the Beijing Stock Exchange (stock
code: 831768.BJ), since August 2017, as a director of Gd Sunlite Science & Technology Co., Ltd.
(ʮ̡ ), a company listed on the NEEQ (stock code: 838807), from January
2016 to December 2022, and as a director of Guangzhou Jeepine Intelligent Compression Molding
Machine Co., Ltd. (ʮ̡ ), a company listed on the NEEQ (stock
code: 833127), from September 2017 to July 2022.
Ms. Luo obtained her dual bachelor’s degree in economics and engineering from Jinan
University (ɽኪ) in the PRC in June 1997.
Mr. OU Weineng ( ਜਃঐ), aged 42, is the employee representative Supervisor of our
Company. He is also the supervisor of Linlux.
After joining our Group in March 2008, Mr. Ou has served successively as a manager and
deputy director of the product department of our Company from September 2008 to October 2016,
and has successively served as the director of the LED product department of our Company since
October 2016.
Mr. Ou obtained his bachelor’s degree of science in July 2005 and his master’s degree of
science in June 2008, both from South China University of Technology (ଣʈɽኪ )i nt h e
PRC.
Save as disclosed in this prospectus, (i) none of our Directors and Supervisors had any other
relationship with any Directors, Supervisors, senior management or Controlling Shareholders of
our Company as of the Latest Practicable Date; (ii) none of our Directors and Supervisors held any
directorship in any other listed companies in the three years immediately prior to the date of this
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prospectus; and (iii) as of the Latest Practicable Date, none of our Directors (other than our
independent non-executive Directors) had interests in business, which competes or is likely to
compete, either directly or indirectly with our business, which would require disclosure under Rule
8.10 of the Listing Rules.
Save as disclosed herein, to the best knowledge, information and belief of our Directors and
Supervisors having made all reasonable enquiries, there was no other matter with respect to the
appointment of our Directors and Supervisors that needs to be brought to the attention of the
Shareholders and there was no information relating to our Directors and Supervisors that is
required to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules as of the Latest
Practicable Date.
SENIOR MANAGEMENT
The following table sets forth certain information of the senior management of the Group:
Name Age Position Principal roles and responsibilities
Date of joining
our Group
Date of
appointment as
Senior
Management
Relationship
with other
Directors,
Supervisors and
senior
management
Mr. XIAO Guowei
David .......
56 Chairperson of the Board,
executive Director and
chief strategic officer
Responsible for the
management of the Board
and the overall development
strategies, business plans
and major operational
decisions of our Group
August
2006
August
2006
None
Mr. HOU Yu .... 54 President Responsible for the overall
management, operation and
business development of our
Group
October 2015 October 2015 None
Mr. ZENG
Zhaoming .....
56 Vice president and head
of the R&D center
Responsible for the R&D,
quality control and
management of the new
technology and products of
our Group
October 2015 October 2015 None
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Name Age Position Principal roles and responsibilities
Date of joining
our Group
Date of
appointment as
Senior
Management
Relationship
with other
Directors,
Supervisors and
senior
management
Ms. ZHOU Baiyun . 46 Vice president and
financial controller
Responsible for the overall
financial management,
accounting and investment
of our Group
August 2006 October 2015 None
Mr. ZHENG
Longfeng .....
36 Board secretary Responsible for overall
corporate governance,
information disclosure,
investor relation and other
Board-related matters
November
2021
December
2021
None
Mr. XIAO Guowei David ( ӽ਷ਃ) is the co-founder, an executive Director, the chairperson
of the Board and the chief strategic officer of our Company. For the biographical details of Mr.
Xiao, see “— Directors — Executive Director.”
Mr. HOU Yu (ρ), aged 54, is the president of our Company. Mr. Hou joined our Group in
October 2015 and served as an executive vice president of our Company from October 2015 to
February 2023, and as a director of Lynway Vision from July 2021 to December 2023. He has also
served as the general manager of Linlux since September 2018 and the supervisor of Lynway
Vision (Guangzhou) since June 2024.
Mr. Hou has more than 20 years of experience in the semiconductor and optoelectronic
industries. Prior to joining our Group, Mr. Hou served as a process engineer, product engineer and
manager of the production department of China Resources Semiconductor Co., Ltd. ( ശᆗ̒ኬ᜗Ϟ
ʮ̡) from June 1996 to December 2007. He successively served as a senior manager and a vice
general manager of Advanced Photoelectronic from November 2007 to October 2015.
Mr. Hou obtained his bachelor’s degree of engineering in July 1991 and his master’s degree
of engineering in June 1994, both from Xi’an Jiaotong University in the PRC. Mr. Hou was
qualified as an intermediate engineer in electronic technology (ࢪ( ཥɿҦஔ)) by the
Nansha District Human Resources and Social Security Bureau of Guangzhou city in October 2019.
He was selected for the Guangzhou High-end Foreign (Overseas) Expert Recruitment Program ( ᄿ
ˏආධͦ ) by Guangzhou Foreign Expert Bureau (҅ )i n
December 2018. He was also awarded the Third Prize and Second Prize of the Guangdong
Province Science and Technology Award by the Guangdong Government continuously in April
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2014 and February 2015, and the Second Prize of the Guangzhou Municipal Award for
Improvement in Science and Technology (ҦආӉɚഃᆤ ) by the Guangzhou Government
(ִ݁in May 2015.
Mr. ZENG Zhaoming (׼)aged 56, is a vice president of our Company.
Mr. Zeng has more than 20 years of experience in the semiconductor and optoelectronic
industries. Prior to joining our Group, Mr. Zeng was a research assistant to the department of
physics and materials science of the City University of Hong Kong from July 1998 to January
2000. From November 2001 to October 2007, he successively served as an engineer, a senior
engineer, an engineering team leader and a manufacturing department deputy manager of China
Resources Semiconductor Co., Ltd. (ʮ̡ ). From October 2007 to October 2015,
he served as a director of the chip engineering department and the deputy general manager of
Advanced Photoelectronic.
Mr. Zeng obtained his bachelor’s degree of engineering in July 1990, his master’s degree of
engineering in March 1993 and his doctorate degree in engineering in December 1999, all from
Harbin Institute of Technology (ဧᏵʈุɽኪ ) in the PRC. He was named as an Industrial
Leading Talent (leading talent in innovation) in Guangzhou (ɛʑ (ɛʑ ))
by the Guangzhou Working Group for Talents ( ᄿψ̹ɛʑʈЪʃଡ଼ ) in August 2018, a High-end
Leading Talent in Guangzhou Nansha District (ɛʑ ) by the Nansha Working
Group for Talents (ӍɛʑʈЪʃଡ଼ ) in July 2019, and a Guangzhou High-caliber Talent
(Excellent Expert) ( ᄿψ̹৷ᄴϣɛʑ (࢕by the Guangzhou Steering Group for Talents
in February 2020. Mr. Zeng was awarded the Third Prize and Second Prize of Guangdong Province
Science and Technology Award by the Guangdong Government in April 2014 and February 2015,
respectively, and the Second Prize of the Guangzhou Municipal Award for Improvement in Science
and Technology (ҦආӉᆤ ) by the Guangzhou Government in May 2015.
Ms. ZHOU Baiyun ( մͣථ), aged 46, is a vice president and the financial controller of our
Company. She is also the supervisor of Lynway Vision. Ms. Zhou joined our Group in August
2006 and successively served as the head of finance and the operating executive of finance
department of our Company from August 2006 to September 2015, as a board secretary of our
Company from May 2017 to December 2021, and as a director of Lynway Vision from October
2018 to December 2023. She has also held positions as the financial controller of Linlux since
September 2018.
Prior to joining the Group, Ms. Zhou worked at Guangzhou Zhengtai Carton Co., Ltd. ( ᄿψ
ʮ̡ ) from June 2000 to August 2005 and from March 2006 to July 2006.
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Ms. Zhou obtained her bachelor’s degree in management from Tianjin University (ɽኪ)
in the PRC in June 2008, and completed an executive master of business management full program
(ʈਠ၍ଣΌሙ೻ධͦ ) at South China University of Technology (ଣʈɽኪ )i n
the PRC in June 2019. Ms. Zhou was qualified as a board secretary of listed companies by the
Shenzhen Stock Exchange in June 2019.
Mr. ZHENG Longfeng ( ቍᎲቜ), aged 36, is the board secretary and a joint company
secretary of our Company.
Prior to joining our Group, from November 2011 to July 2014, Mr. Zheng worked at
WUYIGE Certified Public Accountants LLP (Shanghai) (ה( ౷ஷΥྫ )ɪऎʱ
הHe served as a senior manager of investment banking at Western Securities Co., Ltd. ( Г௅ᗇ
ʮ̡ ), a company listed on the Shenzhen Stock Exchange (stock code: 002673.SZ),
from November 2014 to September 2017. Mr. Zheng worked at Kaiyuan Securities Co., Ltd. ( ක๕
ʮ̡ ) from December 2017 to May 2018. He worked at Central China Securities
Co., Ltd. (ʮ̡ ), a company listed on the Shanghai Stock Exchange (stock
code: 601375.SH) and the Main Board of the Hong Kong Stock Exchange (stock code: 1375), from
July 2018 to February 2021, with his last position as a sponsor representative. Mr. Zheng served as
a financial director and board secretary of Shanghai Enercomn Technology Co., Ltd. (߅
ʮ̡ ) from January 2021 to November 2021.
Mr. Zheng obtained his bachelor’s degree in management in July 2011 from Southwest
University of Political Science and Law (ɽኪ ) in the PRC. He was certified as a
securities professional and a sponsor representative by the Securities Association of China ( ʕ਷ᗇ
Վุ՘ึ) in April 2015 and January 2021, respectively, and a certified public accountant by the
Shanghai Institute of Certified Public Accountants (՘ึ ) in May 2014.
JOINT COMPANY SECRETARIES
Mr. ZHENG Longfeng ( ቍᎲቜ) is the board secretary and a joint company secretary of our
Company. For the biographical details of Mr. Zheng, see “— Senior Management.”
Mr. CHUNG Ming Fai (ሾ), is a joint company secretary of our Company. He has over
18 years of experience in corporate secretary, mergers and acquisitions, financial reporting and
auditing. Mr. Chung served as an audit junior at Henny Wee & Co., CPA from March 2004 to
October 2004, as an audit semi-senior at K.W. Lau CPA Limited from November 2004 to January
2008, at KPMG from January 2008 to August 2011, with his last position held as a manager of
audit, and at Sandmartin International Holdings Limited, a company listed on the Stock Exchange
(stock code: 0482), from September 2011 to October 2021, with his last position held as the head
of project management. Since June 2022, Mr. Chung has served as a vice president of the
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corporate secretarial department of SWCS Corporate Services Group (Hong Kong) Limited, and is
mainly responsible for managing the company secretarial and compliance work for companies
listed on the Stock Exchange.
Mr. Chung is currently a fellow member of the Hong Kong Institute of Certified Public
Accountants and a certified practicing accountant of CPA Australia. He obtained a higher diploma
in accountancy from City University of Hong Kong in Hong Kong in November 2002, and a
bachelor of commerce in accounting and finance from the Australian National University in
Australia in December 2003.
BOARD COMMITTEES
Our Company has established four Board Committees in accordance with the relevant PRC
laws and regulations, the Articles and the corporate governance practice under the Listing Rules,
namely the Strategy Committee, the Audit Committee, the Remuneration and Appraisal Committee
and the Nomination Committee.
Strategy Committee
We have established a strategy committee (the “ Strategy Committee ”), which consists of
five Directors, namely Mr. Xiao, Mr. Chan, Mr. Yuan, Mr. WU Nan-Yang and Ms. LIN Nan. Mr.
XIAO Guowei David currently serves as the chairperson of the Strategy Committee. The primary
duties of the Strategy Committee are as follows:
(i) studying and advising on our long-term development strategy;
(ii) studying and advising on major investment and financing schemes that require Board
approval according to the Articles of Association;
(iii) studying and advising on major capital operation and assets management projects that
require Board approval according to the Articles of Association;
(iv) studying and advising on other material matters that may influence the development of
the Company;
(v) assessing and inspecting the implementation of the above issues after they have been
approved by the Board and report back to the Board; and
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(vi) handling other matters required by laws, regulations, rules, normative documents,
regulatory rules of the jurisdictions where the Shares of our Company are listed, the
Articles of Association or as authorized by the Board.
Audit Committee
We have established an audit committee (the “ Audit Committee ”) in compliance with the
Corporate Governance Code set out in Appendix C1 to the Listing Rules. The Audit Committee
consists of three non-executive Directors, namely Ms. ZHANG He, Ms. LIN Nan and Mr. CHAN
Chi Kong. Ms. ZHANG He currently serves as the chairperson of the Audit Committee. The
primary duties of the Audit Committee are as follows:
(i) to review significant financial policies of the Company and their implementation, and
supervise the financial activities of the Company;
(ii) to review the financial information and relevant disclosures of the Company;
(iii) to supervise and evaluate the risk management and internal control of the Company;
(iv) to supervise and evaluate the work of internal audit of the Company and report to the
Board;
(v) to propose the appointment or dismissal of an external accounting firm;
(vi) to facilitate communications and monitor the relationship between the internal audit
department and the external accounting firm;
(vii) to monitor the non-compliance of the Company in respect of the financial reports and
the risk management and internal control; and
(viii) other matters required by laws, regulations, regulatory documents, the rules of the
securities regulatory authority of the place where the Shares of the Company are listed
and the requirements of the Memorandum and the Articles of Association, and as
authorized by the Board.
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Remuneration and Appraisal Committee
We have established a remuneration and appraisal committee (the “ Remuneration and
Appraisal Committee ”) in compliance with the Corporate Governance Code set out in Appendix
C1 to the Listing Rules. The Remuneration and Appraisal Committee consists of three Directors,
namely Ms. LIN Nan, Mr. Xiao and Ms. DING Hui. Ms. LIN Nan currently serves as the
chairperson of the Remuneration and Appraisal Committee. The primary duties of the
Remuneration and Appraisal Committee are as follows:
(i) to organize and formulate the remuneration policy and plan of Directors and senior
management and submit to the Board for approval; and
(ii) other matters required by laws, regulations, regulatory documents, the rules of the
securities regulatory authority of the place where the Shares of the Company are listed
and the requirements of the Memorandum and the Articles of Association, and as
authorized by the Board.
Nomination Committee
We have established a nomination committee (the “ Nomination Committee ”) in compliance
with the Corporate Governance Code set out in Appendix C1 to the Listing Rules. The Nomination
Committee consists of three Directors, namely Ms. DING Hui, Mr. Xiao and Ms. ZHANG He. Ms.
DING Hui currently serves as the chairperson of the Nomination Committee. The primary duties of
the Nomination Committee are as follows:
(i) to formulate procedures and standards for the election of Directors and senior
management and make recommendations to the Board on the proposed procedures and
standards;
(ii) to make recommendations to the Board on the nomination of candidates for Directors,
Presidents and secretary of the Board;
(iii) to preliminarily examine the eligibility of candidates for Directors and senior
management;
(iv) to make recommendations to the Board on the nomination of candidates for chairmen
and members of the Board committees; and
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(v) other matters required by laws, regulations, regulatory documents, the rules of the
securities regulatory authority of the place where the Shares of the Company are listed
and the requirements of the Memorandum and the Articles of Association, and as
authorized by the Board.
BOARD DIVERSITY POLICY
Pursuant to our board diversity policy, selection of Board candidates will be based on a range
of diversity perspectives, including but not limited to gender, age, cultural and educational
background, industry experience, technical capabilities, professional qualifications and skills,
knowledge, length of service and other related factors. We will also consider our own business
model and special needs. The ultimate selection of Director candidates will be based on merits of
the candidates and contribution that the candidates will bring to our Board.
Our Board currently consists of three female Directors and six male Directors with a
balanced mix of knowledge and skills, including but not limited to overall management and
strategic development, finance, accounting and risk management. The Company is of the view that
the Board satisfies our board diversity policy.
Our Nomination Committee is responsible for the implementation of our board diversity
policy. Upon completion of the Listing, our Nomination Committee will review our board diversity
policy from time to time to ensure its continued effectiveness and we will disclose the
implementation of our board diversity policy in our corporate governance report on an annual
basis.
REMUNERATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
The Directors, Supervisors and senior management members receive remuneration in the
forms of salaries, allowances and benefits in kind, performance related bonuses, share-based
payment expenses, and pension scheme contributions.
The aggregate amount of remuneration (including salaries, allowances and benefits in kind,
performance related bonuses, share-based payment expenses, and pension scheme contributions)
paid to our Directors and Supervisors for the three years ended December 31, 2021, 2022 and 2023
and the five months ended May 31, 2024 were approximately RMB4.1 million, RMB3.8 million,
RMB5.0 million and RMB2.4 million, respectively.
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Under the arrangements currently in force, the aggregate amount of remuneration (including
any discretionary bonus which may be paid) payable by our Group to our Directors and
Supervisors for the financial year ending December 31, 2024 is expected to be approximately
RMB4.8 million.
The aggregate amount of salaries, allowances and benefits in kind, performance related
bonuses, share-based payment expenses, and pension scheme contributions paid to the five
highest-paid individuals of our Group for the three years ended December 31, 2021, 2022 and
2023 and the five months ended May 31, 2024 were approximately RMB9.3 million, RMB9.6
million, RMB12.0 million and RMB5.0 million, respectively.
During the Track Record Period, there was no remuneration paid or payable by our Company
to our Directors, Supervisors or the five highest-paid individuals as an inducement to join or upon
joining our Company. During the Track Record Period, there was no compensation paid or payable
by our Company to our Directors, former Directors, Supervisors, former Supervisors or the five
highest-paid individuals for the loss of any office in connection with the management of the affairs
of any subsidiary of our Company.
During the Track Record Period, none of our Directors or Supervisors has waived or agreed
to waive any remuneration or benefits in kind for the past three years. Save as disclosed above,
there was no other payments paid or payable by our Company or any of our subsidiaries to our
Directors, Supervisors or the five highest-paid individuals during the Track Record Period.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
We are committed to achieving high standards of corporate governance which are crucial to
our development and safeguard the interests of our Shareholders. To accomplish this, we expect to
comply with the corporate governance requirements under the Corporate Governance Code and
Corporate Governance Report as set out in Appendix C1 to the Listing Rules after the Listing.
SHARE INCENTIVE SCHEMES
For more information, please refer to “History, Development and Corporate Structure —
Corporate Development — Issue and Allotment of New Shares” and “Appendix VI — Statutory
and General Information — Further Information about Our Directors, Supervisors, Management
and Substantial Shareholders — Share Incentive Schemes.”
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 350 ---
COMPLIANCE ADVISOR
We have appointed Maxa Capital Limited as our Compliance Advisor upon the Listing
pursuant to Rule 3A.19 of the Listing Rules. The material terms of the compliance advisor’s
agreement are as follows:
(i) Maxa Capital Limited shall act as our Compliance Advisor for the purpose of Rule
3A.19 of the Hong Kong Listing Rules for a period commencing on the Listing Date
and ending on the date on which we comply with Rule 13.46 of the Hong Kong Listing
Rules in respect of our financial results for the first full financial year commencing after
the Listing Date, or until the agreement is terminated, whichever is earlier;
(ii) the Compliance Advisor will provide us with certain services, including proper guidance
and advice as to compliance with the requirements under the Hong Kong Listing Rules
and applicable laws, regulations and rules;
(iii) the Compliance Advisor will, as soon as reasonably practicable, inform us of any
amendment or supplement to the Hong Kong Listing Rules announced by the Hong
Kong Stock Exchange from time to time, and of any amendment or supplement to the
applicable laws, regulations and rules in Hong Kong applicable to the Company; and
(iv) the Compliance Advisor will act as an additional channel of communication of the
Company with the Hong Kong Stock Exchange.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 351 ---
OVERVIEW
Upon Listing, certain transactions between us and our connected persons, which are entered
into in our ordinary course of business, will constitute continuing connected transactions of our
Company under Chapter 14A of the Listing Rules.
CONNECTED PERSONS
The following persons, among others, will become our connected persons upon Listing:
Name of our connected persons Connected Relationship
Geely Group, including but not limited to
Geely Automobile Holdings Limited (a
company listed on the Stock Exchange (stock
code: 175)), Lynk & Co Investment Co.,
Ltd., ZEEKR Intelligent Technology Holding
Limited .............................
Geely Holding is indirectly held as to over
50% by LI Shufu (၅), the father-in-law
of ZHENG Xin, our non-executive Director,
and the father of LI Xingxing (݋݋who
is a substantial shareholder of our Company
by virtue of his interest in Yaoning
Technology.
LI Shufu and his majority-controlled companies
other than Geely Group, including Hangzhou
Fenghua Technology Co., Ltd. (߅
ʮ̡ ) and Zhejiang Geely Commerce
Service Co., Ltd. (ʮ
̡) (collectively, “ Li Connected Persons ”) .
LI Shufu is the father-in-law of ZHENG Xin,
our non-executive Director, and the father of
LI Xingxing, who is a substantial shareholder
of our Company by virtue of his interest in
Yaoning Technology.
OUR CONTINUING CONNECTED TRANSACTIONS
Nature of transaction Counterparty
Applicable Listing
Rules Waiver sought
Fully exempt continuing connected transactions
1. Procurement of products and services ...... Li Connected
Persons
14A.76(1) N/A
CONNECTED TRANSACTIONS
– 340 –


--- page 352 ---
Nature of transaction Counterparty
Applicable Listing
Rules Waiver sought
Non-exempt continuing connected transactions (subject to reporting, annual review and announcement
requirements)
2. Procurement of services .............. Geely Group 14A.35,
14A.76(2),
14A.105
Announcement requirement
Non-exempt continuing connected transactions (subject to reporting, annual review, announcement, circular and
independent Shareholders’ approval requirements)
3. Provision of intelligent automotive vision
products and development services .......
Geely Group 14A.35,
14A.36,
14A.46,
14A.105
Announcement, circular and
independent Shareholders’
approval requirements
FULLY EXEMPT CONTINUING CONNECTED TRANSACTIONS
In the ordinary and usual course of business of our Group, we have procured certain products
and services, including but not limited to travel agency services and office equipment, from Li
Connected Persons. The pricing shall be on normal commercial terms and determined after an
arm’s length negotiations with reference to (i) the type of products or services procured, taken into
account the nature, complexity and scope of services; (ii) the procurement volume; and/or (iii) the
market price of similar products or services. The pricing terms are to be no less favorable to our
Group than those for transactions between our Group and Independent Third Parties under the
same conditions. As the highest applicable percentage ratios for each of the abovementioned
transactions for the purpose of Chapter 14A of the Listing Rules will be less than 0.1% on an
annual basis, each of such transactions will constitute a de minimis continuing connected
transaction of our Company pursuant to Rule 14A.76(1) of the Listing Rules that will be fully
exempt from reporting, annual review, announcement, circular and independent Shareholders’
approval requirements under Chapter 14A of the Listing Rules.
CONNECTED TRANSACTIONS
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--- page 353 ---
NON-EXEMPT CONTINUING CONNECTED TRANSACTION (SUBJECT TO
REPORTING, ANNUAL REVIEW AND ANNOUNCEMENT REQUIREMENTS)
We have entered into the following transaction which, as our Directors currently expect, the
highest applicable percentage ratio calculated for the purpose of Chapter 14A of the Listing Rules
will be more than 0.1% but less than 5% on an annual basis. Under Rule 14A.76(2) of the Listing
Rules, this transaction will be subject to the reporting, annual review and announcement
requirements under Chapter 14A of the Hong Kong Listing Rules but will be exempted from the
independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules.
Procurement of services
Principal terms
On October 12, 2024, we entered into the procurement framework agreement with each of the
respective members of Geely Group (the “ Procurement Framework Agreement ”), pursuant to
which our Group may, from time to time, procure from Geely Group certain services and products,
including but not limited to warehousing and other services, such as consultancy services for
assistance in project application (the “ Procurement ”). The Procurement Framework Agreement
has an initial term commencing on the Listing Date and ending on December 31, 2026, and may be
renewed as the parties may mutually agree, subject to the compliance with the requirements under
Chapter 14A of the Listing Rules and all other applicable laws and regulations.
Reasons and benefits for the transactions
In our ordinary and usual business associated with the intelligent automotive vision projects
with Geely Group, our Group has been procuring warehousing services from Geely Group to
facilitate storage and regional delivery of relevant products to Geely Group. By storage of
products at closer proximity to customers, such procurement improves our operational efficiency
and flexibility of our service response, on the one hand, and improve the customer experience of
Geely Group, on the other hand. We also procure other services through Geely Group to enjoy
more favorable pricing terms given the enhanced economy of scale achieved by bulk procurement.
Based on our experience in cooperations with Geely Group in respect of the Procurement, we
consider that Geely Group is capable of effectively and stably satisfying our demands with quality
services. Therefore, we believe it is in the interest of our Company and our Shareholders to enter
into the Procurement Framework Agreement and to continue with the Procurement upon the
Listing.
CONNECTED TRANSACTIONS
– 342 –


--- page 354 ---
Pricing basis
The pricing for the warehousing services shall be determined based on arm’s length
negotiations between the parties with reference to market rates of similar services, taking into
account factors such as storage time and space taken and type of products concerned.
For other services, Geely Group will charge us fees at the similar level charged to its
affiliates, which shall be based on the cost it incurred, including but not limited to its
administrative and labor costs.
The terms are to be no less favorable to our Group than those for transactions between our
Group and Independent Third Parties under the same conditions. We will regularly review the
prices charged by Geely Group in providing relevant services with reference to prevailing market
prices of similar services to ensure they are on normal commercial terms and are fair and
reasonable.
Historical amounts
Historical amounts
For the year ended December 31,
For the five
months ended
May 31,
2021 2022 2023 2024
(RMB’000)
Procurement fees recognized by our
Group ....................... 666 1,788 2,911 1,949
Annual caps and basis of caps
The maximum aggregate annual procurement amounts in respect of the Procurement
Framework Agreement for the three years ending December 31, 2024, 2025 and 2026 shall not
exceed the caps set out below:
Proposed annual caps (RMB’000)
for the year ending December 31,
2024 2025 2026
Procurement fees to be paid by our Group . 4,400 4,800 5,700
CONNECTED TRANSACTIONS
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--- page 355 ---
In arriving at the above annual caps, the Directors have considered, among other things,
(a) the historical transaction amounts and the growing trend during the Track Record
Period;
(b) the estimated demand for the Procurement for the three years ending December 31,
2026, which is expected to continue to increase considering the production and sales
plan of Geely Group and the robust expansion of our business. The increase in the
annual caps for the Procurement as compared to the historical transaction amounts is
primarily driven by the expected growth in demand for the warehousing services from
Geely Group to cope with the projected increase in our sales to Geely Group, as (i) we
have a number of intelligent automotive vision projects with Geely Group that
commenced mass production in the second half of 2023, the production and sales of
which would bring in significant increase in demand for warehousing services in 2024
and subsequent years as compared to the historical level, and (ii) the increase in number
of new intelligent automotive vision projects secured or expected to be secured by our
Group from Geely Group and the continued launch of new vehicle models by Geely
Group will also lead to increasing sales of our intelligent automotive vision products
which will require warehousing services from Geely Group; and
(c) the estimated unit prices of the Procurement determined based on the existing contracts
or arrangements between our Group and Geely Group.
NON-EXEMPT CONTINUING CONNECTED TRANSACTION (SUBJECT TO
REPORTING, ANNUAL REVIEW, ANNOUNCEMENT, CIRCULAR AND INDEPENDENT
SHAREHOLDERS’ APPROV AL REQUIREMENTS)
We have entered into the following transaction which, as our Directors currently expect, the
highest applicable percentage ratio calculated for the purpose of Chapter 14A of the Listing Rules
will be more than 5% on an annual basis. Under Rule 14A.03 of the Listing Rules, this transaction
will be subject to the reporting, annual review, announcement, circular and independent
Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
Provision of products and services
Principal terms
On October 12, 2024, we have entered into the products and services supply framework
agreement with each of the respective members of Geely Group (the “ Supply Framework
Agreement ”), pursuant to which our Group may, from time to time, provide Geely Group with our
intelligent automotive vision products, including the relevant prototypes and spare parts, and
development services. The Supply Framework Agreement has an initial term commencing on the
CONNECTED TRANSACTIONS
– 344 –


--- page 356 ---
Listing Date and ending on December 31, 2026, and may be renewed as the parties may mutually
agree, subject to the compliance with the requirements under Chapter 14A of the Listing Rules and
all other applicable laws and regulations.
Reason for the transactions
Our Group provides intelligent automotive vision solutions to Geely Group in our ordinary
and usual business. Geely Group is a leading automobile manufacturer and manages several
leading brands such as Geely Auto, Lynk & Co and ZEEKR. To cope with our strategic
developments, it is natural and in the interest of our Group to cooperate with the leading players in
the automotive industry such as Geely Group. We have established continuous and stable
cooperation relationship with Geely Group since 2018. Through the cooperations, our Group and
Geely Group have acquired a comprehensive understanding of the business and operational
requirements of each other, which helped build mutual trust and reduced communication costs. The
transactions also enable us to keep pace with the evolving markets so that we could consistently
enhance our offerings to meet customers’ demands. Considering the longstanding relationship and
Geely Group’s market position as well as its demand to transact with quality and reliable suppliers
like our Group, we believe that entering into the Supply Framework Agreement would be mutually
beneficial for our Group and Geely Group, and would be in the best interest of our Company and
our Shareholders as a whole.
Pricing basis
The price of the transactions contemplated under the Supply Framework Agreement shall be
determined after arm’s length negotiations between the parties, and will generally be subject to the
standard tender process of Geely Group to ensure it is competitive, on normal commercial terms,
and also fair and reasonable.
The price shall be charged (i) in the form of unit price in respect of our intelligent
automotive vision products or (ii) on project basis in respect of our development services. Given
that our intelligent automotive vision products provided to Geely Group are tailored to its
specification and requirements, market price is not considered appropriate as a pricing basis. We
usually charge Geely Group fees determined with reference to a variety of factors such as the type
and specification of products or services, our labor cost and costs of raw materials and production
and price of competitive products. The terms are to be no less favorable to our Group than those
for transactions between our Group and Independent Third Parties under the same conditions.
CONNECTED TRANSACTIONS
– 345 –


--- page 357 ---
Historical amounts
Historical amounts
For the year ended December 31,
For the five
months ended
May 31,
2021 2022 2023 2024
(RMB’000)
Transaction amount recognized
by our Group .................. 50,600 (1) 349,881 686,190 324,477
Note:
(1) we recorded lower transaction amount in 2021 as we provide intelligent automotive vision products to Geely Group
through Lynway Vision, which became our subsidiary on September 30, 2021.
Annual caps and basis of caps
The maximum aggregate annual transaction amounts in respect of the Supply Framework
Agreement for the three years ending December 31, 2026 shall not exceed the caps set out below:
Proposed annual caps (RMB’000)
for the year ending December 31,
2024 2025 2026
Transaction amount to be paid to our
Group ........................... 1,081,000 1,218,000 1,255,000
In arriving at the above annual caps, the Directors have considered, among other things,
(a) the historical transaction amounts and the growing trend during the Track Record
Period. In particular, the transaction amount increased significantly from 2021 to 2023,
primarily because we commenced mass production for a number of intelligent
automotive lamp projects in 2022 and 2023. In line with our business expansion and
development, we expect such growing trend will continue;
(b) the estimated sales volume of our products and services under the Supply Framework
Agreement for the three years ending December 31, 2026, which is expected to continue
to increase primarily due to the projected increase in sales under our existing projects
with Geely Group, based on the production plan of Geely Group and expansion of our
production capacity, taking into account the historical growing trend of our sales of
intelligent automotive vision products to Geely Group. As of May 31, 2024, among the
22 intelligent automotive vision projects we have secured in total, we have secured 21
CONNECTED TRANSACTIONS
– 346 –


--- page 358 ---
intelligent automotive vision projects from Geely Group, among which we commenced
mass production for 16 projects in or before 2023 and expect to commence mass
production for the remaining five projects in 2024 and 2025. In addition, considering the
continuing efforts of Geely Group in development and introduction of new models, we
expect its demand for our intelligent automotive vision products as well as the number
of projects granted by Geely Group to us will be increasing
(Note) , which will become the
additional driver of the increased annual caps;
(c) the estimated unit price of our intelligent automotive vision products to be provided to
Geely Group determined based on the existing contracts or arrangements between our
Group and Geely Group and taking into account various factors such as the new
automobile models to be launched by Geely Group and product specifications;
(d) the estimated cost to be incurred for our development services to be provided to Geely
Group with reference to the costs incurred during the Track Record Period, the expected
increase in manpower and other costs and expenses, the market trends, taking into
account factors such as the detailed aspects of automobile models; and
(e) the estimated revenue to be recognized based on the existing projects between our
Group and Geely Group, mainly in respect of development of intelligent automotive
vision products, the outstanding sum of which is expected to be recognized as our
revenue in 2024 and 2025.
W AIVER APPLICATION FOR NON-EXEMPT CONTINUING CONNECTED
TRANSACTIONS
Under Rule 14A.76(2) of the Listing Rules, the transaction under the subsection headed “—
Non-exempt continuing connected transaction (subject to reporting, annual review and
announcement requirements)” and the transaction under the subsection headed “— Non-exempt
continuing connected transaction (subject to reporting, annual review, announcement, circular and
independent Shareholders’ approval requirements)” will constitute our continuing connected
transactions subject to those requirements under Chapter 14A of the Listing Rules upon the
Listing.
Note:
We expect that as compared with the year ended December 31, 2023, we will have five, five and six additional projects on
an accumulative basis from Geely Group for each of the three years ending December 31, 2026, respectively. This
includes five new projects for the two years ending December 31, 2025, and one additional new project for the year
ending December 31, 2026.
CONNECTED TRANSACTIONS
– 347 –


--- page 359 ---
As those non-exempt continuing connected transactions are expected to continue on a
recurring and continuing basis and have been fully disclosed in this prospectus, our Directors
consider that compliance with the announcement, circular and the independent Shareholders’
approval requirements (as the case may be) would be impractical, and such requirements would
lead to unnecessary administrative costs and would be unduly burdensome to us.
Accordingly, we have applied to the Hong Kong Stock Exchange for, and the Stock Exchange
has granted, waivers exempting us from strict compliance with (i) the announcement requirement
under Chapter 14A of the Listing Rules in respect of the continuing connected transaction as
disclosed in “— Non-exempt Continuing Connected Transaction (subject to reporting, annual
review and announcement requirements)” in this section; and (ii) the announcement, circular and
independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules in
respect of the continuing connected transaction as disclosed in “— Non-exempt Continuing
Connected Transaction (subject to reporting, annual review, announcement, circular and
independent Shareholders’ approval requirements)” in this section, subject to the condition that the
aggregate amounts of the continuing connected transactions for each financial year shall not
exceed the relevant amounts set forth in the respective annual caps (as stated above).
In the event of any future amendments to the Listing Rules imposing more stringent
requirements than those applicable as of the Latest Practicable Date on the continuing connected
transactions referred to in this prospectus, we will take immediate steps to ensure compliance with
such new requirements within reasonable time.
CONFIRMATION FROM OUR DIRECTORS
Our Directors (including our independent non-executive Directors) are of the view that the
non-exempt continuing connected transactions as set out above are in our ordinary and usual
course of business and on normal commercial terms, and are fair and reasonable and in the interest
of our Company and our Shareholders as a whole, and the proposed annual caps for those
transactions are fair and reasonable and in the interest of our Company and our Shareholders as a
whole.
CONFIRMATION FROM THE SOLE SPONSOR
The Sole Sponsor is of the view that the non-exempt continuing connected transactions as set
out above are in the ordinary and usual course of business of our Company and on normal
commercial terms, and are fair and reasonable and in the interests of our Company and our
Shareholders as a whole, and the proposed annual caps for those transactions are fair and
reasonable and in the interest of our Company and our Shareholders as a whole.
CONNECTED TRANSACTIONS
– 348 –


--- page 360 ---
INTERNAL CONTROL MEASURES TO SAFEGUARD SHAREHOLDERS’ INTERESTS
In order to further safeguard the interests of the Shareholders as a whole (including the
minority Shareholders), our Group has implemented the following internal control measures in
relation to the continuing connected transactions:
 Our Group has approved internal guidelines which provide that if the value of any
proposed connected transaction is expected to exceed certain thresholds, the relevant
staff must report the proposed transactions to the relevant responsible personnel in order
for our Company to commence the necessary additional assessment and approval
procedures and ensure that we will comply with the applicable requirements under
Chapter 14A of the Listing Rules.
 Our Company will provide information and supporting documents to the independent
non-executive Directors and the auditors in order for them to conduct an annual review
of the continuing connected transactions entered into by our Company. In accordance
with the requirements under the Listing Rules, the independent non-executive Directors
will provide an annual confirmation to the Board as to whether the continuing connected
transactions have been entered into in the ordinary and usual course of business of our
Group, are on normal commercial terms and are in accordance with the agreement
governing them on terms that are fair and reasonable and in the interests of the
Shareholders as a whole, and the auditors will provide an annual confirmation to the
Board as to whether anything has come to their attention that causes them to believe
that the continuing connected transactions have not been approved by the Board, are not
in accordance with the pricing policies of our Group in all material respects, are not
entered into in accordance with the relevant agreements governing the transactions in all
material respects or have exceeded the cap as stated above.
 When considering any renewal or revisions to the agreements after Listing, the
interested Directors and Shareholders shall abstain from voting on the resolutions to
approve such transactions at board meetings or shareholders’ general meetings (as the
case may be). If the independent Directors’ or independent Shareholders’ approvals
cannot be obtained, we will not continue the transactions under the framework
agreement(s) to the extent that they constitute non-exempt continuing connected
transactions under rule 14A.35 of the Listing Rules.
CONNECTED TRANSACTIONS
– 349 –


--- page 361 ---
OUR SHARE CAPITAL
This section presents certain information regarding our share capital before and upon
completion of the Global Offering.
Immediately before the Global Offering
As of the Latest Practicable Date, the total share capital of our Company was
RMB498,506,709, comprising 498,506,709 Shares of nominal value RMB1.00 each.
Upon the Completion of the Global Offering
Immediately following completion of the Global Offering and Conversion of Domestic
Unlisted Shares into H Shares (assuming the Offer Size Adjustment Option is not exercised), the
share capital of our Company will be as follows:
Description of Shares Number of Shares
Approximate
percentage to
total share capital
(%)
Domestic Unlisted Shares ........................... 283,000,066 53.18
H Shares converted from Domestic Unlisted Shares ........ 215,506,643 40.50
H Shares to be issued pursuant to the Global Offering ...... 33,600,000 6.31
Total ............................................ 532,106,709 100
SHARE CAPITAL
– 350 –


--- page 362 ---
The Conversion of Domestic Unlisted Shares into H Shares will involve an aggregate of
215,506,643 Domestic Unlisted Shares held by 32 out of 41 existing Shareholders, representing
approximately 40.50% of total issued Shares of the Company upon completion of the Conversion
of Domestic Unlisted Shares into H Shares and the Global Offering (assuming the Offer Size
Adjustment Option is not exercised). Set out below are such Shares held by our existing
Shareholders and their respective shareholding upon completion of the Conversion of Domestic
Unlisted Shares into H Shares and the Global Offering (assuming the Offer Size Adjustment
Option is not exercised).
Shares immediately after the Global Offering
(assuming the Offer Size Adjustment Option is not exercised)
and the Conversion of Domestic Unlisted Shares into H Shares
Shareholders
H Shares to be
converted from
Domestic Unlisted
Shares
Approximate
Percentage
Domestic Unlisted
Shares
Approximate
Percentage
(%) (%)
Advanced Photoelectronic ............. 52,483,352 9.86 149,824,524 28.16
Jingyu Investment .................. 5,789,000 1.09 8,316,000 1.56
Jingshi Investment .................. 3,802,910 0.71 2,778,790 0.52
Jingling Investment ................. 367,053 0.07 6,200,617 1.17
Jingrui Investment .................. 1,082,520 0.20 4,196,808 0.79
Yaoning Technology ................. 34,291,287 6.44 34,291,286 6.44
Yueke Investment ................... 0 0.00 23,712,360 4.46
Dingdekai ........................ 11,280,000 2.12 7,520,000 1.41
Guangrong Lianmeng ................. 12,000,000 2.26 0 0.00
FAN Wuzhou ...................... 10,000,000 1.88 1,000,000 0.19
Zhongbao Industrial .................. 10,000,000 1.88 0 0.00
Zhongke Baiyun .................... 4,969,638 0.93 4,969,637 0.93
YE Zhiyu ........................ 9,393,602 1.77 0 0.00
Xijiao Science Innovation .............. 9,347,827 1.76 0 0.00
Guangdong Technology VC ............. 0 0.00 8,695,653 1.63
Gossel .......................... 6,000,000 1.13 2,000,000 0.38
SME Fund ....................... 7,790,000 1.46 0 0.00
Yuecai Yuanhe ..................... 0 0.00 7,700,000 1.45
Yuecai Emerging .................... 7,667,279 1.44 0 0.00
Shidiya ......................... 0 0.00 7,000,000 1.32
GAO Tao ........................ 1,500,000 0.28 3,500,000 0.66
Episky .......................... 4,678,240 0.88 0 0.00
Haohan Photoelectronic ............... 4,205,600 0.79 0 0.00
Guanmaoyuan ..................... 2,010,000 0.38 1,341,304 0.25
SHARE CAPITAL
– 351 –


--- page 363 ---
Shares immediately after the Global Offering
(assuming the Offer Size Adjustment Option is not exercised)
and the Conversion of Domestic Unlisted Shares into H Shares
Shareholders
H Shares to be
converted from
Domestic Unlisted
Shares
Approximate
Percentage
Domestic Unlisted
Shares
Approximate
Percentage
(%) (%)
GUI Fan ......................... 2,100,000 0.39 900,000 0.17
Jiaoying Yihao .................... 3,000,000 0.56 0 0.00
Jiamu Ronghe ..................... 2,488,486 0.47 0 0.00
ZHOU Baiyun ..................... 0 0.00 2,200,000 0.41
WANG Qi ........................ 1,800,000 0.34 200,000 0.04
HE Jinchun ....................... 2,000,000 0.38 0 0.00
GU Wenjun ....................... 2,000,000 0.38 0 0.00
LAI Canwei ...................... 0 0.00 1,826,087 0.34
DENG Zhifeng ..................... 1,700,000 0.32 0 0.00
Vision Capital ..................... 0 0.00 1,700,000 0.32
WANG Hongying ................... 0 0.00 1,300,000 0.24
ZHOU Xiaoyang .................... 650,000 0.12 650,000 0.12
HUANG Dinghe .................... 600,000 0.11 400,000 0.08
LIU Jun ......................... 350,000 0.07 350,000 0.07
Yixingbanyue ...................... 0 0.00 427,000 0.08
YE Zhixiong ...................... 94,885 0.02 0 0.00
Chuangying Jianke .................. 64,964 0.01 0 0.00
215,506,643 40.50 283,000,066 53.18
Immediately following the completion of the Global Offering and Conversion of Domestic
Unlisted Shares into H Shares, assuming the Offer Size Adjustment Option is fully exercised, the
share capital of our Company will be as follows:
Description of Shares Number of Shares
Approximate % of
the enlarged issued
share capital after
the Global Offering
Domestic Unlisted Shares ....................... 283,000,066 52.69
H Shares converted from Domestic Unlisted Shares .... 215,506,643 40.12
H Shares to be issued pursuant to the Global Offering .. 38,640,000 7.19
Total ........................................ 537,146,709 100
SHARE CAPITAL
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--- page 364 ---
DOMESTIC UNLISTED SHARES AND H SHARES
Upon the completion of the Global Offering and the Conversion of Domestic Unlisted Shares
into H Shares, the Shares will consist of Domestic Unlisted Shares and H Shares. Domestic
Unlisted Shares and H Shares are all ordinary Shares in the share capital of our Company.
Apart from certain qualified domestic institutional investors in the PRC, the qualified PRC
investors under the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock
Connect and other persons who are entitled to hold our H Shares pursuant to relevant PRC laws
and regulations or upon approvals of any competent authorities (such as our certain existing
shareholders the Domestic Unlisted Shares held by whom will be converted into H Shares
according to the filing information of CSRC), H Shares generally cannot be subscribed for by or
traded between legal or natural PRC persons.
Domestic Unlisted Shares and H Shares shall rank pari passu with each other in all respects
and, in particular, will rank equally for dividends or distributions declared, paid or made. All
dividends for H Shares will be denominated and declared in Renminbi, and paid in Hong Kong
dollars or Renminbi, whereas all dividends for Domestic Unlisted Shares will be paid in Renminbi.
Other than cash, dividends could also be paid in the form of shares.
CONVERSION OF DOMESTIC UNLISTED SHARES INTO H SHARES
If any of the Domestic Unlisted Shares are to be converted, listed and traded as H Shares on
the Hong Kong Stock Exchange, such conversion, listing and trading will need the filing of the
relevant PRC regulatory authorities, including the CSRC, and the approval of the Hong Kong
Stock Exchange.
File with the CSRC for Full Circulation
In accordance with the Overseas Listing Trial Measures and related guidelines, H-share listed
companies shall file with the CSRC for the conversion of domestic unlisted shares into H shares
for listing and circulation on the Hong Kong Stock Exchange. An unlisted domestic joint stock
company may file for “full circulation” when applying for an overseas initial public offering.
We have filed with the CSRC for the conversion of 215,506,643 Domestic Unlisted Shares in
aggregate into H Shares on a one-for-one basis (“ Conversion of Domestic Unlisted Shares into H
Shares ”) upon the completion of the Global Offering (“ Full Circulation Filing of the Company ”)
and CSRC issued the filing notices in respect of the Conversion of Domestic Unlisted Shares into
H Shares dated June 1, 2024 and September 30, 2024, respectively.
SHARE CAPITAL
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Listing Approval by the Stock Exchange
We have applied to the Listing Committee of 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 H Shares to be converted from 215,506,643 Domestic Unlisted
Shares, on the Hong Kong Stock Exchange, which is subject to the approval by the Hong Kong
Stock Exchange.
We will perform the following procedures for the conversion of Domestic Unlisted Shares
into H Shares after receiving the approval of the Hong Kong Stock Exchange: (1) giving
instructions to our H Share Registrar regarding relevant share certificates of the converted H
Shares; and (2) enabling the converted H Shares to be accepted as eligible securities by HKSCC
for deposit, clearance and settlement in the CCASS.
RESTRICTION ON TRANSFER OF SHARES ISSUED PRIOR TO THE GLOBAL
OFFERING
In accordance with Article 141 of the PRC Company Law, the shares issued prior to any
public offering of shares by a company cannot be transferred within one year from the date on
which such publicly offered shares are listed and traded on the relevant stock exchange. As such,
the Shares issued by the Company prior to the Global Offering will be subject to such statutory
restriction on transfer within a period of one year from the Listing Date. See “History,
Development and Corporate Structure — Pre-IPO Investments.”
CIRCUMSTANCES UNDER WHICH GENERAL MEETINGS ARE REQUIRED
Pursuant to the PRC Company Law and the terms of the Articles of Association, our
Company may from time to time by special resolution of shareholders, among others, increase its
capital or decrease its capital or repurchase of shares. See “Appendix V — Summary of Articles of
Association” in this prospectus.
SHARE CAPITAL
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So far as our Directors are aware, immediately following the completion of the Global
Offering and the Conversion of Domestic Unlisted Shares into H Shares and without taking into
account any H Shares which may be issued pursuant to the exercise of the Offer Size Adjustment
Option, the following persons will have an interest and/or short position in the Shares or the
underlying Shares which would fall to be disclosed to us and the Stock Exchange under the
provisions of Divisions 2 and 3 of Part XV of the SFO, or, who are, directly or indirectly
interested in 10% or more of the nominal value of any class of our share capital carrying rights to
vote in all circumstances at general meetings of our Company:
Shareholder Nature of Interest
Number and
Description of Shares (1)
Approximate
Percentage of
Shareholding in
the Domestic
Unlisted Shares/
H Shares shortly
after the Global
Offering
Approximate
Percentage of
Shareholding in
the Total Issued
Share Capital of
our Company
immediately after
the Global
Offering
(%) (%)
Advanced Photoelectronic (2)(3) . Beneficial owner 149,824,524 Domestic
Unlisted Shares
52.94 28.16
52,483,352 H Shares 21.07 9.86
Interest held jointly
with other persons
21,492,215 Domestic
Unlisted Shares
7.59 4.04
11,041,483 H Shares 4.43 2.08
Jingyu Investment (2)(3) ...... Beneficial owner 8,316,000 Domestic
Unlisted Shares
2.94 1.56
5,789,000 H Shares 2.32 1.09
Interest held jointly
with other persons
163,000,739 Domestic
Unlisted Shares
57.60 30.63
57,735,835 H Shares 23.18 10.85
Jingshi Investment (2)(3) ..... Beneficial owner 2,778,790 Domestic
Unlisted Shares
0.98 0.52
3,802,910 H Shares 1.53 0.71
Interest held jointly
with other persons
168,537,949 Domestic
Unlisted Shares
59.55 31.67
59,721,925 H Shares 23.97 11.22
SUBSTANTIAL SHAREHOLDERS
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--- page 367 ---
Shareholder Nature of Interest
Number and
Description of Shares (1)
Approximate
Percentage of
Shareholding in
the Domestic
Unlisted Shares/
H Shares shortly
after the Global
Offering
Approximate
Percentage of
Shareholding in
the Total Issued
Share Capital of
our Company
immediately after
the Global
Offering
(%) (%)
Jingling Investment (2)(3) ..... Beneficial owner 6,200,617 Domestic
Unlisted Shares
2.19 1.17
367,053 H Shares 0.15 0.07
Interest held jointly
with other persons
165,116,122 Domestic
Unlisted Shares
58.34 31.03
63,157,782 H Shares 25.35 11.87
Jingrui Investment (2)(3) ..... Beneficial owner 4,196,808 Domestic
Unlisted Shares
1.48 0.79
1,082,520 H Shares 0.43 0.20
Interest held jointly
with other persons
167,119,931 Domestic
Unlisted Shares
59.05 31.41
62,442,315 H Shares 25.07 11.73
Mr. Xiao (2)(3)(4) .......... Interest held jointly
with other persons
171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
APTESS Company Limited (2)(3) Interest held jointly
with other persons
171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
Mr. Chan (2)(3)(5) .......... Interest held jointly
with other persons
171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
Ms. Loh (5) ............. Interest of spouse 171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
SUBSTANTIAL SHAREHOLDERS
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--- page 368 ---
Shareholder Nature of Interest
Number and
Description of Shares (1)
Approximate
Percentage of
Shareholding in
the Domestic
Unlisted Shares/
H Shares shortly
after the Global
Offering
Approximate
Percentage of
Shareholding in
the Total Issued
Share Capital of
our Company
immediately after
the Global
Offering
(%) (%)
Mr. Yuan(2)(3) ........... Interest held jointly
with other persons
171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
Giant Power Limited (2)(3) .... Interest held jointly
with other persons
171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
Yaoning Technology (6) ...... Beneficial owner 34,291,286 Domestic
Unlisted Shares
12.12 6.44
34,291,287 H Shares 13.77 6.44
Ningbo Chunhuaqiushi
Technology Co., Ltd. (݆ت
ʮ̡ )
(“Ningbo
Chunhuaqiushi ”)(6) ......
Interest in a controlled
corporation
34,291,286 Domestic
Unlisted Shares
12.12 6.44
34,291,287 H Shares 13.77 6.44
Ningbo Meishan Bonded Port
Area Angbu Investment Co.,
Ltd. (Ӊ
ʮ̡ )( “ Angbu
Investment ”)
(6) ........
Interest in a controlled
corporation
34,291,286 Domestic
Unlisted Shares
12.12 6.44
34,291,287 H Shares 13.77 6.44
Mr. LI Xingxing (6) ........ Interest in a controlled
corporation
34,291,286 Domestic
Unlisted Shares
12.12 6.44
34,291,287 H Shares 13.77 6.44
Guangdong Yueke Finance
Investment Co., Ltd. (޲؇
ʮ̡ )
(“Yueke Investment ”)(7) ...
Beneficial owner 23,712,360 Domestic
Unlisted Shares
8.38 4.46
SUBSTANTIAL SHAREHOLDERS
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--- page 369 ---
Shareholder Nature of Interest
Number and
Description of Shares (1)
Approximate
Percentage of
Shareholding in
the Domestic
Unlisted Shares/
H Shares shortly
after the Global
Offering
Approximate
Percentage of
Shareholding in
the Total Issued
Share Capital of
our Company
immediately after
the Global
Offering
(%) (%)
Guangdong Technology
Financial Group Co., Ltd. ( ᄿ
ʮ̡ )
(“Yueke Group ”) (7) ......
Interest in a controlled
corporation
32,408,013 Domestic
Unlisted Shares
11.45 6.09
Guangdong Yuecai Investment
Holding Co., Ltd. (ຽৌ
ʮ̡ )( “ Yuecai
Holding ”)(8) ...........
Interest in a controlled
corporation
15,522,243 H Shares 6.23 2.92
SU Yongchun (݆9) .... Interest in a controlled
corporation
13,290,000 H Shares 5.34 2.50
Notes:
(1) All interests are long positions.
(2) As of the Latest Practicable Date, Advanced Photoelectronic was held as to (i) 10.50% by Mr. Xiao, (ii) 17.76% by
APTESS, which is wholly owned by Mr. Xiao, (iii) 32.02% by Giant Power Limited, which is wholly owned by Mr.
Yuan, (iv) 3.78% by Mr. Chan, (v) 1.62% by Ms. Loh, spouse of Mr. Chan, and (vi) 34.32% by other shareholders,
none of which held more than one third therein.
(3) Pursuant to the acting-in-concert agreement dated January 1, 2021, Mr. Xiao, Mr. Chan, Mr. Yuan, APTESS and
Giant Power Limited are parties acting in concert. Therefore, each of Mr. Xiao, Mr. Chan, Mr. Yuan, APTESS and
Giant Power Limited is deemed to be interested in the interest of each other under the SFO.
(4) As of the Latest Practicable Date, Mr. Xiao was the general partner of Jingyu Investment, Jingling Investment,
Jingrui Investment and Jingshi Investment. Therefore, Mr. Xiao is deemed to be interested in the 14,105,000,
6,567,670, 5,279,328 and 6,581,700 Shares held by each of Jingyu Investment, Jingling Investment, Jingrui
Investment and Jingshi Investment in the Company. Pursuant to the acting-in-concert agreement dated December 8,
2023, Advanced Photoelectronic, Jingyu Investment, Jingling Investment, Jingrui Investment and Jingshi Investment
are parties acting in concert. Therefore, each of Advanced Photoelectronic, Jingyu Investment, Jingling Investment,
Jingrui Investment and Jingshi Investment is deemed to be interested in the interest of each other under the SFO.
(5) Mr. Chan and Ms. Loh are spouses, and hence are deemed to be interested in the interest of each other under the
SFO.
SUBSTANTIAL SHAREHOLDERS
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--- page 370 ---
(6) As of the Latest Practicable Date, Yaoning Technology was owned as to 85% by Ningbo Chunhuaqiushi, which was
owned as to 95% by Angbu Investment, which was in turn wholly owned by Mr. LI Xingxing. Therefore, each of
Mr. LI Xingxing, Angbu Investment and Ningbo Chunhuaqiushi is deemed to be interested in the Shares held by
Yaoning Technology.
(7) As of the Latest Practicable Date, Yueke Investment was wholly owned by Yueke Group, and Guangdong
Technology Venture Capital Co., Ltd. (ʮ̡ )( “ Guangdong Technology VC ”) was owned
as to 80% by Yueke Group. Therefore, Yueke Group is deemed to be interested in the Shares held by Yueke
Investment and the 8,695,653 Shares held by Guangdong Technology VC.
(8) As of the Latest Practicable Date, Guangzhou Yuecai Yuanhe Venture Capital Partnership (Limited Partnership) ( ᄿψຽ
ৌ๕Υ௴ุҳ༟ΥྫΆุ (Υྫ)) (“ Yuecai Yuanhe ”), Guangdong Yuecai Emerging Industry Equity Investment
Fund Partnership (L.P.) (ΥྫΆุ (Υྫ)) (“ Yuecai Emerging ”), Guangzhou
Chuangying Jianke Investment Partnership (L.P.) (ҳ༟ΥྫΆุ (Υྫ)) (“ Chuangying Jianke ”),
Guangdong SME Equity Investment Fund Limited (ʮ̡ )( “SME Fund ”) and Zhuhai
Hengqin Yixingbanyue Investment Partnership (L.P.) (М˜ҳ༟ΥྫΆุ (Υྫ)) (“ Yixingbanyue ”)
were private equity funds, the fund managers of which were all controlled by Yuecai Holding. Therefore, Yuecai
Holding is deemed to be interested in the Shares held by each of Yuecai Yuanhe, Yuecai Emerging, Chuangying Jianke,
SME Fund and Yixingbanyue.
(9) As of the Latest Practicable Date, SU Yongchun was the general partner of Xinyu Dingdekai Investment
Management Center (Limited Partnership) ( อቱཻᅃ௱ҳ༟၍ଣʕː (Υྫ)) (“ Dingdekai ”) and Xinyu
Guanmaoyuan Investment Management Center (Limited Partnership) (ҳ༟၍ଣʕː (Υྫ))
(“Guanmaoyuan ”). Therefore, SU Yongchun is deemed to be interested in the Shares held by Dingdekai and
Guanmaoyuan.
For those who are directly and/or indirectly interested in 10% or more of the nominal value
of any class of share capital carrying rights to vote in all circumstances at general meeting of any
other member of our Group, see “Appendix VI — Statutory and General Information — Further
Information about Our Directors, Supervisors, Management and Substantial Shareholders —
Substantial Shareholders.”
Save as disclosed herein, our Directors are not aware of any other person who will,
immediately following the Global Offering and the Conversion of Domestic Unlisted Shares into H
Shares (and the offering of any additional H Shares pursuant to the Offer Size Adjustment Option),
have an interest or short position in Shares or underlying Shares of the Company, which would be
required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions
2 and 3 of Part XV of the SFO or will, directly or indirectly, be interested in 10% or more of the
nominal value of any class of share capital carrying rights to vote in all circumstances at general
meeting of the Company.
SUBSTANTIAL SHAREHOLDERS
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The following discussion and analysis should be read in conjunction with our consolidated
financial statements included in “Appendix IA — Accountants’ Report of the Group,” together
with the accompanying notes. Our consolidated financial statements have been prepared in
accordance with IFRS.
The following discussion and analysis contains forward-looking statements that involve
risks and uncertainties. These statements are based on assumptions and analysis that we make
in light of our experience and perception of historical trends, current conditions and expected
future developments, as well as other factors we believe are appropriate under the
circumstances. However , our actual results may differ significantly from those projected in the
forward-looking statements. Factors that might cause future results to differ significantly from
those projected in the forward-looking statements include, but are not limited to, those
discussed in “Risk Factors” and “Forward-Looking Statements” and elsewhere in this
prospectus.
OVERVIEW
We are a leading enterprise in China providing intelligent vision products and system
solutions integrating “LED+” technologies. Our areas of expertise encompass intelligent
automotive vision, high-end lighting and advanced display. Leveraging industry insights and
forward-thinking technology strategies, we house a broad array of “LED+” technologies by
integrating LED technologies with integrated circuits (ICs), electronic control, software, sensors,
optics and others. Our green, energy-efficient and rapidly evolving “LED+” technologies further
empower our intelligent vision products and systems, enabling us to penetrate high-value,
high-growth markets. In terms of revenue in 2023, we ranked third among domestic device and
module manufacturers in China’s high-end lighting industry and fifth among all device and module
manufacturers in the same industry. We ranked fifth among domestic manufacturers in China’s
mid- to high-end intelligent automotive vision industry and twelfth among all manufacturers in the
same industry. We ranked fourth among both domestic and all manufacturers in China’s LCD TV
backlight display industry. As of the Latest Practicable Date, we passed all product verifications
and audit procedures on our manufacturing facilities, conducted by the majority of the top-tier
domestic and international companies in intelligent automotive vision, high-end lighting and
advanced display businesses. In 2021, 2022, 2023 and the five months ended May 31, 2023 and
2024, our revenue amounted to RMB1,388.4 million, RMB1,410.6 million, RMB1,858.0 million,
RMB624.6 million and RMB843.2 million, respectively; our gross profit amounted to RMB228.3
million, RMB235.2 million, RMB339.0 million, RMB104.3 million and RMB154.2 million,
respectively; our net profit amounted to RMB78.0 million, RMB39.1 million, RMB72.0 million,
RMB7.6 million and RMB32.2 million, respectively.
FINANCIAL INFORMATION
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BASIS OF PRESENTATION
Our consolidated financial information has been prepared in accordance with IFRS issued by
the International Accounting Standards Board. All IFRS effective for the accounting period
commencing from January 1, 2023, together with the relevant transitional provisions, have been
early adopted by the Group in the preparation of the historical financial information throughout the
Track Record Period. The historical financial information has been prepared under the historical
cost convention, except for certain financial assets which have been measured at fair value through
profit or loss, or other comprehensive income.
The preparation of our consolidated financial information in conformity with IFRS 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 our
consolidated financial information are disclosed in Note 3 of the Accountants’ Report of the Group
in Appendix IA.
MAJOR FACTORS AFFECTING OUR RESULTS OF OPERATIONS
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:
General Factors
 overall economic growth and conditions;
 technology development in the sectors in which we operate;
 competition we face in the sectors in which we operate;
 conditions of the end markets that we serve and the resulting fluctuations in customer
demand; and
 relevant laws and regulations, government policies and initiatives.
FINANCIAL INFORMATION
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Specific Factors
Besides the general factors affecting the industry, our business and results of operations are
also affected by specific factors, including the following major factors:
Expansion of Customer Base and Strengthening of Customer Relationships
Our results of operations depend significantly on customer demand. We develop and design
our LED products to satisfy the needs and preferences of our customers in various sectors. We
build brand recognition by consistently delivering technically advanced products with superior
performance. We also have a dedicated service team for our customers which is responsible for
demand analysis, solution development, order delivery and after-sales service. Customer
satisfaction helps us solidify relationships with existing customers and generate word-of-mouth
effect which enable us to attract new customers. Our continual effort to expand our customer base
and strengthen customer relationships has yielded strong top-tier customer coverage rates, and our
end-customers include all of the top five TV brands globally, 50% of the top ten LED lighting
companies globally, 70% of the top ten Tier-1 suppliers of automotive lamps and 40% of the top
five domestic automotive OEMs. In addition, we have successfully developed 68, 63, 105 and 45
new customers in 2021, 2022, 2023 and the five months ended May 31, 2024, respectively.
Furthermore, the end markets in which we operate, including the intelligent automotive vision
market, high-end lighting market and advanced display market, are characterized by the constant
evolution of consumer demand and technologies. Our ability to timely identify market trends and
develop innovative products that cater to the changing demands of our downstream markets is
crucial to our continued success. As we continue to develop and launch products with market
competitiveness, promote our brand and expand our sales and service network, we expect to
expand our customer base and achieve revenue growth.
Expansion of Product Portfolio and Changes in Business Mix
Our ability to constantly introduce new products that meet the demand and preference of our
customers is an important contributor to our growth. We plan to continually introduce new
products to expand our product portfolio. We expect our revenue growth to be driven in part by the
continued expansion of our product portfolio. In 2021, 2022, 2023 and the five months ended May
31, 2023 and 2024, we introduced 1,220, 1,144, 1,653, 625 and 590 new products, respectively.
Our results of operations may also be affected by changes in our business mix. During the
Track Record Period, we operated in: (i) intelligent automotive vision, (ii) high-end lighting and
(iii) advanced display. Our intelligent automotive vision business expanded substantially during the
Track Record Period as we continued our transformation from a traditional LED manufacturer to
FINANCIAL INFORMATION
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an intelligent vision product and system provider that integrates “LED+” technologies, with the
revenue from intelligent automotive vision amounting to RMB74.3 million, RMB399.7 million,
RMB771.0 million, RMB225.7 million and RMB365.4 million in 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, representing 5.3%, 28.3%, 41.5%, 36.1% and 43.4% of our
total revenue during the same periods, respectively. At the same time, our profitability varied
across different businesses, depending on the types of products we offered. During the Track
Record Period, we expanded into high-tech, high-profit margin and high-growth potential products
in high-end lighting and advanced display, such as horticultural lighting products and intelligent
local dimming products, to capture a broader range of market opportunities, enhance the diversity
of our product offerings and improve our profitability. As a result, both of our high-end lighting
business and advanced display business recorded stable growth in gross profit margin during the
Track Record Period. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, the
gross profit margin of our high-end lighting business was 19.6%, 19.2%, 23.4%, 22.6% and 24.8%,
respectively. The gross profit margin of our advanced display business was 9.6%, 10.7%, 16.4%,
16.4% and 15.7% in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024,
respectively. The decrease in the gross profit margin of the advanced display business in the five
months ended May 31, 2024 as compared to that of the same period in 2023 was primarily due to
price adjustments on certain products. During the Track Record Period, our intelligent automotive
vision business recorded a gross loss margin of 1.1% in 2021, and a gross profit margin of 17.5%,
14.9%, 10.2% and 15.3% in 2022, 2023 and the five months ended May 31, 2023 and 2024,
respectively. The fluctuations were primarily because in 2021, our intelligent automotive vision
business was in its early stage of development and in 2022 we started to benefit from the
economies of scale as we commenced mass production for several intelligent automotive lamp
projects. In 2023, we adopted a competitive pricing strategy to gain greater market share in
response to the intense market competition. See “— Principal Components of Our Consolidated
Statements of Profit or Loss — Gross Profit/(Loss) and Gross Margin.” Any change in the
structure of revenue contribution and profitability from our business may have a corresponding
impact on our overall profitability.
Ability to Control Raw Material and Consumable Costs
Effective supply chain management is key to our financial performance. Our high degree of
vertical integration significantly simplifies and streamlines our supply chain, lowering procurement
costs while enhancing overall supply chain stability and quality. In 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, our cost of sales amounted to RMB1,160.1 million,
RMB1,175.4 million, RMB1,519.0 million, RMB520.3 million and RMB688.9 million,
respectively.
Raw material and consumable costs contributed to the majority of our cost of sales during the
Track Record Period. We purchase a variety of raw materials and consumables for our production
primarily including LED chips, leadframes, PCBs, automotive lamp modules, plastic particles,
drivers and electronic components. In 2021, 2022, 2023 and the five months ended May 31, 2023
FINANCIAL INFORMATION
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--- page 375 ---
and 2024, our raw material and consumable costs that constitute the cost of sales represented
83.3%, 80.7%, 77.8%, 78.8% and 81.9% of our total cost of sales, respectively. The prices of our
raw materials and consumables may fluctuate with market conditions. We have a dedicated team of
supply chain experts that focuses on establishing and solidifying our relationship with suppliers.
We have strengthened supply chain management by adopting measures such as expanding the
supplier pool for main raw materials and consumables and implementing bidding processes for key
raw materials and consumables. We also seek to enhance our bargaining power in raw materials
and consumables purchases by leveraging our growing procurement scale and centralized
procurement. In addition, leveraging our R&D capabilities, we are able to improve the utilization
efficiency of raw materials and consumables and also improve our adaptability with a diverse
range of raw materials and consumables.
We plan to continue to leverage our strong in-house production capabilities and optimize the
production process in our manufacturing facilities through advanced, intelligent and automated
manufacturing as well as energy-saving measures to reduce our unit production cost and strengthen
our economies of scale. We believe our efficient supply chain management and production process
enable us to quickly launch and upgrade products in response to customer demand. As we continue
to increase our sales, we are committed to controlling our cost of sales to continually enhance our
profitability level.
Continual Investment in R&D and Talents
Continual innovation and development of our products are crucial for us to meet our
customers’ needs and to maintain our market position in the LED intelligent vision industry. We
developed our key technologies in-house to achieve rapid innovation through significant
investment in R&D resources. Our technologies encompass fundamental technologies and
product-specific technologies across our business. Meanwhile, we recruit and cultivate talented
engineers and specialists to develop new technologies and strengthen our key technologies,
enabling us to expand our competitive product offerings as well as upgrading existing product
portfolios to achieve better performance and cost efficiency. In 2021, 2022, 2023 and the five
months ended May 31, 2023 and 2024, our research and development costs were RMB62.0
million, RMB88.7 million, RMB87.2 million, RMB36.3 million and RMB37.6 million,
representing 4.5%, 6.3%, 4.7%, 5.8% and 4.5% of our total revenue and 36.6%, 36.5%, 30.2%,
33.3% and 29.6% of our total expenses (the sum of selling and marketing expenses, administrative
expenses, research and development costs and other expenses) during the same periods,
respectively. The decrease in research and development costs as a percentage of the total revenue
was primarily attributable to the increase in our sales volume. During the same periods, we
introduced 1,220, 1,144, 1,653, 625 and 590 new products, respectively. We plan to continue
investing in R&D and focusing on innovation strategies to support the long-term sustainable
growth of our business, which will, in turn, enhance our competitiveness.
FINANCIAL INFORMATION
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--- page 376 ---
Efficiency in Selling and Marketing and Operation Management
Our results of operations depend partly on our ability to manage costs and expenses and
improve our operational efficiency. We incurred selling and marketing expenses of RMB20.8
million, RMB30.0 million, RMB45.2 million, RMB16.4 million and RMB20.4 million in 2021,
2022, 2023 and the five months ended May 31, 2023 and 2024, representing 1.5%, 2.1%, 2.4%,
2.6% and 2.4% of our total revenue during the same periods, respectively. However, we managed
to improve sales efficiency as our business continue to expand thanks to our lean and efficient
sales team, who successfully facilitated the expansion of our customer base and strengthened our
customer relationships. See “— Expansion of Customer Base and Strengthening of Customer
Relationships” above. In addition, we have effectively managed our administrative expenses
through budget management. During the Track Record Period, our administrative expenses
remained relatively stable, which accounted for 5.7%, 7.1%, 6.4%, 6.4% and 7.1% of our revenue
in 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, respectively. We plan to
continue offering high-quality training to our employees to enhance their technical skills. We
believe that our investments in human resources will allow us to increase the revenue and enhance
the overall productivity, which in turn will have a positive effect on our results of operations. As
we continue to expand our business scale, we are committed to optimizing operational
management and controlling operational expenses to continually improve our operational
efficiency.
Industry Collaboration and Strategic Partnerships
We collaborate with various business partners in various industries to carry out our
operations, and many of our business partners are our customers. Maintaining and strengthening
collaborations with existing business partners and developing relationships with potential business
partners are crucial to our market share, revenue and future expansion, whilst our ability to
achieve these in a cost-efficient manner affects our profitability. We have established strategic
partnerships with Geely Holding, Epistar Corporation, Signify, Hisense and Skyworth. Under such
partnerships, we have established various in-depth collaborations in multiple areas, including the
development of intelligent automotive lamps, high-end lighting devices and modules, the
procurement of LED chips and the establishment of joint laboratories. See “Business — Sales and
Marketing — Relationship with Geely Related Group.” Notably, through our strategic partnerships
with Geely Holding, we jointly established Lynway Vision in 2018 and subsequently acquired a
controlling interest in 2021. See “History, Development and Corporate Structure — Major
Acquisitions, Disposals and Mergers — Acquisition of Lynway Vision.” Our acquisition and
consolidation of Lynway Vision greatly enhanced our intelligent automotive vision offerings and
our vertical integration capabilities. Maintaining long-term and stable relationships with these
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strategic partners is important for our ongoing and future operations and expansion. We believe
that we are well-positioned to further expand our operations along with our industrial value chains
by leveraging our existing capabilities and resources.
CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES
We have identified certain accounting policies and estimates which we consider significant in
the preparation of our financial statements in accordance with IFRS. These material accounting
policy information are set forth in Note 2.3 to the Accountants’ Report of the Group in Appendix
IA to this prospectus, which are important for an understanding of our financial condition and
results of operations.
Some of our accounting policies involve subjective assumptions, estimates and judgments
that are discussed in Note 3 of the Accountants’ Report of the Group in Appendix IA to this
prospectus. The preparation of our financial statements requires our management to make
judgments, estimates and assumptions that affect the reported amounts of revenues, expenses,
assets and liabilities and their accompanying disclosures. Uncertainty about these assumptions and
estimates could result in outcomes that require a material adjustment to the carrying amounts of
our assets or liabilities in the future.
Our management has identified below the accounting policies, estimates and judgments that
they believe are critical to the preparation of our financial statements.
Revenue Recognition
Revenue from Contracts with Customers
We derive our revenue from the sales of our intelligent automotive vision products, high-end
lighting products and advanced display products.
Revenue from contracts with customers is recognized when control of goods or services is
transferred to the customers at an amount that reflects the consideration to which our Group
expects to be entitled in exchange for those goods or services.
When the consideration in a contract includes a variable amount, the amount of consideration
is estimated as that which our Group will be entitled to 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 regarding the
variable consideration is subsequently resolved.
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Sales of Intelligent Vision Products and Systems
Revenue from the sale of intelligent vision products and systems is recognized at the point in
time when control of the asset is transferred to the customer, generally on delivery of the products
and systems.
Rendering of services
Revenue from the services is primarily generated through the development of several
intelligent automotive projects, and is recognized at a point in time as the control of services is
delivered to the customer.
Other Income
Interest income is recognized on an accrual basis using the effective interest method by
applying the rate that exactly discounts the estimated future cash receipts over the expected life of
the financial instrument or a shorter period, when appropriate, to the net carrying amount of the
financial asset.
Rental income is recognized on a time proportion basis over the lease terms.
Government Grants
Government grants are recognized at their fair value where there is reasonable assurance that
the grant will be received and all attaching conditions will be complied with. When the grant
relates to an expense item, it is recognized as income on a systematic basis over the periods that
the costs, for which it is intended to compensate, are expensed.
Where the grant relates to an asset, the fair value is credited to a deferred income account
and is released to profit or loss over the expected useful life of the relevant asset by equal annual
installments or deducted from the carrying amount of the asset and released to profit or loss by
way of a reduced depreciation charge.
Property, Plant and Equipment and Depreciation
Property, plant and equipment, other than construction in progress, are stated at cost less
accumulated depreciation and any impairment losses. The cost of an item of property, plant 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.
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Expenditure incurred after items of property, plant and equipment have been put into
operation, such as repairs and maintenance, is normally charged to 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, plant and equipment are required to be replaced at intervals, our
Group recognizes such parts as individual assets with specific useful lives and depreciates them
accordingly.
Depreciation is calculated on a straight-line basis to write off the cost of each item of
property, plant and equipment to its residual value over its estimated useful life. The principal
annual rates used for this purpose are as follows:
Buildings 4.75% to 4.85%
Machinery and others 9.50% to 32.33%
Leasehold improvements Over the shorter of the lease terms and 33.33%
Where parts of an item of property, plant 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 methods are reviewed, and adjusted if
appropriate, at least at the end of each period of the Track Record Period.
An item of property, plant 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 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 is stated at cost less any impairment losses and is not depreciated. It
is reclassified to the appropriate category of property, plant and equipment when completed and
ready for use.
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined on the
weighted average cost basis and, in the case of work in progress and finished goods, comprises
direct materials, direct labor and an appropriate proportion of overheads. Net realizable value is
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based on estimated selling prices less any estimated costs to be incurred to completion and
disposal. The amount of write-down of inventories to net realisable value and all losses of
inventories are recognised as other expenses in the period the write-down or loss occurs.
Provision for Expected Credit Losses on Trade and Bills Receivables and Contract Assets
Our Group uses a provision matrix to calculate expected credit losses (“ ECLs”) for trade and
bills receivables and contract assets. The provision rates are based on days past due for groupings
of various customer segments that have similar loss patterns.
The provision matrix is initially based on our Group’s historical observed default rates. Our
Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking
information. For instance, if forecasted economic conditions (i.e., gross domestic product) are
expected to deteriorate over the next year and which could lead to an increased number of
defaults, the historical default rates are adjusted. At the each period of the Track Record Period,
the historical observed default rates are updated and changes in the forward-looking estimates are
analyzed.
The assessment of the correlation among historical observed default rates, forecasted
economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to
changes in circumstances and forecasted economic conditions. Our Group’s historical credit loss
experience and forecasted economic conditions may also not be representative of a customer’s
actual default in the future. The information about the ECLs on our Group’s trade and bills
receivables is disclosed in Note 19 to the Accountants’ Report of the Group in Appendix IA to this
prospectus.
Share-Based Payments
Our Company operates a share award scheme. Employees (including directors) of the Group
receive remuneration in the form of share-based payments, whereby employees render services in
exchange for equity instruments (“ equity-settled transactions ”).
The cost of equity-settled transactions with employees is measured by reference to the fair
value at the date on which they are granted.
The cost of equity-settled transactions is recognized in employee benefit expense, together
with a corresponding increase in equity, over the period in which the service conditions are
fulfilled. The cumulative expense recognized for equity-settled transactions at the end of each
period of the Track Record Period until the vesting date reflects the extent to which the vesting
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period has expired and the Group’s best estimate of the number of equity instruments that will
ultimately vest. The charge or credit to profit or loss for a period represents the movement in the
cumulative expense recognized as of the beginning and end of each period of the Track Record
Period.
Service and non-market performance conditions are not taken into account when determining
the grant date fair value of awards, but the likelihood of the conditions being met is assessed as
part of the Group’s best estimate of the number of equity instruments that will ultimately vest.
Market performance conditions are reflected within the grant date fair value. Any other conditions
attached to an award, but without an associated service requirement, are considered to be
non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead
to an immediate expensing of an award unless there are also service and/or performance
conditions.
For awards that do not ultimately vest because non-market performance and/or service
conditions have not been met, no expense is recognized. Where awards include a market or
non-vesting condition, the transactions are treated as vesting irrespective of whether the market or
non-vesting condition is satisfied, provided that all other performance and/or service conditions are
satisfied.
Where the terms of an equity-settled award are modified, as a minimum an expense is
recognized as if the terms had not been modified, if the original terms of the award are met. In
addition, an expense is recognized for any modification that increases the total fair value of the
share-based payments, or is otherwise beneficial to the employee as measured at the date of
modification.
This includes any award where non-vesting conditions within the control of either the Group
or the employee are not met. However, if a new award is substituted for the canceled award, and is
designated as a replacement award on the date that it is granted, the canceled and new awards are
treated as if they were a modification of the original award, as described in the previous
paragraph.
Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred, the amount recognized for non-controlling interests and any fair value of our Group’s
previously held equity interests in the acquiree over the identifiable assets acquired and liabilities
assumed. If the sum of this consideration and other items is lower than the fair value of the net
assets acquired, the difference is, after reassessment, recognized in profit or loss as a gain on
bargain purchase.
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After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of our Group’s cash-generating units, or groups of cash-generating units (“ CGU”), that are
expected to benefit from the synergies of the combination, irrespective of whether other assets or
liabilities of our Group are assigned to those units or groups of units.
Impairment Testing of Goodwill
Impairment is determined by assessing the recoverable amount of the cash-generating unit
(group of cash-generating units) to which the goodwill relates. Where the recoverable amount of
the cash-generating unit (group of cash-generating units) is less than the carrying amount, an
impairment loss is recognized. An impairment loss recognized for goodwill is not reversed in a
subsequent period.
Goodwill acquired through business combinations is allocated to the following CGU for
impairment testing due to the acquisition of Lynway Vision:
Lynway Vision manufacturing and sales CGU
The recoverable amount of the Lynway Vision manufacturing and sales CGU has been
determined based on a value in use calculation using cash flow projections based on financial
budgets covering a 5-year period approved by senior management.
Assumptions were used in the value in use calculation of the Lynway Vision manufacturing
and sales CGU for the end of each of the Relevant Periods. The following are the key assumptions
on which management has based to undertake impairment testing of goodwill:
As of 31 December As of 31 May
2021 2022 2023 2024
Compound growth rate of revenue
over the forecast period .......... 71.0% 34.4% 12.8% 8.6%
Pre-tax discount rate .............. 14.1% 15.2% 14.6% 14.1%
Terminal growth rate ............. 2.5% 2.5% 2.5% 2.5%
Compound growth rate of revenue — The basis is determined with reference to the average
revenue achieved in the years before the budgeted year, increased for management’s expectation of
the future market.
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Pre-tax discount rate — The discount rate used is before tax and reflects specific risks
relating to the relevant unit.
Terminal growth rate — The basis is determined with reference to the long-term Customer
Price Index of China and the nature of the business.
The values assigned to the key assumptions on compound growth rate of revenue, discount
rate and terminal growth rate are consistent with external information sources.
The fluctuation of the compound growth rate of revenue during the Relevant Periods is
mainly attributed to the fact that Lynway Vision was in its initial stage in 2021 and before. With
the production of intelligent automotive vision production line and the increase of mass production
orders, Lynway Vision had achieved significant growth during the Relevant Periods. The Company
has taken a cautious estimate that the growth rate of revenue is expected to slow down compared
to the initial stage in 2021 and before.
Impairment review on the goodwill of the Group has been conducted by management as of
December 31, 2021, 2022, 2023 and May 31, 2024 according to IAS 36 “Impairment of assets”.
The headroom measured by the excess of the recoverable amount over the carrying amount of
Lynway Vision manufacturing and sales CGU was RMB80,116,000, RMB124,642,000,
RMB117,663,000 and RMB109,166,000 as of December 31, 2021, 2022, 2023 and May 31, 2024,
respectively. Based on the results of the impairment assessments, no impairment loss on the
goodwill relating to Lynway Vision manufacturing and sales CGU was recognised as of December
31, 2021, 2022, 2023 and May 31, 2024.
The Group performed the sensitivity analysis based on the assumption that the pre-tax
discount rate and the compound growth rate of revenue has been changed. Had the estimated key
assumption during the forecast period been changed as below, the headroom would have decreased
to the following:
As of 31 December As of 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Compound growth rate of revenue
decreases by 3% ............... 22,138 53,238 27,241 32,027
Pre-tax discount rate increases by 1% 35,221 83,557 77,693 72,004
Considering that there was sufficient headroom based on the assessment, the directors of the
Company believe that any reasonably possible change in any of the key assumptions would not
cause the carrying amount of the CGU to exceed its recoverable amount.
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PRINCIPAL COMPONENTS OF OUR CONSOLIDATED STATEMENTS OF PROFIT OR
LOSS
The following table summarizes our results of operations for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Revenue ....................... 1,388,380 1,410,632 1,858,032 624,617 843,193
Cost of sales .................... (1,160,102) (1,175,447) (1,519,021) (520,307) (688,947)
Gross profit .................... 228,278 235,185 339,011 104,310 154,246
Other income and gains ............. 58,425 25,063 26,267 10,303 8,755
Selling and marketing expenses ......... (20,842) (30,018) (45,188) (16,378) (20,427)
Administrative expenses .............. (78,510) (100,341) (119,431) (39,869) (60,288)
Research and development costs ......... (62,020) (88,749) (87,225) (36,347) (37,632)
Other expenses ................... (8,213) (23,992) (36,835) (16,553) (8,680)
Finance costs .................... (2,817) (6,445) (4,838) (2,188) (1,272)
Share of loss of an associate .......... (23,279) — — — —
Profit before tax ................. 91,022 10,703 71,761 3,278 34,702
Income tax (expense)/credit ........... (13,022) 28,368 282 4,285 (2,529)
Profit for the year/period ............ 78,000 39,071 72,043 7,563 32,173
Attributable to:
Owners of the parent ............... 85,896 40,791 66,378 14,146 32,173
Non-controlling interests ............. (7,896) (1,720) 5,665 (6,583) —
78,000 39,071 72,043 7,563 32,173
Non-IFRS Financial Measure
To supplement our consolidated financial statements which are presented in accordance with
IFRS, we also use EBITDA (non-IFRS measure)/adjusted EBITDA (non-IFRS measure) and
adjusted net profit (non-IFRS measure) as additional financial measures, which are not required by,
or presented in accordance with, IFRS. We believe that these non-IFRS measures facilitate
comparisons of operating performance from period to period and company to company by
eliminating potential impacts of items. We believe that these measures provide useful information
to investors and others in understanding and evaluating our consolidated results of operations in
the same manner as they help our management. However, our presentation of EBITDA (non-IFRS
measure)/adjusted EBITDA (non-IFRS measure) and adjusted net profit (non-IFRS measure) may
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not be comparable to similarly titled measures presented by other companies. The use of these
non-IFRS measures has limitations as an analytical tool and you should not consider them in
isolation from, or as a substitute for analysis of, our results of operations or financial condition as
reported under IFRS.
EBITDA (Non-IFRS Measure) and Adjusted EBITDA (Non-IFRS Measure)
We define EBITDA (non-IFRS measure) as profit for the period adjusted for depreciation and
amortization, finance costs and income tax expense. We define adjusted EBITDA (non-IFRS
measure) as EBITDA (non-IFRS measure) adjusted by adding back share-based payment expenses
and listing expenses. Share-based payment expenses are non-cash in nature. Listing expenses are
expenses relating to the Global Offering. The following table sets out a reconciliation of profit for
the period to EBITDA (non-IFRS measure) and adjusted EBITDA (non-IFRS measure) for the
periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Reconciliation of profit for the year/period to
EBITDA (non-IFRS measure) and adjusted
EBITDA (non-IFRS measure)
Profit for the year/period ............ 78,000 39,071 72,043 7,563 32,173
Add:
Depreciation of property, plant and
equipment ..................... 61,173 97,469 118,489 49,417 50,794
Depreciation of right-of-use assets ....... 1,468 2,478 2,649 1,104 1,104
Amortization of intangible assets ........ 7,499 10,087 9,988 4,323 4,133
Finance costs .................... 2,817 6,445 4,838 2,188 1,272
Income tax expenses/(credit) ........... 13,022 (28,368) (282) (4,285) 2,529
EBITDA (non-IFRS measure) ......... 163,979 127,182 207,725 60,310 92,005
Add:
Share-based payment expenses .......... 1,669 1,698 3,187 724 3,101
Listing expense ................... — — 6,590 — 11,569
Adjusted EBITDA (non-IFRS measure) ... 165,648 128,880 217,502 61,034 106,675
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Adjusted Net Profit (Non-IFRS measure)
We define adjusted net profit (non-IFRS measure) as profit for the period adjusted by adding
back share-based payment expenses and listing expense. Share-based payment expenses are
non-cash in nature. Listing expenses are expenses relating to the Global Offering. The following
table reconciles our adjusted net profit (non-IFRS measure) for the periods presented in accordance
with IFRS, which is profit for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Reconciliation of profit for the year/period to
adjusted net profit (non-IFRS measure)
Profit for the year/period ............ 78,000 39,071 72,043 7,563 32,173
Add:
Share-based payment expenses .......... 1,669 1,698 3,187 724 3,101
Listing expense ................... — — 6,590 — 11,569
Adjusted net profit (non-IFRS measure) .. 79,669 40,769 81,820 8,287 46,843
Revenue
Revenue by Product Category
During the Track Record Period, we generated revenue from (i) intelligent automotive vision
products, (ii) high-end lighting products and (iii) advanced display products.
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The following table sets forth a breakdown of our revenue by product category in absolute
amounts and as percentages of our total revenue for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except for percentages)
(unaudited)
Intelligent automotive vision ..... 74,251 5.3 399,674 28.3 770,973 41.5 225,676 36.1 365,445 43.4
Intelligent automotive lamps ...... 50,732 3.7 351,792 24.9 707,945 38.1 211,550 33.9 331,355 39.3
Automotive-grade LED devices and
modules .............. 23,519 1.6 47,882 3.4 63,028 3.4 14,126 2.2 34,090 4.1
High-end lighting .......... 1,033,857 74.5 670,242 47.5 650,821 35.0 253,630 40.6 254,103 30.1
High-end lighting devices ....... 849,273 61.2 494,608 35.1 469,971 25.3 175,302 28.1 177,117 21.0
High-end lighting modules ...... 184,584 13.3 175,634 12.4 180,850 9.7 78,328 12.5 76,986 9.1
Advanced display .......... 280,272 20.2 340,716 24.2 436,238 23.5 145,311 23.3 223,645 26.5
Total ................ 1,388,380 100.0 1,410,632 100.0 1,858,032 100.0 624,617 100.0 843,193 100.0
During the Track Record Period, revenue from intelligent automotive vision increased
significantly from RMB74.3 million in 2021 by 438.0% to RMB399.7 million in 2022 and further
increased by 92.9% to RMB771.0 million in 2023, revenue from intelligent automotive vision
increased from RMB225.7 million in the five months ended May 31, 2023 by 61.9% to RMB365.4
million in the five months ended May 31, 2024. Such increases were primarily due to the increase
in the intelligent automotive lamp projects commencing mass production and product delivery. In
2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, we had four, seven, 16, ten
and 17 intelligent automotive lamp projects under production, respectively. During the Track
Record Period, our headlamps and rear lamps were sold in Mainland China. With the market’s
increased demand for intelligent, integrated and customized automotive lamps, the sales volume of
our headlamps increased from 9,848 sets in 2021 to 151,603 sets in 2022 and to 302,766 sets in
2023, and the sales volume of our rear lamps increased from 31,874 sets in 2021 to 91,478 sets in
2022 and to 152,283 sets in 2023. The sales volume of our headlamps increased from 104,612 sets
in the five months ended May 31, 2023 to 124,187 sets in the five months ended May 31, 2024,
and the sales volume of our rear lamps increased from 42,590 sets in the five months ended May
31, 2023 to 98,441 sets in the five months ended May 31, 2024. In the meantime, the average
selling price of our headlamps showed steady growth during the Track Record Period, amounting
to RMB1,606.6, RMB1,649.2, RMB1,768.1, RMB1,613.8 and RMB1,629.8 per set, respectively, in
2021, 2022, 2023 and the five months ended May 31, 2023 and 2024. The average selling price of
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our rear lamps also gradually increased during the Track Record Period, amounting to
RMB1,095.3, RMB1,112.5, RMB1,133.6, RMB1,003.3 and RMB1,310.0 per set, respectively, in
2021, 2022, 2023 and the five months ended May 31, 2023 and 2024.
In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024, revenue from
high-end lighting was RMB1,033.9 million, RMB670.2 million, RMB650.8 million, RMB253.6
million and RMB254.1 million, respectively. The sales volume of our high-end lighting devices
decreased from 7,961.8 million pieces in 2021 to 3,567.3 million pieces in 2022 and to 3,239.5
million pieces in 2023, and decreased from 1,399.5 million pieces in the five months ended May
31, 2023 to 1,320.5 million pieces in the five months ended May 31, 2024. The decrease was
primarily due to (i) one of our major customers and its contract manufacturers previously stocked
up on LED devices and thus prioritized depleting existing inventory in 2022, and (ii) the
intensification of competition in the high-end lighting market. In 2021, we shifted our focus
towards high-end products with enhanced performance and higher gross profit margins. As a result,
the average selling price of our high-end lighting devices increased from RMB0.11 per piece in
2021 to RMB0.14 per piece in 2022, and further to RMB0.15 per piece in 2023. The average
selling price remained relatively stable at RMB0.13 per piece in the five months ended May 31,
2023 and 2024. The average selling price of our high-end lighting modules was RMB11.82,
RMB13.09, RMB14.53, RMB16.46 and RMB12.51 per bar, respectively, in 2021, 2022, 2023 and
the five months ended May 31, 2023 and 2024. The fluctuations during the Track Record Period
were primarily due to the customized nature of module products and adjustments of product
portfolio corresponding to customer demand.
During the Track Record Period, revenue from advanced display increased from RMB280.3
million in 2021 by 21.6% to RMB340.7 million in 2022 and further increased by 28.0% to
RMB436.2 million in 2023, revenue from advanced display increased from RMB145.3 million in
the five months ended May 31, 2023 by 53.9% to RMB223.6 million in the five months ended
May 31, 2024. Such increases were primarily due to (i) the growing trend of large screen
televisions that require more LED devices and modules on each unit, and (ii) the increase in the
sales of high-tech and high-profit margin products, such as LED products integrating ICs with
local dimming function and Mini LED products. In particular, the sales volume of our advanced
display modules increased from 32.3 million bars in 2021 to 42.7 million bars in 2022 and to 55.0
million bars in 2023. The sales volume of our advanced display modules increased from 18.7
million bars in the five months ended May 31, 2023 to 23.1 million bars in the five months ended
May 31, 2024. The average selling price of our advanced display modules increased from
RMB6.69 per bar in 2021 to RMB7.12 per bar in 2022 and remained relatively stable at RMB7.10
per bar in 2023 which is in line with the sales trend of our products applied in large-size TVs. The
average selling price of our advanced display modules increased from RMB6.76 per bar in the five
months ended May 31, 2023 to RMB8.25 per bar in the five months ended May 31, 2024.
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Revenue by Geographic Region
During the Track Record Period, we had revenue from both domestic and overseas markets,
including Asia, Europe and North America. The following table sets forth a breakdown of our
revenue by geographic region in absolute amounts and as percentages of our total revenue for the
periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Revenue
% of total
revenue Revenue
% of total
revenue Revenue
% of total
revenue Revenue
% of total
revenue Revenue
% of total
revenue
(RMB in thousands, except for percentages)
(unaudited)
Mainland China ........... 1,058,750 76.3 1,136,009 80.5 1,576,756 84.9 515,804 82.6 707,518 83.9
Overseas ............... 329,630 23.7 274,623 19.5 281,276 15.1 108,813 17.4 135,675 16.1
Total ................ 1,388,380 100.0 1,410,632 100.0 1,858,032 100.0 624,617 100.0 843,193 100.0
During the Track Record Period, high-end lighting business contributed to the majority of our
overseas revenue. In 2021, 2022, 2023 and the five months ended May 31, 2023 and 2024,
overseas revenue from high-end lighting amounted to RMB289.7 million, RMB225.0 million,
RMB234.0 million, RMB91.5 million and RMB105.2 million, respectively. Overseas revenue from
intelligent automotive vision increased from RMB0.2 million in 2021 to RMB0.8 million in 2022
and further to RMB5.9 million in 2023. Overseas revenue from intelligent automotive vision was
RMB2.5 million and RMB3.9 thousand in the five months ended May 31, 2023 and 2024,
respectively. Overseas revenue from advanced display amounted to RMB39.7 million, RMB48.9
million, RMB41.3 million, RMB14.8 million and RMB30.5 million in 2021, 2022, 2023 and the
five months ended May 31, 2023 and 2024, respectively.
FINANCIAL INFORMATION
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--- page 390 ---
Cost of Sales
Cost of Sales by Nature
Our cost of sales primarily consists of raw material and consumable costs, staff costs and
depreciation and amortization expenses. The following table sets forth a breakdown of our cost of
sales by nature and as percentages of our total cost of sales for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except for percentages)
(unaudited)
Raw material and consumable costs .. 966,237 83.3 948,030 80.7 1,182,406 77.8 409,776 78.8 563,920 81.9
Staff costs .............. 58,337 5.0 54,147 4.6 75,968 5.0 25,107 4.8 32,442 4.7
Depreciation and amortization
expenses .............. 32,789 2.8 51,801 4.4 115,501 7.6 31,616 6.1 26,922 3.9
Others (1) ............... 102,739 8.9 121,469 10.3 145,146 9.6 53,808 10.3 65,663 9.5
Total ................ 1,160,102 100.0 1,175,447 100.0 1,519,021 100.0 520,307 100.0 688,947 100.0
Note:
(1) Others primarily includes processing fees and utilities.
Raw material and consumable costs, which mainly represent the expenses paid for the
procurement of our raw materials and consumables, including LED chips, leadframes, PCBs,
automotive lamp modules, plastic particles, drivers and electronic components, represented the
majority of our cost of sales during the Track Record Period. Staff costs mainly represent wages,
salaries, social insurance, housing provident fund and share-based payment expenses. Depreciation
and amortization expenses mainly represent the depreciation of plants and equipment, as well as
the amortization of long-term deferred expenses for renovations and expansions.
FINANCIAL INFORMATION
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--- page 391 ---
Cost of Sales by Product Category
The following table sets forth a breakdown of our cost of sales by product category in
absolute amounts and as percentages of our total cost of sales for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except for percentages)
(unaudited)
Intelligent automotive vision ..... 75,097 6.5 329,612 28.0 655,733 43.2 202,600 38.9 309,362 44.9
Intelligent automotive lamps ...... 51,942 4.5 291,765 24.8 610,499 40.2 192,430 36.9 288,140 41.8
Automotive-grade LED devices and
modules .............. 23,155 2.0 37,847 3.2 45,234 3.0 10,170 2.0 21,222 3.1
High-end lighting .......... 831,508 71.7 541,474 46.1 498,392 32.8 196,189 37.7 191,130 27.7
High-end lighting devices ....... 670,520 57.8 391,542 33.3 359,053 23.6 136,563 26.2 131,959 19.1
High-end lighting modules ...... 160,988 13.9 149,932 12.8 139,339 9.2 59,626 11.5 59,171 8.6
Advanced display .......... 253,497 21.9 304,361 25.9 364,896 24.0 121,518 23.4 188,455 27.4
Total ................ 1,160,102 100.0 1,175,447 100.0 1,519,021 100.0 520,307 100.0 688,947 100.0
FINANCIAL INFORMATION
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--- page 392 ---
Gross Profit/(Loss) and Gross Margin
Gross Profit/(Loss) and Gross Margin by Product Category
The following table sets forth our gross profit/(loss) and gross margin, by product category
for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Gross
profit/(loss)
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin
(RMB in thousands, except for percentages)
(unaudited)
Intelligent automotive vision ..... (846) (1.1) 70,061 17.5 115,240 14.9 23,077 10.2 56,084 15.3
Intelligent automotive lamps ...... (1,210) (2.4) 60,026 17.1 97,446 13.8 19,121 9.0 43,216 13.0
Automotive-grade LED devices and
modules .............. 364 1.5 10,035 21.0 17,794 28.2 3,956 28.0 12,868 37.7
High-end lighting .......... 202,348 19.6 128,768 19.2 152,429 23.4 57,440 22.6 62,973 24.8
High-end lighting devices ....... 178,753 21.0 103,066 20.8 110,918 23.6 38,738 22.1 45,158 25.5
High-end lighting modules ...... 23,595 12.8 25,702 14.6 41,511 23.0 18,702 23.9 17,815 23.1
Advanced display .......... 26,776 9.6 36,356 10.7 71,342 16.4 23,793 16.4 35,189 15.7
Total ................ 228,278 16.4 235,185 16.7 339,011 18.2 104,310 16.7 154,246 18.3
Gross Profit and Gross Margin by Geographic Region
The following table sets forth our gross profit and gross margin by geographic region for the
periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Gross
profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin Gross profit
Gross
margin
(RMB in thousands, except for percentages)
(unaudited)
Mainland China ........... 173,885 16.4 197,392 17.4 293,017 18.6 89,639 17.4 127,148 18.0
Overseas ............... 54,393 16.5 37,793 13.8 45,994 16.4 14,671 13.5 27,098 20.0
Total ................ 228,278 16.4 235,185 16.7 339,011 18.2 104,310 16.7 154,246 18.3
FINANCIAL INFORMATION
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--- page 393 ---
Other Income and Gains
Our other income and gains primarily consist of (i) government grants, including general
policy-related rewards from local governments and subsidies stipulated in investment contracts
with local governments, both were non-recurring in nature; and (ii) gain on remeasurement of the
equity interest in an associate to a subsidiary at the date of acquisition (i.e. Lynway Vision). See
“History, Development and Corporate Structure — Major Acquisitions, Disposals and Mergers —
Acquisition of Lynway Vision.”
Specifically, general policy-related rewards from local governments primarily represent
rewards received in accordance with local government policies, such as rewards on R&D
investments, employment and recognition of high-tech enterprise. In terms of subsidies stipulated
in investment contracts with local governments, the investment contracts set out our investment
commitments, which include investment scale, production value and expected tax contribution, as
well as subsidies payable by the local governments pursuant to the progress of the investment
projects. We apply for such rewards and subsidies upon satisfaction of the conditions specified in
the terms of the investment contracts. Subsequent investment commitments not yet completed,
which are subject to the conditions specified in the investment contracts, do not affect the
government grants received.
FINANCIAL INFORMATION
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--- page 394 ---
The following table sets forth a breakdown of our other income and gains for the periods
indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Other income
Interest income ................... 2,800 3,241 3,276 1,289 1,627
Government grants ................. 29,881 12,650 11,204 6,220 1,426
Rental income ................... 391 1,445 1,257 813 276
Others ........................ 685 329 5,106 147 3,028
Total other income ................ 33,757 17,665 20,843 8,469 6,357
Gains
Gain on foreign exchange differences ..... 648 5,349 205 204 663
Gain on remeasurement of the equity interest
in an associate to a subsidiary at the date
of acquisition .................. 22,139 — — — —
Investment income from financial assets at
FVTPL ....................... 1,092 2,191 4,040 1,134 1,355
Fair value gain/(loss) on financial assets at
FVTPL ....................... 441 (142) 1,179 496 380
Others ........................ 348 — — — —
Total gains ..................... 24,668 7,398 5,424 1,834 2,398
Total ......................... 58,425 25,063 26,267 10,303 8,755
Each of the other income and gains items arises from the ordinary and usual course of our
business. Interest income represents the interest income from bank deposits. Rental income refers
to the income generated from leasing portions of the office and dormitories, inclusive of
management fees. Others primarily consist of the V AT input tax surplus deduction allowed under
the applicable V AT regulations in China and penalty income arising from ordinary course of
business. Gain on foreign exchange differences refers to the exchange difference caused by
fluctuation in exchange rates between the HK dollars and the US dollars relative to the Renminbi.
Investment income from financial assets at FVTPL represents the investment income generated by
the sale of structured deposits. Fair value gain/(loss) on financial assets at FVTPL refers to the
increase or decrease in the fair value of structured deposits held by the end of the period.
FINANCIAL INFORMATION
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--- page 395 ---
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of staff costs and market development
expenses. The following table sets forth a breakdown of our selling and marketing expenses for the
periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except for percentages)
(unaudited)
Staff costs .............. 10,375 49.7 11,844 39.4 15,110 33.4 5,841 35.7 6,790 33.2
Market development expenses ..... 7,210 34.6 9,032 30.1 11,295 25.0 3,969 24.2 5,587 27.4
Storage fees ............. 596 2.9 4,114 13.7 8,032 17.8 2,732 16.7 3,717 18.2
After-sales service fees ........ 914 4.4 3,208 10.7 7,867 17.4 2,806 17.1 3,184 15.6
Others (1) ............... 1,747 8.4 1,820 6.1 2,884 6.4 1,030 6.3 1,149 5.6
Total ................ 20,842 100.0 30,018 100.0 45,188 100.0 16,378 100.0 20,427 100.0
Note:
(1) Others primarily include traveling expenses, business event expenses, office expenses and depreciation and
amortization expenses.
Staff costs under selling and marketing expenses mainly relate to wages, salaries, social
insurance, housing provident fund and share-based payment expenses paid to marketing staff.
Market development expenses mainly represent service fees, exhibition costs and various other
advertising expenditures incurred in relation to our marketing efforts. Storage fees mainly
represent costs of inventory storage. After-sales service fees mainly represent warranty related
expenses incurred in intelligent automotive vision business.
FINANCIAL INFORMATION
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--- page 396 ---
Administrative Expenses
Our administrative expenses primarily consist of staff costs and depreciation and amortization
expenses. The following table sets forth a breakdown of our administrative expenses for the
periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except for percentages)
(unaudited)
Staff costs .............. 41,000 52.2 49,191 49.0 59,642 49.9 20,643 51.7 26,521 44.0
Depreciation and amortization
expenses .............. 16,695 21.3 24,653 24.6 24,877 20.8 10,271 25.8 10,511 17.4
Office fees .............. 9,240 11.8 10,316 10.3 10,025 8.4 3,012 7.6 4,459 7.4
Tax and surcharges .......... 6,678 8.5 7,847 7.8 8,465 7.1 3,070 7.7 3,076 5.1
Listing expense ........... ———— 6,590 5.5 — — 11,569 19.2
External service fees (1) ........ 3,181 4.1 6,251 6.2 6,530 5.5 2,022 5.1 2,219 3.7
Business event expenses ....... 734 0.9 1,119 1.1 1,382 1.2 473 1.2 761 1.3
Others (2) ............... 982 1.2 964 1.0 1,920 1.6 378 0.9 1,172 1.9
Total ................ 78,510 100.0 100,341 100.0 119,431 100.0 39,869 100.0 60,288 100.0
Notes:
(1) External service fees primarily comprise fees for engaging third-party services such as legal and audit services, as
well as charges for local licensing, sewage, landscaping, security and fees related to secondary development of
software.
(2) Others primarily include employment security funds for the disabled and operating lease charges.
Staff costs under administrative expenses mainly represent wages, salaries, social insurance,
housing provident fund and share-based payment expenses paid to administrative staff.
Depreciation and amortization expenses mainly represent the depreciation of office buildings as
well as the amortization of intangible assets, such as land use rights and patents. Office fees
include office expenses, utilities, maintenance fees and traveling expenses. Tax and surcharges
mainly represent the city maintenance and construction taxes, education fee surcharges, property
taxes, stamp duties and land use right taxes.
FINANCIAL INFORMATION
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--- page 397 ---
Research and Development Costs
Our research and development costs primarily consist of staff costs and the costs of raw
materials and consumables used for research and development. The following table sets forth a
breakdown of our research and development costs for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except for percentages)
(unaudited)
Staff costs .............. 29,668 47.8 51,200 57.7 49,984 57.3 21,025 57.8 24,352 64.7
Raw materials and consumables used
for research and development .... 21,712 35.0 14,886 16.8 17,952 20.6 7,155 19.7 4,758 12.6
Depreciation and amortization
expenses .............. 4,317 7.0 7,583 8.5 7,718 8.8 3,139 8.6 3,774 10.0
Testing fees ............. 3,615 5.8 8,905 10.0 5,804 6.7 2,854 7.9 2,997 8.0
Others (1) ............... 2,708 4.4 6,175 7.0 5,767 6.6 2,174 6.0 1,751 4.7
Total ................ 62,020 100.0 88,749 100.0 87,225 100.0 36,347 100.0 37,632 100.0
Note:
(1) Others primarily include leasing fees and utilities, outsourced research and development expenses, traveling
expenses and patent agency fees.
Staff costs under research and development costs mainly represent wages, salaries, social
insurance, housing provident fund and share-based payment expenses and various other employee
benefits paid to R&D staff. Raw materials and consumables used for research and development
mainly represent LED chips, leadframes, PCBs, automotive lamp modules, plastic particles, drivers
and electronic components. Depreciation and amortization expenses mainly represent the
depreciation and amortization of our equipment and machinery for R&D purposes. Testing fees are
incurred in connection with product testings.
FINANCIAL INFORMATION
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--- page 398 ---
Other Expenses
Our other expenses were RMB8.2 million, RMB24.0 million, RMB36.8 million, RMB16.6
million and RMB8.7 million, respectively, in 2021, 2022, 2023 and the five months ended May 31,
2023 and 2024. Our other expenses primarily represent net provision for impairment of
inventories, net impairment losses on financial and contract assets and non-operating expenses,
including losses from the damage or disposal of non-current assets and expenditures related to
donations.
Finance Costs
Our finance costs primarily consist of interest on bank and other borrowings. The following
table sets forth a breakdown of our finance costs for the periods indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Interest on bank and other borrowings ..... 4,996 6,418 4,778 2,161 1,252
Interest on lease liabilities ............ —2 76 02 72 0
Less: Interest capitalized ............. (2,179) — — — —
Total ......................... 2,817 6,445 4,838 2,188 1,272
Share of Loss of An Associate
Our share of loss of an associate represents to our share of loss of Lynway Vision. We
recorded share of loss of RMB23.3 million in 2021. We did not record share of loss of an associate
in 2022, 2023 and the five months ended May 31, 2024 because we acquired the controlling
interest in Lynway Vision in September 2021 and have consolidated its results since then. See
“History, Development and Corporate Structure — Major Acquisitions, Disposals and Mergers —
Acquisition of Lynway Vision.”
Income Tax (Expense)/Credit
We recorded income tax expense of RMB13.0 million and income tax credit of RMB28.4
million in 2021 and 2022, respectively. In 2022, we recognized deferred tax assets for tax loss(es)
and temporary differences which incurred in previous years in the amount of RMB21.3 million,
primarily attributable to our subsidiaries’ commencement of mass production and improved
FINANCIAL INFORMATION
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--- page 399 ---
profitability. We recorded income tax credit of RMB0.3 million in 2023. We recorded income tax
credit of RMB4.3 million and income tax expense of RMB2.5 million in the five months ended
May 31, 2023 and 2024, respectively.
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. We are subject to various rates of
income tax under different jurisdictions. During the Track Record Period and up to the Latest
Practicable Date, we paid all relevant taxes that were due and applicable to us and had no disputes
or unresolved tax issues with the relevant tax authorities. The following set forth our principal
applicable taxes and tax rates:
PRC
Our income tax provision in respect of our operations in the PRC was subject to a statutory
tax rate of 25% on our assessable profits during the Track Record Period, based on the existing
legislation, interpretations and practices in respect thereof. Enterprises that qualify as “High and
New Technology Enterprises” are entitled to a preferential rate of 15% for three years. Our
Company and Lynway Vision were qualified as High and New Technology Enterprises under the
relevant PRC laws and regulations in December 2021 and December 2022, respectively, and such
qualification may be renewed every three years.
Hong Kong
APT (HK) was subject to a statutory tax rate of 16.5% on its assessable profits during the
Track Record Period, based on the existing legislation, interpretations and practices in respect
thereof. However, no provision for Hong Kong profits tax has been made as APT (HK) did not
have assessable profit which arose in, or derived from, Hong Kong during the Track Record
Period.
RESULTS OF OPERATIONS
Comparisons between Five Months Ended May 31, 2024 and 2023
Revenue
Revenue by Product Category
Our revenue increased by 35.0% from RMB624.6 million in the five months ended May 31,
2023 to RMB843.2 million in the five months ended May 31, 2024, primarily due to the increases
in revenue from intelligent automotive vision and advanced display.
FINANCIAL INFORMATION
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--- page 400 ---
Our revenue from intelligent automotive vision increased by 61.9% from RMB225.7 million
in the five months ended May 31, 2023 to RMB365.4 million in the five months ended May 31,
2024, primarily due to the increase in the number of intelligent automotive lamp projects
commencing mass production and product delivery. The number of projects under production
increased from ten in the five months ended May 31, 2023 to 17 in the five months ended May 31,
2024. In addition, we continued to enhance our products and had an increase in the revenue from
automotive-grade LED devices and modules, primarily attributable to (i) increased sales of LED
devices as we enhanced sales efforts and expanded our customer base, and (ii) increased sales of
COB sub-mount automotive modules for headlamps to meet the growing demand of our existing
customers.
Our revenue from high-end lighting remained relatively stable at RMB253.6 million in the
five months ended May 31, 2023 and RMB254.1 million in the five months ended May 31, 2024.
Our revenue from advanced display increased by 53.9% from RMB145.3 million in the five
months ended May 31, 2023 to RMB223.6 million in the five months ended May 31, 2024,
primarily due to (i) the increase in the sales of our LED products integrating ICs with local
dimming function, for which we launched new product lines in the second half of 2023 and
achieved strong business growth, and (ii) the increase in the sales of advanced display products
applied in LCD TVs over 75 inches, driven by the overall market trend in 2024, with the LCD TV
over 75 inches seeing a significant period-on-period increase of approximately 34.5% during the
five months ended May 31, 2024. Specifically, the sales volume of our LED products integrating
ICs with local dimming function increased from 1.1 million bars in the five months ended May 31,
2023 to 2.6 million bars in the five months ended May 31, 2024. The sales volume of advanced
display products applied in LCD TVs over 75 inches increased from 7.6 million bars in the five
months ended May 31, 2023 to 12.4 million bars in the five months ended May 31, 2024.
Revenue by Geographic Region
Our revenue from the sales in Mainland China increased by 37.2% from RMB515.8 million
in the five months ended May 31, 2023 to RMB707.5 million in the five months ended May 31,
2024, primarily due to the increases in revenue from intelligent automotive vision and advanced
display, which were mainly sold domestically.
Our revenue from the sales overseas increased by 24.7% from RMB108.8 million in the five
months ended May 31, 2023 to RMB135.7 million in the five months ended May 31, 2024,
primarily due to (i) the increased sales of horticultural lighting products in our high-end lighting
business, while high-end lighting business contributed to the majority of our overseas revenue
during the Track Record Period, and (ii) the increased sales of our advanced display products.
FINANCIAL INFORMATION
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--- page 401 ---
Cost of Sales
Cost of Sales by Nature
Our cost of sales increased by 32.4% from RMB520.3 million in the five months ended May
31, 2023 to RMB688.9 million in the five months ended May 31, 2024, primarily because our raw
materials and consumables increased by 37.6% from RMB409.8 million in the five months ended
May 31, 2023 to RMB563.9 million in five months ended May 31, 2024 due to the increased
procurement volume of raw materials and consumables in line with the revenue growth of
intelligent automotive vision and advanced display businesses.
Cost of Sales by Product Category
Our cost of sales increased by 32.4% from RMB520.3 million in the five months ended May
31, 2023 to RMB688.9 million in the five months ended May 31, 2024, primarily due to the
increase in the cost of sales of intelligent automotive vision and advanced display. Our cost of
sales of intelligent automotive vision increased by 52.7% from RMB202.6 million in the five
months ended May 31, 2023 to RMB309.4 million in the five months ended May 31, 2024. Our
cost of sales of high-end lighting slightly decreased from RMB196.2 million in the five months
ended May 31, 2023 by 2.6% to RMB191.1 million in the five months ended May 31, 2024. Our
cost of sales of advanced display increased by 55.1% from RMB121.5 million in the five months
ended May 31, 2023 to RMB188.5 million in the five months ended May 31, 2024. Such changes
were primarily in line with the changes in revenue of the respective businesses and affected by
measures taken to maintain the competitive advantage of our products, including product design
optimization, process improvement and enhanced supply chain management.
Gross Profit and Gross Margin
As a result of the foregoing, our gross profit increased from RMB104.3 million in the five
months ended May 31, 2023 to RMB154.2 million in the five months ended May 31, 2024. Our
gross profit margin increased from 16.7% in the five months ended May 31, 2023 to 18.3% in the
five months ended May 31, 2024.
FINANCIAL INFORMATION
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--- page 402 ---
Gross Profit/(Loss) and Gross Margin by Product Category
Our gross profit margin for intelligent automotive vision increased from 10.2% in the five
months ended May 31, 2023 to 15.3% in the five months ended May 31, 2024. Specifically:
 our gross profit margin for intelligent automotive lamps increased from 9.0% in the five
months ended May 31, 2023 to 13.0% in the five months ended May 31, 2024, primarily
because we improved operational efficiency and decreased depreciation and amortization
expenses with increased production volume of intelligent automotive lamps.
 our gross profit margin for automotive-grade LED devices and modules increased from
28.0% in the five months ended May 31, 2023 to 37.7% in the five months ended May
31, 2024, primarily due to the increase in the revenue contribution from products with
higher profit margin such as our high-power automotive-grade LED devices used in
intelligent automotive lamps and COB sub-mount automotive modules for headlamps.
Our gross profit margin for high-end lighting increased from 22.6% in the five months ended
May 31, 2023 to 24.8% in the five months ended May 31, 2024 primarily because of the increase
in the sales of our high-tech and high-profit margin products including horticultural lighting
products and outdoor lighting products.
Our gross profit margin for advanced display decreased from 16.4% in the five months ended
May 31, 2023 to 15.7% in the five months ended May 31, 2024, primarily due to price adjustments
on certain products.
Gross Profit/(Loss) and Gross Margin by Geographic Region
Our gross profit margin for the sales in Mainland China increased from 17.4% in the five
months ended May 31, 2023 to 18.0% in the five months ended May 31, 2024, primarily due to the
increase in the gross profit margin for the intelligent automotive vision and high-end lighting
businesses.
Our gross profit margin for the sales overseas increased from 13.5% in the five months ended
May 31, 2023 to 20.0% in the five months ended May 31, 2024, primarily due to the increase in
the proportion of revenue contribution from horticultural lighting and outdoor lighting products
with higher profit margin in our high-end lighting business.
FINANCIAL INFORMATION
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--- page 403 ---
Other Income and Gains
Our other income and gains decreased by 14.6% from RMB10.3 million in the five months
ended May 31, 2023 to RMB8.8 million in the five months ended May 31, 2024, primarily due to
the non-recurrence of government grants received in the five months ended May 31, 2023.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 24.7% from RMB16.4 million in the five
months ended May 31, 2023 to RMB20.4 million in the five months ended May 31, 2024,
primarily due to the increases in our staff costs, market development expenses and after-sales
service fees, which were in line with our business expansion.
Administrative Expenses
Our administrative expenses increased by 51.1% from RMB39.9 million in the five months
ended May 31, 2023 to RMB60.3 million in the five months ended May 31, 2024, primarily due to
(i) an increase in the listing expenses and (ii) an increase in the staff salaries and bonus in line
with our business growth.
Research and Development Costs
Our research and development costs increased by 3.6% from RMB36.3 million in the five
months ended May 31, 2023 to RMB37.6 million in the five months ended May 31, 2024,
primarily due to the expansion of our R&D team for the research and development of intelligent
automotive lamp projects.
Other Expenses
Our other expenses decreased by 47.6% from RMB16.6 million in the five months ended May
31, 2023 to RMB8.7 million in the five months ended May 31, 2024, primarily due to the decrease
in the net provision for impairment of inventory.
Finance Costs
Our finance costs decreased by 40.9% from RMB2.2 million in the five months ended May
31, 2023 to RMB1.3 million in the five months ended May 31, 2024, primarily because (i) the loan
principal was partially repaid in the second half of 2023 and (ii) loan interest rates decreased since
December 2023.
FINANCIAL INFORMATION
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--- page 404 ---
Income Tax (Expense)/Credit
We recorded income tax credit of RMB4.3 million and income tax expense of RMB2.5
million in the five months ended May 31, 2023 and 2024, respectively, primarily because we
maintained a positive taxable income after offsetting prior losses in the five months ended May 31,
2024.
Profit/Loss for the Period
As a result of the foregoing, our profit for the period increased from RMB7.6 million in the
five months ended May 31, 2023 to RMB32.2 million in the five months ended May 31, 2024.
Comparisons between 2023 and 2022
Revenue
Revenue by Product Category
Our revenue increased by 31.7% from RMB1,410.6 million in 2022 to RMB1,858.0 million
in 2023, primarily due to the increases in revenue from intelligent automotive vision and advanced
display.
Our revenue from intelligent automotive vision increased by 92.9% from RMB399.7 million
in 2022 to RMB771.0 million in 2023, primarily due to the increase in the number of intelligent
automotive lamp projects commencing mass production and product delivery. Specifically, the
number of projects under production increased from seven in 2022 to 16 in 2023. Among projects
that commenced mass production in 2023, the corresponding vehicle models including Lynk & Co
06 EM-P, ZEEKR 001 and ZEEKR 007 gained strong market recognition. According to CIC, the
sales volume of these three vehicle models ranked as leaders in their respective categories in 2023.
In addition, revenue from our automotive-grade LED devices and modules increased as we
endeavored to expand our product portfolio. The type of automotive-grade LED devices and
modules we sold increased from 360 in 2022 to 552 in 2023.
Our revenue from high-end lighting slightly decreased from RMB670.2 million in 2022 to
RMB650.8 million in 2023, primarily due to decreased orders as a result of intense market
competition in 2023, which was partially offset by our strategic expansion in higher-profit margin
lighting devices and modules, such as outdoor lighting and horticultural lighting products, where
we received increased orders.
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Our revenue from advanced display increased by 28.0% from RMB340.7 million in 2022 to
RMB436.2 million in 2023, primarily because (i) we strengthened our sales effort and customer
services, which led to an increase in the sales of our advanced display products; (ii) the increase in
the sales of our high-tech and high-profit margin products, such as LED products integrating ICs
with local dimming function and Mini LED products; and (iii) the growing trend of large screen
television facilitated the sales of our advanced display products as the production of each unit
would require more LED devices and modules due to the increased size. Specifically, the sales
volume of LED products integrating ICs applied in LCD TVs over 75 inches we introduced in
2023 reached 2.8 million bars with an average selling price of RMB12.5 per bar. The sales volume
of our Mini LED products increased from 0.5 million bars in 2022 to 5.7 million bars in 2023. The
sales volume of advanced display products applied in LCD TVs over 75 inches sold in Mainland
China increased from 14.4 million bars in 2022 to 22.1 million bars in 2023.
Revenue by Geographic Region
Our revenue from the sales in Mainland China increased by 38.8% from RMB1,136.0 million
in 2022 to RMB1,576.8 million in 2023, primarily due to the increases in revenue from intelligent
automotive vision and advanced display, which were mainly sold domestically.
Our revenue from the sales overseas increased by 2.4% from RMB274.6 million in 2022 to
RMB281.3 million in 2023, primarily due to the increased sales of our high-end lighting modules
in 2023, while high-end lighting business contributed to the majority of our overseas revenue
during the Track Record Period.
Cost of Sales
Cost of Sales by Nature
Our cost of sales increased by 29.2% from RMB1,175.4 million in 2022 to RMB1,519.0
million in 2023, primarily because (i) our raw materials and consumables increased by 24.7% from
RMB948.0 million in 2022 to RMB1,182.4 million in 2023 due to the increased procurement
volume of raw materials and consumables in line with the revenue growth of intelligent
automotive vision and advanced display businesses and (ii) our depreciation and amortization
expenses increased from RMB51.8 million in 2022 to RMB115.5 million in 2023 as we purchased
more equipment and machinery for our intelligent automotive vision business.
FINANCIAL INFORMATION
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Cost of Sales by Product Category
Our cost of sales increased by 29.2% from RMB1,175.4 million in 2022 to RMB1,519.0
million in 2023, primarily due to the increase in cost of sales of intelligent automotive vision,
partially offset by the decrease in cost of sales of high-end lighting. Our cost of sales of intelligent
automotive vision increased from RMB329.6 million in 2022 to RMB655.7 million in 2023. Our
cost of sales of high-end lighting decreased by 8.0% from RMB541.5 million in 2022 to
RMB498.4 million in 2023. Our cost of sales of advanced display increased by 19.9% from
RMB304.4 million in 2022 to RMB364.9 million in 2023. Such changes were primarily in line
with (i) the revenue changes of the respective business and (ii) our effort to strengthen the supply
chain and production management. See “— Revenue — Revenue by Product Category” above and
“— Gross Profit and Gross Margin.”
Gross Profit and Gross Margin
As a result of the foregoing, our gross profit increased from RMB235.2 million in 2022 to
RMB339.0 million in 2023. Our gross profit margin increased from 16.7% in 2022 to 18.2% in
2023.
Gross Profit/(Loss) and Gross Margin by Product Category
Our gross profit margin for intelligent automotive vision decreased from 17.5% in 2022 to
14.9% in 2023. Specifically:
 our gross profit margin for intelligent automotive lamps decreased from 17.1% in 2022
to 13.8% in 2023, primarily because we adopted more competitive pricing strategies in
response to the intensified market competition.
 our gross profit margin for automotive-grade LED devices and modules increased from
21.0% in 2022 to 28.2% in 2023, primarily due to an increase in the proportion of
revenue contribution from products with higher-profit margin such as our high-power
automotive-grade LED devices used in intelligent automotive lamps.
Our gross profit margin for high-end lighting increased from 19.2% in 2022 to 23.4% in 2023
despite a slight drop in the revenue during the same period. The increase in the gross profit margin
was primarily because (i) the sales of our high-profit margin lighting devices and modules, such as
outdoor lighting and horticultural lighting products, increased, as we strategically shifted our
development and sales focus to high-tech and high-profit margin products, (ii) we strengthened our
FINANCIAL INFORMATION
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supply chain management by expanding the supplier pool for main raw materials and consumables
and implementing bidding processes for key raw materials and consumables and (iii) we continued
to enhance production management and improve production efficiency.
Our gross profit margin for advanced display increased from 10.7% in 2022 to 16.4% in
2023, primarily because (i) we launched several high-tech and high-profit margin advanced display
products, such as LED products integrating ICs with local dimming function and Mini LED
backlight modules, and (ii) we strengthened our supply chain management and production
management, which improved our procurement and production efficiency.
Gross Profit/(Loss) and Gross Margin by Geographic Region
Our gross profit margin for the sales in Mainland China increased from 17.4% in 2022 to
18.6% in 2023, primarily due to (i) the increase in the gross profit margin for the high-end lighting
and advanced display businesses, and (ii) our effort to enhance production management and
improve production efficiency, partially offset by the decrease in the gross profit margin for
intelligent automotive lamps.
Our gross profit margin for the sales in overseas increased from 13.8% in 2022 to 16.4% in
2023, primarily due to the increase in the overseas sales of our horticultural lighting devices and
high-end lighting modules with high profit margins.
Other Income and Gains
Our other income and gains increased by 4.8% from RMB25.1 million in 2022 to RMB26.3
million in 2023, primarily due to (i) an increase primarily resulted from favorable V AT policy
changes and (ii) an increase in investment income from financial assets at fair value through profit
or loss due to our increased investment in wealth management products in line with our overall
business expansion and revenue growth, partially offset by the decrease in our gain on foreign
exchange differences as a result of the appreciation of the USD against the RMB in 2022.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 50.5% from RMB30.0 million in 2022 to
RMB45.2 million in 2023, primarily due to (i) the increase in storage fees incurred for automotive
lamps as we expanded intelligent automotive vision business and (ii) the increases in our staff
costs, market development expenses and after-sales service fees, which were in line with our
business expansion.
FINANCIAL INFORMATION
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Administrative Expenses
Our administrative expenses increased by 19.0% from RMB100.3 million in 2022 to
RMB119.4 million in 2023, primarily due to the increase in our staff costs because, in line with
the growth of our intelligent automotive vision business, we raised staff salaries and bonus.
Research and Development Costs
Our research and development costs remained relatively stable at RMB88.7 million and
RMB87.2 million in 2022 and 2023, respectively.
Other Expenses
Our other expenses increased by 53.5% from RMB24.0 million in 2022 to RMB36.8 million
in 2023, primarily due to an increase in the net provision for impairment of inventory because the
contract costs incurred for an intelligent automotive vision project exceeded the agreed-upon
consideration promised by the customer, and thus we made a provision for impairment of costs
incurred to fulfill contracts.
Finance Costs
Our finance costs decreased by 24.9% from RMB6.4 million in 2022 to RMB4.8 million in
2023, primarily due to a decrease in our interest on bank borrowing in relation to the Linlux
production base because (i) the loan principal was partially repaid in December 2022 and 2023 and
(ii) loan interest rates decreased in 2023 as compared to 2022.
Income Tax (Expense)/Credit
We recorded income tax credit of RMB28.4 million and income tax credit of RMB0.3 million
in 2022 and 2023, respectively, primarily due to the decrease in our deferred tax liabilities arising
from appreciation of assets acquired in business combination and accelerated depreciation of fixed
assets.
Profit for the Y ear
As a result of the foregoing, our profit for the year increased significantly from RMB39.1
million in 2022 to RMB72.0 million in 2023.
FINANCIAL INFORMATION
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Comparisons between 2022 and 2021
Revenue
Revenue by Product Category
Our revenue increased from RMB1,388.4 million in 2021 to RMB1,410.6 million in 2022,
primarily due to the increase in revenue from intelligent automotive vision and advanced display,
partially offset by the decrease in revenue from high-end lighting.
Our revenue from intelligent automotive vision increased significantly from RMB74.3 million
in 2021 to RMB399.7 million in 2022, primarily because (i) we acquired a controlling interest in
Lynway Vision in September 2021 and have consolidated its results since then, see “History,
Development and Corporate Structure — Major Acquisitions, Disposals and Mergers —
Acquisition of Lynway Vision,” and (ii) we strategically shifted our development and sales focus
to the intelligent automotive vision business and commenced mass production of three intelligent
automotive lamp projects in 2022, including two headlamp projects and one rear lamp project.
Our revenue from high-end lighting decreased by 35.2% from RMB1,033.9 million in 2021 to
RMB670.2 million in 2022, primarily because one of our major customers, Customer B, and its
contract manufacturers previously stocked up on LED devices and thus prioritized depleting
existing inventory in 2022. The volume of their purchases in 2021 increased significantly by
1,813.1 million pieces, or 146.2% compared with 2020. As a result, revenue from Customer B and
its contract manufacturers decreased from RMB334.5 million in 2021 to RMB260.3 million in
2022, and then recovered in 2023 as revenue from them increased to RMB303.1 million.
Our revenue from advanced display increased by 21.6% from RMB280.3 million in 2021 to
RMB340.7 million in 2022, primarily due to our efforts in expanding customer base and securing
new orders, which led to an increase in sales of our advanced display products.
Revenue by Geographic Region
Our revenue from the sales in Mainland China increased by 7.3% from RMB1,058.8 million
in 2021 to RMB1,136.0 million in 2022, mainly due to the increase in our revenue from intelligent
automotive vision and advanced display, the products of which were mainly sold domestically.
FINANCIAL INFORMATION
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Our revenue from the sales overseas decreased by 16.7% from RMB329.6 million in 2021 to
RMB274.6 million in 2022, mainly due to the decreases in revenue from our high-end lighting as a
result of decreased market demand and orders from overseas caused by COVID-19, while high-end
lighting business contributed to the majority of our overseas revenue during the Track Record
Period.
Cost of Sales
Our cost of sales remained relatively stable at RMB1,160.1 million and RMB1,175.5 million
in 2021 and 2022, respectively.
Cost of Sales by Nature
Our raw material and consumable costs and staff costs decreased from RMB966.2 million and
RMB58.3 million in 2021 to RMB948.0 million and RMB54.1 million in 2022, respectively,
primarily due to the decrease in the demand for high-end lighting LED devices and modules,
which was partially offset by the increased raw material and consumable costs and staff costs
incurred in intelligent automotive vision business and advanced display business. Our depreciation
and amortization expenses increased from RMB32.8 million in 2021 to RMB51.8 million in 2022,
primarily due to the increase in depreciation of our production bases and equipment, as well as the
amortization of long-term deferred expenses for renovation and expansion as a result of the
consolidation of Lynway Vision in September 2021.
Cost of Sales by Product Category
Our cost of sales of intelligent automotive vision products increased from RMB75.1 million
in 2021 to RMB329.6 million in 2022. Our cost of sales of high-end lighting products decreased
by 34.9% from RMB831.5 million in 2021 to RMB541.5 million in 2022. Our cost of sales of
advanced display products increased by 20.1% from RMB253.5 million in 2021 to RMB304.4
million in 2022. Such changes were primarily in line with (i) the revenue changes of the respective
business and (ii) the emerging economies of scales of our intelligent automotive vision business.
See “— Revenue — Revenue by Product Category” above and “— Gross Profit and Gross Margin”
below.
Gross Profit and Gross Margin
As a result of the foregoing, our gross profit increased from RMB228.3 million in 2021 to
RMB235.2 million in 2022. Our gross profit margin increased from 16.4% in 2021 to 16.7% in
2022.
FINANCIAL INFORMATION
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Gross Profit/(Loss) and Gross Margin by Product Category
We recorded gross loss margin of 1.1% and gross profit margin of 17.5% for intelligent
automotive vision in 2021 and 2022, respectively, primarily because in 2021, the development of
our intelligent automotive vision business was in its early stage, where we incurred substantial
initial investment. As the number of intelligent automotive lamp projects under production
increased from four in 2021 to seven in 2022, we achieved economies of scale and improved profit
margins.
Our gross profit margin for high-end lighting remained relative stable at 19.6% in 2021 and
19.2% in 2022, respectively.
Our gross profit margin for advanced display increased from 9.6% in 2021 to 10.7% in 2022,
primarily because (i) our bargaining power in procurement enhanced as a result of our increased
sales volume and business scale and (ii) we enhanced our internal production management,
including optimizing staffing arrangements and production line utilization in 2022, which led to
lower production costs.
Gross Profit/(Loss) and Gross Margin by Geographic Region
Our gross profit margin for the sales in Mainland China increased from 16.4% in 2021 to
17.4% in 2022, primarily due to the increase in revenue and gross margin for our intelligent
automotive vision business.
Our gross profit margin for the sales overseas decreased from 16.5% in 2021 to 13.8% in
2022, primarily due to the significant decrease in revenue from high-end lighting devices and
decreased utilization rate of our production capacity as a result of the decreased market demand
and orders from overseas caused by COVID-19 while high-end lighting business contributed to the
majority of our overseas revenue during the Track Record Period.
Other Income and Gains
Our other income and gains decreased by 57.1% from RMB58.4 million in 2021 to RMB25.1
million in 2022, primarily due to (i) a decrease in government grants because we received an
investment incentive subsidy of RMB20.0 million from local government in 2021 in relation to our
Linlux production base and (ii) a decrease in the gain on remeasurement of the equity interest in
an associate to a subsidiary at the date of acquisition as a result of the consolidation of Lynway
Vision in September 2021. These were partially offset by a gain on foreign exchange differences,
as a result of the appreciation of the USD against the RMB in 2022.
FINANCIAL INFORMATION
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Selling and Marketing Expenses
Our selling and marketing expenses increased by 44.0% from RMB20.8 million in 2021 to
RMB30.0 million in 2022, primarily due to (i) the increase in storage fees incurred for intelligent
automotive vision business since the consolidation of Lynway Vision in September 2021 and (ii)
the increases in market development expenses, after-sales service fees and staff costs in line with
our business expansion.
Administrative Expenses
Our administrative expenses increased by 27.8% from RMB78.5 million in 2021 to
RMB100.3 million in 2022, primarily due to (i) the increase in staff costs as a result of the
consolidation of Lynway Vision in September 2021 and (ii) the increase in depreciation and
amortization expenses following the completion of the construction of Linlux production base.
Research and Development Costs
Our research and development costs increased by 43.1% from RMB62.0 million in 2021 to
RMB88.7 million in 2022, primarily due to (i) an increase in our staff costs as a result of the
consolidation of Lynway Vision in September 2021 and (ii) an increase in testing fees as a result
of an increased third-party tests and inspection expenditure for our intelligent automotive vision
products. This was partially offset by a decrease in raw materials and consumables used for the
R&D of our high-end lighting products.
Other Expenses
Our other expenses increased from RMB8.2 million in 2021 to RMB24.0 million in 2022,
primarily due to an increase in the net provision for impairment of inventories because the
stockpiling by our customers subsequently reduced the demand for our LED device products in
2022. We adopted the kitting method to improve our inventory efficiency, where we bundle
multiple components together as a single unit for shipping in anticipation of customer demand.
Due to the reduced demand for LED device products in 2022, we made provisions for impairments
of inventories in view of the low likelihood of the sales of such LED components through kitting
method.
FINANCIAL INFORMATION
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Finance Costs
Our finance costs increased from RMB2.8 million in 2021 to RMB6.4 million in 2022,
primarily because the accrued interest on the bank borrowing in relation to the Linlux production
base before the completion of the Linlux production base construction in August 2021 was
capitalized.
Share of Loss of An Associate
Our share of loss of an associate decreased from RMB23.3 million in 2021 to nil in 2022,
primarily due to the loss recorded by the associate, Lynway Vision, in 2021 as a result of its
significant upfront R&D expenses while it had yet to start mass production. Our share of loss of an
associate was nil in 2022 because we acquired the controlling interest in Lynway Vision in
September 2021 and have consolidated its results since then.
Income Tax (Expense)/Credit
We recorded income tax expenses of RMB13.0 million and income tax credit of RMB28.4
million in 2021 and 2022, respectively, primarily because (i) our profit before tax decreased in
2022 and (ii) our deferred income tax decreased in 2022.
Profit for the Y ear
As a result of the foregoing, our profit for the year decreased by 49.9% from RMB78.0
million in 2021 to RMB39.1 million in 2022.
FINANCIAL INFORMATION
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DESCRIPTION OF CERTAIN COMPONENTS OF OUR CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
The following table sets forth the components of our consolidated statements of financial
position as of the dates indicated:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Non-current assets
Property, plant and equipment ....... 816,861 844,946 877,052 871,982
Right-of-use assets ............... 80,983 79,961 77,312 76,208
Goodwill ....................... 13,523 13,523 13,523 13,523
Other intangible assets ............ 39,362 33,457 26,770 25,626
Deferred tax assets ............... 9,021 37,722 37,038 37,941
Other non-current assets ........... 6,562 5,307 181 4,638
Total non-current assets .......... 966,312 1,014,916 1,031,876 1,029,918
Current assets
Inventories ..................... 188,028 211,579 216,026 250,736
Trade and bills receivables ......... 508,985 583,171 669,459 747,607
Contract assets .................. 3,685 4,246 5,445 6,144
Prepayments, deposits and other
receivables ................... 37,457 11,525 12,953 13,947
Financial assets at fair value through
profit or loss .................. 111,341 98,299 187,479 116,859
Pledged deposits ................. 67,270 45,702 67,041 64,291
Cash and cash equivalents .......... 96,778 108,231 209,878 280,085
Total current assets .............. 1,013,544 1,062,753 1,368,281 1,479,669
Current liabilities
Trade and bills payables ........... 479,888 507,302 794,203 865,161
Other payables and accruals ........ 416,857 456,554 462,732 440,854
Tax payable .................... — — — 1,215
Contract liabilities ................ 7,802 13,636 13,995 13,661
Interest-bearing bank borrowings ..... 15,181 25,147 29,481 454
Lease liabilities .................. — 271 287 293
Total current liabilities ........... 919,728 1,002,910 1,300,698 1,321,638
Net current assets ............... 93,816 59,843 67,583 158,031
FINANCIAL INFORMATION
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As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Non-current liabilities
Interest-bearing bank borrowings ..... 135,000 105,000 50,472 62,110
Lease liabilities .................. — 909 623 637
Deferred income ................. 6,976 9,109 14,296 13,139
Deferred tax liabilities ............. 8,293 8,659 7,705 7,282
Total non-current liabilities ....... 150,269 123,677 73,096 83,168
Net assets ...................... 909,859 951,082 1,026,363 1,104,781
Equity
Equity attributable to owners of
the parent
Share capital .................... 411,495 411,495 480,078 498,507
Other reserves ................... 436,078 479,021 546,285 606,274
Non-controlling interests ........... 62,286 60,566 — —
Total equity .................... 909,859 951,082 1,026,363 1,104,781
Property, Plant and Equipment
Our property, plant and equipment mainly consists of buildings, machinery and others, and
construction in progress.
The following table sets forth a breakdown of our property, plant and equipment as of the
dates indicated:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Buildings ...................... 422,374 403,445 394,078 381,259
Machinery and others ............. 367,521 394,366 456,487 431,029
Construction in progress ........... 26,966 46,090 25,711 59,094
Leasehold improvements ........... — 1,045 776 600
Total .......................... 816,861 844,946 877,052 871,982
FINANCIAL INFORMATION
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Our property, plant and equipment increased from RMB816.9 million as of December 31,
2021 to RMB844.9 million as of December 31, 2022, and further increased to RMB877.1 million
as of December 31, 2023, primarily due to (i) our consolidation of Lynway Vision in September
2021 and (ii) the expansion of our intelligent automotive vision business and advanced display
business. Our property, plant and equipment decreased from RMB877.1 million as of December
31, 2023 to RMB872.0 million as of five months ended May 31, 2024, primarily due to
depreciation and amortization.
Right-of-Use Assets
Our right-of-use assets primarily include the lease contracts for the building and leasehold
land we use in our operations. We leased properties for our own use, and these lease liabilities
were measured at net present value of the lease payments to be paid during the lease terms.
As of December 31, 2021, 2022, 2023 and May 31, 2024, our right-of-use assets were
RMB81.0 million, RMB80.0 million, RMB77.3 million and RMB76.2 million, respectively. Such
decreases were due to amortization.
Other Intangible Assets
Our other intangible assets primarily consist of in-licensed trademarks and patents and office
software.
As of December 31, 2021, 2022, 2023 and May 31, 2024, our other intangible assets were
RMB39.4 million, RMB33.5 million, RMB26.8 million and RMB25.6 million, respectively. The
continual decrease in our other intangible assets as of May 31, 2024 compared to December 31,
2021 was primarily due to the amortization of (i) the in-licensed trademarks and patents and (ii)
office software.
Inventory
Our inventories consist of (i) raw materials and consumables, including LED chips,
leadframes, PCBs, automotive lamp modules, plastic particles, drivers and electronic components,
(ii) work in progress, including our intelligent automotive vision, high-end lighting and advanced
display products in production, (iii) finished goods, including our intelligent automotive vision,
high-end lighting and advanced display products and (iv) contract costs, which are the costs
incurred to fulfill contracts for our intelligent automotive lamp projects. Raw materials and
consumables and finished goods, in aggregate, represented the majority of our inventories,
accounting for 86.8%, 81.2%, 79.2% and 76.7% of our total inventories as of December 31, 2021,
2022, 2023 and May 31, 2024, respectively.
FINANCIAL INFORMATION
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The following table sets forth a breakdown of our inventories as of the dates indicated:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Raw materials and consumables ..... 79,812 67,816 63,359 74,942
Work in progress ................. 14,644 17,060 23,918 34,339
Finished goods .................. 83,349 103,990 107,734 117,490
Contract costs ................... 10,223 22,713 21,015 23,965
Total ......................... 188,028 211,579 216,026 250,736
Our inventories increased by 12.5% from RMB188.0 million as of December 31, 2021 to
RMB211.6 million as of December 31, 2022, primarily due to (i) an increase in the inventory of
finished goods, led by the increased number of intelligent automotive lamp projects and advanced
display orders in 2022, and (ii) an increase in the contract costs primarily as a result of the
increase in the costs incurred to fulfill contracts, in line with the growth of our intelligent
automotive vision business. This was partially offset by a decrease in inventory of raw materials
and consumables as a result of the reduced demand for these items from our high-end lighting
business.
Our inventories remained relatively stable at RMB211.6 million and RMB216.0 million as of
December 31, 2022 and 2023, respectively. Our inventories increased by 16.1% from RMB216.0
million as of December 31, 2023 to RMB250.7 million as of May 31, 2024, primarily due to the
expanded production to fulfill the increased customer orders in our high-end lighting and advanced
display businesses.
As of August 31, 2024, RMB172.1 million, or approximately 68.7%, of our inventories as of
May 31, 2024 had been delivered or consumed.
FINANCIAL INFORMATION
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The aging analysis of our inventories based on invoice date as of the dates indicated is as
follows:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Within three months .............. 145,398 156,784 174,440 198,610
Three months to one year .......... 35,623 31,051 25,224 34,608
Over one year ................... 7,007 23,744 16,362 17,518
Total .......................... 188,028 211,579 216,026 250,736
The table below sets forth our inventory turnover days during the periods indicated:
Y ear ended December 31,
Five months
ended May 31,
2021 2022 2023 2024
(days)
Inventory turnover days (1) ......... 58 61 51 51
Note:
(1) Inventory turnover days for each period equals the average of the beginning and ending balances of inventory for
that period divided by cost of sales for that period and multiplied by 360 days for 2021, 2022 and 2023, or by 150
days for the five months ended May 31, 2024.
Our inventory turnover days remained relatively stable at 58 and 61 in 2021 and 2022,
respectively. Our inventory turnover days decreased from 61 in 2022 to 51 in 2023, primarily
because (i) we had slower inventory turnover in 2022 as our customers prioritized depleting their
existing inventory and (ii) we strengthened our inventory management and optimized inbound
warehousing standards subsequently in 2022 and 2023, which effectively reduced the stock of our
finished goods. Our inventory turnover days remained relatively stable at 51 days in 2023 and the
five months ended May 31, 2024.
FINANCIAL INFORMATION
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Trade and Bills Receivables
The following table sets forth our trade and bills receivables as of the dates indicated:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Trade receivables ................ 411,428 436,135 538,554 593,071
Bills receivables ................. 107,703 159,107 144,286 169,479
Impairment ..................... (10,146) (12,071) (13,381) (14,943)
Total .......................... 508,985 583,171 669,459 747,607
As of December 31, 2021, 2022, 2023 and May 31, 2024, our trade and bills receivables were
RMB509.0 million, RMB583.2 million, RMB669.5 million and RMB747.6 million, respectively.
The continual increase was in line with the growth of our intelligent automotive vision business
and advanced display business.
We normally grant credit terms of 60 to 120 days to our customers. The aging analysis of our
trade and bills receivables, net of allowance for credit losses, based on invoice date is as follows:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Within 60 days .................. 270,222 360,058 431,968 522,808
61 to 120 days .................. 169,624 111,016 145,319 134,549
121 to 180 days ................. 53,681 103,994 87,911 70,752
181 days up to one year ........... 15,450 8,072 3,437 17,285
One to two years ................ 8 31 824 2,213
Total .......................... 508,985 583,171 669,459 747,607
Our trade and bills receivables aged between 121 to 180 days increased from RMB53.7
million as of December 31, 2021 to RMB104.0 million as of December 31, 2022 and decreased to
RMB87.9 million and RMB70.8 million as of December 31, 2023 and May 31, 2024, respectively,
primarily because some of our customers changed their payment methods between commercial
acceptance drafts and bank acceptance drafts during the Track Record Period. Commercial
acceptance drafts and bank acceptance drafts have different settlement cycles based on their
respective accounting treatment. Bank acceptance drafts generally have shorter settlement cycles as
compared to commercial acceptance drafts, because the full carrying amount of the endorsed drafts
FINANCIAL INFORMATION
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used by a company for settlements of payables and the associated payables settled can be
derecognized for some of the bank acceptance drafts, after the company endorses such bank
acceptance drafts. When a company endorses commercial acceptance drafts, such drafts continue to
be recognized for their full carrying amount and the associated payables before the drafts mature,
leading to longer settlement cycles. Our trade and bills receivables aged 181 days and up to one
year increased from RMB3.4 million as of December 31, 2023 to RMB17.3 million as of May 31,
2024, primarily due to extended settlement with certain customers who had relatively longer
payment cycles with their overseas clients.
During the Track Record Period, most of our trade and bills receivables were outstanding for
less than one year. The following table sets forth the turnover days of our trade and bills
receivables for the periods indicated:
Y ear ended December 31,
Five months
ended May 31,
2021 2022 2023 2024
(days)
Trade and bills receivables turnover
days(1) ....................... 112 144 124 129
Note:
(1) Trade and bills receivables turnover days equal the average of the opening and closing balances of trade and bills
receivables divided by total revenue for the same period and multiplied by 360 days for 2021, 2022 and 2023, or by
150 days for the five months ended May 31, 2024.
Our trade and bills receivables turnover days increased from 112 in 2021 to 144 in 2022, and
decreased to 124 in 2023, mainly because some of our customers changed their payment methods
between commercial acceptance drafts and bank acceptance drafts during the Track Record Period.
Commercial acceptance drafts and bank acceptance drafts have different settlement cycles based
on their accounting treatment. Our trade and bills receivables turnover days remained relatively
stable at 124 days and 129 days in 2023 and the five months ended May 31, 2024, respectively. No
significant changes in the historical default rates of trade receivables, the economic conditions,
performance, solvency or behavior of debtors were observed during the Track Record Period and
up to the Latest Practicable Date. Therefore, we do not expect to experience any material issues
with the recoverability of trade receivables in the foreseeable future.
As of August 31, 2024, RMB468.4 million, or 79.0%, of our trade receivables as of May 31,
2024 had been settled.
FINANCIAL INFORMATION
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Financial Assets at Fair Value through Profit or Loss
Our financial assets at fair value through profit or loss recorded as current assets represented
investments in wealth management products, primarily consisting of large-denomination
certificates of deposits and structured deposits, which are short-term principal-guaranteed wealth
management instruments. See Note 21 to the Accountants’ Report of the Group in Appendix IA to
this prospectus. We recorded financial assets at fair value through profit or loss of RMB111.3
million, RMB98.3 million, RMB187.5 million and RMB116.9 million as of December 31, 2021,
2022, 2023 and May 31, 2024, respectively. Our financial assets at fair value through profit or loss
decreased by 11.7% from RMB111.3 million as of December 31, 2021 to RMB98.3 million as of
December 31, 2022, primarily due to the redemption of our structured deposits at year end 2022.
Our financial assets at fair value through profit or loss increased by 90.7% from RMB98.3 million
as of December 31, 2022 to RMB187.5 million as of December 31, 2023, primarily due to our
increased investment in wealth management products as a result of our increased amount of cash,
in line with our overall business expansion and revenue growth. Our financial assets at fair value
through profit or loss decreased by 37.7% from RMB187.5 million as of December 31, 2023 to
RMB116.9 million as of May 31, 2024, primarily due to reduced investment in wealth management
products. As of August 31, 2024, our financial assets at fair value through profit or loss amounted
to RMB149.3 million, representing an increase in our investment in wealth management products.
We monitor and control our investment risks with a comprehensive set of internal policies
and guidelines to manage our investments. Our current investments are principal-guaranteed wealth
management products. In line with the company’s business objectives and budget, we annually
present a report detailing the proposed investment amount to both our Board and the general
meeting of shareholders for their consideration and approval. Based on the approved investment
quota, we will purchase wealth management products with idle funds while ensuring sufficient
working capital to meet business needs, operating activities, R&D and capital expenditures, taking
into account a number of factors including the macro-economic environment, general market
conditions, risk control, credit of issuing financial institutions, our own working capital conditions,
duration of the investment and the expected profit or potential loss of the investment. Our finance
department plays a crucial role in proposing, analyzing, and evaluating potential investments in
wealth management products. We strategically utilize our idle funds to invest in short-term wealth
management products offered by banks. To control our risk exposure, we have been, and will
continue to be, seeking other low-risk financial products. The purchase of relevant wealth
management products is subject to the necessary approvals from the chief financial officer and the
president of the Company before any investment within the approved limit can be executed. After
making an investment, we closely monitor its performance and fair value on a regular basis. Our
finance department will record details of each wealth management product, including purchase
amount, redemption and return. A designated personnel from our finance department will actively
monitor our expenditures and cash and bank balances. Upon the Listing, our investment in wealth
management products is subject to the compliance with Chapter 14 of the Listing Rules.
FINANCIAL INFORMATION
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Trade and Bills Payables
Our trade and bills payables primarily represent payables to the suppliers of raw materials
and consumables and payables relating to equipment and construction costs. The aging analysis of
our trade and bills payables, net of allowance for credit losses, based on invoice date is as follows:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Within one year .................. 479,378 504,831 792,766 860,820
One to two years ................. 510 1,927 224 3,263
Two to three years ............... — 544 1,126 —
Over three years ................. — — 87 1,078
Total .......................... 479,888 507,302 794,203 865,161
As of December 31, 2021, 2022, 2023 and the five months ended May 31, 2024, our trade
and bills payables were RMB479.9 million, RMB507.3 million, RMB794.2 million and RMB865.2
million, respectively. The increase in our trade and bills payables as of December 31, 2022
compared to December 31, 2021 was primarily due to the increase in the demand for raw materials
and consumables in line with the expansion of our intelligent automotive vision business. The
increase in our trade and bills payables as of December 31, 2023 compared to December 31, 2022
was primarily due to (i) an increase in the procurement volume of raw materials and consumables
in line with the revenue growth of intelligent automotive vision and advanced display businesses
and (ii) the longer trade and bills payables turnover days resulting from our enhanced bargaining
power in procurement. The increase in our trade and bills payables as of May 31, 2024 compared
to December 31, 2023 was primarily due to the increase in the procurement volume of raw
materials and consumables in line with the growth of our intelligent automotive vision and
advanced display businesses.
As of August 31, 2024, RMB354.3 million, or 75.4%, of our trade payables as of May 31,
2024 had been settled.
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The following table sets forth the turnover days of our trade and bills payables for the
periods indicated:
Y ear ended December 31,
Five months
ended May 31,
2021 2022 2023 2024
(days)
Trade and bills payables turnover
days(1) ....................... 132 151 154 181
Note:
(1) Trade and bills payables turnover days equal the average of the opening and closing balances of trade and bills
payables divided by total cost of sales for the same period and multiplied by 360 days for 2021, 2022 and 2023, or
by 150 days for the five months ended May 31, 2024.
Our trade and bills payables turnover days increased from 132 in 2021 to 151 in 2022, and
further increased to 154 and 181 in 2023 and the five months ended May 31, 2024, respectively,
primarily because as our procurement scale continued to grow, our bargaining power in
procurement was also strengthened, allowing us to secure more favorable payment terms during
negotiations with suppliers.
Other Payables and Accruals
Our other payables and accruals primarily represent (i) government subsidy payable, (ii) other
payables including accrued receivables, salaries payable, prepaid expenses and deposit guarantees
and (iii) payroll and welfare payables.
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Deposits received ................ 3,274 4,122 3,252 2,467
Payroll and welfare payable ........ 30,583 32,383 36,657 28,952
Other payables .................. 171,899 215,530 214,354 198,341
Government subsidy payable (1) ...... 200,000 200,000 200,000 200,000
Other tax payables ............... 11,101 4,519 8,469 11,094
Total .......................... 416,857 456,554 462,732 440,854
FINANCIAL INFORMATION
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Note:
(1) Government subsidy payable represents the non-recurring subsidy stipulated in investment contracts, the attaching
conditions of which are to be fulfilled in the following periods. The expansion of Lynway Ningbo production base
in relation to an investment contract with the local government was delayed due to COVID-19 and is expected to
commence operation in the first half of 2026.
Our other payables and accruals increased from RMB416.9 million as of December 31, 2021
to RMB456.6 million as of December 31, 2022 because we made more settlements through
endorsement of commercial papers as our customers used more commercial papers in settlements,
the amount of which was recognized as other payables before the maturity of the relevant
commercial papers. Such commercial papers generally reach maturity in six months. As of
December 31, 2021, 2022, 2023 and May 31, 2024, the average maturity period was 95 days, 96
days, 80 days and 77 days, respectively. Our other payables and accruals remained relatively stable
at RMB456.6 million and RMB462.7 million as of December 31, 2022 and 2023, respectively. Our
other payables and accruals decreased from RMB462.7 million as of December 31, 2023 to
RMB440.9 million as of May 31 2024, primarily in relation to our payments for equipment and
construction.
As of August 31, 2024, RMB121.1 million, or 27.5%, of our other payables and accruals as
of May 31, 2024 had been settled.
Contract Assets and Contract Liabilities
We recorded contract assets of RMB3.7 million, RMB4.2 million, RMB5.4 million and
RMB6.1 million as of December 31, 2021, 2022, 2023 and May 31, 2024, respectively. As of
August 31, 2024, nil, of our contract assets as of May 31, 2024 had been certified.
We recorded contract liabilities of RMB7.8 million, RMB13.6 million, RMB14.0 million and
RMB13.7 million as of December 31, 2021, 2022, 2023 and May 31, 2024, respectively. As of
August 31, 2024, RMB0.5 million, or 3.9%, of our contract liabilities as of May 31, 2024 had been
recognized as revenue.
FINANCIAL INFORMATION
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Current Assets and Liabilities
The following table sets forth the components of our current assets and liabilities as of the
dates indicated:
As of December 31, As of May 31, As of August 31,
2021 2022 2023 2024 2024
(RMB in thousands)
(unaudited)
Current assets
Inventories ............ 188,028 211,579 216,026 250,736 285,404
Trade and bills receivables .. 508,985 583,171 669,459 747,607 898,573
Contract assets ......... 3,685 4,246 5,445 6,144 6,179
Prepayments, deposits and
other receivables ...... 37,457 11,525 12,953 13,947 19,600
Financial assets at fair value
through profit or loss .... 111,341 98,299 187,479 116,859 149,336
Pledged deposits ........ 67,270 45,702 67,041 64,291 87,235
Cash and cash equivalents .. 96,778 108,231 209,878 280,085 286,715
Total current assets ...... 1,013,544 1,062,753 1,368,281 1,479,669 1,733,042
Current liabilities
Trade and bills payables ... 479,888 507,302 794,203 865,161 1,033,347
Other payables and accruals . 416,857 465,554 462,732 440,854 443,213
Tax payable ........... — — — 1,215 2,084
Contract liabilities ....... 7,802 13,636 13,995 13,661 14,143
Interest-bearing bank
borrowings .......... 15,181 25,147 29,481 454 483
Lease liabilities ......... — 271 287 293 297
Total current liabilities ... 919,728 1,002,910 1,300,698 1,321,638 1,493,567
Net current assets ....... 93,816 59,843 67,583 158,031 239,475
Our net current assets increased by 51.6% from RMB158.0 million as of May 31, 2024 to
RMB239.5 million as of August 31, 2024, primarily due to increases in trade and bills receivables
and inventories, partially offset by an increase in trade and bills payables. Such changes were
primarily in line with the expansion of our high-end lighting and advanced display businesses.
Our net current assets increased by 133.8% from RMB67.6 million as of December 31, 2023
to RMB158.0 million as of May 31, 2024, primarily due to an increase in trade and bills
receivables, partially offset by an increase in trade and bills payables due to the increase in the
procurement volume of raw materials and consumables. Such changes were primarily in line with
the revenue growth of our intelligent automotive vision and advanced display businesses.
FINANCIAL INFORMATION
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Our net current assets increased by 13.0% from RMB59.8 million as of December 31, 2022 to
RMB67.6 million as of December 31, 2023, primarily due to (i) an increase in cash and cash
equivalents due to increased payments from our customers settled by cash, and (ii) an increase in
financial assets at fair value through profit or loss due to our increased investment in wealth
management products, both in line with our overall business expansion and revenue growth,
partially offset by an increase in trade and bills payables primarily due to (i) an increase in the
procurement volume of raw materials and consumables in line with the revenue growth of
intelligent automotive vision and advanced display businesses and (ii) the longer trade and bills
payables turnover days resulting from our enhanced bargaining power in procurement.
Our net current assets decreased by 36.2% from RMB93.8 million as of December 31, 2021
to RMB59.8 million as of December 31, 2022, primarily due to (i) an increase in trade and bills
payables as a result of the increase in demand for raw materials and consumables in line with the
expansion of our intelligent automotive vision business and (ii) an increase in other payables and
accruals because we used more commercial papers in settlements. This was partially offset by an
increase in trade and bills receivables in line with the growth of our intelligent automotive vision
business and advanced display business.
INDEBTEDNESS
As of December 31, 2021, 2022, 2023 and May 31 and August 31, 2024, our indebtedness
primarily included bank borrowings. The table below sets forth the details of our indebtedness as
of the dates indicated:
As of December 31, As of May 31,
As of
August 31,
2021 2022 2023 2024 2024
(RMB in thousands)
(unaudited)
Current
Interest-bearing bank
borrowings ........ 15,181 25,147 29,481 454 483
Lease liabilities ...... — 271 287 293 297
Non-current
Interest-bearing bank
borrowings ........ 135,000 105,000 50,742 62,110 65,182
Lease liabilities ...... — 909 623 637 314
Total .............. 150,181 131,327 80,683 63,494 66,276
FINANCIAL INFORMATION
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Save as disclosed in the table above, 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), acceptance credits, which are either guaranteed, unguaranteed, secured or unsecured, or
guarantees or other contingent liabilities as of August 31, 2024.
Bank Borrowings
The table below sets forth the details of our bank borrowings as of the dates indicated:
As of December 31, As of May 31,
As of
August 31,
2021 2022 2023 2024 2024
(RMB in thousands)
(unaudited)
Current
Interest-bearing bank
borrowings ........ 15,181 25,147 29,481 454 483
Non-current
Interest-bearing bank
borrowings ........ 135,000 105,000 50,472 62,110 65,182
Total .............. 150,181 130,147 79,953 62,564 65,665
Our bank borrowings comprised both secured and unsecured bank loans, with effective
interest rates ranging from 2.95% to 4.28% per annum. As of December 31, 2021, 2022, 2023 and
May 31 and August 31, 2024, the aggregate balance of our borrowings was RMB150.2 million,
RMB130.1 million, RMB80.0 million, RMB62.6 million and RMB65.7 million, respectively. As of
August 31, 2024, we had unutilized banking facilities of RMB78.4 million.
Our bank borrowings agreements contain standard terms, conditions and covenants that are
customary for commercial bank loans. As of the Latest Practicable Date, the agreements relating to
our borrowings did not contain any covenant that would have a material adverse effect on our
ability to make additional borrowings or issue debt or equity securities in the future. During the
Track Record Period and up to the Latest Practicable Date, we did not experience any material
difficulties in obtaining credit facilities, withdrawal of facilities or requests for early repayment.
For details, see Note 27 to the Accountants’ Report of the Group in Appendix IA to this
prospectus.
Our Directors confirm that there has not been any material change in our indebtedness since
August 31, 2024 up to the date of this prospectus.
FINANCIAL INFORMATION
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CONTINGENT LIABILITIES
As of August 31, 2024, we were not involved in any material legal, arbitration or
administrative proceedings that were expected to materially and adversely affect our financial
condition or results of operations, although there can be no assurance that this will not be the case
in the future. Our Directors confirm that there has been no material change in our contingent
liabilities since August 31, 2024 to the date of this prospectus.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Historically, we funded our working capital primarily from operating activities and bank
borrowings. We expect to use a portion of the proceeds from the Global Offering to fund our
working capital requirements.
Working Capital Sufficiency
Taking into account our operating cash flow and the net proceeds from the Global Offering
and the financial resources available to us, our Directors believe, and the Sole Sponsor concurs
with our Directors that, we have sufficient working capital for our present requirements, that is,
for at least 12 months from the date of this prospectus.
FINANCIAL INFORMATION
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Cash Flows
The following table sets forth selected cash flow statement information for the periods
indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Cash generated from operations ......... 93,575 120,554 424,735 201,866 43,705
Interest received .................. 2,800 3,241 3,276 1,289 1,627
Income taxes (paid)/refund ............ (9,128) 1,492 3,481 3,481 (3,109)
Net cash flows from operating activities ... 87,247 125,287 431,492 206,636 42,223
Net cash flows used in investing activities . (281,024) (85,720) (272,750) (266,035) 3,275
Net cash flows from/(used in) financing
activities ..................... 116,220 (28,524) (57,070) 3,465 24,529
Net (decrease)/increase in cash and cash
equivalents .................... (77,557) 11,043 101,672 (55,934) 70,027
Cash and cash equivalents at beginning of
the year/period .................. 174,391 96,778 108,231 108,231 209,878
Effect of foreign exchange rate changes, net . (56) 410 (25) (184) 180
Cash and cash equivalents at the end of
the year/period ................. 96,778 108,231 209,878 52,113 280,085
Net Cash Flows from Operating Activities
Net cash generated from or used in operating activities primarily comprised our profit before
taxation for the period adjusted by (i) non-cash items, (ii) changes in working capital and (iii) the
effect of interest received and income taxes paid or refunded.
In the five months ended May 31, 2024, we had net cash flows from operating activities of
RMB42.2 million, which was primarily due to (i) an increase in trade and bills payables of
RMB80.3 million and (ii) depreciation of property, plant and equipment of RMB50.8 million,
partially offset by (i) an increase in trade and bills receivables of RMB79.9 million and (ii) an
increase in inventories of RMB41.4 million. Our net cash flows from operating activities decreased
from RMB206.6 million in the five months ended May 31, 2023 to RMB42.2 million in the five
months ended May 31, 2024, primarily due to the increase in trade and bills receivables as some of
our customers changed their payment methods between commercial acceptance drafts and bank
acceptance drafts. See “— Description of Certain Components of Our Consolidated Statements of
Financial Position — Trade and Bills Receivables.”
FINANCIAL INFORMATION
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In 2023, we had net cash flows from operating activities of RMB431.5 million, primarily due
to (i) depreciation of property, plant and equipment of RMB118.5 million, (ii) an increase in trade
and bills payables of RMB255.8 million and (iii) an increase in other payables and accruals of
RMB50.2 million, partially offset by (i) an increase in trade and bills receivables of RMB88.0
million and (ii) an increase in inventories of RMB34.6 million.
In 2022, we had net cash flows from operating activities of RMB125.3 million, primarily due
to (i) depreciation of property, plant and equipment of RMB97.5 million, (ii) an increase in other
payables and accruals of RMB40.2 million and (iii) an increase in trade and bills payables of
RMB34.3 million, partially offset by (i) an increase in trade and bills receivables of RMB76.0
million and (ii) an increase in inventories of RMB39.9 million.
In 2021, we had net cash flows from operating activities of RMB87.2 million, primarily due
to (i) depreciation of property, plant and equipment of RMB61.2 million, (ii) an increase in other
payables and accruals of RMB46.0 million and (iii) an increase in trade and bills payables of
RMB46.4 million, partially offset by (i) an increase in trade and bills receivables of RMB130.0
million and (ii) an increase in inventories of RMB34.3 million.
Net Cash Flows (Used in)/From Investing Activities
In the five months ended May 31, 2024, we had net cash flows from investing activities of
RMB3.3 million, which was primarily attributable to the proceeds from the disposal of financial
assets at fair value through profit or loss of RMB462.0 million, partially offset by the purchases of
financial assets at fair value through profit or loss of RMB391.0 million and the purchases of
items of property, plant and equipment of RMB68.8 million.
In 2023, we had net cash flows used in investing activities of RMB272.8 million, which was
primarily attributable to the purchase of financial assets at fair value through profit or loss of
RMB1,637.0 million, partially offset by the proceeds from disposal of items of financial assets at
fair value through profit of loss of RMB1,549.0 million.
In 2022, we had net cash flows used in investing activities of RMB85.7 million, which was
primarily attributable to the purchase of financial assets at fair value through profit or loss of
RMB795.5 million and the purchase of items of property, plant and equipment of RMB118.1
million, partially offset by the proceeds from the disposal of financial assets at fair value through
profit or loss of RMB808.4 million.
FINANCIAL INFORMATION
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In 2021, we had net cash flows used in investing activities of RMB281.0 million, which was
primarily attributable to the purchase of financial assets at fair value through profit or loss of
RMB405.9 million and the purchase of items of property, plant and equipment of RMB223.7
million, partially offset by the proceeds from the disposal of financial assets at fair value through
profit or loss of RMB381.3 million.
Net Cash Flows from/(Used in) Financing Activities
In the five months ended May 31, 2024, we had net cash flows from financing activities of
RMB24.5 million, which was primarily attributable to the capital contribution from shareholders of
RMB43.2 million and new bank borrowings of RMB11.6 million, partially offset by the repayment
of bank borrowings of RMB29.4 million.
In 2023, we had net cash flows used in financing activities of RMB57.1 million, which was
primarily attributable to the repayment of bank borrowings of RMB79.5 million, partially offset by
the new bank borrowings of RMB29.4 million.
In 2022, we had net cash flows used in financing activities of RMB28.5 million, which was
primarily attributable to the repayment of bank borrowings of RMB65.6 million, partially offset by
the new bank and other borrowings of RMB43.9 million.
In 2021, we had net cash flows from financing activities of RMB116.2 million, which was
primarily attributable to the new bank and other borrowings of RMB252.0 million, partially offset
by the repayment of bank borrowings of RMB131.0 million.
FINANCIAL INFORMATION
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SELECTED FINANCIAL RATIOS
The following table sets forth our key financial ratios for the periods or as of the dates
indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(unaudited)
Revenue growth (1) ................. — 1.6% 31.7% — 35.0%
Gross profit growth (2) ............... — 3.0% 44.1% — 47.9%
Gross profit margin (3) ............... 16.4% 16.7% 18.2% 16.7% 18.3%
Adjusted net profit margin
(non-IFRS measure) (4) ............. 5.7% 2.9% 4.4% 1.3% 5.6%
Adjusted EBITDA margin
(non-IFRS measure) (5) ............. 11.9% 9.1% 11.7% 9.8% 12.7%
As of December 31, As of May 31,
2021 2022 2023 2024
Current ratio (times) (6). ............ 1.1 1.1 1.1 1.1
Quick ratio (times) (7) .............. 0.9 0.8 0.9 0.9
Gearing ratio (8) .................. 16.5% 13.7% 7.8% 5.7%
Notes:
(1) Revenue growth is calculated as the period-on-period growth rate of revenue.
(2) Gross profit growth is calculated as the period-on-period growth rate of gross profit.
(3) The calculation of gross profit margin is based on gross profit for the period divided by revenue and multiplied by
100%. See “— Principal Components of Our Consolidated Statements of Profit or Loss — Gross Profit/(Loss) and
Gross Margin.”
(4) Adjusted net profit margin (non-IFRS measure) is calculated as adjusted net profit (non-IFRS measure) divided by
revenue and multiplied by 100%.
(5) Adjusted EBITDA margin (non-IFRS measure) is calculated as adjusted EBITDA (non-IFRS measure) divided by
revenue and multiplied by 100%.
(6) Current ratio is calculated as current assets divided by current liabilities as of the relevant period end.
(7) Quick ratio is calculated as current assets less inventories divided by current liabilities as of the relevant period
end.
(8) Gearing ratio is calculated as total bank borrowings divided by the total equity as of the end of the respective
period and multiplied by 100%.
FINANCIAL INFORMATION
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Revenue growth
See “— Results of Operations” for a discussion of the factors affecting our revenue growth
during the Track Record Period.
Gross profit growth
See “— Results of Operations” for a discussion of the factors affecting our gross profit
growth during the Track Record Period.
Gross profit margin
Our gross profit margin increased from 16.4% in 2021 to 16.7% in 2022, and further
increased to 18.2% in 2023, primarily due to (i) the development of our intelligent automotive
business and advanced display business, (ii) the increased sales of our high-end lighting products
with high profit margin, and (iii) our enhanced production management and improved production
efficiency. Our gross profit margin increased from 16.7% in the five months ended May 31, 2023
to 18.3% in the five months ended May 31, 2024, primarily due to (i) improved operational
efficiencies achieved from the growth of our intelligent automotive business, (ii) the increased
sales of our high-tech and high-profit margin products in the high-end lighting business, and (iii)
measures taken to maintain the competitive advantage of our products, including product design
optimization, process improvement and enhanced supply chain management. See “— Results of
Operations” for a discussion of the factors affecting our gross profit margin during the Track
Record Period.
Adjusted net profit margin (non-IFRS measure)
Our adjusted net profit margin (non-IFRS measure) decreased from 5.7% in 2021 to 2.9% in
2022, primarily due to the increase in our revenue attributable to the intelligent automotive vision
business and advanced display business and the decrease in our profit for the year. Our adjusted
net profit margin (non-IFRS measure) increased from 2.9% in 2022 to 4.4% in 2023 and from
1.3% in the five months ended May 31, 2023 to 5.6% in the five months ended May 31, 2024,
primarily due to the increase in our profit for the year/period. See “— Results of Operations” for a
discussion of the factors affecting our adjusted net profit margin (non-IFRS measure) during the
Track Record Period.
FINANCIAL INFORMATION
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Adjusted EBITDA margin (non-IFRS measure)
Our adjusted EBITDA margin (non-IFRS measure) decreased from 11.9% in 2021 to 9.1% in
2022, primarily due to the decrease in our profit for the year. Our adjusted EBITDA margin
(non-IFRS measure) increased from 9.1% in 2022 to 11.7% in 2023 and from 9.8% in the five
months ended May 31, 2023 to 12.7% in the five months ended May 31, 2024, primarily due to the
increase in our profit for the year/period and the increase in depreciation of property, plant and
equipment. See “— Results of Operations” and “— Principal Components of Our Consolidated
Statements of Profit or Loss — Non-IFRS Financial Measure — EBITDA (Non-IFRS Measure)
and Adjusted EBITDA (Non-IFRS Measure)” for a discussion of the factors affecting our adjusted
EBITDA margin (non-IFRS measure) during the Track Record Period.
Current ratio
Our current ratio remained stable at 1.1x as of December 31, 2021, 2022, 2023 and May 31,
2024.
Quick ratio
Our quick ratio remained relatively stable at 0.9x, 0.8x, 0.9x and 0.9x as of December 31,
2021, 2022, 2023 and May 31, 2024, respectively.
Gearing ratio
Our gearing ratio decreased from 16.5% as of December 31, 2021 to 13.7% as of December
31, 2022, to 7.8% as of December 31, 2023, and further decreased to 5.7% as of May 31, 2024,
primarily due to (i) the decrease in our bank borrowings and (ii) the increase in our total equity.
FINANCIAL INFORMATION
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CAPITAL EXPENDITURES
During the Track Record Period, we incurred capital expenditures mainly for purchases of
financial assets at fair value through profit or loss and purchase of items of property, plant and
equipment. The following table sets forth a breakdown of our capital expenditures for the periods
indicated:
Y ear ended December 31, Five months ended May 31,
2021 2022 2023 2023 2024
(RMB in thousands)
(unaudited)
Purchases of financial assets at fair value
through profit or loss .............. 405,900 795,500 1,637,000 694,000 391,000
Purchases of items of property, plant and
equipment ..................... 223,691 118,093 165,973 80,911 68,799
Purchases of intangible assets .......... 2,567 4,433 2,979 972 3,168
Acquisition of a subsidiary, net of cash and
cash equivalents held by subsidiary at the
acquisition date ................. 13,61 9————
Total ......................... 645,777 918,026 1,805,952 775,883 462,967
Our capital expenditures amounted to RMB645.8 million, RMB918.0 million, RMB1,806.0
million, RMB775.9 million and RMB463.0 million in 2021, 2022, 2023 and the five months ended
May 31, 2023 and 2024, respectively. We funded our capital expenditure requirements during the
Track Record Period mainly from cash generated from operations. Going forward, we intend to use
capital expenditures primarily for (i) the production capacity expansion of our intelligent
automotive vision business and advanced display business and (ii) technical upgrades and
efficiency improvement of our equipment and machinery.
We plan to fund our planned capital expenditures using cash generated from operations and
the net proceeds from the Global Offering. See “Future Plans and Use of Proceeds.” We may
reallocate the fund to be utilized on capital expenditure based on our ongoing business needs.
FINANCIAL INFORMATION
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RELATED PARTY TRANSACTIONS
For details about our related party transactions during the Track Record Period, see Note 36
to Appendix IA to this prospectus. Our Directors believe that our transactions with related parties
during the Track Record Period were conducted on normal commercial terms and on an
arm’s-length basis and would not distort our results of operations or make our historical results not
reflective of our future performance.
OFF-BALANCE SHEET ARRANGEMENTS
As of the Latest Practicable Date, we did not have any outstanding off-balance sheet
arrangements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISKS
Our principal financial instruments comprise interest-bearing bank loans, finance assets at
fair value through profit or loss and cash and short-term deposits. The main purpose of these
financial instruments is to raise finance for our operations. We have various other financial assets
and liabilities such as trade and bills receivables and trade and bills payables, which arise directly
from our operations.
The main risks arising from the Group’s financial instruments are foreign currency risk,
credit risk and liquidity risk. Our Board reviews and agrees policies for managing each of these
risks, and they are summarized below:
Foreign Currency Risk
We have transactional currency exposures. Such exposures arise from sales or purchases by
operating units and investing and financing activities by investment holding units in currencies
other than the units’ functional currencies.
FINANCIAL INFORMATION
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The following table demonstrates the sensitivity at the end of each period of the Track
Record Period to a reasonably possible change in the foreign exchange rates, with all other
variables held constant, of our profit before tax.
Increase/(decrease)
in foreign
currency rate
Increase/(decrease)
in profit before
tax
%
(RMB in
thousands)
As of May 31, 2024
If the RMB weakens against the USD ................... 5 4,554
If the RMB strengthens against the USD ................. (5) (4,554)
As of December 31, 2023
If the RMB weakens against the USD ................... 5 2,760
If the RMB strengthens against the USD ................. (5) (2,760)
As of December 31, 2022
If the RMB weakens against the USD ................... 5 3,701
If the RMB strengthens against the USD ................. (5) (3,701)
As of December 31, 2021
If the RMB weakens against the USD ................... 5 853
If the RMB strengthens against the USD ................. (5) (853)
Credit Risk
An impairment analysis was performed at the end of each period of the Track Record Period
using a provision matrix to measure expected credit losses. The provision rates are based on aging
for groupings of various customer segments with similar loss patterns. The calculation reflects the
probability-weighted outcome, the time value of money and reasonable and supportable
information that is available at the reporting date about past events, current conditions and
forecasts of future economic conditions.
Maximum exposure and year-end staging
The table below shows the credit quality and the maximum exposure to credit risk based on
our Group’s credit policy, which is mainly based on aging information unless other information is
available without undue cost or effort, and year-end staging classification as of the end of each
period of the Track Record Period. The amounts presented are gross carrying amounts for financial
assets.
FINANCIAL INFORMATION
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As of December 31, 2021
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables — — — 508,985 508,985
Financial assets included
in prepayments, other
receivables and other
assets .............. 2,652——— 2,652
Pledged deposits ........ 67,27 0——— 67,270
Cash and cash equivalents 96,77 8——— 96,778
Total ................ 166,700 — — 508,985 675,685
As of December 31, 2022
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables — — — 583,171 583,171
Financial assets included
in prepayments, other
receivables and other
assets .............. 4 8 9——— 4 8 9
Pledged deposits ........ 45,70 2——— 45,702
Cash and cash equivalents 108,23 1——— 108,231
Total ................ 154,422 — — 583,171 737,593
FINANCIAL INFORMATION
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As of December 31, 2023
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables — — — 669,459 669,459
Financial assets included
in prepayments, other
receivables and other
assets .............. 840 — 254 — 1,094
Pledged deposits ........ 67,04 1——— 67,041
Cash and cash equivalents 209,87 8——— 209,878
Total ................ 277,759 — 254 669,459 947,472
As of May 31, 2024
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables . — — — 757,370 757,370
Financial assets included
in prepayments, other
receivables and other
assets ............... 1,070 — 254 — 1,324
Pledged deposits ......... 64,291——— 64,291
Cash and cash equivalents . 280,085——— 280,085
Total ................. 345,446 — 254 757,370 1,103,070
Liquidity Risk
Our Group monitors the risk of a shortage of funds using a recurring liquidity planning tool.
This tool considers the maturity of both our financial instruments and financial assets (e.g., trade
and bills receivables) and projected cash flows from operations.
FINANCIAL INFORMATION
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The maturity profile of our Group’s financial liabilities as of the end of each period of the
Track Record Period, based on the contractual undiscounted payments, is as follows:
As of December 31, 2021
Less than
1 year 1 to 3 years Over 3 years Total
(RMB in thousands)
Interests-bearing bank loans ........ 21,408 91,743 54,093 167,244
Trade and bills payables ........... 479,888 — — 479,888
Other payables and accruals ........ 371,711 — — 371,711
873,007 91,743 54,093 1,018,843
As of December 31, 2022
Less than
1 year 1 to 3 years Over 3 years Total
(RMB in thousands)
Interests-bearing bank loans ........ 30,300 110,437 — 140,737
Lease liabilities .................. 330 661 330 1,321
Trade and bills payables ........... 507,302 — — 507,302
Other payables and accruals ........ 415,159 — — 415,159
953,091 111,098 330 1,064,519
As of December 31, 2023
Less than
1 year 1 to 3 years Over 3 years Total
(RMB in thousands)
Interests-bearing bank loans ........ 31,624 51,840 — 83,464
Lease liabilities .................. 330 661 — 991
Trade and bills payables ........... 794,203 — — 794,203
Other payables and accruals ........ 416,421 — — 416,421
1,242,578 52,501 — 1,295,079
FINANCIAL INFORMATION
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As of May 31, 2024
Less than
1 year 1 to 3 years Over 3 years Total
(RMB in thousands)
Interest-bearing bank borrowings .... 2,794 53,451 10,467 66,712
Lease liabilities ................. 330 661 — 991
Trade and bills payables .......... 865,161 — — 865,161
Other payables and accruals ........ 399,226 — — 399,226
Total .......................... 1,267,511 54,112 10,467 1,332,090
Capital Management
The primary objective of our Group’s capital management is to ensure that we maintain a
strong credit profile and healthy capital ratios in order to support our business and maximize
shareholder value.
Our Group manages the capital structure and makes adjustments to it in light of changes in
economic conditions. To maintain or adjust the capital structure, our Group may adjust the
dividend payment to shareholders, return capital to shareholders or issue new shares. No changes
were made in the objectives, policies or processes for managing capital during the year.
Our Group monitors capital using the debt/asset ratio, which is total liabilities divided by
total assets. The debt-to-asset ratios as of the end of each period of the Track Record Period were
as follows:
As of December 31, As of May 31,
2021 2022 2023 2024
(RMB in thousands)
Total liabilities .................. 1,069,997 1,126,587 1,373,794 1,404,806
Total assets ..................... 1,979,856 2,077,669 2,400,157 2,509,587
Debt-to-asset ratio ................ 54% 54% 57% 56%
DIVIDEND POLICY
Our Company is a joint stock company incorporated in the People’s Republic of China with
limited liability. The payment and amount of any future dividend depend on the availability of
dividends received from our subsidiaries.
FINANCIAL INFORMATION
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During the Track Record Period, no dividend was declared or paid by the Company. Our
dividend distribution record in the past may not be used as a reference or basis to determine the
level of dividends that may be declared or paid by us in the future.
Pursuant to the relevant provisions of the Company Law of the PRC, prior to the allocation
of post-tax profits to shareholders, a company is mandated to make up any accrued losses and
adhere to the prescribed extraction of statutory reserves as per regulatory requirements.
Consequently, if the post-tax profits of a company prove insufficient to adequately offset extant
losses, the company remains proscribed from distributing post-tax profits amongst its shareholders.
Any proposed distribution of dividends shall be formulated by our Board and will be subject
to approval in our shareholders’ meeting. We currently do not have any pre-determined dividend
payout ratio. A decision to declare or to pay any dividends in the future, and the amount of any
such dividends, will depend on a number of factors, including our results of operations, cash
flows, financial condition, payments by our subsidiaries of cash dividends to us, business
prospects, statutory, regulatory and contractual restrictions on our declaration and payment of
dividends and other factors that our Board may consider important. Over the next three years, we
intend to adopt a dividend payout ratio of no less than 30% of our net profit of the year of
dividend payment, according to our business operations and cash flow position, which is subject to
the approvals of the Board and the shareholders’ meeting. No dividend will be declared or payable
except out of our profits and reserves lawfully available for distribution. There can be no
assurance that dividends of any amount will be declared or distributed in any year.
DISTRIBUTABLE RESERVES
As of May 31, 2024, our Company had RMB337.2 million of retained profits available for
distribution to our shareholders, according to the conditions under the PRC laws.
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS
See “Appendix II — Unaudited Pro Forma Financial Information.”
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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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 May 31, 2024
(being the date of our latest audited financial statements) and there has been no event since May
31, 2024 which would materially affect the information shown in the Accountants’ Report of the
Group set out in Appendix IA to this prospectus.
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 RMB52.3 million (at the Offer Price of HK$3.61 per Offer Share and no exercise of
the Offer Size Adjustment Option), representing 47.2% of the gross proceeds (based on the Offer
Price of HK$3.61 per Offer Share and assuming that the Offer Size Adjustment Option is not
exercised) of the Global Offering. During the Track Record Period, we incurred listing expenses of
RMB19.3 million, including RMB18.2 million recorded as administrative expenses and RMB1.1
million capitalized. We expect to incur listing expenses of approximately RMB33.0 million, of
which approximately RMB19.4 million is expected to be recognized in the consolidated statements
of profit or loss as administrative expenses and approximately RMB13.6 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 2024. By nature, our listing expenses are
composed of (i) underwriting commission of approximately RMB11.7 million and (ii)
non-underwriting-related expenses of approximately RMB40.6 million, which consist of fees and
expenses of legal advisors and the Reporting Accountant of approximately RMB25.5 million and
other fees and expenses of approximately RMB15.1 million.
FINANCIAL INFORMATION
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FUTURE PLANS
See “Business — Our Strategies” in this prospectus for a detailed description of our future
plans.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately HK$64.1 million from the
Global Offering, after deducting the underwriting fees, commissions and estimated expenses
payable by us in connection with the Global Offering, assuming the Offer Size Adjustment Option
is not exercised and based on the Offer Price of HK$3.61 per Offer Share.
At an Offer Price of HK$3.61 per Offer Share, we currently intend to apply these net
proceeds for the following purposes:
 approximately 70.0% of the net proceeds, or HK$44.8 million, will be used for
expanding our production capacity in intelligent automotive vision in an effort to
continue promoting its development, meeting customer demands, optimizing our
geographic network and further increasing our market share. As the LED intelligent
vision industry undergoes vigorous development and rapid technology iteration, we
remain dedicated to the development of the intelligent automotive vision business.
During the Track Record Period, our intelligent automotive vision business experienced
substantial growth. Revenue from intelligent automotive vision increased significantly
from RMB74.3 million in 2021 by 438.0% to RMB399.7 million in 2022 and further
increased by 92.9% to RMB771.0 million in 2023. Revenue from intelligent automotive
vision increased by 61.9% from RMB225.7 million in the five months ended May 31,
2023 to RMB365.4 million in the five months ended May 31, 2024. We expect that such
trend will continue as we have achieved economies of scale, demonstrated our
technological capabilities and succeeded in passing supplier qualification audits
conducted by various leading automotive OEMs. In the meantime, China’s intelligent
automotive vision industry, with its market size expanding at a CAGR of 14.4% from
RMB88.7 billion in 2023 to RMB174.2 billion in 2028, has also witnessed a substantial
trend towards domestic substitution. In line with industry norms, we generally reserve
20% of our production capacity to accommodate potential surges in purchase orders and
expand production capacity in advance to ensure the satisfaction of the needs of new
customers, the launch of new products and increased demand overall. We plan to expand
our production capacity, further enhance our customer coverage and product and service
delivery capabilities and improve the competitiveness of our intelligent automotive
vision products through such investment and construction plan.
FUTURE PLANS AND USE OF PROCEEDS
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In particular, we plan to establish Lynway Guangdong production base 1, considering the
increasing purchase orders from south China and leveraging our capabilities of vertical
integration of industry value chain as well as our strong presence and talent pool in
south China. The new production base is projected to span an estimated total
construction area of 100,000 sq.m. It is expected to commence operation in the second
half of 2025. We plan to invest in: (i) acquisition of lands for the construction of the
production base, (ii) construction of the production base, which includes the
construction of separate functional areas for the production process, logistics and power,
to support the process requirements for injection molding, spraying, aluminizing, mold
repair and assembly, and (iii) purchase of production equipment and machinery such as
headlamp cover coating lines, injection molding equipment and assembly lines for
headlamps and rear lamps. We plan to increase the annual designed capacity by 700,000
sets of both headlamps and rear lamps, respectively, to further enhance coverage of
downstream automotive OEMs located in south China.
The following table sets forth the expected investment breakeven time, investment
payback period and estimated breakeven production volume for the proposed production
capacity expansion
(1):
Expected
investment
breakeven time (2)
Expected
investment
payback period (3)
Estimated
breakeven
production
volume (4)
Establishment of Lynway
Guangdong production base (5) .
In 2027 7.2 years 700,000 sets
Note:
(1) The information in the table is calculated based on our best estimation and on a series of assumptions
speculative in nature and may not reflect actual circumstances.
(2) The establishment of production base will achieve investment breakeven when the revenue is equal to
the cost and expenses for that accounting period on accrual basis. The time required to achieve
investment breakeven depends on various factors, including but not limited to general economic and
market conditions, market competition, utilization rate and price of raw materials.
1 Such construction is currently at planning phase, with production and building operations yet to commence. The
construction plan may undergo necessary modifications based on further regulatory consents, market conditions and
practical execution among other factors. We are committed to diligently completing the requisite filing processes
and securing the necessary approvals within the appropriate timeframes, which encompass, among others, NDRC
filings and environmental impact assessment (EIA) approval procedure.
FUTURE PLANS AND USE OF PROCEEDS
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(3) The investment payback period is the time required for the accumulated operating cash flow since the
commencement of business operation is able to cover the total investment amount. The time required
to achieve investment payback varies depending on various factors, including (i) the capital investment
such as costs of machinery and equipment; and (ii) level of profitability achieved.
(4) The breakeven production volume is calculated based on the overall production volume of the
production base/line of the year when such plan achieves breakeven.
(5) Assuming the commencement of operations occurs around the second half of 2025 for the Lynway
Guangdong production base.
 approximately 20.0% of the net proceeds, or HK$12.8 million, will be used for
technological innovation and product upgrades to continually improve our technologies,
accelerate our R&D on cutting-edge technologies, optimize and expand our product
pipeline and expand our R&D team. We are dedicated to advancing our products
towards enhanced intelligence, integration, and systematization. In particular:
 approximately 10.0% of the net proceeds, or HK$6.4 million, will be used to
establish an R&D center. Complementing our existing R&D center and
CNAS-certified laboratories, which are dedicated to the R&D of LED devices and
modules, our new R&D center will specialize in the development of intelligent
automotive lamps. The new R&D center is designed to bolster our Lynway
Guangdong production base by undertaking R&D for new projects from diverse
automotive OEMs and facilitating customer development in South China,
leveraging its proximity to the production base. The construction of the R&D
center is expected to commence in the second half of 2024 and be completed by
the end of 2025. In particular, we plan to use (i) approximately 6.0% of the net
proceeds, or HK$3.8 million, to upgrade the technologies to be deployed in the
R&D programs in the intelligent automotive vision business, optimizing flip-chip
technologies, packaging technologies and other fundamental technologies, to
facilitate the development, system integration, testing and the design of new
products such as LED intelligent automotive lamps. Our planned technological
development initiatives encompass a range of directions, including headlamps with
multifunctional modules, rear lamps and ambient lights with surface light source,
high-definition projection and driver platforms, flat platform modules,
cost-effective HCM for headlamps and shared drivers for headlamps and rear
lamps. Leveraging our vertical integration capabilities, we will continue to
integrate our intelligent automotive vision products and systems with ICs,
electronic control, software, sensors, optics and others to further enhance our R&D
capabilities and consolidate our technological leadership in the industry; and (ii)
approximately 4.0% of the net proceeds, or HK$2.6 million, to purchase relevant
software and equipment from time to time, in support of the R&D activities;
FUTURE PLANS AND USE OF PROCEEDS
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--- page 447 ---
 approximately 6.0% of the net proceeds, or HK$3.8 million, will be used to expand
our R&D team in support of the R&D programs to be conducted at the new R&D
center and to strengthen our innovative R&D capabilities, optimize and upgrade
our teams, so as to enhance our competitive edge in the industry. In addition to the
technological development initiatives undertaken by the new R&D center, the R&D
team will be responsible for, among others, R&D programs focusing on (i)
interactive displays for intelligent automotive lamps, the size of which exceeds 1.3
meters and features over 3,000 pixels, offering programmable and dynamic display
capabilities, (ii) advanced high-pixel projection modules capable of light
navigation, proximity warnings, lane change alerts, blind spot detection, pedestrian
alerts, pre-collision signals and projection of dynamic visual contents in
automobiles, and (iii) AR HUD products designed to deliver a comprehensive
overview of vehicle and road conditions, display ADAS information intuitively,
and provide notification through lane-level AR navigation. We plan to recruit
around 15 R&D personnel with professional knowledge and rich experience by
2025, to facilitate the optimization of our existing technologies and continually
explore advanced manufacturing processes while expediting new product
introductions; and
 approximately 4.0% of the net proceeds, or HK$2.6 million, will be used to invest
in product development, product category expansion and product tests with a focus
on the development of LED devices, LED modules and intelligent automotive
lamps. We aim to optimize our one-stop solutions through the expansion of product
categories in the intelligent automotive vision, high-end lighting and advanced
display business.
 approximately 10.0% of the net proceeds, or HK$6.4 million, as working capital and for
general corporate uses to support our day-to-day business operations and growth.
If we urgently need the funds for the above purposes, but cannot immediately obtain the net
proceeds from the Global Offering, we will use self-raised funds to meet the relevant funding
requirements and replace these self-raised funds with the net proceeds from the Global Offering
when the proceeds become available to us.
To the extent that our net proceeds are not sufficient to fund the purposes set out above, we
intend to fund the balance through a variety of means, including cash generated from operations,
bank loans and other borrowings.
FUTURE PLANS AND USE OF PROCEEDS
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If the Offer Size Adjustment Option is exercised in full, the net proceeds that we will receive
will be approximately HK$82.3 million at the Offer Price of HK$3.61 per Offer Share. In the
event that the Offer Size Adjustment Option is exercised in full, we intend to apply the additional
net proceeds to the above purposes in the proportions stated above.
To the extent that the net proceeds are not immediately applied to the above purposes and to
the extent permitted by the relevant law and regulations, we will only deposit the net proceeds 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 applicable laws and
regulations in other jurisdictions, the Law of the People’s Republic of China on Commercial Banks
() and other applicable laws in China). We will make an appropriate
announcement if there is any change to the above proposed use of proceeds.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 449 ---
HONG KONG UNDERWRITERS
CLSA Limited
GF Securities (Hong Kong) Brokerage Limited
Sinolink Securities (Hong Kong) Company Limited
BOCI Asia Limited
ABCI Securities Company Limited
ICBC International Securities Limited
China Galaxy International Securities (Hong Kong) Co., Limited
China Sunrise Securities (International) Limited
Futu Securities International (Hong Kong) Limited
Patrons Securities Limited
Tiger Brokers (HK) Global Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, our Company has agreed to offer the
Hong Kong Offer Shares for subscription by the public in Hong Kong on and subject to the terms
and conditions of the Hong Kong Underwriting Agreement and this prospectus.
Subject to (a) the Stock Exchange 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 on the Main Board as
mentioned in this prospectus (including any additional H Shares which maybe allotted and issued
pursuant to the exercise of the Offer Size Adjustment Option) and such approval not having been
withdrawn; 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, or procure
subscribers to subscribe, for the Hong Kong Offer Shares which are being offered but are not
taken up under the Hong Kong Public Offering on the terms and subject to the conditions set out
in this prospectus and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on and subject to, among other
things, the International Underwriting Agreement having been executed and becoming
unconditional and not having been terminated in accordance with its terms.
UNDERWRITING
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Grounds for Termination
The obligations of the Hong Kong Underwriters to subscribe or procure subscribers for the
Hong Kong Offer Shares under the Hong Kong Underwriting Agreement are subject to termination
by written notice from the Sole Sponsor and the Sole Overall Coordinator (for itself and on behalf
of the Hong Kong Underwriters), at any time prior to 8:00 a.m. on the Listing Date if:
(1) there develops, occurs, exists or comes into force:
(a) any local, national, regional, or international event or circumstance in the nature of
force majeure (including, without limitation, any acts of government, declaration of
a national or international emergency or war, calamity, crisis, epidemic, pandemic,
outbreak of infectious disease (including contagious coronavirus (COVID-19),
SARS, swine or avian flu, H5N1, H1N1, H7N9 or such related/mutated forms),
economic sanctions, strikes, lock-outs, fire, explosion, flooding, earthquake,
volcanic eruption, civil commotion, riots, public disorder, acts of war, outbreak or
escalation of hostilities (whether or not war is declared), acts of God or acts of
terrorism (whether or not responsibility has been claimed)) in or affecting Hong
Kong, the PRC, the United States or any other jurisdiction relevant to any member
of the Group or the Global Offering (collectively, the “ Relevant Jurisdictions ”
and each, a “ Relevant Jurisdiction ”); or
(b) any change, or any development involving a prospective change or development in
(whether or not permanent), or any event or circumstance or series of events
resulting or likely to result in any change or development, or a prospective change
or development, in any local, national, regional or international financial, political,
military, industrial, fiscal, economic, regulatory, currency, credit, currency or
market conditions, or exchange control or any monetary or trading settlement
system or other financial markets (including, but not limited to, a change in the
conditions in stock and bond markets, money and foreign exchange markets, the
interbank markets and credit markets or a change in the system under which the
value of the Hong Kong dollar is linked to the U.S. dollar or Renminbi is linked to
any foreign currency or currencies) in or affecting any of the Relevant
Jurisdictions; or
(c) any moratorium, suspension, limitation 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
Shanghai Stock Exchange, the Shenzhen Stock Exchange, the New York Stock
Exchange or the NASDAQ Global Market; or
(d) any general moratorium on commercial banking activities in or affecting 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
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State level or by other competent authority), or any other Relevant Jurisdictions
(declared by the relevant authorities), 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; or
(e) any new law, or any change or any development involving a prospective change or
any event or circumstance likely to result in a change or a development involving a
prospective change in, or in the interpretation or application by any court or other
competent authorities of, existing laws, in each case, in or affecting any Relevant
Jurisdiction; or
(f) any imposition of economic sanctions, or the withdrawal of trading privileges, in
respect of any jurisdiction relevant to the business operations of the Group, in
whatever form, directly and indirectly, by, or for, any Relevant Jurisdictions; or
(g) any change or development involving a prospective change in or affecting Taxation
or exchange control, currency exchange rates or foreign investment regulations
(including, without limitation, a material devaluation of the U.S. dollar, Euro,
Hong Kong dollar or the Renminbi against any foreign currencies), or the
implementation of any exchange control, in any of the Relevant Jurisdictions; or
(h) any litigation, legal action (except for any investigation or other action as
stipulated in (i) below) or claim being threatened or instigated against any member
of the Group or any Director or Supervisor; or
(i) an authority in any Relevant Jurisdiction commencing any investigation or other
action, or announcing an intention to investigate or take other action, against any
member of the Group or any Director or Supervisor; or
(j) any Director, Supervisor or senior management member of the Company as named
in this prospectus being charged with or found guilty of an indictable offence or
prohibited by operation of law or otherwise disqualified from taking part in the
management of a company or taking directorship of a company or there is
commencement by any authority of any investigation or other action against any
Director, Supervisor or member of senior management of the Company in his or
her capacity as such or any member of the Group or any announcement by any
authority that it intends to commence any such investigation or take any such
action; or
(k) any Director, or president or financial controller of the Company vacating his or
her office; or
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(l) save as disclosed in this prospectus, any contravention by any member of the
Group or any Director or Supervisor of any applicable laws (including, without
limitation, the Listing Rules or the Companies (Winding Up and Miscellaneous
Provisions) Ordinance); or
(m) a prohibition by any competent authority on the Company for whatever reason
from offering, allotting, issuing, selling the Offer Shares (including any additional
H Shares that may be issued pursuant to the exercise of the Offer Size Adjustment
Option) pursuant to the terms of the Global Offering; or
(n) any change or development involving a prospective change which has the effect of
materialization of, any of the risks set out in the section headed “Risk Factors” in
this prospectus; or
(o) non-compliance of this prospectus, the CSRC filings (or any other documents used
in connection with the contemplated offer, subscription and sale of the Offer
Shares) or any aspect of the Global Offering with the Listing Rules, the rules of
the CSRC or any other applicable laws; or
(p) any breach or any event or circumstance rendering untrue or incorrect in any
respect, any of the warranties specified in the Hong Kong Underwriting
Agreement; or
(q) the issue or requirement to issue by the Company of any supplement or amendment
to this prospectus, (or to any other documents in connection with the contemplated
offer, subscription and sale of the Offer Shares) pursuant to the Companies
Ordinance and the Companies (Winding Up and Miscellaneous Provisions)
Ordinance or the Listing Rules or any requirement or request of the Stock
Exchange, the SFC and/or the CSRC, unless such supplemental or amendment has
been issued with the prior written consent of the Sole Sponsor and the Sole Overall
Coordinator; or
(r) an order or a petition is presented for the winding up or liquidation of any member
of the Group or any member of the Group makes any composition, compromise or
arrangement with its creditors or enters into a scheme of arrangement or any
resolution is passed for the winding-up of any member of the Group or a
provisional liquidator, receiver or manager is appointed over all or part of the
assets or undertaking of any member of the Group or anything analogous thereto
occurs in respect of any member of the Group; or
(s) a valid demand by any creditor for repayment or payment of any indebtedness of
any member of the Group or in respect of which any member of the Group is liable
prior to its stated maturity,
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which, individually or in the aggregate, in the sole and absolute opinion of the Sole
Sponsor and the Sole Overall Coordinator (for itself and on behalf of the Hong Kong
Underwriters),
(A) has or will have or is likely to have a material adverse effect or change, or any
development involving a prospective material adverse effect or material adverse
change, in or affecting the assets, liabilities, business, general affairs, management,
prospects, Shareholders’ equity, revenue, profits, losses, results of operations,
position or condition, financial or otherwise, or performance of the Company and
the other members of the Group, taken as a whole; or
(B) has or will have or is likely to have a material adverse effect on the success of the
Global Offering or the level of applications under the Hong Kong Public Offering
or the level of interest under the International Offering; or
(C) makes or will make or is likely to make it inadvisable or inexpedient or
impracticable for the Global Offering to proceed or to be performed or
implemented as envisaged or to market the Global Offering, or to deliver the Offer
Shares on the terms and in the manner contemplated by this prospectus, the formal
notice, the preliminary offering circular or the final offering circular; or
(D) has or will have or is likely to have the effect of (i) making any part of the Hong
Kong Underwriting Agreement (including underwriting) incapable of performance
in accordance with its terms or (ii) preventing or delaying the processing of
applications and/or payments pursuant to the Global Offering or pursuant to the
underwriting thereof; or
(2) there has come to the notice of the Sole Sponsor and the Sole Overall Coordinator as at
or after the date of the Hong Kong Underwriting Agreement:
(a) that any statement contained in any of the Offering Documents (as defined in the
Hong Kong Underwriting Agreement), the CSRC filing and/or in any notices,
announcements, advertisements, communications or other documents issued or used
by or on behalf of the Company in connection with the Hong Kong Public Offering
(including any supplement or amendment thereto) (collectively, the “ Offer Related
Documents ”) was, when it was issued, or has become, untrue, incorrect,
inaccurate, incomplete or misleading or deceptive in any material respect, or that
any forecast, estimate, expression of opinion, intention or expectation expressed or
contained in any of the Offer Related Documents is not fair and honest, not made
on reasonable grounds or, where appropriate, not based on reasonable assumptions
with reference to the facts and circumstances then subsisting; or
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(b) that 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 omission or misstatement from any of the Offer Related Documents; or
(c) a prohibition by a relevant authority on the Company for whatever reason from
allotting or issuing the H Shares (including the Offer Size Adjustment Option
Shares) pursuant to the terms of the Global Offering; or
(d) that any material breach of the obligations or undertakings imposed upon any party
to, the Hong Kong Underwriting Agreement or the International Underwriting
Agreement (other than upon any of the Sole Overall Coordinator, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries, the Sole Sponsor, Hong Kong Underwriters or the International
Underwriters); or
(e) any event, act or omission which gives rise to or is likely to give rise to any
liability of any of the Company or the Warranting Shareholder under the Hong
Kong Underwriting Agreement; or
(f) that there is any material adverse effect or change, or any development involving a
prospective material adverse effect or material adverse change, in or affecting the
assets, liabilities, business, general affairs, management, prospects, Shareholders’
equity, revenue, profits, losses, results of operations, position or condition,
financial or otherwise, or performance of the Company and the other members of
the Group, taken as a whole; or
(g) that the approval 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
any additional H Shares that may be issued pursuant to the exercise of the Offer
Size Adjustment Option) is refused or not granted, other than subject to customary
conditions, on or before the Listing Date, or if granted, the approval is
subsequently withdrawn, cancelled, qualified (other than by customary conditions),
revoked or withheld; or
(h) that the Company withdraws any of the Hong Kong Public Offering document or
the Global Offering; or
(i) any of the experts specified in this prospectus (other than the Sole Sponsor) has
withdrawn its respective 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; or
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(j) that there is a material breach of, or any matter circumstance or event rendering
any of the warranties given by our Company or any of the Warranting Shareholders
is (or might when repeated be) being untrue or misleading or inaccurate; or
(k) a material portion of the orders in the book-building process or the investment
commitments by placees have been withdrawn, terminated or cancelled,
then the Sole Sponsor and the Sole Overall Coordinator (for itself and on behalf of the Hong
Kong Underwriters), shall be entitled, in its sole and absolute discretion, by giving a written
notice to our Company and Warranting Shareholders, to terminate the Hong Kong
Underwriting Agreement with immediate effect if prior to 8:00 a.m. on the Listing Date. The
exercise of right of the Sole Sponsor and the Sole Overall Coordinator under the termination
clause of the Hong Kong Underwriting Agreement shall be final, conclusive and binding on
the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital
Market Intermediaries and the Hong Kong Underwriters.
Undertakings to the Stock Exchange Pursuant to the Listing Rules
(A) Undertakings by our Company
In accordance with Rule 10.08 of the Listing Rules, our Company has undertaken to the
Stock Exchange that no further Shares or securities convertible into our equity securities (whether
or not of a class already listed) may be issued by us or form the subject of any agreement to such
an issue within six months from the Listing Date (whether or not such issue of Shares or our
securities will be completed within six months from the Listing Date) except for: (a) any
capitalization issue, capital reduction or consolidation or sub-division of Shares; or (b) issue of
Shares or our securities pursuant to the Global Offering and the Offer Size Adjustment Option; or
(c) any other applicable circumstances provided under Rule 10.08 of the Listing Rules.
(B) Undertakings by our Controlling Shareholders
In accordance with the relevant requirements under Rule 10.07 of the Listing Rules, each of
our Controlling Shareholders has undertaken to the Stock Exchange and the Company that:
(a) at any time in the period commencing on the date by reference to which disclosure of
the shareholding of our Controlling Shareholders in the Company is made in this
prospectus and ending on the date which is six months from the Listing Date (the “ First
Six Month Period ”), each of our Controlling Shareholder shall not and shall procure
that the relevant registered holder(s) shall not 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 in respect of which the Controlling Shareholder(s) is
shown by this prospectus to be the beneficial owner(s) (the “ Relevant Securities ”);
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(b) at any time in the period of six months commencing on the date on which the period
referred to in paragraph (a) above expires, each of our Controlling Shareholders shall
not and shall procure that the relevant registered holder(s) shall not 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 referred to in paragraph (a) above if,
immediately following such disposal or upon exercise or enforcement of such options,
rights, interests or encumbrances, the Controlling Shareholders would cease to be the
Controlling Shareholders (as defined in the Listing Rules) of the Company;
(c) within the period commencing on the date by reference to which disclosure of
shareholdings of the Controlling Shareholders in the Company is made in the Prospectus
and ending on the date which is 12 months from the Listing Date, each of our
Controlling Shareholders will:
(i) when any of our Controlling Shareholders pledges or charges any Relevant
Securities or interests in any of the Relevant Securities, whether directly or
indirectly, in favor of any authorized institution (as defined in the Banking
Ordinance (Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial
loan pursuant to Note (2) to Rule 10.07(2), immediately inform the Company of
such pledge or charge together with the number of Relevant Shares of the
Company so pledged or charged; and
(ii) when any of our Controlling Shareholders receives indications, either verbal or
written, from the pledgee or chargee of any Relevant Securities that any of the
pledged or charged securities of the Company will be disposed of, immediately
inform the Company in writing of such indications.
Our Company will inform the Stock Exchange in writing as soon as we have been informed
of matters referred in above by any of our Controlling Shareholders and disclose such matters by
way of announcement pursuant to the requirements under the Listing Rules as soon as possible.
Undertakings pursuant to the Hong Kong Underwriting Agreement
(A) Undertakings by our Company
Our Company has undertaken to each of the Sole Sponsor, the Sole Overall Coordinator, the
Joint Bookrunners, the Joint Lead Managers, the Hong Kong Underwriters and the Capital Market
Intermediaries, that except for the offer, allotment, issue and sale of the Offer Shares pursuant to
the Global Offering (including pursuant to the Offer Size Adjustment Option), at any time after the
date of the Hong Kong Underwriting Agreement up to and including the date falling the First
Six-Month Period, our Company will not, without the prior written consent of the Sole Sponsor
and the Sole Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) and
unless in compliance with the requirements of the Listing Rules:
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(i) offer, allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or
agree to allot, issue or sell, 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, make any short 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, any H Shares or other equity securities of our Company, as applicable,
or any interest in any of the foregoing (including, without limitation, any 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, as applicable, or any interest in any of the foregoing), 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; or
(ii) enter into any swap, derivative or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership (legal or beneficial) of any
H Shares or other equity securities of our Company, as applicable, or any interest in any
of the foregoing (including, without limitation, any 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
other interest in any of the foregoing); or
(iii) enter into any transaction with the same economic effect as any transaction specified in
(i) or (ii) above; or
(iv) offer to or agree to or announce any intention to effect any transaction specified in (i),
(ii) or (iii) above,
in each case, whether any of the transactions specified in (i), (ii) or (iii) above is to be settled by
delivery of H Shares or other securities of our Company, or in cash or otherwise (whether or not
the issue of such H Shares or other equity securities of our Company will be completed within the
First Six-month Period).
During the period of six months commencing on the date on which the First Six-Month
Period expires (the “ Second Six-Month Period ”), our Company shall not enter into any of the
transactions specified in (i), (ii) or (iii) above or offer to or agree to or announce any intention to
enter into any such transaction, such that any Controlling Shareholder would, directly or indirectly,
cease to be a controlling shareholder (within the meaning defined in the Listing Rules) of our
Company. In the event that our Company enters into any of the transactions specified in (i), (ii) or
(iii) above or offers to or agrees to or announces any intention to enter into any such transaction,
our Company shall take all reasonable steps to ensure that it will not, and no other act of our
Company will, create a disorderly or false market in the securities of the Company.
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(B) Undertakings by our Warranting Shareholders
Each of our Warranting Shareholders has jointly and severally agreed and undertaken to each
of the Company, the Sole Sponsor, the Sponsor-Overall Coordinator, the Sole Overall Coordinator,
the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong
Underwriters and the Capital Market Intermediaries that, except as pursuant to the Global Offering
and the exercise of the Offer Size Adjustment Option and the issue of the H Shares thereof,
without the prior written consent of the Sole Sponsor and the Sole Overall Coordinator (for itself
and on behalf of the Hong Kong Underwriters) and unless in compliance with the requirements of
the Listing Rules:
(i) it/he/she will not, at any time during the First Six-Month Period, (a) sell, offer to sell,
contract or agree to sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any
option, warrant, contract or right to purchase, grant or purchase any option, warrant,
contract or right to sell, assign, make short 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, any H Shares or
other securities of our Company or any interest therein (including, without limitation,
any 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 any such
other securities of our Company, as applicable), or deposit any H Shares or other
securities of our Company with a depositary in connection with the issue of depositary
receipts, or (b) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of any H Shares or
other securities of our Company or any interest therein (including, without limitation,
any 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 any such
other equity securities, as applicable), or (c) enter into any transaction with the same
economic effect as any transaction specified in (a) or (b) above, or (d) offer to or
contract to or agree to or announce any intention to enter into any transaction specified
in (a), (b) or (c) above, in each case, whether any of the transactions specified in (a), (b)
or (c) above is to be settled by delivery of H Shares or other securities of our Company
or in cash or otherwise (whether or not the settlement or delivery of such H Shares or
other securities will be completed within the First Six-Month Period);
(ii) until the expiry of the Second Six-Month Period, it/he/she will not enter into any of the
transactions specified in (a), (b) or (c) above or offer to or agree to or announce any
intention to enter into any such transaction if, immediately following such transaction,
it/he/she will cease, whether individually or collectively with the other Controlling
Shareholders, to be a controlling shareholder of our Company. In the event that it/he/she
enters into any of the transactions specified in (a), (b), (c) or (d) above or offers to or
agrees to or announces any intention to enter into any such transaction after the expiry
of the Second Six-Month Period, it/he/she will take all reasonable steps to ensure that it
will not create a disorderly or false market in the securities of our Company,
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provided that, subject to strict compliance with any requirements of applicable laws (including,
without limitation and for the avoidance of doubt, the requirements of the Stock Exchange or of
the SFC or of any other relevant authority), nothing in the undertakings above shall prevent any of
our Warranting Shareholders from (i) purchasing additional H Shares or other securities of our
Company and disposing of such additional H Shares or other securities of our Company, (ii) using
the H Shares or other securities of our Company or any interest therein beneficially owned by it as
security (including without limitation a charge or a pledge) 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.
Offer Size Adjustment Option
As part of the Global Offering, our Company has the Offer Size Adjustment Option under the
Hong Kong Underwriting Agreement, pursuant to which, our Company may issue and allot any
number of up to an aggregate of 5,040,000 H Shares, representing approximately 15% of the Offer
Shares initially offered under the Global Offering, at the Offer Price, to cover additional market
demand, if any. The Offer Size Adjustment Option may be exercised by our Company after
consultation with the Sole Overall Coordinator prior to the execution of the International
Underwriting Agreement and will expire upon execution of the International Underwriting
Agreement. These additional Offer Shares (the “ 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 following the application of the
reallocation arrangement described in “Structure of the Global Offering — The Hong Kong Public
Offering — Reallocation” below and the Sole Overall Coordinator shall allocate additional new 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.
Indemnity
We and our Warranting Shareholders have agreed to indemnify, among others, the Sole
Sponsor, the Sole Overall Coordinator, the Joint Global Coordinators, the Joint Bookrunners, the
Joint Lead Managers, the Hong Kong Underwriters and the Capital Market Intermediaries for
certain losses which they may suffer, including, among others, losses arising from the performance
of their obligations under the Hong Kong Underwriting Agreement and any breach by our
Company and our Warranting Shareholders of the Hong Kong Underwriting Agreement.
The International Offering
International Underwriting Agreement
In connection with the International Offering, it is expected that our Company and our
Warranting Shareholders will enter into the International Underwriting Agreement with the Sole
Sponsor, the Sole Overall Coordinator and the International Underwriters. Under the International
Underwriting Agreement, subject to the conditions set forth therein, the International Underwriters
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would severally and not jointly agree to purchase, or procure purchasers to purchase, the Offer
Shares being offered pursuant to the International Offering (subject to, among others, any
reallocation between the International Offering and the Hong Kong Public Offering). It is expected
that the International Underwriting Agreement may be terminated on similar grounds as the Hong
Kong Underwriting Agreement. Potential investors are reminded that in the event that the
International Underwriting Agreement is not entered into, or is terminated, the Global Offering
will not proceed.
It is expected that each of our Warranting Shareholders will undertake to the International
Underwriters not to dispose of, or enter into any agreement to dispose of, or otherwise create any
options, rights, interest or encumbrances in respect of any of the H Shares held by it in our
Company for a period similar to such undertakings given by them pursuant to the Hong Kong
Underwriting Agreement, which is described in “— Underwriting Arrangements and Expenses —
Undertakings pursuant to the Hong Kong Underwriting Agreement — (B) Undertakings by our
Warranting Shareholders” above.
Commission and Expenses
Our Company will pay an underwriting commission of 9.2% of the aggregate Offer Price of
all the Offer Shares (including H Shares to be issued if the Offer Size Adjustment Option is fully
exercised) (the “ Fixed Fees ”). Our Company may also in our sole and absolute discretion pay any
one or all of the Underwriters an additional incentive fee in aggregate of up to 1% of the
aggregate Offer Price for all of the Offer Shares (including H Shares to be issued if the Offer Size
Adjustment Option is fully exercised) (the “ Discretionary Fees ”). The ratio of the Fixed Fees and
Discretionary Fees payable is therefore approximately 90.2%:9.8% (on the basis that the
Discretionary Fees will be fully paid). For any unsubscribed Hong Kong Offer Shares reallocated
to the International Offering, we will pay an underwriting commission at the rate applicable to the
International Offering and such commission will be paid to the relevant International Underwriters
and not the Hong Kong Underwriters.
Assuming the Offer Size Adjustment Option are not exercised, based on the Offer Price of
HK$3.61 per H Share, the aggregate commissions and fees, together with Stock Exchange listing
fees, SFC transaction levy of 0.0027%, Stock Exchange trading fee of 0.00565%, AFRC
transaction levy of 0.00015%, legal and other professional fees and printing and all other expenses
payable by us relating to the Global Offering are currently estimated to amount in aggregate to
approximately HK$57.2 million.
INDEPENDENCE OF THE SOLE SPONSOR
The Sole Sponsor satisfies the independence criteria applicable to sponsor set out in Rule
3A.07 of the Listing Rules.
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UNDERWRITERS’ INTERESTS IN OUR COMPANY
Save for the obligations under the Hong Kong Underwriting Agreement and the International
Underwriting Agreement and as disclosed in this prospectus, as at the Latest Practicable Date,
none of the Underwriters has any shareholding or beneficial interests in any member of our Group
nor has any right or option (whether legally enforceable or not) to subscribe for or purchase or to
nominate persons to subscribe for or purchase securities in any member of our Group nor any
interest in the Global Offering.
Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of the H Shares as a result of fulfilling their
obligations under the Hong Kong Underwriting Agreement.
ACTIVITIES BY SYNDICATE MEMBERS
The underwriters of the Hong Kong Public Offering and the International Offering (together,
the “ Syndicate Members ”) and their affiliates may each individually undertake a variety of
activities (as further described below) which do not form part of the underwriting process.
The Syndicate Members and their 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
various business activities, the Syndicate Members 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. Such investment and trading activities may involve or
relate to assets, securities and/or instruments our Company and/or persons and entities with
relationships with our Company and may also include swaps and other financial instruments
entered into for hedging purposes in connection with our Group’s loans and other debt.
In relation to issues by Syndicate Members or their affiliates of any listed securities having
the H Shares as their underlying securities, whether on the Stock Exchange or on any other stock
exchange, the rules of the 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 the H Shares in most cases.
No stabilizing manager will be appointed, and it is anticipated that no stabilization activities
will be carried out in relation to 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.
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It should be noted that when engaging in any of these activities, the Syndicate Members will
be subject to certain restrictions, including the following:
(a) the Syndicate Members 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 Syndicate Members 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.
Certain of the Syndicate Members or their respective affiliates have provided from time to
time, and expect to provide in the future, investment banking and other services to our Company
and our affiliates for which such Syndicate Members or their respective affiliates have received or
will receive customary fees and commissions.
UNDERWRITING
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--- page 463 ---
THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part of the
Global Offering. The Global Offering comprises:
(a) the Hong Kong Public Offering of initially 3,360,000 H Shares (subject to reallocation
and the Offer Size Adjustment Option) in Hong Kong, as described in “— The Hong
Kong Public Offering” below; and
(b) the International Offering of initially 30,240,000 H Shares (subject to reallocation, the
Offer Size Adjustment Option) outside the United States in offshore transactions in
reliance on Regulation S, as described in “— The International Offering” below.
The 33,600,000 H Shares initially being offered in the Global Offering will represent 6.31%
of the total number of issued Shares immediately after completion of the Global Offering,
assuming that the Offer Size Adjustment Option is not exercised. The underwriting arrangements,
and the respective Underwriting Agreements, are summarized in “Underwriting” in this prospectus.
Investors may apply for Hong Kong Offer Shares under the Hong Kong Public Offering, or, if
qualified to do so, apply for or indicate an interest in International Offer Shares under the
International Offering, but may not do both.
References in this prospectus to applications, application monies or the procedure for
application relate solely to the Hong Kong Public Offering.
THE HONG KONG PUBLIC OFFERING
Number of Shares Initially Offered
We are initially offering 3,360,000 Hong Kong Offer Shares, representing 10% of the total
number of Offer Shares initially available under the Global Offering, at the Offer Price for
subscription by the public in Hong Kong. Subject to the reallocation of H Shares between (i) the
International Offering, and (ii) the Hong Kong Public Offering, the Hong Kong Offer Shares will
represent approximately 10% of the total number of Offer Shares initially available under the
Global Offering (assuming the Offer Size Adjustment 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.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 464 ---
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on a
several basis under the terms of the Hong Kong Underwriting Agreement. Completion of the Hong
Kong Public Offering is subject to the conditions as set out in “— Conditions of the Global
Offering” below.
Allocation
Allocation of the Offer 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. Such allocation 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 the Offer Shares initially available under the
Hong Kong Public Offering (after taking account of any reallocation in the number of Offer Shares
allocated between the Hong Kong Public Offering and the International Offering referred to below)
will be divided equally into two pools (with any odd lots being allocated to pool A): pool A and
pool B. Pool A will comprise 1,680,000 Hong Kong Offer Shares and pool B will comprise
1,680,000 Hong Kong Offer Shares initially. Both of which are available on an equitable basis to
successful applicants. All valid applications that have applied for Hong Kong Offer Shares with a
total price (excluding brokerage of 1.0%, SFC transaction levy of 0.0027%, Stock Exchange
trading fee of 0.00565% and AFRC transaction levy of 0.00015% payable) of HK$5 million or
below will fall into pool A. All valid applications that have applied for Hong Kong Offer Shares
with a total price (excluding brokerage of 1.0%, SFC transaction levy of 0.0027%, Stock Exchange
trading fee of 0.00565% and AFRC transaction levy of 0.00015% payable) of over HK$5 million
and up to the total value of pool B will fall into pool B.
For the purpose of this sub-section only, the “price” for Offer Shares means the price payable
on application therefor which is HK$3.61 per Offer Share.
Applicants should be aware that applications in Pool A and applications in Pool B may
receive different allocation ratios. If Hong Kong Offer Shares in one (but not both) of the two
pools are undersubscribed, the surplus Hong Kong Offer Shares will be transferred to the other
pool to satisfy demand in that other pool and be allocated accordingly.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 465 ---
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 1,680,000 Hong Kong Offer Shares (being approximately 50% of the 3,360,000
Offer Shares initially available under the Hong Kong Public Offering) will be rejected.
Reallocation
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation on the following basis:
(a) where the International Offer Shares are fully subscribed or oversubscribed and:
(i) if the Hong Kong Offer Shares are undersubscribed, the Sole Overall Coordinator
(for itself and on behalf of the Underwriters) has the authority (but not the
obligation) in its absolute discretion to reallocate all or any unsubscribed Hong
Kong Offer Shares to the International Offering, in such proportions as the Sole
Overall Coordinator deems appropriate to satisfy demand under the International
Offering;
(ii) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents less than 15 times the number of the Offer Shares initially
available for subscription under the Hong Kong Public Offering, then up to
3,360,000 Offer Shares may be reallocated to the Hong Kong Public Offering from
the International Offering in accordance with Chapter 4.14 of the Guide for New
Listing Applicants issued by the Stock Exchange, so that the number of the Offer
Shares available under the Hong Kong Public Offering will be increased to
6,720,000 Offer Shares, representing approximately 20% of the number of the
Offer Shares initially available under the Global Offering (before any exercise of
the Offer Size Adjustment Option);
(iii) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 15 times or more but less than 50 times the number of the
Offer Shares initially available for subscription under the Hong Kong Public
Offering, then 6,720,000 Offer Shares will 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 will be increased to
10,080,000 Offer Shares, representing approximately 30% of the number of the
Offer Shares initially available under the Global Offering (before any exercise of
the Offer Size Adjustment Option);
STRUCTURE OF THE GLOBAL OFFERING
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--- page 466 ---
(iv) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 50 times or more but less than 100 times the number of the
Offer Shares initially available for subscription under the Hong Kong Public
Offering, then 10,080,000 Offer Shares will be reallocated to the Hong Kong
Public Offering from the International Offering, so that the number of the Offer
Shares available under the Hong Kong Public Offering will be increased to
13,440,000 Offer Shares, representing approximately 40% of the number of the
Offer Shares initially available under the Global Offering (before any exercise of
the Offer Size Adjustment Option); and
(v) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 100 times or more the number of the Offer Shares initially
available for subscription under the Hong Kong Public Offering, then 13,440,000
Offer Shares will be reallocated to the Hong Kong Public Offering from the
International Offering, so that the number of the Offer Shares available under the
Hong Kong Public Offering will be increased to 16,800,000 Offer Shares,
representing approximately 50% of the number of the Offer Shares initially
available under the Global Offering (before any exercise of the Offer Size
Adjustment Option).
(b) where the International Offer Shares are undersubscribed and:
(i) if the Hong Kong Offer Shares are undersubscribed, the Global Offering will not
proceed unless fully underwritten by the Underwriters; and
(ii) if the Hong Kong Offer Shares are oversubscribed, irrespective of the number of
times the number of Offer Shares initially available for subscription under the
Hong Kong Public Offering, then up to 3,360,000 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 will be
increased to 6,720,000 Offer Shares, representing 20% of the number of the Offer
Shares initially available under the Global Offering (before any exercise of the
Offer Size Adjustment Option).
The Offer Shares to be offered in the Hong Kong Public Offering and the International
Offering may, in certain circumstances, be reallocated as between these offerings at the sole and
absolute discretion of the Sole Overall Coordinator. If either the Hong Kong Public Offering or the
International Offering is not fully subscribed for, the Sole Overall Coordinator has the authority
STRUCTURE OF THE GLOBAL OFFERING
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--- page 467 ---
(but not the obligation) in its sole and absolute discretion to reallocate all or any unsubscribed
Offer Shares from such offering to the other, in such proportion as the Sole Overall Coordinator
deems appropriate.
In addition to any mandatory reallocation required as described above, the Sole Overall
Coordinator (for itself and on behalf of the Underwriters) may reallocate the Offer Shares from the
International Offering to the Hong Kong Public Offering. In accordance with Chapter 4.14 of the
Guide for New Listing Applicants issued by the Stock Exchange, if such reallocation is done other
than pursuant to Practice Note 18 of the Listing Rules, the maximum total number of Offer Shares
that may be reallocated to the Hong Kong Public Offering following such reallocation shall be not
more than double the initial allocation to the Hong Kong Public Offering (i.e. 3,360,000 Offer
Shares).
In the event of a reallocation of the Offer Shares from the International Offering to the Hong
Kong Public Offering in the circumstances under paragraphs (a)(ii), (a)(iii), (a)(iv), (a)(v) or (b)(ii)
above, the number of Offer Shares allocated to the International Offering will be correspondingly
reduced.
Applications
The Sole Overall Coordinator (for itself and on behalf of the Underwriters) may require any
investor who has been offered H Shares under the International Offering, and who has made an
application under the Hong Kong Public Offering, to provide sufficient information to the Sole
Overall Coordinator so as to allow it to identify the relevant applications under the Hong Kong
Public Offering and to ensure that it is excluded from any application for H Shares under the Hong
Kong Public Offering.
Each applicant under the Hong Kong Public Offering will also be required to give an
undertaking and confirmation in the application submitted by him/her/it that he/she/it and any
person(s) for whose benefit he/she/it is making the application has not applied for or taken up, or
indicated an interest in, and will not apply for or take up, or indicate an interest in, any
International Offer Shares under the International Offering, and such applicant’s application is
liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the
case may be) or it has been or will be placed or allocated International Offer Shares under the
International Offering.
Applicants under the Hong Kong Public Offering may be required to pay, on application
(subject to application channels), the price of HK$3.61 per Offer Share in addition to the
brokerage, SFC transaction levy, Stock Exchange trading fee and AFRC transaction levy payable
on each Offer Share. Further details are set out in “How to Apply for Hong Kong Offer Shares.”
STRUCTURE OF THE GLOBAL OFFERING
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--- page 468 ---
References in this prospectus to applications, application monies or the procedure for
application relate solely to the Hong Kong Public Offering.
THE INTERNATIONAL OFFERING
Number of Offer Shares Offered
Subject to the reallocation as described above, the number of Offer Shares to be initially
offered under the International Offering will be 30,240,000, representing 90% of the total number
of Offer Shares initially available under the Global Offering. The International Offering is
expected to be fully underwritten by the International Underwriters subject to the terms and
conditions of the International Underwriting Agreement, and is subject to the Hong Kong Public
Offering becoming unconditional.
Allocation
The International Offering will include selective marketing of Offer Shares to institutional
and professional investors and other investors anticipated to have a sizeable demand for such Offer
Shares in Hong Kong and other jurisdictions outside the United States in offshore transactions 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 which regularly invest in shares and other securities. The International
Offering is subject to the Hong Kong Public Offering being unconditional.
Allocation of Offer Shares pursuant to the International Offering will be effected in
accordance with the “book-building” process described in “— Pricing and Allocation” below 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 the relevant investor is likely hold or sell, H Shares, after the Listing. Such allocation is
intended to result in a distribution of the H Shares on a basis which would lead to the
establishment of a solid shareholder base to the benefit of our Company and our Shareholders as a
whole.
The Sole Overall Coordinator (for itself and on behalf of the Underwriters) may require any
investor who has been offered Offer Shares under the International Offering and who has made an
application under the Hong Kong Public Offering, to provide sufficient information to the Sole
Overall Coordinator (for itself and on behalf of the Underwriters) so as to allow them to identify
the relevant applications under the Hong Kong Public Offering and to ensure that they are
excluded from any application of Offer Shares under the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 469 ---
Reallocation
The total number of Offer Shares to be issued pursuant to the International Offering may
change as a result of the reallocation arrangement described in “— The Hong Kong Public
Offering — Reallocation” above, the exercise of the Offer Size Adjustment Option and any
reallocation of unsubscribed Offer Shares originally included in the Hong Kong Public Offering.
OFFER SIZE ADJUSTMENT OPTION
In connection with the Global Offering, our Company has the Offer Size Adjustment Option
under the Hong Kong Underwriting Agreement. 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, if any. The Offer Size Adjustment Option may be exercised by
our Company after consultation with the Sole Overall Coordinator and the Sole Sponsor on or
before November 6, 2024 and will expire upon execution of the International Underwriting
Agreement.
Under the Offer Size Adjustment Option, our Company may issue any number of Shares up to
an aggregate of 5,040,000 additional H Shares at the Offer Price. 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 following
the application of the clawback arrangement described in subsection headed “— The Hong Kong
Public Offering — Reallocation” above and the Sole Overall Coordinator 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.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 470 ---
If the Offer Size Adjustment Option is exercised in full, the Offer Size Adjustment Option
Shares to be issued pursuant thereto will represent approximately 0.9% of the total issued share
capital immediately following the completion of the Global Offering. The dilution effect of the
Offer Size Adjustment Option is set out below:
Number of Shares issued
under the Global Offering
before the exercise of the
Offer Size Adjustment
Option (“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 Shares issued
under the Global Offering
after the exercise of the
Offer Size Adjustment
Option
Approximate percentage
of total issued share
capital held by the
Original Subscribers after
the exercise of the Offer
Size Adjustment Option
33,600,000 6.3% 38,640,000 6.3%
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 Stabilization) Rules (Chapter
571W of the Laws of Hong Kong).
Our Company will disclose in its allotment results announcement if and to what extent the
Offer Size Adjustment Option has been exercised, or will confirm that if the Offer Size Adjustment
Option has not been exercised by the date of the International Underwriting Agreement, it will
lapse and cannot be exercised at any future date.
PRICING AND ALLOCATION
The International Underwriters will be soliciting from prospective investors’ indications of
interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of 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, and to cease on or
around, the last day for lodging applications under the Hong Kong Public Offering.
The Offer Price will be HK$3.61 per H Share, unless otherwise announced. Applicants under
the Hong Kong Public Offering must pay, on application (subject to application channels), the
Offer Price of HK$3.61 per H Share, plus 1.0% brokerage, 0.0027% SFC transaction levy, AFRC
transaction levy of 0.00015% and 0.00565% Stock Exchange trading fee.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 471 ---
Reduction in Offer Price and/or Number of Offer Shares
The Sole Overall Coordinator (for itself and on behalf of the other Underwriters) may, where
considered appropriate, based on the level of interest expressed by prospective professional and
institutional investors during the book-building process, and with the consent of our Company,
reduce the number of Offer Shares and/or the Offer Price as stated in this prospectus at any time
on or prior to the morning of the last day for lodging applications under the Hong Kong Public
Offering. In such case, we will, as soon as practicable following the decision to make such
reduction, and in any event not later than the morning of the day which is the last day for lodging
applications under the Hong Kong Public Offering, cause to be announced on the website of our
Company at www.apt-hk.com
and the website of the Stock Exchange at www.hkexnews.hk ,
notices of the reduction, and the cancellation of the Global Offering and relaunch of the offer at
the revised number of Offer Shares and/or the revised Offer Price.
As soon as practicable after such reduction of the number of Offer Shares and/or the Offer
Price, we will also issue a supplemental prospectus or a new prospectus updating investors of the
change in the number of Offer Shares being offered under the Global Offering and/or the Offer
Price, and giving investors at least three business days to consider the new information. The
supplemental or new prospectus should include at least the following: updated (i) Offer Price and
market capitalization; (ii) listing timetable and underwriting obligations; (iii) price/earning
multiple, unaudited pro forma and adjusted net tangible assets; and (iv) use of proceeds and
working capital adequacy confirmation based on the revised proceeds.
Before submitting applications for the Hong Kong Offer Shares, applicants should have
regard to the possibility that any announcement of a reduction in the number of Offer Shares
and/or the Offer Price may not be made until the day which is the last day for lodging applications
under the Hong Kong Public Offering, which is Tuesday, November 5, 2024. In the absence of any
such supplemental or new prospectus so published, the number of Offer Shares and/or the Offer
Price will not be reduced.
If there is any change to the offer size due to change in the number of Offer Shares offered in
the Global Offering (other than pursuant to the reallocation mechanism as disclosed in this
prospectus), or change to the Offer Price, or if the Company becomes aware that there has been a
significant change affecting any matter contained in this prospectus or a significant new matter has
arisen, the inclusion of information in respect of which would have been required to be in this
prospectus if it had arisen before this prospectus was issued, after the issue of this prospectus and
before the commencement of dealings in our Offer Shares as prescribed under Rule 11.13 of the
Listing Rules, our Company is required to cancel the Global Offering and issue a supplemental
prospectus or a new prospectus and subsequently relaunched on FINI pursuant to the supplemental
prospectus.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 472 ---
In the event of a reduction in the number of Offer Shares, the Sole Overall Coordinator (for
itself and on behalf of the Underwriters) may, at its discretion, reallocate the number of Offer
Shares to be offered in the Hong Kong Public Offering and the International Offering, provided
that the number of Offer Shares comprised in the Hong Kong Public Offering shall not be less than
10% of the total number of Offer Shares available under the Global Offering. The Offer Shares to
be offered in the Hong Kong Public Offering and the Offer Shares to be offered in the
International Offering may, in certain circumstances, be reallocated between these offerings at the
discretion of the Sole Overall Coordinator (for itself and on behalf of the Underwriters).
Announcement of Basis of Allocations
The results of indications of interest in the International Offering, the results of applications
in the Hong Kong Public Offering, the basis of allocations of the Hong Kong Offer Shares and the
results of allocations are expected to be announced on Thursday, November 7, 2024 on the website
of our Company at www.apt-hk.com
and the website of the Stock Exchange at
www.hkexnews.hk .
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under
the terms of the Hong Kong Underwriting Agreement and is conditional upon the International
Underwriting Agreement being signed and becoming unconditional.
We expect to enter into the International Underwriting Agreement relating to the International
Offering on or around the date of the International Underwriting Agreement.
These underwriting arrangements under the Hong Kong Underwriting Agreement and the
International Underwriting Agreement are summarized in “Underwriting” in this prospectus.
CONDITIONS OF THE GLOBAL OFFERING
Acceptances of all applications for Offer Shares pursuant to the Global Offering will be
conditional on, among others:
(a) the Stock Exchange granting approval for the listing of, and permission to deal in, the H
Shares in issue and the H Shares to be issued pursuant to the (i) Global Offering, and
(ii) the exercise of the Offer Size Adjustment Option, and such approval not
subsequently having been revoked prior to the commencement of dealings in the H
Shares on the Stock Exchange;
STRUCTURE OF THE GLOBAL OFFERING
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--- page 473 ---
(b) the execution and delivery of the International Underwriting Agreement on or around
November 6, 2024; and
(c) the obligations of the Underwriters under the respective Underwriting Agreements
becoming and remaining unconditional and not having been terminated in accordance
with the terms of the respective agreements,
in each case on or before the dates and times specified in the respective Underwriting Agreements
(unless and to the extent such conditions are validly waived on or before such dates and times)
and, in any event, not later than the date which is 30 days after the date of this prospectus.
The consummation of each of the Hong Kong Public Offering and the International Offering
is conditional upon, among other things, the other offering becoming unconditional and not having
been terminated in accordance with their respective terms.
If the above conditions are not fulfilled or waived prior to the times and dates specified, the
Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of the
lapse of the Hong Kong Public Offering will be published by our Company on the website of the
Stock Exchange at www.hkexnews.hk
and the website of our Company at www.apt-hk.com on the
next Business Day following such lapse. In such eventuality, all application monies will be
returned, without interest, on the terms set out in “How to Apply for Hong Kong Offer Shares —
D. Dispatch/Collection of H Share Certificates and Refund of Application Monies.” In the
meantime, all application monies will be held in separate bank account(s) with the receiving
bankers or other bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the
Laws of Hong Kong) (as amended).
H Share certificates will only become valid evidence of title at 8:00 a.m. on the Listing Date
provided that (i) the Global Offering has become unconditional in all respects, and (ii) the right of
termination as described in “Underwriting — Underwriting Arrangements and Expenses — Hong
Kong Public Offering — Grounds for Termination” has not been exercised.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the listing of, and permission to deal in, the H
Shares in issue and to be issued by us pursuant to the Global Offering (including the H Shares
which may be allotted and issued pursuant to the exercise of the Offer Size Adjustment Option).
No part of our Company’s share or loan capital is listed on or dealt in on any other stock
exchange and no such listing or permission to deal is being or proposed to be sought in the near
future.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 474 ---
SHARES WILL BE ELIGIBLE FOR CCASS
Subject to the granting of the listing of, and permission to deal in, the H Shares on the Stock
Exchange and 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 Stock Exchange or any
other date HKSCC chooses. Settlement of transactions between participants of the Stock Exchange
(as defined in the Listing Rules) 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 advisors for details of the settlement arrangements as such
arrangements may affect their rights and interests.
All necessary arrangements have been made enabling our H Shares to be admitted into
CCASS.
DEALING ARRANGEMENTS
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m.
in Hong Kong on Friday, November 8, 2024, it is expected that dealings in the H Shares on the
Stock Exchange will commence at 9:00 a.m. on Friday, November 8, 2024. The H Shares will be
traded in board lots of 1,000 H Shares. The stock code of the H Shares will be 2551.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 475 ---
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 Stock Exchange at
www.hkexnews.hk under the “HKEXnews > New Listings > New Listing Information”
section, and our website at www.apt-hk.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.
A. APPLICATION FOR 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 for:
 are 18 years of age or older; and
 have a Hong Kong address (for the White Form eIPO service only).
Unless permitted by the Listing Rules or a waiver and/or consent has been granted by the
Stock Exchange to us, 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 Shareholder or close associates; or
 are a Director or a Supervisor, or any of his/her close associates.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 476 ---
2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Thursday, October 31,
2024 and end at 12:00 noon on Tuesday, November 5, 2024 (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 H Share
certificate. Hong Kong
Offer Shares successfully
applied for will be allotted
and issued in your own
name.
From 9:00 a.m. on
Thursday, October 31,
2024 to 11:30 a.m. on
Tuesday, November 5,
2024, Hong Kong time.
The latest time for
completing full payment
of application monies will
be 12:00 noon on Tuesday,
November 5, 2024, Hong
Kong time.
HKSCC EIPO channel . Your broker or custodian
who is a HKSCC
Participant will submit a
HKSCC EIPO application
on your behalf through
HKSCC’s FINI system in
accordance with your
instruction.
Investors who would not like
to receive a physical H
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 477 ---
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 White Form
eIPO 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 payment 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
White Form eIPO 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.
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--- page 478 ---
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
 Identity document’s issuing country or
jurisdiction
 Identity document type, with order of
priority:
i. HKID card; or
ii. National identification document; or
iii. Passport; and
 Identity document number
 Full name(s)
2 as shown on your identity
document
 Identity document’s issuing country or
jurisdiction
 Identity document type, with order of
priority:
i. LEI registration document; or
ii. Certificate of incorporation; or
iii. Business registration certificate; or
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. 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, 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.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 479 ---
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.
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 Sole Overall Coordinator, 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.
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--- page 480 ---
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size ............ : 1,000 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 Offer Price is HK$3.61 per H Share.
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 Offer Price,
brokerage, SFC transaction levy, the 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 Offer 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
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--- page 481 ---
APT Electronics Co., Ltd.
(HK$3.61 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES THAT MAY BE APPLIED FOR AND
PAYMENTS
No. of Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
HK$ HK$ HK$ HK$
1,000 3,646.41 20,000 72,928.14 100,000 364,640.69 800,000 2,917,125.48
2,000 7,292.81 25,000 91,160.18 150,000 546,961.02 900,000 3,281,766.16
3,000 10,939.22 30,000 109,392.20 200,000 729,281.36 1,000,000 3,646,406.86
4,000 14,585.63 35,000 127,624.24 250,000 911,601.71 1,100,000 4,011,047.54
5,000 18,232.04 40,000 145,856.28 300,000 1,093,922.05 1,200,000 4,375,688.22
6,000 21,878.43 45,000 164,088.31 350,000 1,276,242.40 1,300,000 4,740,328.90
7,000 25,524.85 50,000 182,320.34 400,000 1,458,562.75 1,400,000 5,104,969.59
8,000 29,171.25 60,000 218,784.41 450,000 1,640,883.08 1,500,000 5,469,610.28
9,000 32,817.67 70,000 255,248.48 500,000 1,823,203.43 1,680,000
(1) 6,125,963.51
10,000 36,464.06 80,000 291,712.55 600,000 2,187,844.11
15,000 54,696.10 90,000 328,176.62 700,000 2,552,484.80
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) or to the White Form eIPO Service Provider (for applications made through the application
channel of the White Form eIPO Service Provider) while the SFC transaction levy, the Stock Exchange trading fee
and the AFRC transaction levy will be paid to the SFC, the Stock Exchange and the AFRC, respectively.
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 “ — A. Application for Hong Kong Offer Shares
— 3. 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.
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--- page 482 ---
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 White Form eIPO service or HKSCC EIPO channel, you or the
person(s) for whose benefit you have made the application shall not apply further for any
International Offer Shares.
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):
(i) undertake to execute all relevant documents and instruct and authorize us and/or the
Sole Overall Coordinator, 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;
(ii) 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 (or as the case may be, the agreement you entered into with your broker or
custodian), and agree to be bound by them;
(iii) (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;
(iv) confirm that you are aware of the restrictions on the Global Offering set out in this
prospectus and they do not apply to you, or the person(s) for whose benefit you have
made the application;
(v) confirm that you have read this prospectus and any supplement to it and have relied
only 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;
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--- page 483 ---
(vi) agree that our Company, the Sole Sponsor, the Sole Overall Coordinator, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters,
the Capital Market Intermediaries, and any of their or our Company’s respective
directors, officers, employees, partners, agents, advisors, and representatives, and any
other parties involved in the Global Offering (collectively, the “ Relevant Persons ”), the
H Share Registrar and HKSCC will not be liable for any information and representations
not in this prospectus and any supplement to it;
(vii) 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, the H Share Registrar, HKSCC,
HKSCC Nominees, the 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 paragraphs headed “ — G. Personal Data — 3. Purposes ” and “ —G .
Personal Data — 4. Transfer of personal data ” in this section;
(viii) 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;
(ix) 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 “ —B .
Publication of Results ” in this section;
(x) confirm that you are aware of the situations specified in the paragraph headed “ —C .
Circumstances In Which You Will Not Be Allocated Hong Kong Offer Shares ” in this
section;
(xi) 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;
(xii) agree to comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Articles of Association and laws of any place
outside Hong Kong that apply to your application and that neither we nor the Relevant
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--- page 484 ---
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;
(xiii) confirm that (a) your application or HKSCC Nominees’ application on your behalf is not
financed directly or indirectly by our Company, any of the Directors, Supervisors, chief
executives, substantial Shareholder(s) or existing Shareholder(s) of our Company or any
of our subsidiaries or any of their respective close associates; and (b) you are not
accustomed or will not be accustomed to taking instructions from our Company, any of
the Directors, Supervisors, chief executives, substantial Shareholder(s) or existing
Shareholder(s) of our Company or any of our 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;
(xiv) warrant that the information you have provided is true and accurate;
(xv) confirm that you understand that we and the Sole Overall Coordinator will rely on your
declarations and representations in deciding whether or not to allocate any Hong Kong
Offer Shares to you and that you may be prosecuted for making a false declaration;
(xvi) agree to accept Hong Kong Offer Shares applied for or any lesser number allocated to
you under the application;
(xvii) 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;
(xviii) (if the application is made 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 indirectly or through the application channel of the White Form
eIPO Service Provider or by any one as your agent or by any other person; and
(xix) (if you are making the application as an agent for the benefit of another person) warrant
that (1) 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 electronic application instructions to HKSCC and the White Form eIPO
Service Provider and (2) you have due authority to give electronic application
instructions on behalf of that other person as its agent.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 485 ---
B. 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 the 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.
24 hours, from 11:00 p.m. on
Thursday, November 7, 2024 to
12:00 midnight Wednesday,
November 13, 2024 (Hong Kong
time).
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
).
The Stock Exchange’s website at
www.hkexnews.hk and our
website at www.apt-hk.com which
will provide links to the above
mentioned websites of the H Share
Registrar.
No later than 11:00 p.m. on
Thursday, November 7, 2024
(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 Friday, November 8, 2024 to
Wednesday, November 13, 2024
(excluding Saturdays, Sundays and
public holidays in Hong Kong).
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--- page 486 ---
For those applying through HKSCC EIPO channel, you may also check with your broker or
custodian from 6:00 p.m. on Wednesday, November 6, 2024 (Hong Kong time). HKSCC
Participants can log into FINI and review the allotment result from 6:00 p.m. on Wednesday,
November 6, 2024 (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 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 Stock Exchange’s website at www.hkexnews.hk
and our website at
www.apt-hk.com by no later than 11:00 p.m. on Thursday, November 7, 2024 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
You should note the following situations in which Hong Kong Offer Shares will not 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 our discretion to reject your application:
We, the Sole Overall Coordinator, the H Share Registrar and 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 Stock Exchange does not grant
permission to list the H 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 Stock Exchange notifies us of that
longer period within three weeks of the closing date of the application lists.
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--- page 487 ---
4. If:
 you make multiple applications or suspected multiple applications. You may refer to the
paragraph headed “ — A. Application for Hong Kong Offer Shares — 5. Multiple
Applications Prohibited ” in this section on what constitutes multiple applications;
 your application instruction is incomplete;
 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;
 we or the Sole Overall Coordinator believe that by accepting your application, it or we
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 H 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.
D. DISPATCH/COLLECTION OF H SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
You will receive one H Share certificate for all Hong Kong Offer Shares allotted to you under
the Hong Kong Public Offering (except pursuant to applications made through the HKSCC EIPO
channel where the H Share certificates will be deposited into CCASS as described below).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 488 ---
No temporary document of title will be issued in respect of the H Shares. No receipt will be
issued for sums paid on application.
H Share certificates will only become valid evidence of title at 8:00 a.m. on the Listing Date,
provided that the Global Offering has become unconditional and the right of termination described
in the section headed “Underwriting — Underwriting Arrangements and Expenses — Hong Kong
Public Offering — Grounds for Termination” has not been exercised. Investors who trade the H
Shares prior to the receipt of H Share certificates or prior to 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
Dispatch/collection of H Share certificate 1 .........................................
For physical H
Share
certificates of
1,000,000 or
more Offer
Shares issued
under your
own name ....
Collection in person at the H Share
Registrar, Computershare Hong
Kong Investor Services Limited, at
Shops 1712-1716, 17th Floor,
Hopewell Centre, 183 Queen’s
Road East, Wanchai, Hong Kong.
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.
Time: from 9:00 a.m. to 1:00 p.m.
on Friday, November 8, 2024
(Hong Kong time).
No action by you is required.
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.
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--- page 489 ---
White Form eIPO service HKSCC EIPO channel
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.
For physical H
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.
Date: Thursday, November 7, 2024.
Refund mechanism for surplus application monies paid by you .........................
Date ........... Friday, November 8, 2024. 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 ..
White Form e-Refund payment
instructions to your designated
bank account.
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.
1. Except in the event of a tropical cyclone warning signal number 8 or above, a black rainstorm warning and/or
Extreme Conditions in the morning on Thursday, November 7, 2024 rendering it impossible for the relevant H
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 H Share certificates in accordance with the contingency
arrangements as agreed between them. You may refer to “— E. Bad Weather Arrangements” in this section.
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--- page 490 ---
E. BAD WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Tuesday, November 5, 2024 if, there is/are:
 a tropical cyclone warning signal number 8 or above;
 a black rainstorm warning; and/or
 Extreme Conditions,
(collectively, “ Bad Weather Signals ”),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, November 5,
2024.
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 Bad Weather Signals 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 Stock Exchange’s website at www.hkexnews.hk
and our website at
www.apt-hk.com of the revised timetable.
If a Bad Weather Signal is hoisted on Thursday, November 7, 2024, 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 Friday, November 8,
2024.
If a Bad Weather Signal is hoisted on Thursday, November 7, 2024, the despatch of physical
H Share certificates of less than 1,000,000 Offer Shares issued under your own name will be made
by ordinary post when the post office re-opens after the Bad Weather Signal is lowered or canceled
(e.g. in the afternoon of Thursday, November 7, 2024 or on Friday, November 8, 2024).
If a Bad Weather Signal is hoisted on Friday, November 8, 2024, physical H Share
certificates of 1,000,000 Offer Shares or more issued under your own name are available for
collection in person at the H Share Registrar’s Office after the Bad Weather Signal is lowered or
canceled (e.g. in the afternoon of Friday, November 8, 2024 or on Monday, November 11, 2024).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 491 ---
Prospective investors should be aware that if they choose to receive physical H Share
certificates issued in their own name, there may be a delay in receiving the H Share
certificates.
F. ADMISSION OF THE H SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the H Shares on the
Stock Exchange and we comply 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 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.
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.
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by our Company, the H Share Registrar, the receiving bank and the Relevant
Persons 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.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs the applicant for, and holder of,
Hong Kong Offer Shares, of the policies and practices of our Company and the H Share Registrar
in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of
Hong Kong).
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 480 –


--- page 492 ---
2. 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 our Company or its 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 Hong Kong Offer Shares being rejected, or in the delay or the inability of our
Company 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 dispatch of H Share certificate(s) to which you are entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform our
Company and the H Share Registrar immediately of any inaccuracies in the personal data supplied.
3. 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;
 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 the H
Shares including, where applicable, HKSCC Nominees;
 maintaining or updating the register of members of our Company;
 verifying identities of applicants for and holders of the H Shares and identifying any
duplicate applications for the H Shares;
 facilitating Hong Kong Offer Shares balloting;
 establishing benefit entitlements of holders of the H Shares, such as dividends, rights
issues, bonus issues, etc.;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 481 –


--- page 493 ---
 distributing communications from our Company and our subsidiaries;
 compiling statistical information and profiles of the holder of the 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 our
Company and the H Share Registrar to discharge their obligations to applicants and
holders of the H Shares and/or regulators and/or any other purposes to which applicants
and holders of the H Shares may from time to time agree.
4. Transfer of personal data
Personal data held by our Company and the H Share Registrar relating to the applicants for
and holders of Hong Kong Offer Shares will be kept confidential but our Company 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 Company’s appointed agents such as financial advisors, receiving bank 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, in each case 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);
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to our Company or the H
Share Registrar in connection with their respective business operation;
 the 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
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 brokers etc.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 482 –


--- page 494 ---
5. Retention of personal data
Our Company 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).
6. Access to and correction of personal data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether
our Company or the H Share Registrar hold their personal data, to obtain a copy of that data, and
to correct any data that is inaccurate. Our Company 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 our Company and the H Share Registrar, at their
registered address disclosed in the section headed “Corporate information” in this prospectus or as
notified from time to time, for the attention of our joint company secretaries, or the H Share
Registrar for the attention of the privacy compliance officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 483 –


--- page 495 ---
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong
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ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF APT ELECTRONICS CO., LTD. AND CITIC SECURITIES (HONG
KONG) LIMITED
Introduction
We report on the historical financial information of APT Electronics Co., Ltd. (the
“Company ”) and its subsidiaries (together, the “ Group ”) set out on pages IA-4 to IA-120, which
comprises the consolidated statements of profit or loss and other comprehensive income,
statements of changes in equity and statements of cash flows of the Group for each of the years
ended 31 December 2021, 2022 and 2023 and five months ended 31 May 2024 (the “ Relevant
Periods ”), and the consolidated statements of financial position of the Group and the statements of
financial position of the Company as at 31 December 2021, 2022 and 2023 and 31 May 2024, and
material accounting policy information and other explanatory information (together, the
“Historical Financial Information ”). The Historical Financial Information set out on pages IA-4
to IA-120 forms an integral part of this report, which has been prepared for inclusion in the
prospectus of the Company dated 31 October 2024 (the “ Prospectus ”) in connection with the
initial listing of the shares of the Company on the Main Board of The Stock Exchange of Hong
Kong Limited (the “ Stock Exchange ”).
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of the Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation set out in
note 2.1 to the Historical Financial Information, and for such internal control as the directors
determine is necessary to enable the preparation of the Historical Financial Information that is free
from material misstatement, whether due to fraud or error.
Reporting accountants’ 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.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-1 –


--- page 496 ---
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 accountants’ judgement, 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 accountants consider internal control relevant to the entity’s preparation of the
Historical Financial Information that gives a true and fair view in accordance with the basis of
preparation set out in note 2.1 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
accountants’ report, a true and fair view of the financial position of the Group and the Company as
at 31 December 2021, 2022 and 2023 and 31 May 2024 and of the financial performance and cash
flows of the Group for each of the Relevant Periods in accordance with the basis of preparation set
out in note 2.1 to the Historical Financial Information.
Review of interim comparative financial information
We have reviewed the interim comparative financial information of the Group which
comprises the consolidated statement of profit or loss and other comprehensive income, statement
of changes in equity and statement of cash flows for the five months ended 31 May 2023 and other
explanatory information (the “ Interim Comparative Financial Information ”). The directors of
the Company are responsible for the preparation and presentation of the Interim Comparative
Financial Information in accordance with the basis of preparation set out in notes 2.1 to the
Historical Financial Information. Our responsibility is to express a conclusion on the Interim
Comparative Financial Information based on our 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 issued by the HKICPA. A review 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 significant matters that might be
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-2 –


--- page 497 ---
identified in an audit. Accordingly, we do not express an audit opinion. Based on our review,
nothing has come to our attention that causes us to believe that the Interim Comparative Financial
Information, for the purposes of the accountants’ report, is not prepared, in all material respects, in
accordance with the basis of preparation set out in notes 2.1 to the Historical Financial
Information.
REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OF
SECURITIES ON THE STOCK EXCHANGE 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 IA-4 have been made.
Dividends
We refer to note 11 to the Historical Financial Information which states that no dividends
have been paid by the Company in respect of the Relevant Periods.
Certified Public Accountants
Hong Kong
31 October 2024
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-3 –


--- page 498 ---
I HISTORICAL FINANCIAL INFORMATION
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountants’ report.
The financial statements of the Group for the Relevant Periods, on which the Historical
Financial Information is based, were audited by Ernst & Young in accordance with Hong Kong
Standards on Auditing (“ HKSAs ”) issued by the 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 IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-4 –


--- page 499 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Y ear ended 31 December
Five months ended
31 May
2021 2022 2023 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
REVENUE ..................... 5 1,388,380 1,410,632 1,858,032 624,617 843,193
Cost of sales ................... (1,160,102) (1,175,447) (1,519,021) (520,307) (688,947)
Gross profit .................... 228,278 235,185 339,011 104,310 154,246
Other income and gains ............. 5 58,425 25,063 26,267 10,303 8,755
Selling and marketing expenses ........ (20,842) (30,018) (45,188) (16,378) (20,427)
Administrative expenses ............. (78,510) (100,341) (119,431) (39,869) (60,288)
Research and development costs ........ (62,020) (88,749) (87,225) (36,347) (37,632)
Other expenses .................. (8,213) (23,992) (36,835) (16,553) (8,680)
Finance costs ................... 7 (2,817) (6,445) (4,838) (2,188) (1,272)
Share of loss of an associate .......... (23,279) ————
PROFIT BEFORE TAX ............. 6 91,022 10,703 71,761 3,278 34,702
Income tax (expense)/credit .......... 10 (13,022) 28,368 282 4,285 (2,529)
PROFIT FOR THE YEAR/PERIOD ..... 78,000 39,071 72,043 7,563 32,173
Attributable to:
Owners of the parent .............. 85,896 40,791 66,378 14,146 32,173
Non-controlling interests ............ (7,896) (1,720) 5,665 (6,583) —
78,000 39,071 72,043 7,563 32,173
EARNING PER SHARE ATTRIBUTABLE
TO ORDINARY EQUITY HOLDERS OF
THE PARENT
Basic and diluted (RMB) ............ 12 0.21 0.10 0.16 0.03 0.06
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-5 –


--- page 500 ---
Y ear ended 31 December
Five months ended
31 May
2021 2022 2023 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
OTHER COMPREHENSIVE
(LOSS)/INCOME
Other comprehensive income that may be
reclassified to profit or loss in subsequent
periods:
Financial assets at fair value through other
comprehensive income:
Changes in fair value .............. (22) 74 62 16 (35)
Income tax effect ................. 3 (7) (12) (4) 6
(19) 67 50 12 (29)
Exchange differences on translation of
foreign operations ............... (33) 387 1 22 2
Net other comprehensive (loss)/income that
may be reclassified to profit or loss in
subsequent periods .............. (52) 454 51 34 (27)
OTHER COMPREHENSIVE
(LOSS)/INCOME FOR THE
YEAR/PERIOD, NET OF TAX ....... (52) 454 51 34 (27)
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR/PERIOD ............. 77,948 39,525 72,094 7,597 32,146
Attributable to:
Owners of the parent .............. 85,844 41,245 66,429 14,180 32,146
Non-controlling interests ............ (7,896) (1,720) 5,665 (6,583) —
77,948 39,525 72,094 7,597 32,146
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-6 –


--- page 501 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 31 December
As at
31 May
2021 2022 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Property, plant and equipment .... 13 816,861 844,946 877,052 871,982
Right-of-use assets ............. 14 80,983 79,961 77,312 76,208
Goodwill .................... 15 13,523 13,523 13,523 13,523
Other intangible assets .......... 16 39,362 33,457 26,770 25,626
Deferred tax assets ............. 17 9,021 37,722 37,038 37,941
Other non-current assets ......... 20 6,562 5,307 181 4,638
Total non-current assets ......... 966,312 1,014,916 1,031,876 1,029,918
CURRENT ASSETS
Inventories ................... 18 188,028 211,579 216,026 250,736
Trade and bills receivables ....... 19 508,985 583,171 669,459 747,607
Contract assets ................ 3,685 4,246 5,445 6,144
Prepayments, deposits and other
receivables ................. 20 37,457 11,525 12,953 13,947
Financial assets at fair value
through profit or loss ......... 21 111,341 98,299 187,479 116,859
Pledged deposits .............. 22 67,270 45,702 67,041 64,291
Cash and cash equivalents ....... 22 96,778 108,231 209,878 280,085
Total current assets ............ 1,013,544 1,062,753 1,368,281 1,479,669
CURRENT LIABILITIES
Trade and bills payables ......... 23 479,888 507,302 794,203 865,161
Other payables and accruals ...... 24 416,857 456,554 462,732 440,854
Tax payable .................. — — — 1,215
Contract liabilities ............. 25 7,802 13,636 13,995 13,661
Interest-bearing bank borrowings .. 27 15,181 25,147 29,481 454
Lease liabilities ............... 14 — 271 287 293
Total current liabilities .......... 919,728 1,002,910 1,300,698 1,321,638
NET CURRENT ASSETS ....... 93,816 59,843 67,583 158,031
TOTAL ASSETS LESS CURRENT
LIABILITIES ............... 1,060,128 1,074,759 1,099,459 1,187,949
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-7 –


--- page 502 ---
As at 31 December
As at
31 May
2021 2022 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT LIABILITIES
Interest-bearing bank borrowings .. 27 135,000 105,000 50,472 62,110
Lease liabilities ............... 14 — 909 623 637
Deferred income .............. 26 6,976 9,109 14,296 13,139
Deferred tax liabilities .......... 17 8,293 8,659 7,705 7,282
Total non-current liabilities ...... 150,269 123,677 73,096 83,168
Net assets .................... 909,859 951,082 1,026,363 1,104,781
EQUITY
Equity attributable to owners of
the parent
Share capital ................. 28 411,495 411,495 480,078 498,507
Other reserves ................ 30 436,078 479,021 546,285 606,274
Non-controlling interests ........ 62,286 60,566 — —
Total equity .................. 909,859 951,082 1,026,363 1,104,781
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-8 –


--- page 503 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Y ear ended 31 December 2021
Attributable to owners of the parent
Share
capital
Capital
reserve *
Share-based
payment
reserve *
Foreign
currency
translation
reserve *
Fair value
reserve of
financial
assets at
fair value
through
other
comprehensive
income *
Statutory
reserve *
Retained
profits * Total
Non-controlling
interests Total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(note 28) (note 30) (note 29) (note 30) (note 30)
At 1 January 2021 .......... 411,495 194,844 2,433 (196) (127) 13,461 138,150 760,060 — 760,060
Profit for the year .......... —————— 85,896 85,896 (7,896) 78,000
Other comprehensive loss for the year:
Exchange differences on translation of
foreign operations ......... — — — (33) — — — (33) — (33)
Changes in fair value of financial
assets at fair value through other
comprehensive income, net of tax .. ———— (19) — — (19) — (19)
Total comprehensive income for
the year .............. — — — (33) (19) — 85,896 85,844 (7,896) 77,948
Share-based payments (note 29) .... — — 1,669 ———— 1,669 — 1,669
Non-controlling interests on acquisition
of a subsidiary ........... ———————— 70,182 70,182
Profit appropriations to statutory
reserve .............. ————— 9,084 (9,084) — — —
At 31 December 2021 ........ 411,495 194,844 4,102 (229) (146) 22,545 214,962 847,573 62,286 909,859
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-9 –


--- page 504 ---
Y ear ended 31 December 2022
Attributable to owners of the parent
Share
capital
Capital
reserve *
Share-based
payment
reserve *
Foreign
currency
translation
reserve *
Fair value
reserve of
financial
assets at
fair value
through
other
comprehensive
income *
Statutory
reserve *
Retained
profits * Total
Non-controlling
interests Total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(note 28) (note 30) (note 29) (note 30) (note 30)
At 1 January 2022 .......... 411,495 194,844 4,102 (229) (146) 22,545 214,962 847,573 62,286 909,859
Profit for the year .......... —————— 40,791 40,791 (1,720) 39,071
Other comprehensive income for
the year:
Exchange differences on translation of
foreign operations ......... — — — 387 — — — 387 — 387
Changes in fair value of financial
assets at fair value through other
comprehensive income, net of tax .. ————6 7——6 7—6 7
Total comprehensive income
for the year ............ — — — 387 67 — 40,791 41,245 (1,720) 39,525
Share-based payments (note 29) .... — — 1,698 ———— 1,698 — 1,698
Profit appropriations to statutory
reserve .............. ————— 3,808 (3,808) — — —
At 31 December 2022 ........ 411,495 194,844 5,800 158 (79) 26,353 251,945 890,516 60,566 951,082
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-10 –


--- page 505 ---
Y ear ended 31 December 2023
Attributable to owners of the parent
Share
capital
Capital
reserve *
Share-based
payment
reserve *
Foreign
currency
translation
reserve *
Fair value
reserve of
financial
assets at fair
value through
other
comprehensive
income *
Special
reserve –
safety
fund*
Statutory
reserve *
Retained
profits * Total
Non-controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(note 28) (note 30) (note 29) (note 30) (note 30) (note 30)
At 1 January 2023 ....... 411,495 194,844 5,800 158 (79) — 26,353 251,945 890,516 60,566 951,082
Profit for the year ....... ———— ——— 66,378 66,378 5,665 72,043
Other comprehensive income for
the year:
Exchange differences on
translation of foreign
operations .......... ——— 1 ———— 1— 1
Changes in fair value of
financial assets at fair value
through other comprehensive
income, net of tax ...... ———— 5 0———5 0—5 0
Total comprehensive income for
the year ........... — — — 1 50 — — 66,378 66,429 5,665 72,094
Share-based payments (note 29) . — — 3,187 — ———— 3,187 — 3,187
Profit appropriations to statutory
reserve ........... ———— —— 3,057 (3,057) — — —
Safety fund (note 30) ...... ———— — 7,011 — (7,011) — — —
Acquisition of non-controlling
interests ........... 68,583 (2,352) — — ———— 66,231 (66,231) —
At 31 December 2023 ..... 480,078 192,492 8,987 159 (29) 7,011 29,410 308,255 1,026,363 — 1,026,363
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-11 –


--- page 506 ---
Five months ended 31 May 2023 (unaudited)
Attributable to owners of the parent
Share
capital
Capital
reserve
Share-based
payment
reserve
Foreign
currency
translation
reserve
Fair value
reserve of
financial
assets at fair
value through
other
comprehensive
income
Special
reserve —
safety
fund
Statutory
reserve
Retained
profits Total
Non-controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(note 28) (note 30) (note 29) (note 30) (note 30) (note 30)
At 1 January 2023 ........ 411,495 194,844 5,800 158 (79) — 26,353 251,945 890,516 60,566 951,082
Profit for the period (unaudited) .. ———— ——— 14,146 14,146 (6,583) 7,563
Other comprehensive income for
the period:
Exchange differences on translation
of foreign operations
(unaudited) .......... ———2 2 ————2 2—2 2
Changes in fair value of financial
assets at fair value through other
comprehensive income, net of
tax (unaudited) ......... ———— 1 2———1 2—1 2
Total comprehensive income for
the period (unaudited) ..... — — — 22 12 — — 14,146 14,180 (6,583) 7,597
Share-based payments (note 29)
(unaudited) .......... —— 7 2 4— ———— 7 2 4— 7 2 4
Safety fund (note 30) (unaudited) . ———— — 2,999 — (2,999) — — —
At 31 May 2023 (unaudited) .... 411,495 194,844 6,524 180 (67) 2,999 26,353 263,092 905,420 53,983 959,403
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-12 –


--- page 507 ---
Five months ended 31 May 2024
Attributable to owners of the parent
Share
capital
Capital
reserve *
Share-based
payment
reserve *
Foreign
currency
translation
reserve *
Fair value
reserve of
financial
assets at fair
value through
other
comprehensive
income *
Special
reserve —
safety
fund*
Statutory
reserve *
Retained
profits * Total
Non-controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(note 28) (note 30) (note 29) (note 30) (note 30) (note 30)
At 1 January 2024 ........ 480,078 192,492 8,987 159 (29) 7,011 29,410 308,255 1,026,363 — 1,026,363
Profit for the period ....... ———— ——— 32,173 32,173 — 32,173
Other comprehensive income for
the period:
Exchange differences on translation
of foreign operations ...... ——— 2 ———— 2— 2
Changes in fair value of financial
assets at fair value through other
comprehensive income, net of
tax .............. ———— (29) — — — (29) — (29)
Total comprehensive income for
the period ........... — — — 2 (29) — — 32,173 32,146 — 32,146
Share-based payments (note 29) .. — — 3,101 — ———— 3,101 — 3,101
Safety fund (note 30) ....... ———— — 3,262 — (3,262) — — —
Contributions from shareholders .. 18,429 24,742 — — ———— 43,171 — 43,171
At 31 May 2024 ......... 498,507 217,234 12,088 161 (58) 10,273 29,410 337,166 1,104,781 — 1,104,781
* These reserve accounts comprise the consolidated other reserves of RMB436,078,000, RMB479,021,000,
RMB546,285,000 and RMB606,274,000 in the consolidated statements of financial position as at 31 December
2021, 2022 and 2023 and 31 May 2024, respectively.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-13 –


--- page 508 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Y ear ended 31 December
Five months ended
31 May
2021 2022 2023 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit before tax ................. 91,022 10,703 71,761 3,278 34,702
Adjustments for:
Finance costs .................. 7 2,817 6,445 4,838 2,188 1,272
Interest income ................. 5 (2,800) (3,241) (3,276) (1,289) (1,627)
Foreign exchange losses, net ........ (241) 1,74 2———
Depreciation of property, plant and
equipment .................. 13 61,173 97,469 118,489 49,417 50,794
Amortisation of intangible assets ...... 16 7,499 10,087 9,988 4,323 4,133
Depreciation of right-of-use assets ..... 14 1,468 2,478 2,649 1,104 1,104
Net loss on disposal of property, plant
and equipment ................ 6 51 4,785 3,057 475 346
Fair value (gain)/loss on financial assets
at fair value through profit or loss ... 5 (441) 142 (1,179) (496) (380)
Write-down of inventories to net
realisable value ............... 6 4,505 16,343 30,158 16,827 6,650
Investment income from financial assets
at fair value through profit or loss ... 5 (1,092) (2,191) (4,040) (1,134) (1,355)
Impairment losses on financial assets and
contract assets, net ............ 6 3,232 1,950 2,128 (1,054) 1,580
Share of loss of an associate ........ 23,27 9————
Share-based payment expenses ....... 1,669 1,698 3,187 724 3,101
Gain on remeasurement of the equity
interest in an associate to a subsidiary
at the date of acquisition ......... (22,139) ————
Increase in inventories ............ (34,308) (39,892) (34,605) (4,631) (41,359)
(Increase)/decrease in trade and bills
receivables .................. (129,953) (76,047) (88,043) 46,663 (79,920)
Increase in contract assets .......... (2,107) (572) (1,223) — (714)
(Increase)/decrease in prepayments,
deposits and other receivables ...... (9,638) 6,169 (694) (935) (1,522)
Increase in trade and bills payables .... 46,374 34,315 255,823 72,666 80,313
Increase/(decrease) in other payables and
accruals .................... 46,008 40,204 50,179 3,218 (11,919)
Increase/(decrease) in contract liabilities . 4,141 5,834 359 5,831 (334)
Increase/(decrease) in deferred income .. 3,056 2,133 5,179 4,691 (1,160)
Cash generated from operations ....... 93,575 129,554 424,735 201,866 43,705
Interest received ................ 2,800 3,241 3,276 1,289 1,627
Income taxes (paid)/refunded ........
(9,128) 1,492 3,481 3,481 (3,109)
Net cash flows from operating activities . 87,247 125,287 431,492 206,636 42,223
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-14 –


--- page 509 ---
Y ear ended 31 December
Five months ended
31 May
2021 2022 2023 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from disposal of items of
property, plant and equipment ........ 1,308 148 1,501 1,182 137
Purchases of items of property, plant and
equipment .................... (223,691) (118,093) (165,973) (80,911) (68,799)
Purchases of intangible assets ......... (2,567) (4,433) (2,979) (972) (3,168)
Proceeds from disposal of financial assets
at fair value through profit or loss ..... 381,300 808,400 1,549,000 558,000 462,000
Purchases of financial assets at fair value
through profit or loss ............. (405,900) (795,500) (1,637,000) (694,000) (391,000)
Acquisition of a subsidiary, net of cash and
cash equivalents held by the subsidiary at
the acquisition date .............. 32 (13,619) ————
(Increase)/decrease in pledged deposits ... (18,947) 21,567 (21,339) (50,468) 2,750
Investment income from financial assets at
fair value through profit or loss ...... 1,092 2,191 4,040 1,134 1,355
Net cash flows (used in)/from investing
activities ..................... (281,024) (85,720) (272,750) (266,035) 3,275
CASH FLOWS FROM FINANCING
ACTIVITIES
New bank borrowings .............. 31 252,025 43,905 29,400 29,400 11,637
Capital contribution from shareholders ... ———— 43,170
Repayment of bank borrowings ........ 31 (130,953) (65,646) (79,526) (24,500) (29,400)
Interest paid .................... (4,852) (6,453) (4,846) (1,435) (878)
Payment of lease liabilities ........... — (330) (360) — —
Payment of listing expenses .......... — — (1,738) — —
Net cash flows from/(used in) financing
activities ..................... 116,220 (28,524) (57,070) 3,465 24,529
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIV ALENTS ........ (77,557) 11,043 101,672 (55,935) 70,027
Cash and cash equivalents at beginning of
year/period ................... 174,391 96,778 108,231 108,231 209,878
Effect of foreign exchange rate changes,
net ........................ (56) 410 (25) (184) 180
CASH AND CASH EQUIV ALENTS AT
END OF YEAR/PERIOD .......... 96,778 108,231 209,878 52,113 280,085
ANALYSIS OF BALANCES OF CASH
AND CASH EQUIV ALENTS
Cash and bank balances ............. 22 164,048 153,933 276,919 148,283 344,376
Less: pledged deposits .............. 22 67,270 45,702 67,041 96,170 64,291
Cash and cash equivalents as stated in the
statements of financial position and the
statements of cash flows ........... 22 96,778 108,231 209,878 52,113 280,085
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-15 –


--- page 510 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
As at 31 December
As at
31 May
2021 2022 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Property, plant and equipment .... 13 235,848 197,205 164,560 155,194
Right-of-use assets ............. 8,737 8,506 8,275 8,179
Other intangible assets .......... 16 22,632 16,956 11,562 9,415
Investments in subsidiaries ....... 184,973 335,181 589,217 593,872
Deferred tax assets ............. 17 5,909 5,906 10,439 11,164
Other non-current assets ......... 20 23 1,315 — 2,257
Total non-current assets ......... 458,122 565,069 784,053 780,081
CURRENT ASSETS
Inventories ................... 18 149,656 84,611 69,234 93,029
Trade and bills receivables ....... 19 465,257 272,284 281,729 333,859
Contract assets ................ 3,685 196 — —
Prepayments, deposits and other
receivables ................. 20 103,582 62,242 94,068 103,711
Financial assets at fair value
through profit or loss ......... 21 50,400 20,359 41,314 71,868
Pledged deposits .............. 22 34,534 10,685 10,906 3,467
Cash and cash equivalents ....... 22 53,289 88,509 154,845 114,861
Total current assets ............ 860,403 538,886 652,096 720,795
CURRENT LIABILITIES
Trade and bills payables ......... 23 371,994 155,231 237,631 248,935
Other payables and accruals ...... 24 125,484 66,066 58,973 52,107
Interest-bearing bank borrowings .. 27 — 25,028 — —
Contract liabilities ............. 25 752 491 796 315
Total current liabilities .......... 498,230 246,816 297,400 301,357
NET CURRENT ASSETS ....... 362,173 292,070 354,696 419,438
TOTAL ASSETS LESS CURRENT
LIABILITIES ............... 820,295 857,139 1,138,749 1,199,519
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-16 –


--- page 511 ---
As at 31 December
As at
31 May
2021 2022 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT LIABILITIES
Deferred income .............. 26 6,976 3,952 1,635 1,400
Deferred tax liabilities .......... 17 60 54 197 280
Total non-current liabilities ...... 7,036 4,006 1,832 1,680
Net assets .................... 813,259 853,133 1,136,917 1,197,839
EQUITY
Share capital ................. 28 411,495 411,495 480,078 498,507
Other reserves ................ 30 401,764 441,638 656,839 699,332
Total equity ................. 813,259 853,133 1,136,917 1,197,839
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-17 –


--- page 512 ---
II NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. CORPORATE INFORMATION
The Company is a joint stock company with limited liability established in the People’s
Republic of China (“ PRC”). The registered office of the Company is located at 33 South Huanshi
Avenue, Nansha District, Guangzhou, Guangdong Province, China.
During the Relevant Periods, the Group was involved in the following principal activities:
 manufacture and sale of light-emitting diode (“ LED”) related products
 manufacture and sale of automotive intelligent vision products
As at 31 May 2024, the Company had direct and indirect interests in its subsidiaries, all of
which are private limited liability companies, the particulars of which are set out below:
Name
Place and date of incorporation/
registration and place of operations
Nominal value of issued
ordinary/registered share
capital
Percentage of equity
attributable to the
Company Principal activities
Direct Indirect
ʮ̡
Linlux Electronics Co., Ltd.* (note (a)(d)) ..
PRC/Chinese Mainland
9 October 2018
RMB250,000,000 100% — LED related modules
Ҧ (ಥ)ʮ̡
APT Electronics (HK) Co.,
Limited (note (b)(c)) ............
Hong Kong
26 June 2017
USD5,000,000 100% — Research and
development
Ҧ (ت)ʮ̡
Lynway Vision Technology (NB) Co., Ltd.*
(“Lynway Vision ”) (note (a)(d)) .......
PRC/Chinese Mainland
26 October 2018
RMB104,100,000 100% — Automotive intelligent
vision products
ʮ̡
Guangzhou Lynway Automotive Lighting Co.,
Ltd.* (note (e)) ...............
PRC/Chinese Mainland
19 October 2022
RMB10,000,000 — 100% Automotive intelligent
vision products
* The English names of the above company registered in the PRC represents the best efforts made by the directors of
the Company in directly translating the Chinese names of these companies as no English names have been
registered.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-18 –


--- page 513 ---
Notes:
(a) The statutory financial statements of these entities for the years ended 31 December 2021 and 2022 prepared under
PRC Generally Accepted Accounting Principles (“ PRC GAAP ”) were audited by Pan-China Certified Public
Accountants, certified public accountants registered in the PRC.
(b) The statutory financial statements of this entity for the years ended 31 December 2021 and 2022 prepared under
Hong Kong Financial Reporting Standards were audited by Confucius International CPA Limited registered in Hong
Kong.
(c) The statutory financial statements of these entities for the year ended 31 December 2023 have not yet been issued
as at the date of this report.
(d) The statutory financial statements of these entities for the year ended 31 December 2023 prepared under PRC
GAAP were audited by Ernst & Young Hua Ming LLP Guangzhou Branch (ה( ౷ஷΥ
ྫ)הcertified public accountants registered in the PRC.
(e) No audited financial statements have been prepared for this entity for the years ended 31 December 2021, 2022 and
2023.
2. ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
The Historical Financial Information has been prepared in accordance with International
Financial Reporting Standards (“ IFRSs ”), which comprise all standards and interpretations
approved by the International Accounting Standards Board (“ IASB”). All IFRSs effective for the
accounting period commencing from 1 January 2024, together with the relevant transitional
provisions, have been early adopted by the Group in the preparation of the Historical Financial
Information throughout the Relevant Periods and the period covered by the Interim Comparative
Financial Information.
The Historical Financial Information has been prepared under the historical cost convention,
except for certain financial assets which have been measured at fair value through profit or loss, or
other comprehensive income.
2.2 ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING
STANDARDS
The Group has not applied the following new and revised IFRSs, that have been issued but
are not yet effective, in the Historical Financial Information. The Group intends to apply these
revised and new IFRSs, if applicable, when they become effective.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-19 –


--- page 514 ---
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint V enture 1
Amendments to IAS 21 Lack of Exchangeability 2
Amendments to IFRS 9 and
IFRS 7
Amendments to the Classification and Measurement of
Financial Instruments 3
IFRS 18 Presentation and Disclosure in Financial Statements 4
IFRS 19 Subsidiaries without Public Accountability: Disclosures 4
Notes:
1 No mandatory effective date yet determined but available for adoption
2 Effective for annual periods beginning on or after 1 January 2025
3 Effective for annual periods beginning on or after 1 January 2026
4 Effective for annual periods beginning on or after 1 January 2027
The Group is in the process of making a detailed assessment of the impact of these revised
IFRSs upon initial application. So far, the Group considers that these revised IFRSs may result in
changes in certain accounting policies and are unlikely to have a significant impact on the Group’s
financial performance and financial position in the period of initial application.
2.3 MATERIAL ACCOUNTING POLICY INFORMATION
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The consideration
transferred is measured at the acquisition date fair value which is the sum of the acquisition date
fair values of assets transferred by the Group, liabilities assumed by the Group to the former
owners of the acquiree and the equity interests issued by the Group in exchange for control of the
acquiree. For each business combination, the Group elects whether to measure the non-controlling
interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net
assets. All other components of non-controlling interests are measured at fair value.
Acquisition-related costs are expensed as incurred.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred, the amount recognised for non-controlling interests and any fair value of the Group’s
previously held equity interests in the acquiree over the identifiable assets acquired and liabilities
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-20 –


--- page 515 ---
assumed. If the sum of this consideration and other items is lower than the fair value of the net
assets acquired, the difference is, after reassessment, recognised in profit or loss as a gain on
bargain purchase.
After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of the Group’s cash-generating units, or groups of cash-generating units, that are expected to
benefit from the synergies of the combination, irrespective of whether other assets or liabilities of
the Group are assigned to those units or groups of units.
Impairment is determined by assessing the recoverable amount of the cash-generating unit
(group of cash-generating units) to which the goodwill relates. Where the recoverable amount of
the cash-generating unit (group of cash-generating units) is less than the carrying amount, an
impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a
subsequent period.
Fair value measurement
The Group measures its financial instruments at fair value at the end of each reporting period.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either in the principal market for the asset or liability, or in the absence of a
principal market, in the most advantageous market for the asset or liability. The principal or the
most advantageous market must be accessible by the Group. The fair value of an asset or a
liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling it
to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-21 –


--- page 516 ---
All assets and liabilities for which fair value is measured or disclosed in the Historical
Financial Information are categorised within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 — based on quoted prices (unadjusted) in active markets for identical assets or
liabilities
Level 2 — based on valuation techniques for which the lowest level input that is
significant to the fair value measurement is observable, either directly or
indirectly
Level 3 — based on valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the Historical Financial Information on a
recurring basis, the Group determines whether transfers have occurred between levels in the
hierarchy by reassessing categorisation (based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each reporting period.
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is
required (other than inventories, contract assets, deferred tax assets and financial assets), the
asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s
or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined
for an individual asset, unless the asset does not generate cash inflows that are largely independent
of those from other assets or groups of assets, in which case the recoverable amount is determined
for the cash-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment, a portion of the carrying amount of a
corporate asset (e.g., a headquarters building) is allocated to an individual cash-generating unit if
it can be allocated on a reasonable and consistent basis or, otherwise, to the smallest group of
cash-generating units.
An impairment loss is recognised only if the carrying amount of an asset exceeds its
recoverable amount. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. An impairment loss is charged to profit or
loss in the period in which it arises in those expense categories consistent with the function of the
impaired asset.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-22 –


--- page 517 ---
An assessment is made at the end of each reporting period as to whether there is an
indication that previously recognised impairment losses may no longer exist or may have
decreased. If such an indication exists, the recoverable amount is estimated. A previously
recognised impairment loss of an asset other than goodwill is reversed only if there has been a
change in the estimates used to determine the recoverable amount of that asset, but not to an
amount higher than the carrying amount that would have been determined (net of any
depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A
reversal of such an impairment loss is credited to profit or loss in the period in which it arises.
Related parties
A party is considered to be related to the Group if:
(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the
Group;
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent,
subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of
the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either
the Group or an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-23 –


--- page 518 ---
(vii) a person identified in (a)(i) has significant influence over the entity or is a member
of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key
management personnel services to the Group or to the parent of the Group.
Property, plant and equipment and depreciation
Property, plant and equipment, other than construction in progress, are stated at cost less
accumulated depreciation and any impairment losses. The cost of an item of property, plant 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 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 capitalised in the carrying amount of the asset as a replacement. Where
significant parts of property, plant and equipment are required to be replaced at intervals, the
Group recognises such parts as individual assets with specific useful lives and depreciates them
accordingly.
Depreciation is calculated on the straight-line basis to write off the cost of each item of
property, plant and equipment to its residual value over its estimated useful life. The principal
annual rates used for this purpose are as follows:
Buildings 4.75% to 4.85%
Machinery and others 9.50% to 32.33%
Leasehold improvements Over the shorter of the lease terms and 33.33%
Where parts of an item of property, plant 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 methods are reviewed, and adjusted if
appropriate, at least at each financial year end.
An item of property, plant and equipment including any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss on disposal or retirement recognised in profit or loss in the year the
asset is derecognised is the difference between the net sales proceeds and the carrying amount of
the relevant asset.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-24 –


--- page 519 ---
Construction in progress is stated at cost less any impairment losses, and is not depreciated.
It is reclassified to the appropriate category of property, plant and equipment when completed and
ready for use.
Intangible assets (other than goodwill)
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is the fair value at the date of acquisition. The
useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with
finite lives are subsequently amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible assets may be impaired. The amortisation period
and the amortisation method for intangible assets with a finite useful life are reviewed at least at
each financial year end.
Intangible assets are stated at cost less any impairment losses and are amortised on the
straight-line basis over their estimated useful lives. The principal estimated useful lives of
intangible assets are as follows:
Categories Estimated useful lives
Software 3-10 years
Trademarks and patents 3-16 years
The estimated useful lives of intangible assets are determined by considering the period of
the economic benefits to the Group or the periods of validity of intangible assets protected by the
relevant laws, as well as by referring to the industry practice.
Research and development costs
All research costs are charged to profit or loss as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only
when the Group can demonstrate the technical feasibility of completing the intangible asset so that
it will be available for use or sale, its intention to complete and its ability to use or sell the asset,
how the asset will generate future economic benefits, the availability of resources to complete the
project and the ability to measure reliably the expenditure during the development. Product
development expenditure which does not meet these criteria is expensed when incurred.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-25 –


--- page 520 ---
Leases
The Group assesses at contract inception whether a contract is, or contains, 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.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. The Group recognises lease liabilities to make
lease payments and right-of-use assets representing the right to use the underlying assets.
(a) Right-of-use assets
Right-of-use assets are recognised at the commencement date of the lease (that is the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less accumulated
depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities.
The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the commencement date less any lease
incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of
the lease terms and the estimated useful lives of the assets as follows:
Buildings 5 years
Leasehold land 20-50 years
If ownership of the leased asset transfers to the Group by the end of the lease term or the
cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful
life of the asset.
(b) Lease liabilities
Lease liabilities are recognised at the commencement date of the lease at the present value of
lease payments to be made over the lease term. The lease payments include fixed payments
(including in-substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payments of penalties for termination of a lease, if the
lease term reflects the Group exercising the option to terminate the lease. The variable lease
payments that do not depend on an index or a rate are recognised as an expense in the period in
which the event or condition that triggers the payment occurs.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-26 –


--- page 521 ---
In calculating the present value of lease payments, the Group uses its incremental borrowing
rate at the lease commencement date because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in
lease payments (e.g., a change to future lease payments resulting from a change in an index or
rate) or a change in assessment of an option to purchase the underlying asset.
(c) Short-term leases
The Group applies the short-term lease recognition exemption to its short-term leases of
buildings (that is those leases that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option).
Lease payments on short-term leases are recognised as an expense on a straight-line basis
over the lease term.
Group as a lessor
When the Group acts as a lessor, it classifies at lease inception (or when there is a lease
modification) each of its leases as either an operating lease or a finance lease.
Leases in which the Group does not transfer substantially all the risks and rewards incidental
to ownership of an asset are classified as operating leases. When a contract contains lease and
non-lease components, the Group allocates the consideration in the contract to each component on
a relative stand-alone selling price basis. Rental income is accounted for on a straight-line basis
over the lease terms and is included in other income and gains in the consolidated statements of
profit or loss and other comprehensive income due to its operating nature. Initial direct costs
incurred in negotiating and arranging an operating lease are added to the carrying amount of the
leased asset and recognised over the lease term on the same basis as rental income. Contingent
rents are recognised as revenue in the period in which they are earned.
Investments and other financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised
cost, fair value through other comprehensive income, and fair value through profit or loss.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-27 –


--- page 522 ---
The classification of financial assets at initial recognition depends on the financial asset’s
contractual cash flow characteristics and the Group’s business model for managing them. With the
exception of trade receivables that do not contain a significant financing component or for which
the Group has applied the practical expedient of not adjusting the effect of a significant financing
component, the Group initially measures a financial asset at its fair value, plus in the case of a
financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do
not contain a significant financing component or for which the Group has applied the practical
expedient are measured at the transaction price determined under IFRS 15 in accordance with the
policies set out for “Revenue recognition” below.
In order for a financial asset to be classified and measured at amortised cost or fair value
through other comprehensive income, it needs to give rise to cash flows that are solely payments
of principal and interest (“ SPPI”) on the principal amount outstanding. Financial assets with cash
flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective
of the business model.
The Group’s business model for managing financial assets refers to how it manages its
financial assets in order to generate cash flows. The business model determines whether cash flows
will result from collecting contractual cash flows, selling the financial assets, or both. Financial
assets classified and measured at amortised cost are held within a business model with the
objective to hold financial assets in order to collect contractual cash flows, while financial assets
classified and measured at fair value through other comprehensive income are held within a
business model with the objective of both holding to collect contractual cash flows and selling.
Financial assets which are not held within the aforementioned business models are classified and
measured at fair value through profit or loss.
Purchases or sales of financial assets that require delivery of assets within the period
generally established by regulation or convention in the marketplace are recognised on the trade
date, that is, the date that the Group commits to purchase or sell the asset.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest
method and are subject to impairment. Gains and losses are recognised in profit or loss when the
asset is derecognised, modified or impaired.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-28 –


--- page 523 ---
Financial assets at fair value through other comprehensive income (debt instruments)
For financial assets at fair value through other comprehensive income, interest income,
foreign exchange revaluation and impairment losses or reversals are recognised in profit or loss
and computed in the same manner as for financial assets measured at amortised cost. The
remaining fair value changes are recognised in other comprehensive income. Upon derecognition,
the cumulative fair value change recognised in other comprehensive income is recycled to profit or
loss.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial
position at fair value with net changes in fair value recognised in profit or loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement
of financial position) when:
 the rights to receive cash flows from the asset have expired; or
 the Group has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third
party under a “pass-through” arrangement; and either (a) the Group has transferred
substantially all the risks and rewards of the asset, or (b) the Group has neither
transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and
rewards of ownership of the asset. When it has neither transferred nor retained substantially all the
risks and rewards of the asset, nor transferred control of the asset, the Group continues to
recognise the transferred asset to the extent of its continuing involvement. In that case, the Group
also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Group has retained.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-29 –


--- page 524 ---
Impairment of financial assets
The Group recognises an allowance for expected credit losses (“ ECLs”) for all debt
instruments not held at fair value through profit or loss (“ FVTPL ”). 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.
General approach
ECLs are recognised in two stages. For credit exposures for which there has not been a
significant increase in credit risk since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next 12 months (a 12-month ECL). For those
credit exposures for which there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses expected over the remaining life of the
exposure, irrespective of the timing of the default (a lifetime ECL).
At each reporting date, the Group assesses whether the credit risk on a financial instrument
has increased significantly since initial recognition. When making the assessment, the Group
compares the risk of a default occurring on the financial instrument as at the reporting date with
the risk of a default occurring on the financial instrument as at the date of initial recognition and
considers reasonable and supportable information that is available without undue cost or effort,
including historical and forward-looking information.
The Group considers a financial asset in default when contractual payments are 90 days past
due. However, in certain cases, the Group may also consider a financial asset to be in default when
internal or external information indicates that the Group is unlikely to receive the outstanding
contractual amounts in full before taking into account any credit enhancements held by the Group.
A financial asset is written off when there is no reasonable expectation of recovering the
contractual cash flows.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-30 –


--- page 525 ---
Financial assets at amortised cost are subject to impairment under the general approach and
they are classified within the following stages for measurement of ECLs except for trade
receivables which apply the simplified approach as detailed below.
Stage 1 — Financial instruments for which credit risk has not increased significantly
since initial recognition and for which the loss allowance is measured at an
amount equal to 12-month ECLs
Stage 2 — Financial instruments for which credit risk has increased significantly since
initial recognition but that are not credit-impaired financial assets and for
which the loss allowance is measured at an amount equal to lifetime ECLs
Stage 3 — Financial assets that are credit-impaired at the reporting date (but that are not
purchased or originated credit-impaired) and for which the loss allowance is
measured at an amount equal to lifetime ECLs
Simplified approach
For trade and bills receivables and contract assets that do not contain a significant financing
component or when the Group applies the practical expedient of not adjusting the effect of a
significant financing component, the Group applies the simplified approach in calculating ECLs.
Under the simplified approach, the Group does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has
established a provision matrix that is based on its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic environment.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as loans and borrowings, or payables,
as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and bills payables, other payables and accruals,
interest-bearing bank borrowings.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-31 –


--- page 526 ---
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
Financial liabilities at amortised cost (trade and other payables, and borrowings)
After initial recognition, trade and other payables, and interest-bearing borrowings are
subsequently measured at amortised cost, using the effective interest rate method unless the effect
of discounting would be immaterial, in which case they are stated at cost. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as through the effective
interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the effective interest rate. The effective interest rate
amortisation is included in finance costs in profit or loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled, or expires.
When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition of the original liability and a recognition
of a new liability, and the difference between the respective carrying amounts is recognised in
profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the
weighted average cost basis and, in the case of work in progress and finished goods, comprises
direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is
based on estimated selling prices less any estimated costs to be incurred to completion and
disposal. The amount of write-down of inventories to net realisable value and all losses of
inventories are recognised as other expenses in the period the write-down or loss occurs.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-32 –


--- page 527 ---
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash on hand and at
banks, and short-term highly liquid deposits with a maturity of generally within three months that
are readily convertible into known amounts of cash, subject to an insignificant risk of changes in
value and held for the purpose of meeting short-term cash commitments.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents
comprise cash on hand and at banks, and short-term deposits as defined above, less bank
overdrafts which are repayable on demand and form an integral part of the Group’s cash
management.
Provisions
A provision is recognised when a present obligation (legal or constructive) has arisen as a
result of a past event and it is probable that a future outflow of resources will be required to settle
the obligation, provided that a reliable estimate can be made of the amount of the obligation.
The Group provides for warranties in relation to the sale of intelligent vision products and
systems. Provisions for these assurance-type warranties granted by the Group are initially
recognised based on sales volume and past experience of the level of repairs and returns. The
warranty-related cost is revised annually.
Income tax
Income tax comprises current and deferred tax. Income tax relating to items recognised
outside profit or loss is recognised outside profit or loss, either in other comprehensive income or
directly in equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or
paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of each reporting period, taking into consideration interpretations
and practices prevailing in the countries in which the Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end
of each reporting period between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-33 –


--- page 528 ---
Deferred tax liabilities are recognised for all taxable temporary differences, except:
 when the deferred tax liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss and does not
give rise to equal taxable and deductible temporary differences; and
 in respect of taxable temporary differences associated with investments in subsidiaries
and an associate, when the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, and the
carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to
the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carryforward of unused tax credits and unused tax losses can be
utilised, except:
 when the deferred tax asset relating to the deductible temporary differences arises from
the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss and does not give rise to equal taxable and deductible temporary
differences; and
 in respect of deductible temporary differences associated with investments in
subsidiaries and an associate, deferred tax assets are only recognised to the extent that it
is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period
and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax
assets are reassessed at the end of each reporting period and are recognised to the extent that it has
become probable that sufficient taxable profit will be available to allow all or part of the deferred
tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to
the period when the asset is realised or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of each reporting period.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-34 –


--- page 529 ---
Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally
enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets
and deferred tax liabilities relate to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities which intend either to settle current tax
liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously,
in each future period in which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that
the grant will be received and all attaching conditions will be complied with. When the grant
relates to an expense item, it is recognised as income on a systematic basis over the periods that
the costs, for which it is intended to compensate, are expensed.
Where the grant relates to an asset, the fair value is credited to a deferred income account
and is released to profit or loss over the expected useful life of the relevant asset by equal annual
instalments or deducted from the carrying amount of the asset and released to profit or loss by way
of a reduced depreciation charge.
Revenue recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of goods or services is
transferred to the customers at an amount that reflects the consideration to which the Group
expects to be entitled in exchange for those goods or 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
recognised will not occur when the associated uncertainty with the variable consideration is
subsequently resolved.
Sale of intelligent vision products and systems
Revenue from the sale of intelligent vision products and systems is recognised at the point in
time when control of the asset is transferred to the customer, generally on delivery of the products
and systems.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-35 –


--- page 530 ---
Volume rebates
Retrospective volume rebates may be provided to certain customers once the quantity of
products purchased during the period exceeds a threshold specified in the contract. Rebates are
offset against amounts payable by the customer. To estimate the variable consideration for the
expected future rebates, the most likely amount method is used for contracts with a single-volume
threshold and the expected value method for contracts with more than one volume threshold. The
selected method that best predicts the amount of variable consideration is primarily driven by the
number of volume thresholds contained in the contract. The requirements on constraining estimates
of variable consideration are applied and a refund liability for the expected future rebates is
recognised.
Rendering of services
Revenue from the services is primarily generated through the development of several
intelligent automotive projects and is recognised at a point in time as the control of services is
delivered to the customer.
Other income
Interest income is recognised on an accrual basis using the effective interest method by
applying the rate that exactly discounts the estimated future cash receipts over the expected life of
the financial instrument or a shorter period, when appropriate, to the net carrying amount of the
financial asset.
Rental income is recognised on a time proportion basis over the lease terms.
Contract assets
If the Group performs by transferring goods to a customer before being unconditionally
entitled to the consideration under the contract terms, a contract asset is recognised for the earned
consideration that is conditional. Contract assets are subject to impairment assessment, details of
which are included in the accounting policies for impairment of financial assets. They are
reclassified to trade receivables when the right to the consideration becomes unconditional.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-36 –


--- page 531 ---
Contract liabilities
A contract liability is recognised when a payment is received or a payment is due (whichever
is earlier) from a customer before the Group transfers the related services. Contract liabilities are
recognised as revenue when the Group performs under the contract (i.e., transfers control of the
related services to the customer).
Contract costs
Other than the costs which are capitalised as inventories, property, plant and equipment and
intangible assets, costs incurred to fulfil a contract with a customer are capitalised as an asset if all
of the following criteria are met:
(a) The costs relate directly to a contract or to an anticipated contract that the entity can
specifically identify.
(b) The costs generate or enhance resources of the entity that will be used in satisfying (or
in continuing to satisfy) performance obligations in the future.
(c) The costs are expected to be recovered.
The capitalised contract costs are amortised and charged to profit or loss on a systematic
basis that is consistent with the transfer to the customer of the goods or services to which the asset
relates. Other contract costs are expensed as incurred.
Employee benefits
Pension scheme
The employees of the Group’s subsidiaries which operate in Chinese Mainland are required to
participate in a central pension scheme operated by the local municipal government. These
subsidiaries are required to contribute a certain proportion of its payroll costs to the central
pension scheme. The contributions are charged to profit or loss as they become payable in
accordance with the rules of the central pension scheme.
Housing fund — Chinese Mainland
The Group contributes on a monthly basis to a defined contribution housing fund plan
operated by the local municipal government. Contributions to this plan by the Group are expensed
as incurred.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-37 –


--- page 532 ---
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of
qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their
intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such
borrowing costs ceases when the assets are substantially ready for their intended use or sale. All
other borrowing costs are expensed in the period in which they are incurred. Borrowing costs
consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Share-based payments
The Company operates a share award scheme. Employees (including directors) of the Group
receive remuneration in the form of share-based payments, whereby employees render services in
exchange for equity instruments (“ equity-settled transactions ”). The cost of equity-settled
transactions with employees is measured by reference to the fair value at the date on which they
are granted.
The cost of equity-settled transactions is recognised in employee benefit expense, together
with a corresponding increase in equity, over the period in which the service conditions are
fulfilled. The cumulative expense recognised for equity-settled transactions at the end of each
reporting period until the vesting date reflects the extent to which the vesting period has expired
and the Group’s best estimate of the number of equity instruments that will ultimately vest. The
charge or credit to profit or loss for a period represents the movement in the cumulative expense
recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining
the grant date fair value of awards, but the likelihood of the conditions being met is assessed as
part of the Group’s best estimate of the number of equity instruments that will ultimately vest.
Market performance conditions are reflected within the grant date fair value. Any other conditions
attached to an award, but without an associated service requirement, are considered to be
non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead
to an immediate expensing of an award unless there are also service and/or performance
conditions.
For awards that do not ultimately vest because non-market performance and/or service
conditions have not been met, no expense is recognised. Where awards include a market or
non-vesting condition, the transactions are treated as vesting irrespective of whether the market or
non-vesting condition is satisfied, provided that all other performance and/or service conditions are
satisfied.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-38 –


--- page 533 ---
Where the terms of an equity-settled award are modified, as a minimum an expense is
recognised as if the terms had not been modified, if the original terms of the award are met. In
addition, an expense is recognised for any modification that increases the total fair value of the
share-based payments, or is otherwise beneficial to the employee as measured at the date of
modification.
This includes any award where non-vesting conditions within the control of either the Group
or the employee are not met. However, if a new award is substituted for the cancelled award, and
is designated as a replacement award on the date that it is granted, the cancelled and new awards
are treated as if they were a modification of the original award, as described in the previous
paragraph.
Foreign currencies
The Historical Financial Information is presented in RMB, which is the Company’s functional
currency. Each entity in the Group determines its own functional currency and items included in
the Historical Financial Information of each entity are measured using that functional currency.
Foreign currency transactions recorded by the entities in the Group are initially recorded using
their respective functional currency rates prevailing at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies are translated at the functional currency
rates of exchange ruling at the end of each reporting period. Differences arising on settlement or
translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates at the dates of the initial transactions. Non-monetary items
measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was measured. The gain or loss arising on translation of a non-monetary item
measured at fair value is treated in line with the recognition of the gain or loss on change in fair
value of the item (i.e., translation difference on the item whose fair value gain or loss is
recognised in other comprehensive income or profit or loss is also recognised in other
comprehensive income or profit or loss, respectively).
In determining the exchange rate on initial recognition of the related asset, expense or income
on the derecognition of a non-monetary asset or non-monetary liability relating to an advance
consideration, the date of initial transaction is the date on which the Group initially recognises the
non-monetary asset or non-monetary liability arising from the advance consideration. If there are
multiple payments or receipts in advance, the Group determines the transaction date for each
payment or receipt of the advance consideration.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-39 –


--- page 534 ---
The functional currency of one overseas subsidiary is currency other than RMB. As at the end
of the reporting period, the assets and liabilities of this entity is translated into RMB at the
exchange rates prevailing at the end of the reporting period and its statement of profit or loss is
translated into RMB at the weighted average exchange rates for each of the year or period.
The resulting exchange differences are recognised in other comprehensive income and
accumulated in the exchange fluctuation reserve, except to the extent that the differences are
attributable to non-controlling interests. On disposal of a foreign operation, the cumulative amount
in the reserve relating to that particular foreign operation is recognised in profit or loss.
For the purpose of the consolidated statement of cash flows, the cash flows of overseas
subsidiary is translated into RMB at the exchange rates ruling at the dates of the cash flows.
Frequently recurring cash flows of overseas subsidiary which arise throughout the year or period is
translated into RMB at the weighted average exchange rates for each of the reporting period.
3. MATERIAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s Historical Financial Information requires management to
make judgements, estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of
contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes
that could require a material adjustment to the carrying amounts of the assets or liabilities affected
in the future.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at
the end of each reporting period, that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year, are described below.
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires
an estimation of the value in use of the cash-generating units to which the goodwill is allocated.
Estimating the value in use requires the Group to make an estimate of the expected future cash
flows from the cash-generating units and also to choose a suitable discount rate in order to
calculate the present value of those cash flows. Further details are given in note 15.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-40 –


--- page 535 ---
Provision for expected credit losses on trade and bills receivables and contract assets
The Group uses a provision matrix to calculate ECLs for trade and bills receivables and
contract assets. The provision rates are based on days past due for groupings of various customer
segments that have similar loss patterns.
The provision matrix is initially based on the Group’s historical observed default rates. The
Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking
information. For instance, if forecast economic conditions (i.e., gross domestic product) are
expected to deteriorate over the next year which can lead to an increased number of defaults, the
historical default rates are adjusted. At each reporting date, the historical observed default rates are
updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation among historical observed default rates, forecast economic
conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in
circumstances and forecast economic conditions. The Group’s historical credit loss experience and
forecast of economic conditions may also not be representative of a customer’s actual default in
the future. The information about the ECLs on the Group’s trade receivables is disclosed in note
19 to the Historical Financial Information.
Deferred tax assets
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilised. Significant management
judgement is required to determine the amount of deferred tax assets that can be recognised, based
upon the likely timing and level of future taxable profits together with future tax planning
strategies. Further details are included in note 17 to the Historical Financial Information.
Write-down of inventories to net realisable value
The Group reviews the carrying amounts of the inventories at the end of each of the Relevant
Periods to determine whether the inventories are carried at the lower of cost and net realisable
value. The net realisable value is estimated based on the current market situation and historical
experience on similar inventories. Any change in the assumptions would increase or decrease the
amount of inventories written down or the related reversals of write-down and affect the Group’s
financial position.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-41 –


--- page 536 ---
Share-based payments
The Group makes the best estimate of the number of exercisable equity instruments at the end
of the reporting period during the waiting period. Share-based payment expenses are recognised
based on the fair value on the grant date and the latest subsequent information obtained. The
Group has evaluated the fair value of the equity instruments on the grant date based on the recent
transaction price, and also estimated the number of exercisable equity instruments.
4. OPERATING SEGMENT INFORMATION
Management monitors the operating results of the Group’s operating segment as a whole for
the purpose of making decisions about resource allocation and performance assessment.
Geographical information
(a) Revenue from external customers
Revenue is attributed to geographical areas based on the locations of customers. Revenues by
geographical segment based on the locations of customers for each of the Relevant Periods and
five months ended 31 May 2023 are presented as follows:
Segments
Y ear ended
31 December
Five months ended
31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Chinese Mainland .......... 1,058,750 1,136,009 1,576,756 515,804 707,518
Outside Chinese Mainland .... 329,630 274,623 281,276 108,813 135,675
Total revenue .............. 1,388,380 1,410,632 1,858,032 624,617 843,193
(b) Non-current assets
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Chinese Mainland ................ 957,279 976,598 993,693 990,877
Outside Chinese Mainland .......... 12 596 1,145 1,100
Total non-current assets ............ 957,291 977,194 994,838 991,977
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-42 –


--- page 537 ---
The non-current asset information of continuing operations above is based on the locations of
the assets and excludes deferred tax assets.
Information about major customers
Revenue from the major customers which amounted to 10% or more of the Group’s revenue
is set out below:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Customer I ................ 423,585 288,982 229,076 87,074 98,588
Customer II ............... 255,095 140,924 N/A 65,413 N/A
Customer III .............. 148,784 N/A N/A N/A N/A
Customer IV .............. N/A 350,129 705,774 211,389 326,739
Customer V ............... N/A 140,250 192,211 66,080 100,022
N/A represents revenue from the customers which amounted to less than 10% of the Group’s
revenue.
5. REVENUE, OTHER INCOME AND GAINS
An analysis of revenue is as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue from contracts with
customers ............... 1,388,380 1,410,632 1,858,032 624,617 843,193
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-43 –


--- page 538 ---
Revenue from contracts with customers
(a) Disaggregated revenue information
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Types of products
Automotive intelligent vision .. 74,251 399,674 770,973 225,676 365,445
High-end lighting ........... 1,033,857 670,242 650,821 253,630 254,103
Advanced display ........... 280,272 340,716 436,238 145,311 223,645
Total revenue from contracts
with customers ........... 1,388,380 1,410,632 1,858,032 624,617 843,193
Geographical markets
Chinese Mainland .......... 1,058,750 1,136,009 1,576,756 515,804 707,518
Outside Chinese Mainland .... 329,630 274,623 281,276 108,813 135,675
Total revenue from contracts
with customers ........... 1,388,380 1,410,632 1,858,032 624,617 843,193
Sales Channels
Direct sales ............... 1,220,663 1,261,897 1,718,451 585,254 780,251
Channel partners ........... 167,717 148,735 139,581 39,363 62,942
Total revenue from contracts
with customers ........... 1,388,380 1,410,632 1,858,032 624,617 843,193
Timing of revenue recognition
Goods or services transferred
at a point in time ......... 1,388,380 1,410,632 1,858,032 624,617 843,193
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-44 –


--- page 539 ---
The following table shows the amounts of revenue recognised during the Relevant Periods
and five months ended 31 May 2023 that were included in the contract liabilities at the beginning
of each reporting period.
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue recognised that was
included in contract
liabilities at the beginning of
the reporting period:
Automotive intelligent vision .. — — 5,100 — —
High-end lighting ........... 900 752 491 367 795
Advanced display ........... — — 956 956 239
Total .................... 900 752 6,547 1,323 1,034
(b) Performance obligations
Information about the Group’s performance obligations is summarised below:
Sale of intelligent vision products and systems
The performance obligation is satisfied upon delivery of the intelligent vision products and
systems, and payment is generally due within 60 to 120 days from delivery, except for new
customers and intelligent automotive vision development services, where payment in advance is
normally required.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-45 –


--- page 540 ---
The amounts of transaction prices allocated to the remaining performance obligations
(unsatisfied or partially unsatisfied) for the Relevant Periods and five months ended 31 May 2023
are as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Amounts expected to be
recognised as revenue:
Within one year ............ 752 9,136 10,995 14,327 10,661
After one year ............. 7,050 4,500 3,000 5,139 3,000
Total .................... 7,802 13,636 13,995 19,466 13,661
An analysis of other income and gains is as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Other income
Interest income ............ 2,800 3,241 3,276 1,289 1,627
Government grants* ......... 29,881 12,650 11,204 6,220 1,426
Rental income ............. 391 1,445 1,257 813 276
Others ................... 685 329 5,106 147 3,028
Total other income .......... 33,757 17,665 20,843 8,469 6,357
Gains
Gain on foreign exchange
differences .............. 648 5,349 205 204 663
Gain on remeasurement of the
equity interest in an
associate to a subsidiary at
the date of acquisition ..... 22,13 9————
Investment income from
financial assets at FVTPL ... 1,092 2,191 4,040 1,134 1,355
Fair value gain/(loss) on
financial assets at FVTPL ... 441 (142) 1,179 496 380
Others ................... 3 4 8————
Total gains ................ 24,668 7,398 5,424 1,834 2,398
Total other income and gains .. 58,425 25,063 26,267 10,303 8,755
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-46 –


--- page 541 ---
* Government grants mainly represent incentives received from local governments for the purpose of compensation
on R&D contribution, local economic contribution and purchases of items of property, plant and equipment. There
are no unfulfilled conditions or contingencies relating to these grants.
6. PROFIT BEFORE TAX
The Group’s profit before tax is arrived at after charging/(crediting):
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Cost of inventories sold ............. 1,160,102 1,174,395 1,490,317 520,307 688,947
Cost of services provided ............ — 1,052 28,704 — —
Depreciation of property, plant and
equipment .................... 13 61,173 97,469 118,489 49,417 50,794
Depreciation of right-of-use assets ...... 14(a) 1,468 2,478 2,649 1,104 1,104
Amortisation of intangible assets ....... 16 7,499 10,087 9,988 4,323 4,133
Research and development costs ........ 62,020 88,749 87,225 36,347 37,632
Lease payments not included in the
measurement of lease liabilities ....... 14(c) 518 366 427 73 166
Listing expenses ................. — — 6,590 — 11,569
Employee benefit expenses (excluding
directors’ and chief executive’s
remuneration (note 8) ):
Wages, salaries and other allowances ..... 160,670 219,310 240,646 93,161 114,114
Pension scheme contributions and social
welfare* ..................... 15,638 23,831 27,392 10,654 13,386
Share-based payment expenses ......... 1,233 1,233 2,257 337 2,335
Total ........................ 177,541 244,374 270,295 104,152 129,835
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-47 –


--- page 542 ---
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Foreign exchange differences, net ....... (648) (5,349) (205) (204) (663)
Impairment losses on financial and contract
assets, net .................... 3,232 1,950 2,128 (1,054) 1,580
Write-down of inventories to net realisable
value ....................... 4,505 16,343 30,158 16,827 6,650
Gain on remeasurement of the equity
interest in an associate to a subsidiary at
the date of acquisition ............ (22,139) ————
Loss on derecognition of financial assets
measured at amortised cost ......... —7 9———
Investment income from financial assets at
FVTPL ...................... (1,092) (2,191) (4,040) (1,134) (1,355)
Fair value (gain)/loss on financial assets at
FVTPL ...................... (441) 142 (1,179) (496) (380)
Loss on disposal of items of property, plant
and equipment ................. 51 4,785 3,057 475 346
* There are no forfeited contributions that may be used by the Group as the employer to reduce the existing level of
contributions.
7. FINANCE COSTS
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest on bank and other
borrowings .............. 4,996 6,418 4,778 2,161 1,252
Interest on lease liabilities .... —2 76 02 72 0
Less: Interest capitalised ..... (2,179) ————
Total .................... 2,817 6,445 4,838 2,188 1,272
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-48 –


--- page 543 ---
8. DIRECTORS’ AND CHIEF EXECUTIVE’S REMUNERATION
Directors’ and chief executive’s remuneration for the Relevant Periods and five months ended
31 May 2023, disclosed pursuant to the Listing Rules, section 383(1)(a), (b), (c) and (f) of the
Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about
Benefits of Directors) Regulation, is as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Fees ..................... 160 256 300 126 296
Other emoluments:
— Salaries, allowances and
benefits in kind ........ 1,608 1,614 1,680 687 689
— Performance related
bonuses .............. 781 454 659 72 74
— Share-based payment
expenses .............. 436 465 930 387 766
— Pension scheme
contributions ........... 34 35 53 15 29
Subtotal .................. 2,859 2,568 3,322 1,161 1,558
Total fees and other
emoluments ........... 3,019 2,824 3,622 1,287 1,854
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-49 –


--- page 544 ---
(a) Independent non-executive directors
The fees paid to independent non-executive directors during the Relevant Periods and five
months ended 31 May 2023 were as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Ms. ZHANG He ............ 80 92 100 42 67
Ms. LIN Nan .............. — 72 100 42 67
Ms. DING Hui ............. 80 92 100 42 67
Mr. CHAN Chi Kong ....... ————9 5
Total .................... 160 256 300 126 296
There were no other emoluments payable to the independent non-executive directors during
the Relevant Periods and five months ended 31 May 2023.
(b) Executive director and non-executive directors
Fees
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Share-based
payment
expenses
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Year ended 31 December 2021
Executive director:
Mr. XIAO Guowei ............. — 1,608 781 436 34 2,859
Non-executive directors:
Mr. YUAN Lie Ming Peter ........ ——————
Mr. WU Nan-Yang ............. ——————
Mr. CHAN Philip Ching Ho ....... ——————
Total ..................... — 1,608 781 436 34 2,859
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-50 –


--- page 545 ---
Fees
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Share-based
payment
expenses
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Year ended 31 December 2022
Executive director:
Mr. XIAO Guowei ............. — 1,614 454 465 35 2,568
Non-executive directors:
Mr. YUAN Lie Ming Peter ........ ——————
Mr. WU Nan-Yang ............. ——————
Mr. CHAN Philip Ching Ho ....... ——————
Total ..................... — 1,614 454 465 35 2,568
Fees
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Share-based
payment
expenses
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Year ended 31 December 2023
Executive director:
Mr. XIAO Guowei ............ — 1,680 659 930 53 3,322
Non-executive directors:
Mr. YUAN Lie Ming Peter ....... ——————
Mr. WU Nan-Yang ............. ——————
Mr. CHAN Philip Ching Ho ....... ——————
Total ..................... — 1,680 659 930 53 3,322
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-51 –


--- page 546 ---
Fees
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Share-based
payment
expenses
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Five months ended 31 May 2023
Executive director:
Mr. XIAO Guowei ............. — 687 72 387 15 1,161
Non-executive directors:
Mr. YUAN Lie Ming Peter ........ ——————
Mr. WU Nan-Yang ............. ——————
Mr. CHAN Philip Ching Ho ....... ——————
Total ..................... — 687 72 387 15 1,161
Fees
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Share-based
payment
expenses
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Five months ended 31 May 2024
Executive director:
Mr. XIAO Guowei ............. — 689 74 766 29 1,558
Non-executive directors:
Mr. YUAN Lie Ming Peter ........ ——————
Mr. WU Nan-Yang ............. ——————
Mr. CHAN Philip Ching Ho ....... ——————
Mr. ZHENG Xin .............. ——————
Total ..................... — 689 74 766 29 1,558
There were no emoluments payable to the non-executive directors during the Relevant
Periods and five months ended 31 May 2023.
There was no arrangement under which a director or the chief executive waived or agreed to
waive any remuneration during the Relevant Periods and five months ended 31 May 2023.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-52 –


--- page 547 ---
9. FIVE HIGHEST PAID EMPLOYEES
The five highest paid employees of the Group included one director of the Company during
the Relevant Periods and five months ended 31 May 2023, details of whose remuneration are set
out in note 8 above. Details of the remuneration of the remaining four highest paid employees who
are not directors of the Company are as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries, allowances and
benefits in kind .......... 4,032 4,723 5,434 2,199 2,308
Performance related bonuses .. 1,602 1,407 1,890 406 405
Share-based payment expenses . 663 598 1,099 458 594
Pension scheme contributions .. 152 268 292 115 98
Total .................... 6,449 6,996 8,715 3,178 3,405
The number of non-director highest paid employees whose remuneration fell within the
following bands is as follows:
Y ear ended 31 December
Five months ended
31 May
2021 2022 2023 2023 2024
(unaudited)
HK$500,001 to HK$1,000,000 .... — — —32
HK$1,000,001 to HK$1,500,000 ... 1 — —12
HK$1,500,001 to HK$2,000,000 ... 1 2 1——
HK$2,000,001 to HK$2,500,000 ... 2 2 1——
HK$2,500,001 to HK$3,000,000 ... —— 2——
Total ........................ 44444
10. INCOME TAX
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 IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-53 –


--- page 548 ---
Hong Kong
The subsidiary incorporated in Hong Kong is subject to Hong Kong profits tax at the rate of
16.5% on the estimated assessable profits arising in Hong Kong. No provision for Hong Kong
profits tax has been made as the Group had no assessable profits derived from or earned in Hong
Kong during the Relevant Periods and five months ended 31 May 2023.
Chinese Mainland
Pursuant to the Corporate Income Tax Law of the PRC and the respective regulations (the
“CIT Law ”), the subsidiaries which operate in Chinese Mainland are subject to CIT at a rate of
25% on the taxable income except those which are subject to tax concession as set out below:
(a) In 2021, the Company was accredited as a “High and New Technology Enterprise”
(“HNTE”), and was entitled to a preferential CIT rate of 15% for the Relevant Periods.
(b) In 2022, a certain subsidiary was accredited as an HNTE, and is entitled to a
preferential CIT rate of 15% from 2022 to 2024.
The income tax expense of the Group for the Relevant Periods and five months ended 31
May 2023 is analysed as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current income tax ............. 7,809 (26) — — 3,849
Deferred income tax ............ 5,213 (28,342) (282) (4,285) (1,320)
Total ....................... 13,022 (28,368) (282) (4,285) 2,529
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-54 –


--- page 549 ---
A reconciliation of the tax expense/(credit) applicable to profit before tax at the statutory tax
rate for the countries in which the Company and its subsidiaries are domiciled to the tax expense
at the effective tax rate is as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit before tax ............... 91,022 10,703 71,760 3,277 34,702
Tax at the statutory tax rate ....... 13,653 1,605 10,764 492 5,205
Effect on different tax rate ........ — (5,221) (427) (1,655) 1,335
Adjustments in respect of current tax
of previous periods ........... 15 (26) — — 1,221
Expenses not deductible for tax .... 179 294 265 149 93
Additional deductible allowance for
qualified research and development
costs ..................... (8,730) (11,934) (12,523) (4,303) (4,635)
Additional deductible allowance for
disabled people ............. — (49) (67) (25) (39)
Additional deductible allowance for
high-tech enterprise equipment
cost ...................... — (2,151) — — —
Deductible temporary differences in
unrecognised deferred tax assets .. 398 294 462 546 —
Recognition of tax losses and
temporary differences not
recognised ................. — (21,331) (865) (953) (1,265)
Tax losses on unrecognised deferred
tax assets .................. 7,507 10,151 2,109 1,464 614
Tax charge/(credit) at the Group’s
effective tax rate ............. 13,022 (28,368) (282) (4,285) 2,529
11. DIVIDENDS
No dividends have been paid or declared by the Company during the Relevant Periods.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-55 –


--- page 550 ---
12. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF
THE PARENT
The calculation of the basic earnings per share amounts is based on the profit attributable to
owners of the parent and the weighted average number of ordinary shares in issue during the
Relevant Periods and five months ended 31 May 2023.
No adjustment has been made to the basic earnings per share amounts presented for the
Relevant Periods in respect of a dilution as the Group had no potentially dilutive ordinary shares
in issue during the Relevant Periods and five months ended 31 May 2023.
The following reflects the income and share data used in the basic earnings per share
computation:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
(unaudited)
Earnings:
Profit for the year attributable to
owners of the parent, used in the
basic earnings per share
calculation (RMB’000) ......... 85,896 40,791 66,378 14,146 32,173
Number of shares:
Weighted average number of ordinary
shares in issue during the year,
used in the basic earnings per
share calculation (in thousand
shares) .................... 411,495 411,495 417,884 411,495 496,203
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-56 –


--- page 551 ---
13. PROPERTY, PLANT AND EQUIPMENT
The Group
31 December 2021 Buildings
Machinery and
others
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021:
Cost .......................... 129,647 371,050 121,923 622,620
Accumulated depreciation .......... (52,373) (166,667) — (219,040)
Net carrying amount .............. 77,274 204,383 121,923 403,580
At 1 January 2021, net of
accumulated depreciation ......... 77,274 204,383 121,923 403,580
Acquisition of a subsidiary (note 32) . 132,670 88,938 14,351 235,959
Additions ...................... 22 4,793 234,980 239,795
Disposals ....................... — (1,300) — (1,300)
Transfers ....................... 231,702 112,586 (344,288) —
Depreciation provided during the year . (19,294) (41,879) — (61,173)
At 31 December 2021,
net of accumulated depreciation .... 422,374 367,521 26,966 816,861
At 31 December 2021:
Cost .......................... 487,150 573,614 26,966 1,087,730
Accumulated depreciation .......... (64,776) (206,093) — (270,869)
Net carrying amount (note (a)) ...... 422,374 367,521 26,966 816,861
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-57 –


--- page 552 ---
31 December 2022 Buildings
Machinery and
others
Leasehold
improvements
Construction in
progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2022:
Cost ............... 487,150 573,614 — 26,966 1,087,730
Accumulated depreciation . (64,776) (206,093) — — (270,869)
Net carrying amount .... 422,374 367,521 — 26,966 816,861
At 1 January 2022, net of
accumulated
depreciation ........ 422,374 367,521 — 26,966 816,861
Additions ............ 8,364 7,916 — 114,146 130,426
Disposals ............ — (4,898) — — (4,898)
Transfers ............ 1,241 92,699 1,107 (95,047) —
Exchange realignment ... — 1—2 52 6
Depreciation provided
during the year ...... (28,534) (68,873) (62) — (97,469)
At 31 December 2022,
net of accumulated
depreciation ........ 403,445 394,366 1,045 46,090 844,946
At 31 December 2022:
Cost ............... 483,178 657,870 1,107 46,090 1,188,245
Accumulated depreciation . (79,733) (263,504) (62) — (343,299)
Net carrying amount
(note (a)) .......... 403,445 394,366 1,045 46,090 844,946
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-58 –


--- page 553 ---
31 December 2023 Buildings
Machinery and
others
Leasehold
improvements
Construction in
progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2023:
Cost ............... 483,178 657,870 1,107 46,090 1,188,245
Accumulated depreciation . (79,733) (263,504) (62) — (343,299)
Net carrying amount .... 403,445 394,366 1,045 46,090 844,946
At 1 January 2023, net of
accumulated
depreciation ........ 403,445 394,366 1,045 46,090 844,946
Additions ........... 3,626 4,351 154 146,796 154,927
Disposals ........... — (4,344) — — (4,344)
Transfers ........... 15,725 151,454 — (167,179) —
Exchange realignment ... —8 —4 1 2
Depreciation provided
during the year ...... (28,718) (89,348) (423) — (118,489)
At 31 December 2023,
net of accumulated
depreciation ........ 394,078 456,487 776 25,711 877,052
At 31 December 2023:
Cost ............... 492,517 797,362 1,261 25,711 1,316,851
Accumulated depreciation (98,439) (340,875) (485) — (439,799)
Net carrying amount
(note (a)) .......... 394,078 456,487 776 25,711 877,052
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-59 –


--- page 554 ---
31 May 2024 Buildings
Machinery and
others
Leasehold
improvements
Construction in
progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2024:
Cost ............... 492,517 797,362 1,261 25,711 1,316,851
Accumulated depreciation . (98,439) (340,875) (485) — (439,799)
Net carrying amount .... 394,078 456,487 776 25,711 877,052
At 1 January 2024, net of
accumulated
depreciation ........ 394,078 456,487 776 25,711 877,052
Additions ............ 1,167 365 — 44,671 46,203
Disposals ............ — (483) — — (483)
Transfers ............ — 11,288 — (11,288) —
Exchange rate adjustment . — 4—— 4
Depreciation provided
during the period ..... (13,986) (36,632) (176) — (50,794)
At 31 May 2024, net of
accumulated
depreciation ........ 381,259 431,029 600 59,094 871,982
At 31 May 2024:
Cost ............... 489,985 805,002 1,261 59,094 1,355,342
Accumulated depreciation . (108,726) (373,973) (661) — (483,360)
Net carrying amount
(note (a)) .......... 381,259 431,029 600 59,094 871,982
(a) Certain property, plant and equipment with net carrying amounts of approximately RMB66,264,000,
RMB259,141,000, RMB237,734,000 and RMB253,934,000 as at 31 December 2021, 2022 and 2023 and 31 May
2024, respectively, were pledged as security for bank facilities granted to the Group.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-60 –


--- page 555 ---
The Company
31 December 2021 Buildings
Machinery and
others
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021:
Cost .......................... 129,647 343,924 3,466 477,037
Accumulated depreciation .......... (52,373) (162,028) — (214,401)
Net carrying amount .............. 77,274 181,896 3,466 262,636
At 1 January 2021, net of
accumulated depreciation ......... 77,274 181,896 3,466 262,636
Additions ...................... — 3,539 37,449 40,988
Disposals ....................... — (22,969) — (22,969)
Transfers ....................... — 40,242 (40,242) —
Depreciation provided during the year . (13,712) (31,095) — (44,807)
At 31 December 2021, net of
accumulated depreciation ......... 63,562 171,613 673 235,848
At 31 December 2021:
Cost .......................... 122,756 355,455 673 478,884
Accumulated depreciation .......... (59,194) (183,842) — (243,036)
Net carrying amount (note (a)) ...... 63,562 171,613 673 235,848
31 December 2022 Buildings
Machinery and
others
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2022:
Cost .......................... 122,756 355,455 673 478,884
Accumulated depreciation .......... (59,194) (183,842) — (243,036)
Net carrying amount .............. 63,562 171,613 673 235,848
At 1 January 2022, net of
accumulated depreciation ......... 63,562 171,613 673 235,848
Additions ...................... 3,303 497 7,142 10,942
Disposals ....................... — (4,739) — (4,739)
Transfers ....................... — 7,003 (7,003) —
Depreciation provided during the year . (9,802) (35,044) — (44,846)
At 31 December 2022, net of
accumulated depreciation ......... 57,063 139,330 812 197,205
At 31 December 2022:
Cost .......................... 112,481 347,053 812 460,346
Accumulated depreciation .......... (55,418) (207,723) — (263,141)
Net carrying amount (note (a)) ...... 57,063 139,330 812 197,205
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-61 –


--- page 556 ---
31 December 2023 Buildings
Machinery and
others
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2023:
Cost .......................... 112,481 347,053 812 460,346
Accumulated depreciation .......... (55,418) (207,723) — (263,141)
Net carrying amount .............. 57,063 139,330 812 197,205
At 1 January 2023, net of
accumulated depreciation ......... 57,063 139,330 812 197,205
Additions ...................... — 1,160 6,533 7,693
Disposals ...................... — (1,453) — (1,453)
Transfers ...................... 203 5,840 (6,043) —
Depreciation provided
during the year ................ (7,586) (31,299) — (38,885)
At 31 December 2023, net of
accumulated depreciation ........ 49,680 113,578 1,302 164,560
At 31 December 2023:
Cost .......................... 103,369 343,189 1,302 447,860
Accumulated depreciation ......... (53,689) (229,611) — (283,300)
Net carrying amount (note (a)) ..... 49,680 113,578 1,302 164,560
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-62 –


--- page 557 ---
31 May 2024 Buildings
Machinery and
others
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2024:
Cost .......................... 103,369 343,189 1,302 447,860
Accumulated depreciation .......... (53,689) (229,611) — (283,300)
Net carrying amount .............. 49,680 113,578 1,302 164,560
At 1 January 2024, net of
accumulated depreciation ......... 49,680 113,578 1,302 164,560
Additions ...................... 210 100 5,269 5,579
Disposals ....................... — (331) — (331)
Transfers ....................... — 647 (647) —
Depreciation provided during the
period ....................... (2,674) (11,940) — (14,614)
At 31 May 2024, net of accumulated
depreciation ................... 47,216 102,054 5,924 155,194
At 31 May 2024:
Cost .......................... 102,312 341,077 5,924 449,313
Accumulated depreciation .......... (55,096) (239,023) — (294,119)
Net carrying amount (note (a)) ...... 47,216 102,054 5,924 155,194
(a) Certain property, plant and equipment with net carrying amounts of approximately RMB66,264,000,
RMB39,974,000, RMB18,749,000 and RMB18,033,000 as at 31 December 2021, 2022 and 2023 and 31 May 2024,
respectively, were pledged as security for bank facilities granted to the Group.
14. LEASES
The Group as a lessee
The Group has lease contracts for various items of properties used in its operations. Leases of
properties generally have lease terms between 5 and 50 years. Generally, the Group is restricted
from assigning and subleasing the leased assets outside the Group.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-63 –


--- page 558 ---
(a) Right-of-use assets
The carrying amounts of the right-of-use assets and the movements during the Relevant
Periods are as follows:
Leasehold land
RMB’000
Year ended 31 December 2021
At beginning of year .............................................. 26,531
Additions as a result of acquisition of a subsidiary ....................... 55,920
Depreciation charge (note 6) ........................................ (1,468)
At end of year (note (i)) ........................................... 80,983
Buildings Leasehold land Total
RMB’000 RMB’000 RMB’000
Year ended 31 December 2022
At beginning of year .................. — 80,983 80,983
Additions .......................... 1,456 — 1,456
Depreciation charge (note 6) ............ (121) (2,357) (2,478)
At end of year (note (i)) ............... 1,335 78,626 79,961
Buildings Leasehold land Total
RMB’000 RMB’000 RMB’000
Year ended 31 December 2023
At beginning of year .................. 1,335 78,626 79,961
Additions .......................... ———
Depreciation charge (note 6) ........... (291) (2,358) (2,649)
At end of year (note (i)) .............. 1,044 76,268 77,312
Buildings Leasehold land Total
RMB’000 RMB’000 RMB’000
Five months ended 31 May 2024
At beginning of period ................ 1,044 76,268 77,312
Additions .......................... ———
Depreciation charge (note 6) ............ (121) (983) (1,104)
At end of period (note (i)) ............. 923 75,285 76,208
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-64 –


--- page 559 ---
(i) Certain leasehold land with net carrying amounts of approximately RMB16,623,000, nil, nil and nil as at 31
December 2021, 2022 and 2023 and 31 May 2024, respectively, was pledged as security for bank facilities granted
to the Group (note 27).
(b) Lease liabilities
The carrying amounts of lease liabilities and the movements during the Relevant Periods are
as follows:
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period ........ — — 1,180 910
New leases ..................... — 1,456 — —
Accretion of interest recognised
during the year/period (note 7) .... —2 76 02 0
Payments ....................... — (303) (330) —
Carrying amount at the end of the
year/period ................... — 1,180 910 930
Analysed into:
Current portion .................. — 271 287 293
Non-current portion ............... — 909 623 637
(c) The amounts recognised in profit or loss in relation to leases are as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest on lease liabilities
(note 7) ................ —2 76 02 72 0
Depreciation charge of
right-of-use assets (note 6) .. 1,468 2,478 2,649 1,104 1,104
Expense relating to short-term
leases (note 6) ........... 518 366 427 73 166
Total amount recognised in
profit or loss ............. 1,986 2,871 3,136 1,204 1,290
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-65 –


--- page 560 ---
The Group as a lessor
The Group leases its dormitories and offices in Guangzhou under operating lease
arrangements. Details of rental income recognised are included in note 5.
At the end of each of the Relevant Periods, the undiscounted lease payments receivable by
the Group in future periods under non-cancellable operating leases with its tenants are as follows:
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within one year .................. — 170 83 —
15. GOODWILL
As at
1 January As at 31 December As at 31 May
2021 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost and carrying
amount ........... — 13,523 13,523 13,523 13,523
Impairment testing of goodwill
Goodwill acquired through business combinations is allocated to the following
cash-generating unit (“ CGU”) for impairment testing due to the acquisition of Lynway Vision:
— Lynway Vision manufacturing and sales CGU
The recoverable amount of the Lynway Vision manufacturing and sales CGU has been
determined based on a value-in-use calculation using cash flow projections based on financial
budgets covering a 5-year period approved by senior management.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-66 –


--- page 561 ---
Assumptions were used in the value in use calculation of the Lynway Vision manufacturing
and sales CGU for the end of each of the Relevant Periods. The following are the key assumptions
on which management has based to undertake impairment testing of goodwill:
As at 31 December As at 31 May
2021 2022 2023 2024
Compound growth rate of revenue
over the forecast period .......... 71.0% 34.4% 12.8% 8.6%
Pre-tax discount rate .............. 14.1% 15.2% 14.6% 14.1%
Terminal growth rate ............. 2.5% 2.5% 2.5% 2.5%
Compound growth rate of revenue — The basis is determined with reference to the average
revenue achieved in the years before the budgeted year, increased for management’s expectation of
the future market.
Pre-tax discount rate — The discount rate used is before tax and reflects specific risks
relating to the relevant unit.
Terminal growth rate — The basis is determined with reference to the long-term Customer
Price Index of China and the nature of the business.
The values assigned to the key assumptions on compound growth rate of revenue, discount
rate and terminal growth rate are consistent with external information sources.
The fluctuation of the compound growth rate of revenue during the Relevant Periods is
mainly attributed to the fact that Lynway Vision was in its initial stage in 2021 and before. With
the production of intelligent automotive vision production line and the increase of mass production
orders, Lynway Vision had achieved significant growth during the Relevant Periods. The Company
has taken a cautious estimate that the growth rate of revenue is expected to slow down compared
to the initial stage in 2021 and before.
Impairment review on the goodwill of the Group has been conducted by management as at 31
December 2021, 2022 and 2023 and 31 May 2024 according to IAS 36 “Impairment of assets”.
The headroom measured by the excess of the recoverable amount over the carrying amount of
Lynway Vision manufacturing and sales CGU was RMB80,116,000, RMB124,642,000,
RMB117,663,000 and RMB109,166,000 as at 31 December 2021, 2022 and 2023 and 31 May
2024, respectively. Based on the results of the impairment assessments, no impairment loss on the
goodwill relating to Lynway Vision manufacturing and sales CGU was recognised as at 31
December 2021, 2022 and 2023 and 31 May 2024.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-67 –


--- page 562 ---
The Group performed the sensitivity analysis based on the assumption that the pre-tax
discount rate and the compound growth rate of revenue has been changed. Had the estimated key
assumption during the forecast period been changed as below, the headroom would have decreased
to the following:
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Compound growth rate of revenue
decreases by 3% ............... 22,138 53,238 27,241 32,027
Pre-tax discount rate increases by 1% 35,221 83,557 77,693 72,004
Considering that there was sufficient headroom based on the assessment, the directors of the
Company believe that any reasonably possible change in any of the key assumptions would not
cause the carrying amount of the CGU to exceed its recoverable amount.
16. OTHER INTANGIBLE ASSETS
The Group
31 December 2021 Software
Trademarks
and patents Total
RMB’000 RMB’000 RMB’000
At 1 January 2021:
Cost .............................. 2,528 58,035 60,563
Accumulated amortisation .............. (542) (31,104) (31,646)
Net carrying amount .................. 1,986 26,931 28,917
At 1 January 2021, net of accumulated
amortisation ....................... 1,986 26,931 28,917
Acquisition of a subsidiary (note 32) ..... 5,165 10,358 15,523
Additions .......................... 2,421 — 2,421
Amortisation provided during the year .... (576) (6,923) (7,499)
At 31 December 2021, net of accumulated
amortisation ....................... 8,996 30,366 39,362
At 31 December 2021:
Cost .............................. 10,114 68,393 78,507
Accumulated amortisation .............. (1,118) (38,027) (39,145)
Net carrying amount .................. 8,996 30,366 39,362
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-68 –


--- page 563 ---
31 December 2022 Software
Trademarks
and patents Total
RMB’000 RMB’000 RMB’000
At 1 January 2022:
Cost .............................. 10,114 68,393 78,507
Accumulated amortisation .............. (1,118) (38,027) (39,145)
Net carrying amount .................. 8,996 30,366 39,362
At 1 January 2022, net of accumulated
amortisation ....................... 8,996 30,366 39,362
Additions .......................... 4,182 — 4,182
Amortisation provided during the year .... (1,723) (8,364) (10,087)
At 31 December 2022, net of accumulated
amortisation ....................... 11,455 22,002 33,457
At 31 December 2022:
Cost .............................. 14,086 68,394 82,480
Accumulated amortisation .............. (2,631) (46,392) (49,023)
Net carrying amount .................. 11,455 22,002 33,457
31 December 2023 Software
Trademarks
and patents Total
RMB’000 RMB’000 RMB’000
At 1 January 2023:
Cost .............................. 14,086 68,394 82,480
Accumulated amortisation .............. (2,631) (46,392) (49,023)
Net carrying amount .................. 11,455 22,002 33,457
At 1 January 2023, net of accumulated
amortisation ....................... 11,455 22,002 33,457
Additions .......................... 3,301 — 3,301
Amortisation provided during the year .... (2,145) (7,843) (9,988)
At 31 December 2023, net of accumulated
amortisation ...................... 12,611 14,159 26,770
At 31 December 2023:
Cost .............................. 17,212 63,302 80,514
Accumulated amortisation ............. (4,601) (49,143) (53,744)
Net carrying amount ................. 12,611 14,159 26,770
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-69 –


--- page 564 ---
31 May 2024 Software
Trademarks
and patents Total
RMB’000 RMB’000 RMB’000
At 1 January 2024:
Cost .............................. 17,212 63,302 80,514
Accumulated amortisation .............. (4,601) (49,143) (53,744)
Net carrying amount .................. 12,611 14,159 26,770
At 1 January 2024, net of accumulated
amortisation ....................... 12,611 14,159 26,770
Additions .......................... 2,892 97 2,989
Amortisation provided during the period ... (1,103) (3,030) (4,133)
At 31 May 2024, net of accumulated
amortisation ....................... 14,400 11,226 25,626
At 31 May 2024:
Cost .............................. 20,104 63,399 83,503
Accumulated amortisation .............. (5,704) (52,173) (57,877)
Net carrying amount .................. 14,400 11,226 25,626
The Company
31 December 2021 Software
Trademarks
and patents Total
RMB’000 RMB’000 RMB’000
At 1 January 2021:
Cost .............................. 2,528 58,035 60,563
Accumulated amortisation .............. (542) (31,104) (31,646)
Net carrying amount .................. 1,986 26,931 28,917
At 1 January 2021, net of accumulated
amortisation ....................... 1,986 26,931 28,917
Additions .......................... 475 — 475
Amortisation provided during the year .... (355) (6,405) (6,760)
At 31 December 2021, net of accumulated
amortisation ....................... 2,106 20,526 22,632
At 31 December 2021:
Cost .............................. 3,003 58,035 61,038
Accumulated amortisation .............. (897) (37,509) (38,406)
Net carrying amount .................. 2,106 20,526 22,632
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-70 –


--- page 565 ---
31 December 2022 Software
Trademarks
and patents Total
RMB’000 RMB’000 RMB’000
At 1 January 2022:
Cost .............................. 3,003 58,035 61,038
Accumulated amortisation .............. (897) (37,509) (38,406)
Net carrying amount .................. 2,106 20,526 22,632
At 1 January 2022, net of accumulated
amortisation ....................... 2,106 20,526 22,632
Additions .......................... 1,015 — 1,015
Amortisation provided during the year .... (398) (6,293) (6,691)
At 31 December 2022, net of accumulated
amortisation ....................... 2,723 14,233 16,956
At 31 December 2022:
Cost .............................. 3,809 58,035 61,844
Accumulated amortisation .............. (1,086) (43,802) (44,888)
Net carrying amount .................. 2,723 14,233 16,956
31 December 2023 Software
Trademarks
and patents Total
RMB’000 RMB’000 RMB’000
At 1 January 2023:
Cost .............................. 3,809 58,035 61,844
Accumulated amortisation .............. (1,086) (43,802) (44,888)
Net carrying amount .................. 2,723 14,233 16,956
At 1 January 2023, net of accumulated
amortisation ....................... 2,723 14,233 16,956
Additions .......................... 827 — 827
Amortisation provided during the year .... (450) (5,771) (6,221)
At 31 December 2023, net of accumulated
amortisation ...................... 3,100 8,462 11,562
At 31 December 2023:
Cost .............................. 4,461 52,944 57,405
Accumulated amortisation ............. (1,361) (44,482) (45,843)
Net carrying amount ................. 3,100 8,462 11,562
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-71 –


--- page 566 ---
31 May 2024 Software
Trademarks
and patents Total
RMB’000 RMB’000 RMB’000
At 1 January 2024:
Cost .............................. 4,461 52,944 57,405
Accumulated amortisation .............. (1,361) (44,482) (45,843)
Net carrying amount .................. 3,100 8,462 11,562
At 1 January 2024, net of accumulated
amortisation ....................... 3,100 8,462 11,562
Additions .......................... 246 — 246
Amortisation provided during the period ... (227) (2,166) (2,393)
At 31 May 2024, net of accumulated
amortisation ....................... 3,119 6,296 9,415
At 31 May 2024:
Cost .............................. 4,706 52,944 57,650
Accumulated amortisation .............. (1,587) (46,648) (48,235)
Net carrying amount .................. 3,119 6,296 9,415
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-72 –


--- page 567 ---
17. DEFERRED TAX
The movements in deferred tax assets of the Group during each of the Relevant Periods are
as follows:
Deferred tax assets
The Group
Tax losses
Accrued
expenses
Impairment
of financial
assets and
inventories Lease Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 ................ 916 — 8,927 — 928 10,771
Acquisition of a subsidiary ........... 3,570———— 3,570
Deferred tax (charged)/credited to the
consolidated statement of profit or loss
and other comprehensive income during
the year ..................... (1,092) — (4,910) — 682 (5,320)
At 31 December 2021 .............. 3,394 — 4,017 — 1,610 9,021
At 1 January 2022 ................ 3,394 — 4,017 — 1,610 9,021
Deferred tax credited to the consolidated
statement of profit or loss and other
comprehensive income during the year .. 26,340 169 1,712 178 302 28,701
At 31 December 2022 .............. 29,734 169 5,729 178 1,912 37,722
At 1 January 2023 ................ 29,734 169 5,729 178 1,912 37,722
Deferred tax (charged)/credited to the
consolidated statement of profit or loss
and other comprehensive income during
the year ..................... (2,803) 828 (208) (42) 1,677 (548)
At 31 December 2023 ............. 26,931 997 5,521 136 3,589 37,174
At 1 January 2024 ................ 26,931 997 5,521 136 3,589 37,174
Deferred tax (charged)/credited to the
consolidated statement of profit or loss
and other comprehensive income during
the period .................... 165 (559) 445 (40) 852 863
At 31 May 2024 ................. 27,096 438 5,966 96 4,441 38,037
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-73 –


--- page 568 ---
The Company
Tax losses
Impairment of
financial assets
and
inventories Others Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 ................ 916 8,949 927 10,792
Deferred tax (charged)/credited to the
statement of profit or loss and other
comprehensive income during the
year ......................... (916) (4,650) 683 (4,883)
At 31 December 2021 ............. — 4,299 1,610 5,909
At 1 January 2022 ................ — 4,299 1,610 5,909
Deferred tax credited/(charged) to the
statement of profit or loss and other
comprehensive income during the
year ......................... 1,664 (1,419) (248) (3)
At 31 December 2022 ............. 1,664 2,880 1,362 5,906
At 1 January 2023 ................ 1,664 2,880 1,362 5,906
Deferred tax credited/(charged) to the
statement of profit or loss and other
comprehensive income during the
year ........................ 4,443 (448) 538 4,533
At 31 December 2023 ............ 6,107 2,432 1,900 10,439
At 1 January 2024 ................ 6,107 2,432 1,900 10,439
Deferred tax credited/(charged) to the
statement of profit or loss and other
comprehensive income during the
period ....................... 328 82 315 725
At 31 May 2024 ................. 6,435 2,514 2,215 11,164
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-74 –


--- page 569 ---
Deferred tax liabilities
The Group
Appreciation of
assets acquired
in business
combination
Changes in fair
value
Accelerated
depreciation of
fixed assets Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 .............. —————
Acquisition of a subsidiary ......... 8,404——— 8,404
Deferred tax (credited)/charged to the
consolidated statement of profit or loss
and other comprehensive income
during the year ............... (176) 65 — — (111)
At 31 December 2021 ............ 8,228 65 — — 8,293
At 1 January 2022 .............. 8,228 65 — — 8,293
Deferred tax (credited)/charged to the
consolidated statement of profit or loss
and other comprehensive income
during the year ............... (1,860) (11) 2,037 200 366
At 31 December 2022 ............ 6,368 54 2,037 200 8,659
At 1 January 2023 .............. 6,368 54 2,037 200 8,659
Deferred tax (credited)/charged to the
consolidated statement of profit or loss
and other comprehensive income
during the year ............... (423) 168 (518) (45) (818)
At 31 December 2023 ............ 5,945 222 1,519 155 7,841
At 1 January 2024 .............. 5,945 222 1,519 155 7,841
Deferred tax (credited)/charged to the
consolidated statement of profit or loss
and other comprehensive income
during the period .............. (176) 57 (327) (17) (463)
At 31 May 2024 ................ 5,769 279 1,192 138 7,378
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-75 –


--- page 570 ---
The Company
Changes in fair
value
RMB’000
At 1 January 2021 ................................................ —
Deferred tax charged to the statement of profit or loss and other comprehensive
income during the year .......................................... 60
At 31 December 2021 ............................................. 60
At 1 January 2022 ................................................ 60
Deferred tax credited to the statement of profit or loss and other comprehensive
income during the year .......................................... (6)
At 31 December 2022 ............................................. 54
At 1 January 2023 ................................................ 54
Deferred tax charged to the statement of profit or loss and other comprehensive
income during the year .......................................... 143
At 31 December 2023 ............................................ 197
At 1 January 2024 ................................................ 197
Deferred tax charged to the statement of profit or loss and
other comprehensive income during the period ........................ 83
At 31 May 2024 ................................................. 280
For presentation purposes, certain deferred tax assets and liabilities have been offset in the
consolidated statements of financial position. The following is an analysis of the deferred tax
balances of the Group for financial reporting purposes:
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Net deferred tax assets recognised in
the consolidated statements of
financial position ............... 9,021 37,544 37,038 37,941
Net deferred tax liabilities recognised
in the consolidated statements of
financial position ............... 8,293 8,481 7,705 7,282
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-76 –


--- page 571 ---
As at 31 December 2021, 2022 and 2023 and 31 May 2024, the Group has tax losses arising
in Hong Kong of RMB14,324,000, RMB17,913,000, RMB23,729,000 and RMB25,632,000 that are
available indefinitely for offsetting against future taxable profits of the companies in which the
losses arose.
As at 31 December 2021, 2022 and 2023 and 31 May 2024, deferred tax assets have not been
recognised in respect of tax losses of RMB168,333,000, RMB96,228,000, RMB96,629,000 and
RMB90,158,000 arising in Chinese Mainland, respectively, which will expire in one to ten years
for offsetting against future taxable profits.
Deferred tax assets have not been recognised in respect of these losses and deductible
temporary differences as they have arisen in subsidiaries that have been loss-making for some time
and it is not considered probable that taxable profits will be available against which the tax losses
and deductible temporary differences can be utilised.
Deferred tax assets have not been recognised in respect of the following items:
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Tax losses not recognised .......... 182,657 114,141 120,358 115,790
Deductible temporary differences .... 7,560 2,927 6,010 5,064
Total .......................... 190,217 117,068 126,368 120,854
18. INVENTORIES
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Raw materials and consumables ..... 79,811 67,816 63,359 74,942
Work in progress ................. 14,644 17,060 23,918 34,339
Finished goods .................. 83,349 103,990 107,734 117,490
Contract costs ................... 10,223 22,713 21,015 23,965
Total .......................... 188,027 211,579 216,026 250,736
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-77 –


--- page 572 ---
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Raw materials and consumables ..... 67,451 31,729 24,459 31,715
Work in progress ................. 10,857 8,247 12,243 19,250
Finished goods .................. 71,348 44,635 32,532 42,064
Total .......................... 149,656 84,611 69,234 93,029
19. TRADE AND BILLS RECEIV ABLES
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables ................ 411,428 436,135 538,554 593,071
Bills receivable .................. 107,703 159,107 144,286 169,479
Impairment ..................... (10,146) (12,071) (13,381) (14,943)
Net carrying amount .............. 508,985 583,171 669,459 747,607
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables ................ 385,933 215,029 190,658 246,583
Bills receivable .................. 88,577 63,149 96,020 92,709
Impairment ..................... (9,253) (5,894) (4,949) (5,433)
Net carrying amount .............. 465,257 272,284 281,729 333,859
The Group’s trading terms with its customers are mainly on credit. The credit period is
generally 60 to 120 days. The Group seeks to maintain strict control over its outstanding
receivables and has a credit control department to minimise credit risk. Overdue balances are
reviewed regularly by senior management and credit limits attributed to customers are reviewed
once a month. Trade receivables are non-interest-bearing.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-78 –


--- page 573 ---
An ageing analysis of the trade and bills receivables as at the end of each of the Relevant
Periods (based on the invoice date and net of loss allowance) is as follows:
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 60 days .................. 270,222 360,058 431,968 522,808
61 to 120 days .................. 169,624 111,016 145,319 134,549
121 to 180 day .................. 53,681 103,994 87,911 70,752
181 days up to 1 year ............. 15,450 8,072 3,437 17,285
1 year to 2 years ................. 8 31 824 2,213
Total .......................... 508,985 583,171 669,459 747,607
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 60 days .................. 227,100 144,652 142,691 192,160
61 to 120 days .................. 168,956 56,420 73,331 86,568
121 to 180 days ................. 53,681 63,215 62,737 31,939
181 days up to 1 year ............. 15,512 7,966 2,152 20,980
1 year to 2 years ................. 8 31 818 2,212
Total .......................... 465,257 272,284 281,729 333,859
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-79 –


--- page 574 ---
The movements in the loss allowance for impairment of trade and bills receivables are as
follows:
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period ........ 7,494 10,146 12,071 13,381
Impairment losses, net ............. 3,191 1,933 1,846 1,562
Amount written off as uncollectible .. (539) (8) (536) —
At end of year/period ............. 10,146 12,071 13,381 14,943
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period ........ 7,494 9,253 5,894 4,949
Impairment losses, net ............. 2,298 (3,351) (410) 484
Amount written off as uncollectible .. (539) (8) (535) —
At end of year/period ............. 9,253 5,894 4,949 5,433
For trade and bills receivables, the Group has applied the simplified approach in IFRS 9 to
measure the loss allowance at an amount equal to lifetime ECLs. The Group determines the ECLs
on these items by using a provision matrix, estimated based on the financial quality of the debtors
and historical credit loss experience based on the days past due of the trade receivables, adjusted
as appropriate to reflect current conditions and estimates of future economic conditions. The
following table details the risk profile of trade and bills receivables:
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-80 –


--- page 575 ---
The Group
As at 31 December 2021
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 518,991 2% 10,014
1 year to 2 years ..................... 120 93% 112
2 years to 3 years .................... ———
Over 3 years ........................ 20 100% 20
Total .............................. 519,131 2% 10,146
As at 31 December 2022
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 594,694 2% 11,554
1 year to 2 years ..................... 430 93% 399
2 years to 3 years .................... 111 100% 111
Over 3 years ........................ 7 100% 7
Total .............................. 595,242 2% 12,071
As at 31 December 2023
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 681,918 2% 13,283
1 year to 2 years ..................... 915 10% 91
2 years to 3 years .................... ———
Over 3 years ........................ 7 100% 7
Total .............................. 682,840 2% 13,381
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-81 –


--- page 576 ---
As at 31 May 2024
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 760,084 2% 14,690
1 year to 2 years ..................... 2,459 10% 246
2 years to 3 years .................... ———
Over 3 years ....................... 7 100% 7
Total .............................. 762,550 2% 14,943
Certain of the Group’s bill receivables with net carrying amounts of approximately nil,
RMB18,186,000, RMB39,583,000 and RMB51,118,000 as at 31 December 2021, 2022 and 2023
and 31 May 2024, respectively, were pledged to secure bank facilities.
The Company
As at 31 December 2021
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 474,370 2% 9,121
1 year to 2 years ..................... 120 93% 112
2 years to 3 years .................... ———
Over 3 years ........................ 20 100% 20
Total .............................. 474,510 2% 9,253
As at 31 December 2022
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 277,630 2% 5,377
1 year to 2 years ..................... 430 93% 399
2 years to 3 years .................... 111 100% 111
Over 3 years ........................ 7 100% 7
Total .............................. 278,178 2% 5,894
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-82 –


--- page 577 ---
As at 31 December 2023
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 285,762 2% 4,851
1 year to 2 years ..................... 909 10% 91
2 years to 3 years .................... ———
Over 3 years ........................ 7 100% 7
Total .............................. 286,678 2% 4,949
As at 31 May 2024
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 336,827 2% 5,180
1 year to 2 years ..................... 2,458 10% 246
2 years to 3 years .................... ———
Over 3 years ........................ 7 100% 7
Total .............................. 339,292 2% 5,433
Certain of the Company’s bill receivables with net carrying amounts of approximately nil,
RMB12,351,000, RMB32,222,000 and RMB46,118,000 as at 31 December 2021, 2022 and 2023
and 31 May 2024, respectively, were pledged to secure bank facilities.
There was no significant change in the ECL rates for the time band between the years ended
31 December 2021 and 2022, mainly because no significant changes in the historical default rates
of trade receivables, economic conditions and performance, solvency and behaviour of the debtors
were noted, based on which the ECL rates are determined. As at 31 December 2021 and 2022, the
ECL rates for the time band of 1 year to 2 years are higher than those at 31 December 2023 and 31
May 2024, due to the recognition of a full loss allowance for the trade receivable from a certain
customer on an individual basis. In 2023, the account receivable from this customer was written
off, leading to a decrease in the ECL rate for the time band of 1 year to 2 years.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-83 –


--- page 578 ---
20. PREPAYMENTS, DEPOSITS AND OTHER RECEIV ABLES
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments .................... 14,596 9,270 1,301 5,692
Other receivables ................ 3,264 1,185 2,196 2,685
Value-added tax recoverable ........ 20,124 1,828 4,652 4,184
Tax repayments .................. 5,527 4,032 580 1,054
Prepaid expenses ................. 508 522 3,019 4,120
Listing expenses ................. — — 1,648 1,116
Less: Non-current portion .......... (6,562) (5,307) (181) (4,638)
Provision for impairment of other
receivables .................... — (5) (262) (266)
Current portion .................. 37,457 11,525 12,953 13,947
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments .................... 2,404 1,337 60 2,319
Other receivables ................ 97,048 58,987 87,837 99,667
Value-added tax recoverable ........ — — 3,217 468
Tax repayments .................. 5,527 4,032 580 1,054
Prepaid expense ................. 508 493 733 1,354
Listing expenses ................ — — 1,648 1,116
Less: Non-current portion .......... (23) (1,315) — (2,257)
Provision for impairment of other
receivables .................... (1,882) (1,292) (7) (10)
Current portion .................. 103,582 62,242 94,068 103,711
An impairment analysis was performed at the end of each of the Relevant Periods. The Group
has applied the general approach to provide for expected credit losses for non-trade other
receivables under IFRS 9. The Group considered the historical loss rate and adjusted it for
forward-looking macroeconomic data in calculating the expected credit loss rate.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-84 –


--- page 579 ---
21. FINANCIAL ASSETS AT FVTPL
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Current assets
Financial products, at fair value ..... 111,341 98,299 187,479 116,859
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Current assets
Financial products, at fair value ..... 50,400 20,359 41,314 71,868
The above financial assets were wealth management products issued by banks in Chinese
Mainland. They were mandatorily classified as financial assets at FVTPL as their contractual cash
flows are not solely payments of principal and interest.
22. CASH AND CASH EQUIV ALENTS AND PLEDGED DEPOSITS
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Cash and bank balances ........... 164,048 153,933 276,919 344,376
Less: Pledged deposits ............ 67,270 45,702 67,041 64,291
Cash and cash equivalents .......... 96,778 108,231 209,878 280,085
Denominated in RMB ............. 72,600 55,589 160,241 234,327
Denominated in US$ .............. 23,826 51,745 48,243 45,468
Denominated in HK$ .............. 352 897 1,394 290
Cash and cash equivalents .......... 96,778 108,231 209,878 280,085
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-85 –


--- page 580 ---
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Cash and bank balances ........... 87,823 99,194 165,751 118,328
Less: Pledged deposits ............ 34,534 10,685 10,906 3,467
Cash and cash equivalents .......... 53,289 88,509 154,845 114,861
Denominated in RMB ............. 35,588 38,425 108,323 73,331
Denominated in US$ .............. 17,701 50,084 46,522 41,530
Cash and cash equivalents .......... 53,289 88,509 154,845 114,861
The RMB is not freely convertible into other currencies, however, under Chinese Mainland’s
Foreign Exchange Control Regulations and Administration of Settlement, and Sale and Payment of
Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies
through banks authorised to conduct foreign exchange business.
Certain bank deposits are pledged for the issuance of a banker’s acceptance.
Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank
balances and pledged deposits are deposited with creditworthy banks with no recent history of
default. The carrying amounts of the cash and cash equivalents approximated to their fair values.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-86 –


--- page 581 ---
23. TRADE AND BILLS PAYABLES
An ageing analysis of the trade and bills payables as at the end of each of the Relevant
Periods was as follows:
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year ................... 479,378 504,831 792,766 860,820
1 to 2 years ..................... 510 1,927 224 3,263
2 to 3 years ..................... — 544 1,126 —
Over 3 years .................... — — 87 1,078
Total .......................... 479,888 507,302 794,203 865,161
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year ................... 371,801 154,153 236,553 247,571
1 to 2 years ..................... 193 1,078 — 286
2 to 3 years ..................... — — 1,078 —
Over 3 years .................... — — — 1,078
Total .......................... 371,994 155,231 237,631 248,935
Trade payables are non-interest-bearing and are normally settled on 90-day terms.
As at the end of each of the Relevant Periods, the carrying amounts of trade and bills
payables approximated to their fair values.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-87 –


--- page 582 ---
24. OTHER PAYABLES AND ACCRUALS
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Deposits received ................ 3,274 4,122 3,252 2,467
Payroll and welfare payable ........ 30,583 32,383 36,657 28,952
Other payables .................. 171,899 215,530 214,354 198,341
Government subsidy payable* ....... 200,000 200,000 200,000 200,000
Other tax payables ............... 11,101 4,519 8,469 11,094
Total .......................... 416,857 456,554 462,732 440,854
* Government subsidy payable represents the non-recurring subsidy stipulated in investment contracts, the attaching
conditions of which are to be fulfilled in the following periods. The expansion of Lynway Ningbo production base
in relation to an investment contract with the local government was delayed due to COVID-19 and is expected to
commence operation in the first half of 2026.
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Deposits received ................ 389 272 129 110
Payroll and welfare payable ........ 15,263 11,653 14,219 9,468
Other payables .................. 100,486 52,806 44,098 41,466
Other tax payables ............... 9,346 1,335 527 1,063
Total .......................... 125,484 66,066 58,973 52,107
Other payables are unsecured and repayable on demand.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-88 –


--- page 583 ---
25. CONTRACT LIABILITIES
The Group recognised the following revenue-related contract liabilities:
The Group
As at
1 January As at 31 December
As at
31 May
2021 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Advances from customers .... 915 7,802 13,636 13,995 13,661
The Company
As at
1 January As at 31 December
As at
31 May
2021 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Advances from customers .... 913 752 491 796 315
The Group receives payments from customers based on billing schedules as established in the
contracts. A portion of payments is usually received in advance of the performance under the
contracts. The contract liabilities comprise the prepayments received from customers, to whom the
goods or services have not yet been transferred or provided. The increase in contract liabilities as
at 31 December 2022 and 2023 was mainly due to the increase in advances received from
customers in relation to the provision of automotive light development services.
26. DEFERRED INCOME
The Group
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Government grants and subsidies .... 6,976 9,109 14,296 13,139
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-89 –


--- page 584 ---
The Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Government grants and subsidies .... 6,976 3,952 1,635 1,400
27. INTEREST-BEARING BANK BORROWINGS
The Group
31 December 2021
Effective interest
rate (%) Maturity RMB’000
Current
Current portion of long-term bank loans —
secured (b) ........................ 4.28 2022 15,181
Non-current
Long-term bank loans — secured (b) ..... 4.28 2023-2025 135,000
Total .............................. 150,181
31 December 2022
Effective interest
rate (%) Maturity RMB’000
Current
Current portion of long-term bank loans —
secured (c) ........................ 4.075~4.28 2023 119
Bank loans — secured (e) .............. 3.00 2023 21,017
Bank loans — unsecured ............... 2.95 2023 4,011
Total — current ...................... 25,147
Non-current
Long-term bank loans — secured (c) ...... 4.075~4.28 2024-2025 105,000
Total .............................. 130,147
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-90 –


--- page 585 ---
31 December 2023
Effective interest
rate (%) Maturity RMB’000
Current
Current portion of long-term bank loans —
secured (c) ........................ 3.875 2024 54
Bank loans — secured (f) .............. 2.95 2024 29,427
Total — current ...................... 29,481
Non-current
Long-term bank loans — secured (c) ...... 3.875 2025 50,472
Total .............................. 79,953
31 May 2024
Effective interest
rate (%) Maturity RMB’000
Current
Current portion of long-term bank loans —
secured (d) ........................ 3.875 2025 454
Non-current
Long-term bank loans — secured (d) ..... 3.3-3.875 2025-2029 62,110
Total .............................. 62,564
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Analysed into:
Bank loans repayable:
Within one year or on demand ..... 15,181 25,147 29,481 454
In the second year .............. 30,000 52,500 50,472 51,636
In the third year ................ 52,500 52,500 — 1,164
In the fourth to fifth years,
inclusive .................... 52,500 — — 9,310
Total .......................... 150,181 130,147 79,953 62,564
(a) The Group’s bank loans are all denominated in RMB.
(b) As at 31 December 2021, certain long-term bank loans of RMB150,181,000 were pledged by
certain leasehold land amounting to RMB16,623,000.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-91 –


--- page 586 ---
(c) As at 31 December 2022 and 2023, certain long-term bank loans of RMB105,119,000 and
RMB50,526,000 were pledged by certain buildings amounting to RMB219,167,000 and
RMB218,985,000, respectively.
(d) As at 31 May 2024, certain long-term bank loans of RMB62,654,000 were pledged by certain
buildings and machines amounting to RMB235,901,000.
(e) As at 31 December 2022, certain short-term bank loans of RMB21,017,000 were pledged by
certain buildings amounting to RMB10,214,000.
(f) As at 31 December 2023, certain short-term bank loans of RMB29,427,000 were guaranteed
by the Company.
The Company
31 December 2022
Effective interest
rate (%) Maturity RMB’000
Current
Bank loans — secured (b) .............. 3.00 2023 21,017
Bank loans — unsecured ............... 2.95 2023 4,011
Total — current ...................... 25,028
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Analysed into:
Bank loans repayable:
Within one year or on demand ...... — 25,028 — —
Notes:
(a) The Company’s bank loans are all denominated in RMB.
(b) As at 31 December 2021, 2022 and 2023 and 31 May 2024, certain short-term bank loans of nil, RMB21,017,000,
nil and nil were guaranteed by certain buildings amounting to nil, RMB10,124,000, nil and nil, respectively.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-92 –


--- page 587 ---
28. SHARE CAPITAL
The Group and the Company
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Issued:
Ordinary shares of RMB1.00 each .... 411,495 411,495 498,507 498,507
Fully paid:
Ordinary shares of RMB1.00 each .... 411,495 411,495 480,078 498,507
A summary of movements in the Company’s share capital is as follows:
Number of shares
in issue in
thousand shares Share capital
RMB’000
At 31 December 2022 and 1 January 2023 ............... 411,495 411,495
New issues for acquisition of
non-controlling interests (note 31(a)) ................. 68,583 68,583
New issues for share-based payments (a) ................ 18,429 —
At 31 December 2023 .............................. 498,507 480,078
At 31 December 2023 and 1 January 2024 ............... 498,507 480,078
Contributions from shareholders (a) .................... — 18,429
At 31 May 2024 ................................... 498,507 498,507
(a) As at 31 December 2023, 18,429,000 shares were issued for share-based payments, details of which were included
in notes 29. As at 18 January 2024, all the 18,429,000 shares issued were fully paid by cash.
29. SHARE-BASED PAYMENTS
On 31 May 2019, the Company granted the Group’s employees and directors with restricted
shares (the “ Share Incentive Scheme I ”), which are subject to restrictions on transfer, termination
and such other limitations set forth in the plans. The relevant portion of restricted shares shall vest
on the relevant vesting date, which is determined by the board of directors.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-93 –


--- page 588 ---
On 4 December 2023, the Company revised the Share Incentive Scheme I in relation to the
exercise periods, and established new employee shareholding platforms under the Share Incentive
Scheme II and Share Incentive Scheme III. Restricted shares were granted under the Share
Incentive Scheme II and Share Incentive Scheme III to the participants as awards. After the grant
of the awards, the participants became partners of employee shareholding platforms and are
indirectly interested in the incentive shares under the terms and conditions contained in the
relevant agreements.
The above shares granted to employees and directors under the Share Incentive Scheme I and
Share Incentive Scheme II shall be vested and exercisable after the completion of the public
offering of H shares by the Company and the expiration of the corresponding restriction period.
The shares granted to employees under the Share Incentive Scheme III shall be vested and
exercisable when the following conditions are met: (i) after the completion of the public offering
of H shares by the Company, (ii) the expiration of the corresponding restriction period and (iii) in
four equal tranches of 25% over a period of four years based on the annual performance.
The fair value of services received in return for shares granted to employees and directors
was measured by reference to the fair value of shares granted and the subscription price paid by
employees and directors. The recent transaction price method was used to determine the underlying
equity fair value of the Company.
Movements in the number of restricted shares for the Relevant Periods are as follows:
Y ear ended 31 December
Five months
ended 31 May
2021 2022 2023 2024
In thousand
shares
In thousand
shares
In thousand
shares
In thousand
shares
At beginning of the year/period ...... 14,105 14,105 14,105 32,534
Granted ........................ 350 250 18,429 —
Forfeited ....................... (350) (250) — —
At end of the year/period .......... 14,105 14,105 32,534 32,534
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-94 –


--- page 589 ---
Share-based payment expenses during the Relevant Periods and five months ended 31 May
2024 are as follows:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Restricted shares
granted by the
Company under the
plans ............. 1,669 1,698 3,187 724 3,101
30. OTHER RESERVES
The amounts of the Group’s reserves and the movements therein for the Relevant Periods and
five months ended 31 May 2024 are presented in the consolidated statements of changes in equity.
(a) Capital reserve
The capital reserve of the Group includes the share premium contributed by the shareholders
of the Company.
(b) Statutory surplus reserve
In accordance with the PRC Company Law and the articles of association of the subsidiaries
established in the PRC, the Group is required to appropriate 10% of its net profits after tax, as
determined under the Chinese Accounting Standards, to the statutory surplus reserve until the
reserve balance reaches 50% of its registered capital. Subject to certain restrictions set out in the
relevant PRC regulations and in the articles of association of the subsidiaries, the statutory surplus
reserve may be used either to offset losses, or to be converted to increase paid-in capital, provided
that the balance after such conversion is not less than 25% of the registered capital of the
respective entities. The reserve cannot be used for purposes other than those for which it is created
and is not distributable as cash dividends.
(c) Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising
from the translation of the financial statements of companies of which the functional currencies are
not RMB. The reserve is dealt with in accordance with the accounting policy set out in note 2.3.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-95 –


--- page 590 ---
(d) Special reserve — safety fund
Pursuant to the revised Measures for the Extraction and Use of Enterprise Safety Production
Funds issued in November 2022, the Group is required to set aside an amount to maintenance,
production and other similar funds. The funds can be used for maintenance of production and
improvements of safety and are not available for distribution to shareholders.
31. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Major non-cash transactions
During the years ended 31 December 2021, 2022, 2023 and five months ended 31 May 2024,
the Group had non-cash additions to right-of-use assets and lease liabilities of nil, RMB1,456,000,
nil and nil, respectively, in respect of lease arrangements for properties.
On 27 November 2023, the Company entered into an agreement for equity purchase by share
issue with Zhejiang Yaoning Technology Group Co., Ltd. (“ Y aoning Technology ”) to acquire a
49% equity interest in Lynway Vision in consideration of the Company’s issue and allotment of
68,582,573 shares to Yaoning Technology. On 4 December 2023, the Company and Yaoning
Technology completed the equity transfer, and Lynway Vision became wholly owned by the
Company.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-96 –


--- page 591 ---
(b) Changes in liabilities arising from financing activities
Bank loans Lease liabilities Total
RMB’000 RMB’000 RMB’000
At 1 January 2021 .................... 29,206 — 29,206
Additions .......................... 252,025 — 252,025
Payment ........................... (130,953) — (130,953)
Exchange rate adjustment .............. (241) — (241)
Interest paid ........................ (4,852) — (4,852)
Interest capitalised (note 7) ............. 2,179 — 2,179
Interest expense (note 7) ............... 2,817 — 2,817
At 31 December 2021 ................. 150,181 — 150,181
At 1 January 2022 .................... 150,181 — 150,181
Additions .......................... 43,905 1,456 45,361
Payment ........................... (65,646) (303) (65,949)
Exchange rate adjustment .............. 1,742 — 1,742
Interest paid ........................ (6,453) — (6,453)
Interest expense (note 7) ............... 6,418 27 6,445
At 31 December 2022 ................. 130,147 1,180 131,327
At 1 January 2023 .................... 130,147 1,180 131,327
Additions .......................... 29,400 — 29,400
Payment ........................... (79,526) (330) (79,856)
Interest paid ........................ (4,846) — (4,846)
Interest expense (note 7) .............. 4,778 60 4,838
At 31 December 2023 ................. 79,953 910 80,863
At 1 January 2023 .................... 130,147 1,180 131,327
Additions (unaudited) ................. 29,400 — 29,400
Payment (unaudited) .................. (24,500) — (24,500)
Interest paid (unaudited) ............... (1,435) — (1,435)
Interest expense (note 7) (unaudited) ...... 2,161 27 2,188
At 31 May 2023 (unaudited) ............ 135,773 1,207 136,980
At 1 January 2024 .................... 79,953 910 80,863
Additions .......................... 11,637 — 11,637
Payment ........................... (29,400) — (29,400)
Interest paid ........................ (878) — (878)
Interest expense (note 7) ............... 1,252 20 1,272
At 31 May 2024 ..................... 62,564 930 63,494
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
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--- page 592 ---
(c) Total cash outflow for leases
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Within operating
activities .......... 518 366 427 73 166
Within financing
activities .......... — 357 420 — —
Total .............. 518 723 847 73 166
32. BUSINESS COMBINATION
On 29 September 2021, the Company subscribed for an additional RMB4,100,000 registered
capital of Lynway Vision, which is mainly engaged in arrangements for the sale of automotive
intelligent vision products. After the subscription, the Company held approximately 51% of
Lynway Vision’s equity, and the Company was able to exercise control over Lynway Vision on 30
September 2021 (the “ Acquisition Date ”). The acquisition was made as part of the Group’s
strategy to expand its market share of automotive intelligent vision products.
The Group has elected to measure the non-controlling interest in Lynway Vision at the
non-controlling interest’s proportionate share of Lynway Vision’s identifiable net assets.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
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--- page 593 ---
The fair values of the identifiable assets and liabilities of Lynway Vision as at the Acquisition
Date were as follows:
Fair value
recognised on
acquisition
RMB’000
Property, plant and equipment ....................................... 235,959
Right-of-use assets ............................................... 55,920
Other intangible assets ............................................ 15,523
Inventories ..................................................... 21,436
Trade and bills receivables ......................................... 17,071
Prepayments, other receivables and other assets ......................... 5,082
Financial assets at fair value through profit or loss ....................... 86,300
Pledged deposits ................................................. 16,761
Cash and cash equivalents .......................................... 2,781
Trade and bills payables ........................................... (66,362)
Other payables and accruals ........................................ (239,637)
Contract liabilities ................................................ (2,746)
Deferred tax assets ............................................... 3,570
Deferred tax liabilities ............................................. (8,404)
Total identifiable net assets at fair value ............................... 143,254
Non-controlling interests ........................................... (70,182)
Goodwill on acquisition ........................................... 13,523
Satisfied by cash and equity investment ............................... 86,595
The fair values of the trade and bill receivables, and prepayment, other receivables and other
assets as at the date of acquisition amounted to RMB17,071,000 and RMB5,082,000, respectively.
The gross contractual amounts of trade and bill receivables, and prepayment, other receivables and
others were RMB17,071,000 and RMB5,082,000, respectively, and are expected to be collectible.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-99 –


--- page 594 ---
An analysis of the cash flows in respect of the acquisition is as follows:
RMB’000
Cash consideration ............................................... (16,400)
Cash and cash equivalents acquired ................................... 2,781
Net outflow of cash and cash equivalents included
in cash flows from investing activities ............................... (13,619)
(13,619)
Since the acquisition, Lynway Vision contributed RMB50,732,000 to the Group’s revenue and
caused a loss of RMB15,413,000 to the consolidated profit for the year ended 31 December 2021.
Had the combination taken place at the beginning of 2021, the revenue of the Group and the profit
of the Group for 2021 would have been RMB1,440,392,000 and RMB30,492,000, respectively.
Refer to Accountants’ Report of Lynway Vision in Appendix IB for additional information of
Lynway Vision for the pre-acquisition period.
33. PLEDGE OF ASSETS
Details of the Group’s assets pledged are included in notes 13, 14, 19 and 22 to the Historical
Financial Information at the end of each of the Relevant Periods.
34. COMMITMENTS
The Group had the following contractual commitments at the end of each of the Relevant
Periods:
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Construction in progress ........... 34,273 85,906 40,117 98,834
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-100 –


--- page 595 ---
35. PARTLY OWNED SUBSIDIARY WITH MATERIAL NON-CONTROLLING
INTERESTS
Details of the Group’s subsidiary that has material non-controlling interests are set out below:
As at 31 December As at 31 May
2021 2022 2023 2024
Percentage of equity interest held by
non-controlling interests:
Lynway Vision (Note i) ............ 49% 49% — —
(i) On 27 November 2023, the Company entered into an agreement for equity purchase by share issue with Yaoning
Technology to acquire a 49% equity interest in Lynway Vision in consideration of the Company’s issue and
allotment of 68,582,573 shares to Yaoning Technology. On 4 December 2023, the Company and Yaoning
Technology completed the equity transfer, and Lynway Vision became wholly owned by the Company.
Period from 30
September to
31 December Y ear ended 31 December
Five months
ended 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
(Loss)/Profit for the year/period
allocated to non-controlling
interests:
Lynway Vision .................. (7,896) (1,720) 5,665 —
Accumulated balances of
non-controlling interests at the
reporting date:
Lynway Vision .................. 62,286 60,566 — —
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-101 –


--- page 596 ---
The following tables illustrate the summarised financial information of the above subsidiary.
The amounts disclosed are before any inter-company eliminations:
Period from
30 September to
31 December
Y ear ended
31 December
Period from
1 January to
4 December
2021 2022 2023
RMB’000 RMB’000 RMB’000
Revenue ........................... 50,732 351,792 639,324
Total expenses ....................... (66,145) (353,049) (625,258)
(Loss)/profit for the year ............... (15,413) (1,257) 14,066
Total comprehensive (loss)/income for the
year ............................. (15,413) (1,257) 14,066
Current assets ....................... 180,484 372,977 550,111
Non-current assets .................... 279,655 348,124 401,468
Current liabilities .................... (361,075) (615,266) (825,283)
Non-current liabilities ................. (5) (8,033) (14,427)
Net cash flows from operating activities ... 501 65,489 192,935
Net cash flows from/(used in) investing
activities ......................... 19,645 (76,442) (159,301)
Net cash flows used in financing activities . — (330) (360)
Net increase/(decrease) in cash and cash
equivalents ........................ 20,146 (11,283) 33,274
36. RELATED PARTY TRANSACTIONS
(a) Names and relationships
Name of related parties Relationship with the Group
Epistar Corporation .......................... Shareholder of the Company with more
than 5% of indirect shareholding
Zhejiang Yaoning Technology Group Co., Ltd. .... Non-controlling shareholder of a
subsidiary of the Company
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-102 –


--- page 597 ---
Name of related parties Relationship with the Group
Yenrich Technology Corp. ..................... Controlled by the ultimate controlling
shareholders of Epistar Corporation
Lextar Electronics (Chuzhou) Corp. ............. Controlled by the ultimate controlling
shareholders of Epistar Corporation
Sichuan Lingji Automobile Manufacturing Co., Ltd. . Subsidiary of Geely Related Group
Zhejiang Jichuang Auto Parts Co., Ltd. ........... Subsidiary of Geely Related Group
Yuyao LYNK&CO Automobile Parts Co., Ltd. ..... Subsidiary of Geely Related Group
Ningbo Geely Automobile Research & Development
Co., Ltd. ................................
Subsidiary of Geely Related Group
Geely Automobile Research Institute (Ningbo) Co.,
Ltd. ....................................
Subsidiary of Geely Related Group
Wuhan Lotus Cars Co., Ltd. ................... Subsidiary of Geely Related Group
SCI Seating (Ningbo) Co., Ltd. ................. Subsidiary of Geely Related Group
Zhejiang Geely Business Service Company Limited Subsidiary of Geely Related Group
Shanghai Global Trading Corporation ............ Subsidiary of Geely Related Group
Geely Auto Group Co., Ltd. ................... Subsidiary of Geely Related Group
ZEEKR Automobile (Hangzhou Bay New District,
Ningbo) Co., Ltd. .........................
Subsidiary of Geely Related Group
Smart Automobile Co., Ltd. ................... Affiliate of Geely Related Group
Lynk&Co Automobile Sales Co., Ltd. ............ Subsidiary of Geely Related Group
Zhejiang Jichuang Industry Development Co., Ltd. .. Subsidiary of Geely Related Group
Shenzhen Epiklyn Co., Ltd. ................... Subsidiary of Epistar Corporation
Zhejiang Geely Automobile Parts & Components
Stock Co., Ltd. ...........................
Subsidiary of Geely Related Group
Zhejiang Jizhi New Energy Automotive Technology
Co., Ltd. ................................
Subsidiary of Geely Related Group
Chongqing LIV AN Auto Research Institute Co.,
Ltd. ....................................
Affiliate of Geely Related Group
Guangdong AscenPower Semiconductor Co., Ltd. ... Controlled by the ultimate controlling
person of the Company
Guangdong AccoPower Semiconductor Co., Ltd. ... Controlled by the ultimate controlling
person of the Company
Ningbo Jining Auto Parts Co., Ltd. .............. Subsidiary of Geely Related Group
Sichuan LYNK&CO Automobile Manufacturing Co.,
Ltd. ....................................
Subsidiary of Geely Related Group
LYNK&CO Investment Co., Ltd. ............... Subsidiary of Geely Related Group
Qizheng New Energy Automobile (Jinan) Co., Ltd. .. Subsidiary of Geely Related Group
Zhejiang Jirun Meishan Auto Parts Co., Ltd. ...... Subsidiary of Geely Related Group
Smart Automobile Sales (Nanning) Co., Ltd. ...... Affiliate of Geely Related Group
Xi’an Geely Automobile Co., Ltd. .............. Subsidiary of Geely Related Group
Ningbo Jirun Auto Parts Co., Ltd. ............... Subsidiary of Geely Related Group
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-103 –


--- page 598 ---
Name of related parties Relationship with the Group
CHINA-EURO VEHICLE TECHNOLOGY ........ Subsidiary of Geely Related Group
Chongqing Livan Automotive Manufacturing
Company Limited .........................
Subsidiary of Geely Related Group
Ningbo Hangzhou Bay Geely Auto Parts Co., Ltd. . Subsidiary of Geely Related Group
ZEEKR Intelligent Technology Holding Limited .... Subsidiary of Geely Related Group
Zhejiang ZEEKR Automobile Research &
Development Co., Ltd ......................
Subsidiary of Geely Related Group
Wuhan Geely Auto Parts Co., Ltd. .............. Subsidiary of Geely Related Group
(b) The Group had the following transactions with related parties during the Relevant Periods:
As at 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue from goods and
services (note i)
Geely Related Group ........ 50,600 350,129 705,774 211,389 326,739
Lextar Electronics (Chuzhou)
Corp. .................. 7,174 9,070 48,874 16,330 25,638
Yenrich Technology Corp. .... 8 82 0———
Lynway Vision
(note ii) ................ 1 5 3————
58,015 359,219 754,648 227,719 352,377
Purchase of goods and services
(note iii)
Geely Related Group ........ 3,378 3,633 3,787 1,187 2,078
Epistar Corporation ......... 300,432 140,407 138,657 38,851 48,958
303,180 144,040 142,444 40,038 51,036
Rental income (note iv)
Guangdong AscenPower
Semiconductor Co., Ltd .... — 1,445 1,257 813 276
Guangdong AccoPower
Semiconductor
Co., Ltd ............... 3 9 1————
391 1,445 1,257 813 276
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-104 –


--- page 599 ---
(i) The sales to the related parties were made according to the published prices and conditions offered to the major
customers of the Group. The credit terms granted to the related parties were generally in line with the credit terms
granted to other customers.
(ii) Lynway Vision was acquired by the Group on 30 September 2021 and the amount of it’s revenue was from January
to September 2021.
(iii) The purchases from the related parties were made according to the published prices and conditions offered by the
related parties to their major customers. The credit terms granted by the related parties were generally in line with
the credit terms granted to their major customers.
(iv) The rental fees with the related parties were made according to the agreed prices.
(c) Outstanding balances with related parties as at 31 December 2021, 2022 and 2023 and 31
May 2024:
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables
Yenrich Technology Corp. ......... 3 4———
Lextar Electronics (Chuzhou) Corp. .. 1,806 1,409 10,836 4,282
Lynway Vision .................. 1 4 8———
Geely Related Group .............. 43,853 163,193 216,977 229,766
Impairment ..................... (917) (3,292) (4,556) (4,681)
44,924 161,310 223,257 229,367
Prepayments, deposits and other
receivables
Geely Related Group .............. 2 9———
Trade payables
Epistar Corporation ............... 112,079 36,616 55,786 48,213
Geely Related Group .............. 1,311 1,704 1,173 —
113,390 38,320 56,959 48,213
Other payables and accruals
Geely Related Group .............. 234 52 95 3,128
Contract liabilities
Geely Related Group .............. 7,050 12,189 11,820 11,820
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-105 –


--- page 600 ---
As at 31 December 2021, 2022 and 2023 and 31 May 2024, all the remaining balances with
related parties are trade in nature.
(d) Compensation of key management personnel of the Group:
Y ear ended 31 December Five months ended 31 May
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Short term employee benefits .. 7,218 7,396 8,896 2,939 3,189
Share-based payment expenses . 1,033 1,063 2,029 846 1,363
8,251 8,459 10,925 3,785 4,552
Further details of directors’ and the chief executive’s emoluments are included in note 8 to
the Historical Financial Information.
The related party transactions in respect of Geely Group above constitute connected
transactions or continuing connected transactions as defined in Chapter 14A of the Listing Rules.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-106 –


--- page 601 ---
37. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments at the end of each of
the Relevant Periods were as follows:
As at 31 December 2021
Financial assets
Financial
assets at fair
value through
profit or loss
Financial
assets at fair
value through
other
comprehensive
income
Financial
assets at
amortised cost Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. 111,341 — — 111,341
Trade and bills receivables ......... — 19,126 489,859 508,985
Financial assets included in
prepayments, other receivables and
other assets ................... — — 2,652 2,652
Pledged deposits ................. — — 67,270 67,270
Cash and cash equivalents .......... — — 96,778 96,778
Total .......................... 111,341 19,126 656,559 787,026
Financial liabilities
Financial
liabilities at
amortised cost
RMB’000
Trade and bills payables ........................................... 479,888
Financial liabilities included in other payables and accruals ................ 371,711
Interest-bearing bank borrowings ..................................... 150,181
Total .......................................................... 1,001,780
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-107 –


--- page 602 ---
As at 31 December 2022
Financial assets
Financial
assets at fair
value through
profit or loss
Financial
assets at fair
value through
other
comprehensive
income
Financial
assets at
amortised cost Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. 98,299 — — 98,299
Trade and bills receivables ......... — 9,333 573,838 583,171
Financial assets included in
prepayments, other receivables and
other assets ................... — — 489 489
Pledged deposits ................. — — 45,702 45,702
Cash and cash equivalents .......... — — 108,231 108,231
Total .......................... 98,299 9,333 728,260 835,892
Financial liabilities
Financial
liabilities at
amortised cost
RMB’000
Trade and bills payables ........................................... 507,302
Financial liabilities included in other payables and accruals ................ 415,159
Interest-bearing bank borrowings ..................................... 130,147
Total .......................................................... 1,052,608
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-108 –


--- page 603 ---
As at 31 December 2023
Financial assets
Financial
assets at fair
value through
profit or loss
Financial
assets at fair
value through
other
comprehensive
income
Financial
assets at
amortised cost Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. 187,479 — — 187,479
Trade and bills receivables ......... — 2,925 666,534 669,459
Financial assets included in
prepayments, other receivables and
other assets ................... — — 1,094 1,094
Pledged deposits ................. — — 67,041 67,041
Cash and cash equivalents .......... — — 209,878 209,878
Total .......................... 187,479 2,925 944,547 1,134,951
Financial liabilities
Financial
liabilities at
amortised cost
RMB’000
Trade and bills payables ........................................... 794,203
Financial liabilities included in other payables and accruals ................ 416,421
Interest-bearing bank borrowings ..................................... 79,953
Total .......................................................... 1,290,577
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-109 –


--- page 604 ---
As at 31 May 2024
Financial assets
Financial
assets at fair
value through
profit or loss
Financial
assets at fair
value through
other
comprehensive
income
Financial
assets at
amortised cost Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. 116,859 — — 116,859
Trade and bills receivables ......... — 9,763 747,607 757,370
Financial assets included in
prepayments, other receivables and
other assets ................... — — 1,324 1,324
Pledged deposits ................. — — 64,291 64,291
Cash and cash equivalents .......... — — 280,085 280,085
116,859 9,763 1,093,307 1,219,929
Financial liabilities
Financial
liabilities at
amortised cost
RMB’000
Trade and bills payables ........................................... 865,161
Financial liabilities included in other payables and accruals ................ 399,226
Interest-bearing bank borrowings ..................................... 62,564
1,326,951
Transfers of financial assets
Transferred financial assets that are not derecognised in their entirety
At 31 December 2021, 2022 and 2023 and 31 May 2024, the Group endorsed certain bills
receivable in Chinese Mainland (the “ Endorsed Bills ”) with a carrying amount of
RMB84,205,000, RMB110,836,000, RMB75,351,000 and RMB84,707,000, respectively, to certain
of its suppliers in order to settle the trade payables due to such suppliers (the “ Endorsement ”). In
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-110 –


--- page 605 ---
the opinion of the directors, the Group has retained the substantial risks and rewards, which
include default risks relating to such Endorsed Bills, and accordingly, it continued to recognise the
full carrying amounts of the Endorsed Bills and the associated trade payables settled. Subsequent
to the Endorsement, the Group did not retain any rights on the use of the Endorsed Bills, including
the sale, transfer or pledge of the Endorsed Bills to any other third parties.
Transferred financial assets that are derecognised in their entirety
At 31 December 2021, 2022 and 2023 and 31 May 2024, the Group, endorsed certain bills
receivable accepted by banks in Chinese Mainland (the “ Derecognised Bills ”) to certain of its
suppliers in order to settle the trade payables due to such suppliers with a carrying amount in
aggregate of RMB35,253,000, RMB84,788,000, RMB170,569,000 and RMB151,443,000. The
Derecognised Bills had a maturity of one to six months at the end of the reporting period. In
accordance with the Law of Negotiable Instruments in the PRC, the holders of the Derecognised
Bills may exercise the right of recourse against any, several or all of the persons liable for the
Derecognised Bills, including the Group, in disregard of the order of precedence (the “ Continuing
Involvement ”). In the opinion of the directors, the risk of the Group being claimed by the holders
of the Derecognised Bills is remote in the absence of a default of the accepted banks. The Group
has transferred substantially all risks and rewards relating to the Derecognised Bills. Accordingly,
it has derecognised the full carrying amounts of the Derecognised Bills and the associated trade
payables. The maximum exposure to loss from the Group’s Continuing Involvement in the
Derecognised Bills and the undiscounted cash flows to repurchase these Derecognised Bills is
equal to their carrying amounts. In the opinion of the directors, the fair values of the Group’s
Continuing Involvement in the Derecognised Bills are not significant.
During the year ended 31 December 2021 and 2023 and five months ended 31 May 2024, the
Group has not recognised any gain or loss on the date of transfer of the Derecognised Bills. No
gains or losses were recognised from the Continuing Involvement, both during the year or
cumulatively. The endorsement has been made evenly throughout the year. During the year ended
31 December 2022, the Group has recognised the loss RMB79,000 on the date of transfer of the
Derecognised Bills.
38. FAIR V ALUE AND FAIR V ALUE HIERARCHY OF FINANCIAL INSTRUMENTS
Management has assessed that the fair values of cash and cash equivalents, trade and bills
receivables, financial assets included in other receivables, pledged deposits and other assets,
interest-bearing bank borrowings (current portion), trade and bills payables, and financial
liabilities included in other payables and accruals approximate to their carrying amounts largely
due to the short term maturities of these instruments.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-111 –


--- page 606 ---
The Group’s finance team headed by the chief finance controller/his or her designator is
responsible for determining the policies and procedures for the fair value measurement of financial
instruments. The finance team reports directly to the finance head. At each reporting date, the
finance team analyses the movements in the values of financial instruments and determines the
major inputs applied in the valuation. The valuation is reviewed and approved by the finance head.
The fair values of the financial assets and liabilities are included at the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale.
The carrying amounts and fair values of the Group’s financial instruments are as follows:
As at 31 December 2021
Carrying amounts Fair values
RMB’000 RMB’000
Financial assets
Financial assets at FVTPL ............................ 111,341 111,341
Financial liabilities
Interest-bearing bank borrowings ....................... 150,181 148,667
As at 31 December 2022
Carrying amounts Fair values
RMB’000 RMB’000
Financial assets
Financial assets at FVTPL ............................ 98,299 98,299
Financial liabilities
Interest-bearing bank borrowings ....................... 105,119 104,903
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-112 –


--- page 607 ---
As at 31 December 2023
Carrying amounts Fair values
RMB’000 RMB’000
Financial assets
Financial assets at FVTPL ............................ 187,479 187,479
Financial liabilities
Interest-bearing bank borrowings ....................... 50,526 50,179
As at 31 May 2024
Carrying amounts Fair values
RMB’000 RMB’000
Financial assets
Financial assets at FVTPL ............................ 116,859 116,859
Financial liabilities
Interest-bearing bank borrowings ....................... 62,564 61,642
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Group’s financial
instruments.
Assets measured at fair value
As at 31 December 2021
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. — 111,341 — 111,341
Trade and bills receivables ......... — 19,126 — 19,126
Total .......................... — 130,467 — 130,467
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-113 –


--- page 608 ---
As at 31 December 2022
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. — 98,299 — 98,299
Trade and bills receivables ......... — 9,333 — 9,333
Total .......................... — 107,632 — 107,632
As at 31 December 2023
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. — 187,479 — 187,479
Trade and bills receivables ......... — 2,925 — 2,925
Total .......................... — 190,404 — 190,404
As at 31 May 2024
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. — 116,859 — 116,859
Trade and bills receivables ......... — 9,763 — 9,763
— 126,622 — 126,622
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-114 –


--- page 609 ---
During the Relevant Periods, there were no transfers of fair value measurements between
Level 1 and Level 2 and no transfers into or out of Level 3 for financial assets.
39. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise interest-bearing bank loans, finance
assets at FVTPL and cash and cash equivalents. The main purpose of these financial instruments is
to raise finance for the Group’s operations. The Group has various other financial assets and
liabilities such as trade receivables and trade payables, which arise directly from its operations.
The main risks arising from the Group’s financial instruments are foreign currency risk,
credit risk and liquidity risk. The board of directors reviews and agrees policies for managing each
of these risks and they are summarised below.
Foreign currency risk
The Group has transactional currency exposures. Such exposures arise from sales or
purchases by operating units and investing and financing activities by investment holding units in
currencies other than the units’ functional currencies.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-115 –


--- page 610 ---
The following table demonstrates the sensitivity at the end of each of the Relevant Periods to
a reasonably possible change in the foreign exchange rates, with all other variables held constant,
of the Group’s profit before tax.
Increase/
(decrease) in
foreign currency
rate
Increase/
(decrease) in
profit before tax
% RMB’000
As at 31 May 2024
If the RMB weakens against the USD ................... 5 4,554
If the RMB strengthens against the USD ................. (5) (4,554)
As at 31 December 2023
If the RMB weakens against the USD .................. 5 2,760
If the RMB strengthens against the USD ................. (5) (2,760)
As at 31 December 2022
If the RMB weakens against the USD ................... 5 3,701
If the RMB strengthens against the USD ................. (5) (3,701)
As at 31 December 2021
If the RMB weakens against the USD ................... 5 853
If the RMB strengthens against the USD ................. (5) (853)
Credit risk
An impairment analysis was performed at end of each of the Relevant Periods using a
provision matrix to measure expected credit losses. The provision rates are based on ageing for
groupings of various customer segments with similar loss patterns. The calculation reflects the
probability-weighted outcome, the time value of money and reasonable and supportable
information that is available at the reporting date about past events, current conditions and
forecasts of future economic conditions.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-116 –


--- page 611 ---
Maximum exposure and year-end staging
The table below shows the credit quality and the maximum exposure to credit risk based on
the Group’s credit policy, which is mainly based on ageing information unless other information is
available without undue cost or effort, and year-end staging classification as at the end of each of
the Relevant Periods. The amounts presented are gross carrying amounts for financial assets.
As at 31 December 2021
12-month ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables ......... — — — 508,985 508,985
Financial assets included in prepayments,
other receivables and other assets .... 2,652——— 2,652
Pledged deposits ................ 67,27 0——— 67,270
Cash and cash equivalents .......... 96,77 8——— 96,778
Total ....................... 166,700 — — 508,985 675,685
As at 31 December 2022
12-month ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables ......... — — — 583,171 583,171
Financial assets included in prepayments,
other receivables and other assets .... 4 8 9——— 4 8 9
Pledged deposits ................ 45,70 2——— 45,702
Cash and cash equivalents .......... 108,23 1——— 108,231
Total ....................... 154,422 — — 583,171 737,593
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-117 –


--- page 612 ---
As at 31 December 2023
12-month ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables ......... — — — 669,459 669,459
Financial assets included in prepayments,
other receivables and other assets .... 840 — 254 — 1,094
Pledged deposits ................ 67,04 1——— 67,041
Cash and cash equivalents .......... 209,87 8——— 209,878
Total ....................... 277,759 — 254 669,459 947,472
As at 31 May 2024
12-month ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and bills receivables ......... — — — 757,370 757,370
Financial assets included in prepayments,
other receivables and other assets .... 1,070 — 254 — 1,324
Pledged deposits ................ 64,29 1——— 64,291
Cash and cash equivalents .......... 280,08 5——— 280,085
Total ....................... 345,446 — 254 757,370 1,103,070
Liquidity risk
The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.
This tool considers the maturity of both its financial instruments and financial assets (e.g., trade
and bills receivables) and projected cash flows from operations.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-118 –


--- page 613 ---
The maturity profile of the Group’s financial liabilities and lease liabilities as at end of each
of the Relevant Periods, based on the contractual undiscounted payments, is as follows:
As at 31 December 2021
Less than 1
year 1 to 3 years Over 3 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Interest-bearing bank borrowings ..... 21,408 91,743 54,093 167,244
Trade and bills payables ........... 479,888 — — 479,888
Other payables and accruals ........ 371,711 — — 371,711
Total .......................... 873,007 91,743 54,093 1,018,843
As at 31 December 2022
Less than 1
year 1 to 3 years Over 3 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Interest-bearing bank borrowings ..... 30,300 110,437 — 140,737
Lease liabilities .................. 330 661 330 1,321
Trade and bills payables ........... 507,302 — — 507,302
Other payables and accruals ........ 415,159 — — 415,159
Total .......................... 953,091 111,098 330 1,064,519
As at 31 December 2023
Less than 1
year 1 to 3 years Over 3 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Interest-bearing bank borrowings ..... 31,624 51,840 — 83,464
Lease liabilities ................. 330 661 — 991
Trade and bills payables .......... 794,203 — — 794,203
Other payables and accruals ........ 416,421 — — 416,421
Total .......................... 1,242,578 52,501 — 1,295,079
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-119 –


--- page 614 ---
As at 31 May 2024
Less than 1
year 1 to 3 years Over 3 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Interest-bearing bank borrowings ..... 2,794 53,451 10,467 66,712
Lease liabilities .................. 330 661 — 991
Trade and bills payables ........... 865,161 — — 865,161
Other payables and accruals ........ 399,226 — — 399,226
Total .......................... 1,267,511 54,112 10,467 1,332,090
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a
strong credit profile and healthy capital ratios in order to support its business and maximise
shareholders’ value.
The Group manages its capital structure and makes adjustments to it in light of changes in
economic conditions. To maintain or adjust the capital structure, the Group may adjust the
dividend payment to shareholders, return capital to shareholders or issue new shares. No changes
were made in the objectives, policies or processes for managing capital during the year.
The Group monitors capital using the debt-to-asset ratio, which is total liabilities divided by
total assets. The debt-to-asset ratios as at the end of each of the Relevant Periods were as follows:
As at 31 December As at 31 May
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Total liabilities .................. 1,069,997 1,126,587 1,373,794 1,404,806
Total assets ..................... 1,979,856 2,077,669 2,400,157 2,509,587
Debt-to-asset ratio ................ 54% 54% 57% 56%
40. EVENTS AFTER THE RELEV ANT PERIODS
There were no significant events after the end of the Relevant Periods that require additional
disclosure or adjustments.
41. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company, the Group or any of the
companies now comprising the Group in respect of any period subsequent to 31 May 2024.
APPENDIX IA ACCOUNTANTS’ REPORT OF THE GROUP
– IA-120 –


--- page 615 ---
Ernst & Young
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979 King’s Road
Quarry Bay, Hong Kong
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ACCOUNTANTS’ REPORT ON LYNW AY VISION HISTORICAL FINANCIAL
INFORMATION TO THE DIRECTORS OF APT ELECTRONICS CO., LTD. AND CITIC
SECURITIES (HONG KONG) LIMITED
Introduction
We report on the historical financial information of Lynway Vision Technology (Ningbo) Co.,
Ltd. (“ Lynway Vision ”) set out on pages IB-4 to IB-41, which comprises the statement of profit or
loss and other comprehensive income, statement of changes in equity and statement of cash flows
of Lynway Vision for the nine months ended 30 September 2021 (the “ Pre-acquisition Period ”),
and the statement of financial position of Lynway Vision as at 30 September 2021, and material
accounting policy information and other explanatory information (together, the “ Lynway Vision
Historical Financial Information ”). The Lynway Vision Historical Financial Information set out
on pages IB-4 to IB-41 forms an integral part of this report, which has been prepared for inclusion
in the prospectus of APT Electronics Co., Ltd. (the “ Company ”) dated 31 October 2024 (the
“Prospectus ”) in connection with the initial listing of the shares of the Company on the Main
Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”).
Directors’ responsibility for the Lynway Vision Historical Financial Information
The directors of Lynway Vision are responsible for the preparation of the Lynway Vision
Historical Financial Information that gives a true and fair view in accordance with the basis of
preparation set out in note 2.1 to the Lynway Vision Historical Financial Information, and for such
internal control as the directors determine is necessary to enable the preparation of the Lynway
Vision Historical Financial Information that is free from material misstatement, whether due to
fraud or error.
Reporting accountants’ responsibility
Our responsibility is to express an opinion on the Lynway Vision 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 Lynway
Vision Historical Financial Information is free from material misstatement.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-1 –


--- page 616 ---
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Lynway Vision Historical Financial Information. The procedures selected depend
on the reporting accountants’ judgement, including the assessment of risks of material
misstatement of the Lynway Vision Historical Financial Information, whether due to fraud or error.
In making those risk assessments, the reporting accountants consider internal control relevant to
the entity’s preparation of the Lynway Vision Historical Financial Information that gives a true and
fair view in accordance with the basis of preparation set out in note 2.1 to the Lynway Vision
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 Lynway Vision 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 Lynway Vision Historical Financial Information gives, for the purposes of
the accountants’ report, a true and fair view of the financial position of Lynway Vision as at 30
September 2021 and of the financial performance and cash flows of Lynway Vision for the
Pre-acquisition Period in accordance with the basis of preparation set out in note 2.1 to the
Lynway Vision Historical Financial Information.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-2 –


--- page 617 ---
REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OF
SECURITIES ON THE STOCK EXCHANGE AND THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
Adjustments
In preparing the Lynway Vision Historical Financial Information, no adjustments to the
Lynway Vision Underlying Financial Statements as defined on page IB-4 have been made.
Dividends
No dividends have been paid by Lynway Vision in respect of the Pre-acquisition Period.
Certified Public Accountants
Hong Kong
31 October 2024
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-3 –


--- page 618 ---
I LYNW AY VISION HISTORICAL FINANCIAL INFORMATION
Preparation of Lynway Vision Historical Financial Information
Set out below is the Lynway Vision Historical Financial Information which forms an integral
part of this accountants’ report.
The financial statements of Lynway Vision for the Pre-acquisition Period, on which the
Lynway Vision Historical Financial Information is based, were audited by Ernst & Young in
accordance with Hong Kong Standards on Auditing (“ HKSAs ”) issued by the HKICPA (the
“Lynway Vision Underlying Financial Statements ”).
The Lynway Vision Historical Financial Information is presented in Renminbi (“ RMB”) and
all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Nine months
ended
30 September
2021
Notes RMB’000
REVENUE ............................................ 4 52,160
Cost of sales ........................................... (65,957)
Gross loss ............................................. (13,797)
Other income and gains ................................... 4 2,153
Selling and marketing expenses ............................. (2,894)
Administrative expenses .................................. (12,873)
Research and development costs ............................ (15,486)
Other expenses ......................................... (4,671)
Finance costs ........................................... (1)
LOSS BEFORE TAX .................................... 5 (47,569)
Income tax credit ....................................... 6 61
LOSS FOR THE PERIOD ................................. (47,508)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD .......... (47,508)
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-4 –


--- page 619 ---
STATEMENT OF FINANCIAL POSITION
As at
30 September
2021
Notes RMB’000
NON-CURRENT ASSETS
Property, plant and equipment .............................. 7 230,339
Right-of-use assets ...................................... 8 38,283
Other intangible assets ................................... 9 5,165
Total non-current assets ................................... 273,787
CURRENT ASSETS
Inventories ............................................ 10 21,436
Trade receivables ....................................... 11 17,071
Prepayments, other receivables and other assets ................ 12 5,082
Financial assets at fair value through profit or loss .............. 13 86,300
Pledged deposits ........................................ 14 16,761
Cash and cash equivalents ................................. 14 2,781
Total current assets ...................................... 149,431
CURRENT LIABILITIES
Trade payables ......................................... 15 66,362
Other payables and accruals ............................... 16 239,637
Contract liabilities ....................................... 17 2,746
Total current liabilities ................................... 308,745
NET CURRENT LIABILITIES ............................. (159,314)
TOTAL ASSETS LESS CURRENT LIABILITIES ............... 114,473
Net assets ............................................. 114,473
EQUITY
Equity attributable to owners of the parent ....................
Share capital ........................................... 18 104,100
Other reserves .......................................... 19 10,373
Total equity ............................................ 114,473
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-5 –


--- page 620 ---
STATEMENT OF CHANGES IN EQUITY
Share capital
Capital
reserve *
Accumulated
losses * Total equity
RMB’000 RMB’000 RMB’000 RMB’000
(note 19)
As at 1 January 2021 ............. 100,000 100,000 (54,419) 145,581
Loss for the year ................. — — (47,508) (47,508)
Total comprehensive loss for the year . — — (47,508) (47,508)
Capital contribution by shareholders .. 4,100 12,300 — 16,400
As at 30 September 2021 .......... 104,100 112,300 (101,927) 114,473
* These reserve accounts comprise the other reserves of RMB10,373,000 in the statement of financial position as at
30 September 2021.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-6 –


--- page 621 ---
STATEMENT OF CASH FLOWS
Nine months
ended
30 September
2021
Notes RMB’000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax ......................................... (47,569)
Adjustments for:
Finance costs ......................................... 1
Interest income ....................................... 4 (567)
Depreciation of property, plant and equipment ................ 7 11,689
Amortisation of intangible assets .......................... 9 355
Depreciation of right-of-use assets ......................... 8 609
Net loss on disposal of items of property, plant and equipment ... 5
Fair value loss on financial assets at FVTPL ................. 5 407
Write-down of inventories to net realisable value ............. 5 4,317
Investment income from financial assets at FVTPL ............ 5 (1,925)
Impairment loss, net of reversal – financial assets under
the ECL model ...................................... 5 348
Increase in inventories ................................... (17,815)
Increase in trade receivables ............................... (17,420)
Decrease in prepayments, other receivables and other assets ....... 122
Increase in trade payables ................................. 36,224
Decrease in other payables and accruals ...................... (1,058)
Increase in contract liabilities .............................. 2,746
Cash generated from operations
Interest received ........................................ 567
Income taxes paid ....................................... —
Net cash flows used in operating activities .................... (28,964)
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-7 –


--- page 622 ---
Nine months
ended
30 September
2021
Notes RMB’000
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of items of property, plant and equipment .. 8
Proceeds from disposal of financial assets at FVTPL ............ 576,600
Purchases of financial assets at FVTPL ....................... (518,400)
Purchases of items of property, plant and equipment ............. (46,476)
Purchases of intangible assets .............................. (5,385)
Increase in pledged deposits ............................... (4,805)
Investment income from financial assets at FVTPL .............. 1,925
Net cash flows from investing activities ...................... 3,467
CASH FLOWS FROM FINANCING ACTIVITIES
New bank borrowings .................................... 469
Repayment of bank borrowings ............................. (469)
Interest paid ........................................... (1)
Capital contribution from shareholders ....................... 16,400
Net cash flows from financing activities ...................... 16,399
NET DECREASE IN CASH AND CASH EQUIV ALENTS (9,098)
Cash and cash equivalents at beginning of period ............... 11,879
CASH AND CASH EQUIV ALENTS AT END OF PERIOD ....... 2,781
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-8 –


--- page 623 ---
II NOTES TO THE LYNW AY VISION HISTORICAL FINANCIAL INFORMATION
1. CORPORATE INFORMATION
Lynway Vision was established with limited liability in the PRC on 26 October 2018. The
registered office of Lynway Vision is located at Ninghai County, Ningbo, Zhejiang Province,
China. Lynway Vision is primarily engaged in the design, R&D, production and sales of intelligent
automotive vision products.
Pursuant to the capital increase agreement dated 27 January 2021, signed by the Company,
Zhejiang Yaoning Technology Group Co., Ltd. (“ Y aoning Technology ”) and Lynway Vision, the
Company subscribed for an additional RMB4.1 million registered capital of Lynway Vision at a
consideration of RMB16.4 million. Upon completion of the capital subscription, the Company’s
shareholding in the Lynway Vision increased from 49% to 51%. The Company paid the capital
subscription amount of RMB16.4 million on 29 September 2021 and completed the corresponding
industrial and commercial change procedures. The Company was able to exercise control over
Lynway Vision on 30 September 2021.
2. ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
The Lynway Vision Historical Financial Information has been prepared in accordance with
International Financial Reporting Standards (“ IFRSs ”), which comprise all standards and
interpretations approved by the International Accounting Standards Board (“ IASB”). All IFRSs
effective for the accounting period commencing from 1 January 2024, together with the relevant
transitional provisions, have been early adopted by Lynway Vision in the preparation of the
Lynway Vision Historical Financial Information throughout the Pre-acquisition Period.
The Lynway Vision Historical Financial Information has been prepared under the historical
cost convention, except for certain financial assets which have been measured at fair value through
profit or loss.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-9 –


--- page 624 ---
2.2 ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING
STANDARDS
Lynway Vision has not applied the following new and revised IFRSs, that have been issued
but are not yet effective, in the Lynway Vision Historical Financial Information. Lynway Vision
intends to apply these revised and new IFRSs, if applicable, when they become effective.
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint V enture
1
Amendments to IAS 21 Lack of Exchangeability 2
Amendments to IFRS 9 and IFRS 7 Amendments to the Classification and Measurement of
Financial Instruments 3
IFRS 18 Presentation and Disclosure in Financial Statements 4
IFRS 19 Subsidiaries without Public Accountability: Disclosures 4
Notes:
1 No mandatory effective date yet determined but available for adoption
2 Effective for annual periods beginning on or after 1 January 2025
3 Effective for annual periods beginning on or after 1 January 2026
4 Effective for annual periods beginning on or after 1 January 2027
Lynway Vision is in the process of making a detailed assessment of the impact of these
revised IFRSs upon initial application. So far, Lynway Vision considers that these revised IFRSs
may result in changes in certain accounting policies and are unlikely to have a significant impact
on the Lynway Vision’s financial performance and financial position.
2.3 MATERIAL ACCOUNTING POLICY INFORMATION
Fair value measurement
Lynway Vision measures its financial instruments at fair value at the end of each reporting
period. Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either in the principal market for the asset or liability, or in the absence of a
principal market, in the most advantageous market for the asset or liability. The principal or the
most advantageous market must be accessible by Lynway Vision. The fair value of an asset or a
liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-10 –


--- page 625 ---
A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling it
to another market participant that would use the asset in its highest and best use.
Lynway Vision uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, maximising the use of relevant
observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the Lynway Vision
Historical Financial Information are categorised within the fair value hierarchy, described as
follows, based on the lowest level input that is significant to the fair value measurement as a
whole:
Level 1 — based on quoted prices (unadjusted) in active markets for identical assets or
liabilities
Level 2 — based on valuation techniques for which the lowest level input that is
significant to the fair value measurement is observable, either directly or
indirectly
Level 3 — based on valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the Lynway Vision Historical Financial
Information on a recurring basis, Lynway Vision determines whether transfers have occurred
between levels in the hierarchy by reassessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each reporting period.
Related parties
A party is considered to be related to Lynway Vision if:
(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over Lynway Vision;
(ii) has significant influence over Lynway Vision; or
(iii) is a member of the key management personnel of Lynway Vision or of a parent of
Lynway Vision;
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-11 –


--- page 626 ---
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and Lynway Vision are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent,
subsidiary or fellow subsidiary of the other entity);
(iii) the entity and Lynway Vision are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of
the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either
Lynway Vision or an entity related to Lynway Vision;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member
of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key
management personnel services to Lynway Vision or to the parent of Lynway
Vision.
Property, plant and equipment and depreciation
Property, plant and equipment, other than construction in progress, are stated at cost less
accumulated depreciation and any impairment losses. The cost of an item of property, plant 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 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 capitalised in the carrying amount of the asset as a replacement. Where
significant parts of property, plant and equipment are required to be replaced at intervals, Lynway
Vision recognises such parts as individual assets with specific useful lives and depreciates them
accordingly.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-12 –


--- page 627 ---
Depreciation is calculated on the straight-line basis to write off the cost of each item of
property, plant and equipment to its residual value over its estimated useful life. The principal
annual rates used for this purpose are as follows:
Buildings 4.75%
Machinery and others 9.50% to 31.67%
Where parts of an item of property, plant 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 methods are reviewed, and adjusted if
appropriate, at least at each financial year end.
An item of property, plant and equipment including any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss on disposal or retirement recognised in profit or loss in the year the
asset is derecognised is the difference between the net sales proceeds and the carrying amount of
the relevant asset.
Construction in progress is stated at cost less any impairment losses, and is not depreciated.
It is reclassified to the appropriate category of property, plant and equipment when completed and
ready for use.
Intangible assets (other than goodwill)
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is the fair value at the date of acquisition. The
useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with
finite lives are subsequently amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible assets may be impaired. The amortisation period
and the amortisation method for intangible assets with a finite useful life are reviewed at least at
each financial year end.
Intangible assets are stated at cost less any impairment losses and are amortised on the
straight-line basis over their estimated useful lives. The principal estimated useful lives of
intangible assets are as follows:
Categories Estimated useful lives
Software 10 years
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-13 –


--- page 628 ---
The estimated useful lives of intangible assets are determined by considering the period of
the economic benefits to Lynway Vision or the periods of validity of intangible assets protected by
the relevant laws, as well as by referring to the industry practice.
Research and development costs
All research costs are charged to profit or loss as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only
when Lynway Vision can demonstrate the technical feasibility of completing the intangible asset so
that it will be available for use or sale, its intention to complete and its ability to use or sell the
asset, how the asset will generate future economic benefits, the availability of resources to
complete the project and the ability to measure reliably the expenditure during the development.
Product development expenditure which does not meet these criteria is expensed when incurred.
Leases
Lynway Vision assesses at contract inception whether a contract is, or contains, 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.
Lynway Vision as a lessee
Lynway Vision applies a single recognition and measurement approach for all leases, except
for short-term leases and leases of low-value assets. Lynway Vision recognises lease liabilities to
make lease payments and right-of-use assets representing the right to use the underlying assets.
(a) Right-of-use assets
Right-of-use assets are recognised at the commencement date of the lease (that is the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less accumulated
depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities.
The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the commencement date less any lease
incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of
the lease terms and the estimated useful lives of the assets as follows:
Leasehold land 50 years
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-14 –


--- page 629 ---
If ownership of the leased asset transfers to Lynway Vision by the end of the lease term or
the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated
useful life of the asset.
Investments and other financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised
cost and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s
contractual cash flow characteristics and Lynway Vision’s business model for managing them. With
the exception of trade receivables that do not contain a significant financing component or for
which Lynway Vision has applied the practical expedient of not adjusting the effect of a significant
financing component, Lynway Vision initially measures a financial asset at its fair value, plus in
the case of a financial asset not at fair value through profit or loss, transaction costs. Trade
receivables that do not contain a significant financing component or for which Lynway Vision has
applied the practical expedient are measured at the transaction price determined under IFRS 15 in
accordance with the policies set out for “Revenue recognition” below.
In order for a financial asset to be classified and measured at amortised cost or fair value
through other comprehensive income, it needs to give rise to cash flows that are solely payments
of principal and interest (“ SPPI”) on the principal amount outstanding. Financial assets with cash
flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective
of the business model.
Lynway Vision’s business model for managing financial assets refers to how it manages its
financial assets in order to generate cash flows. The business model determines whether cash flows
will result from collecting contractual cash flows, selling the financial assets, or both. Financial
assets classified and measured at amortised cost are held within a business model with the
objective to hold financial assets in order to collect contractual cash flows, while financial assets
classified and measured at fair value through other comprehensive income are held within a
business model with the objective of both holding to collect contractual cash flows and selling.
Financial assets which are not held within the aforementioned business models are classified and
measured at fair value through profit or loss.
Purchases or sales of financial assets that require delivery of assets within the period
generally established by regulation or convention in the marketplace are recognised on the trade
date, that is, the date that Lynway Vision commits to purchase or sell the asset.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-15 –


--- page 630 ---
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest
method and are subject to impairment. Gains and losses are recognised in profit or loss when the
asset is derecognised, modified or impaired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial
position at fair value with net changes in fair value recognised in profit or loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e., removed from Lynway Vision’s statement of
financial position) when:
 the rights to receive cash flows from the asset have expired; or
 Lynway Vision has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material delay to a
third party under a “pass-through” arrangement; and either (a) Lynway Vision has
transferred substantially all the risks and rewards of the asset, or (b) Lynway Vision has
neither transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
When Lynway Vision has transferred its rights to receive cash flows from an asset or has
entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk
and rewards of ownership of the asset. When it has neither transferred nor retained substantially all
the risks and rewards of the asset, nor transferred control of the asset, Lynway Vision continues to
recognise the transferred asset to the extent of its continuing involvement. In that case, Lynway
Vision also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that Lynway Vision has retained.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-16 –


--- page 631 ---
Impairment of financial assets
Lynway Vision recognises an allowance for expected credit losses (“ ECLs”) for all debt
instruments not held at fair value through profit or loss (“ FVTPL ”). ECLs are based on the
difference between the contractual cash flows due in accordance with the contract and all the cash
flows that Lynway Vision 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.
General approach
ECLs are recognised in two stages. For credit exposures for which there has not been a
significant increase in credit risk since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next 12 months (a 12-month ECL). For those
credit exposures for which there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses expected over the remaining life of the
exposure, irrespective of the timing of the default (a lifetime ECL).
At each reporting date, Lynway Vision assesses whether the credit risk on a financial
instrument has increased significantly since initial recognition. When making the assessment,
Lynway Vision compares the risk of a default occurring on the financial instrument as at the
reporting date with the risk of a default occurring on the financial instrument as at the date of
initial recognition and considers reasonable and supportable information that is available without
undue cost or effort, including historical and forward-looking information.
Lynway Vision considers a financial asset in default when contractual payments are 90 days
past due. However, in certain cases, Lynway Vision may also consider a financial asset to be in
default when internal or external information indicates that Lynway Vision is unlikely to receive
the outstanding contractual amounts in full before taking into account any credit enhancements
held by Lynway Vision.
A financial asset is written off when there is no reasonable expectation of recovering the
contractual cash flows.
Financial assets at amortised cost are subject to impairment under the general approach and
they are classified within the following stages for measurement of ECLs except for trade
receivables which apply the simplified approach as detailed below.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-17 –


--- page 632 ---
Stage 1 — Financial instruments for which credit risk has not increased significantly
since initial recognition and for which the loss allowance is measured at an
amount equal to 12-month ECLs
Stage 2 — Financial instruments for which credit risk has increased significantly since
initial recognition but that are not credit-impaired financial assets and for
which the loss allowance is measured at an amount equal to lifetime ECLs
Stage 3 — Financial assets that are credit-impaired at the reporting date (but that are not
purchased or originated credit-impaired) and for which the loss allowance is
measured at an amount equal to lifetime ECLs
Simplified approach
For trade receivables that do not contain a significant financing component or when Lynway
Vision applies the practical expedient of not adjusting the effect of a significant financing
component, Lynway Vision applies the simplified approach in calculating ECLs. Under the
simplified approach, Lynway Vision does not track changes in credit risk, but instead recognises a
loss allowance based on lifetime ECLs at each reporting date. Lynway Vision has established a
provision matrix that is based on its historical credit loss experience, adjusted for forward-looking
factors specific to the debtors and the economic environment.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as loans and borrowings, or payables,
as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
Lynway Vision’s financial liabilities include trade payables, other payables and accruals.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-18 –


--- page 633 ---
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
Financial liabilities at amortised cost (trade and other payables, and borrowings)
After initial recognition, trade and other payables, and interest-bearing borrowings are
subsequently measured at amortised cost, using the effective interest rate method unless the effect
of discounting would be immaterial, in which case they are stated at cost. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as through the effective
interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the effective interest rate. The effective interest rate
amortisation is included in finance costs in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the
weighted average cost basis and, in the case of finished goods, comprises direct materials, direct
labour and an appropriate proportion of overheads. Net realisable value is based on estimated
selling prices less any estimated costs to be incurred to completion and disposal. The amount of
write-down of inventories to net realisable value and all losses of inventories are recognised as
other expenses in the period the write-down or loss occurs.
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash on hand and at
banks, and short-term highly liquid deposits with a maturity of generally within three months that
are readily convertible into known amounts of cash, subject to an insignificant risk of changes in
value and held for the purpose of meeting short-term cash commitments.
For the purpose of the statement of cash flows, cash and cash equivalents comprise cash on
hand and at banks, and short-term deposits as defined above and form an integral part of Lynway
Vision’s cash management.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-19 –


--- page 634 ---
Provisions
A provision is recognised when a present obligation (legal or constructive) has arisen as a
result of a past event and it is probable that a future outflow of resources will be required to settle
the obligation, provided that a reliable estimate can be made of the amount of the obligation.
Lynway Vision provides for warranties in relation to the sale of intelligent vision products
and systems. Provisions for these assurance-type warranties granted by Lynway Vision are initially
recognised based on sales volume and past experience of the level of repairs and returns. The
warranty-related cost is revised annually.
Income tax
Income tax comprises current tax and deferred tax. Income tax relating to items recognised
outside profit or loss is recognised outside profit or loss, either in other comprehensive income or
directly in equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or
paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of each reporting period, taking into consideration interpretations
and practices prevailing in the countries in which Lynway Vision operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end
of each reporting period between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that
the grant will be received and all attaching conditions will be complied with. When the grant
relates to an expense item, it is recognised as income on a systematic basis over the periods that
the costs, for which it is intended to compensate, are expensed.
Where the grant relates to an asset, the fair value is credited to a deferred income account
and is released to profit or loss over the expected useful life of the relevant asset by equal annual
instalments or deducted from the carrying amount of the asset and released to profit or loss by way
of a reduced depreciation charge.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-20 –


--- page 635 ---
Revenue recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of goods or services is
transferred to the customers at an amount that reflects the consideration to which Lynway Vision
expects to be entitled in exchange for those goods or services.
When the consideration in a contract includes a variable amount, the amount of consideration
is estimated to which Lynway Vision 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 recognised will not occur when the associated uncertainty with the variable
consideration is subsequently resolved.
Sale of intelligent vision products and systems
Revenue from the sale of intelligent vision products and systems is recognised at the point in
time when control of the asset is transferred to the customer, generally on delivery of the products
and systems.
Contract liabilities
A contract liability is recognised when a payment is received or a payment is due (whichever
is earlier) from a customer before Lynway Vision transfers the related services. Contract liabilities
are recognised as revenue when Lynway Vision performs under the contract (i.e., transfers control
of the related services to the customer).
Contract costs
Other than the costs which are capitalised as inventories, property, plant and equipment and
intangible assets, costs incurred to fulfil a contract with a customer are capitalised as an asset if all
of the following criteria are met:
(a) The costs relate directly to a contract or to an anticipated contract that the entity can
specifically identify.
(b) The costs generate or enhance resources of the entity that will be used in satisfying (or
in continuing to satisfy) performance obligations in the future.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-21 –


--- page 636 ---
(c) The costs are expected to be recovered.
The capitalised contract costs are amortised and charged to profit or loss on a systematic
basis that is consistent with the transfer to the customer of the goods or services to which the asset
relates. Other contract costs are expensed as incurred.
Employee benefits
Pension scheme
The employees of Lynway Vision’s subsidiaries which operate in Chinese Mainland are
required to participate in a central pension scheme operated by the local municipal government.
These subsidiaries are required to contribute a certain proportion of its payroll costs to the central
pension scheme. The contributions are charged to profit or loss as they become payable in
accordance with the rules of the central pension scheme.
Housing fund — Chinese Mainland
Lynway Vision contributes on a monthly basis to a defined contribution housing fund plan
operated by the local municipal government. Contributions to this plan by Lynway Vision are
expensed as incurred.
3. MATERIAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of Lynway Vision Historical Financial Information requires management to
make judgements, estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of
contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes
that could require a material adjustment to the carrying amounts of the assets or liabilities affected
in the future.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at
the end of each reporting period, that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year, are described below.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-22 –


--- page 637 ---
Provision for expected credit losses on trade receivables
Lynway Vision uses a provision matrix to calculate ECLs for trade receivables. The provision
rates are based on days past due for groupings of various customer segments that have similar loss
patterns.
The provision matrix is initially based on Lynway Vision’s historical observed default rates.
Lynway Vision will calibrate the matrix to adjust the historical credit loss experience with
forward-looking information. For instance, if forecast economic conditions (i.e., gross domestic
product) are expected to deteriorate over the next year which can lead to an increased number of
defaults, the historical default rates are adjusted. At each reporting date, the historical observed
default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation among historical observed default rates, forecast economic
conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in
circumstances and forecast economic conditions. Lynway Vision’s historical credit loss experience
and forecast of economic conditions may also not be representative of a customer’s actual default
in the future. The information about the ECLs on Lynway Vision’s trade receivables is disclosed in
note 11 to the Lynway Vision Historical Financial Information.
Write-down of inventories to net realisable value
Lynway Vision reviews the carrying amounts of the inventories at the end of the
Pre-acquisition Period to determine whether the inventories are carried at the lower of cost and net
realisable value. The net realisable value is estimated based on the current market situation and
historical experience on similar inventories. Any change in the assumptions would increase or
decrease the amount of inventories written down or the related reversals of write-down and affect
Lynway Vision’s financial position.
4. REVENUE, OTHER INCOME AND GAINS
An analysis of revenue is as follows:
Nine months
ended
30 September
2021
RMB’000
Revenue from contracts with customers ................................ 52,160
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-23 –


--- page 638 ---
Revenue from contracts with customers
(a) Disaggregated revenue information
Nine months
ended
30 September
2021
RMB’000
Type of goods
Automotive intelligent vision ....................................... 52,160
Geographical market
Chinese Mainland ................................................ 52,160
Timing of revenue recognition
Products transferred at a point in time ................................ 52,160
(b) Performance obligations
Information about Lynway Vision’s performance obligations is summarised below:
Sale of intelligent vision products and systems
The performance obligation is satisfied upon delivery of the intelligent vision products and
systems, and payment is generally due within 60 to 120 days from delivery, except for new
customers and intelligent automotive vision development services, where payment in advance is
normally required.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-24 –


--- page 639 ---
The amounts of transaction prices allocated to the remaining performance obligations
(unsatisfied or partially unsatisfied) for the Pre-acquisition Period are as follows:
As at
30 September
2021
RMB’000
Amounts expected to be recognised as revenue:
Within one year .................................................. 46
After one year ................................................... 2,700
Total .......................................................... 2,746
An analysis of other income and gains is as follows:
Nine months
ended
30 September
2021
RMB’000
Other income
Interest income .................................................. 567
Government grants and others ....................................... 68
Total other income ............................................... 635
Gains
Investment income and fair value change from financial assets at FVTPL ..... 1,518
Total other income and gains ....................................... 2,153
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-25 –


--- page 640 ---
5. LOSS BEFORE TAX
Nine months
ended
30 September
2021
Notes RMB’000
Cost of inventories sold .................................. 65,957
Depreciation of property, plant and equipment ................. 7 11,689
Depreciation of right-of-use assets .......................... 8 609
Amortisation of intangible assets ............................ 9 355
Research and development costs ............................ 15,486
Employee benefit expenses:
Wages, salaries and other allowances ........................ 31,764
Pension scheme contributions and social welfare ................ 3,493
Total ................................................. 35,257
Impairment losses on financial assets, net ..................... 348
Write-down of inventories to net realisable value ............... 4,317
Investment income from financial assets at FVTPL .............. (1,925)
Fair value loss on financial assets at FVTPL ................... 407
6. INCOME TAX
The income tax expense of Lynway Vision for the nine months ended 30 September 2021 is
analysed as follows:
Nine months
ended
30 September
2021
RMB’000
Deferred income tax .............................................. (61)
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-26 –


--- page 641 ---
The taxation on the Lynway Vision’s profit before taxation differs from the theoretical
amount that would arise using the taxation rate of Chinese Mainland as follows:
Nine months
ended
30 September
2021
RMB’000
Loss before tax .................................................. (47,569)
Tax at the statutory tax rate ........................................ (11,892)
Effect of different tax rate .......................................... 41
Expenses not deductible for tax ...................................... 34
Additional deductible allowance for qualified research and development costs .. (1,879)
Deductible temporary differences in unrecognised deferred tax assets ......... 1,207
Tax losses on unrecognised deferred tax assets .......................... 12,428
Tax credit at the Lynway Vision’s effective tax rate ...................... (61)
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-27 –


--- page 642 ---
7. PROPERTY, PLANT AND EQUIPMENT
30 September 2021 Buildings
Machinery and
others
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021:
Cost .......................... 15,950 61,057 135,615 212,622
Accumulated depreciation .......... (94) (1,952) — (2,046)
Net carrying amount .............. 15,856 59,105 135,615 210,576
At 1 January 2021, net of
accumulated depreciation ......... 15,856 59,105 135,615 210,576
Additions ...................... 2,687 1,940 26,838 31,465
Disposals ....................... — (13) — (13)
Transfers ....................... 114,759 33,343 (148,102) —
Depreciation provided during
the period (note 5) .............. (4,762) (6,927) — (11,689)
At 30 September 2021, net of
accumulated depreciation ......... 128,540 87,448 14,351 230,339
At 30 September 2021:
Cost .......................... 133,396 96,324 14,351 244,071
Accumulated depreciation .......... (4,856) (8,876) — (13,732)
Net carrying amount .............. 128,540 87,448 14,351 230,339
8. LEASES
Lynway Vision as a lessee
Lynway Vision has lease contracts for various items of properties used in its operations.
Leases of properties generally have lease terms of 50 years. Generally, Lynway Vision is restricted
from assigning and subleasing the leased assets outside Lynway Vision.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-28 –


--- page 643 ---
(a) Right-of-use assets
The carrying amounts of the right-of-use assets and the movements during the Pre-acquisition
Period are as follows:
Nine months ended 30 September 2021 Leasehold land
RMB’000
At the beginning of period ......................................... 38,892
Depreciation charge (note 5) ........................................ (609)
At the end of period .............................................. 38,283
(b) The amounts recognised in profit or loss in relation to leases are as follows:
Nine months
ended
30 September
2021
RMB’000
Depreciation charge of right-of-use assets (note 5) ....................... 609
9. OTHER INTANGIBLE ASSETS
30 September 2021 Software
RMB’000
At 1 January 2021:
Cost .......................................................... 151
Accumulated amortisation .......................................... (17)
Net carrying amount .............................................. 134
At 1 January 2021, net of accumulated amortisation ...................... 134
Additions ...................................................... 5,386
Amortisation provided during the period (note 5) ........................ (355)
At 30 September 2021, net of accumulated amortisation ................... 5,165
At 30 September 2021:
Cost .......................................................... 5,536
Accumulated amortisation .......................................... (371)
Net carrying amount .............................................. 5,165
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-29 –


--- page 644 ---
10. INVENTORIES
As at
30 September
2021
RMB’000
Raw materials and consumables ..................................... 5,196
Contract costs ................................................... 5,396
Finished goods .................................................. 10,844
Total .......................................................... 21,436
11. TRADE RECEIV ABLES
As at
30 September
2021
RMB’000
Trade receivables ................................................ 17,419
Impairment ..................................................... (348)
Net carrying amount .............................................. 17,071
Lynway Vision has various credit policies for different business operations depending on the
requirements of the markets and businesses. The ageing analysis of the trade receivables based on
date of the invoice and net of provision for impairment is as follows:
As at
30 September
2021
RMB’000
Within 1 year ................................................... 17,071
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-30 –


--- page 645 ---
The movements in the loss allowance for impairment of trade receivables are as follows:
As at
30 September
2021
RMB’000
At the beginning of the period ...................................... —
Impairment losses, net ............................................. 348
At the end of the period ........................................... 348
For trade receivables, Lynway Vision has applied the simplified approach in IFRS 9 to
measure the loss allowance at an amount equal to lifetime ECLs. Lynway Vision determines the
ECLs on these items by using a provision matrix, estimated based on the financial quality of the
debtors and historical credit loss experience based on the days past due of the trade receivables,
adjusted as appropriate to reflect current conditions and estimates of future economic conditions.
The following table details the risk profile of trade receivables:
Gross carrying
amount
Expected credit
loss rate
Expected credit
losses
RMB’000 RMB’000
Within 1 year ....................... 17,419 2% 348
12. PREPAYMENTS, OTHER RECEIV ABLES AND OTHER ASSETS
As at
30 September
2021
RMB’000
Value-added tax recoverable ........................................ 4,961
Prepayments and other receivables ................................... 121
Total .......................................................... 5,082
An impairment analysis was performed at the end of the Pre-acquisition Period. Lynway
Vision has applied the general approach to provide for expected credit losses for other receivables
under IFRS 9. Lynway Vision considered the historical loss rate and adjusted it for
forward-looking macroeconomic data in calculating the expected credit loss rate. At the end of the
Pre-acquisition Period, the loss allowance was assessed to be not material.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-31 –


--- page 646 ---
13. FINANCIAL ASSETS AT FAIR V ALUE THROUGH PROFIT OR LOSS
As at
30 September
2021
RMB’000
Current
Financial products, at fair value ..................................... 86,300
14. CASH AND CASH EQUIV ALENTS AND PLEDGED DEPOSITS
As at
30 September
2021
RMB’000
Cash at banks and on hand ......................................... 19,542
Less: Pledged deposits ............................................ 16,761
Cash and bank balances ........................................... 2,781
15. TRADE PAYABLES
The ageing analysis of trade payables of Lynway Vision is as follows:
As at
30 September
2021
RMB’000
Within 1 year ................................................... 64,301
1 to 2 years ..................................................... 2,061
Total .......................................................... 66,362
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-32 –


--- page 647 ---
16. OTHER PAYABLES AND ACCRUALS
As at
30 September
2021
RMB’000
Deposits received ................................................ 2,168
Payroll and welfare payable ........................................ 6,118
Other payables .................................................. 30,129
Government subsidy payable* ....................................... 200,000
Other tax payables ............................................... 1,222
Total .......................................................... 239,637
* Government subsidy payable represents the non-recurring subsidy stipulated in investment contracts, the attaching
conditions of which are to be fulfilled in the following periods.
17. CONTRACT LIABILITIES
As at
1 January
As at
30 September
2021 2021
RMB’000 RMB’000
Advances from customers ............................ — 2,746
18. SHARE CAPITAL
As at
30 September
2021
RMB’000
Issued and fully paid:
Ordinary shares of RMB1.00 each .................................... 104,100
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-33 –


--- page 648 ---
19. OTHER RESERVES
The amounts of Lynway Vision’s reserves and the movements therein for the Pre-acquisition
Period are presented in the statement of changes in equity.
(a) Capital reserve
The capital reserve of Lynway Vision includes the share premium contributed by the
shareholders of Lynway Vision.
20. COMMITMENTS
Lynway Vision had the following contractual commitments at the end of the Pre-acquisition
Period:
As at
30 September
2021
RMB’000
Construction in progress ........................................... 22,204
21. RELATED PARTY TRANSACTIONS
(a) Names and relationships
Name of related parties Relationship with the Lynway Vision
Linlux Electronics Ltd. ............................. Controlled by the Company
Geely Related Group .............................. Shareholder of Lynway Vision with
more than 5% of indirect
shareholding
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-34 –


--- page 649 ---
(b) Lynway Vision had the following transactions with related parties during the
Pre-acquisition Period:
As at
30 September
2021
RMB’000
Revenue from goods (note i)
Geely Related Group .............................................. 50,450
Purchase of goods and services (note ii)
Geely Related Group .............................................. 731
Linlux Electronics Ltd. ............................................ 153
Total .......................................................... 884
Notes:
(i) The sales to the related parties were made according to the published prices and conditions offered to the major
customers of Lynway Vision.
(ii) The purchases from the related parties were made according to the published prices and conditions offered by the
related parties to their major customers. The credit terms granted by the related parties were generally in line with
the credit terms granted to their major customers.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-35 –


--- page 650 ---
(c) Outstanding balances with related parties as at 30 September 2021:
As at
30 September
2021
RMB’000
Trade receivables
Geely Related Group .............................................. 17,419
Impairment ..................................................... (348)
Total .......................................................... 17,071
Trade payables
Geely Related Group .............................................. 1,789
Linlux Electronics Ltd. ............................................ 94
Total .......................................................... 1,883
Other payables and accruals
Geely Related Group .............................................. 1,860
Contract liabilities
Geely Related Group .............................................. 2,700
At the end of the Pre-acquisition Period, all the remaining balances with related parties are
trade in nature.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-36 –


--- page 651 ---
22. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments at the end of the
Pre-acquisition Period were as follows:
As at 30 September 2021
Financial assets
Financial assets
at fair value
through
profit or loss
Financial assets
at amortised cost Total
RMB’000 RMB’000 RMB’000
Financial assets at fair value through profit
or loss ........................... 86,300 — 86,300
Trade receivables .................... — 17,071 17,071
Financial assets included in prepayments,
other receivables and other assets ...... —4 24 2
Pledged deposits ..................... — 16,761 16,761
Cash and cash equivalents .............. – 2,781 2,781
Total .............................. 86,300 36,655 122,955
Financial liabilities
Financial
liabilities at
amortised cost
RMB’000
Trade payables .................................................. 66,362
Financial liabilities included in other payables and accruals ................ 232,123
Total .......................................................... 298,485
23. FAIR V ALUE AND FAIR V ALUE HIERARCHY OF FINANCIAL INSTRUMENTS
Management has assessed that the fair values of cash and cash equivalents, trade receivables,
financial assets included in other receivables, pledged deposits and other assets, trade payables,
and financial liabilities included in other payables and accruals approximate to their carrying
amounts largely due to the short term maturities of these instruments.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-37 –


--- page 652 ---
Lynway Vision’s finance team headed by the chief finance controller/his or her designator is
responsible for determining the policies and procedures for the fair value measurement of financial
instruments. The finance team reports directly to the finance head. At each reporting date, the
finance team analyses the movements in the values of financial instruments and determines the
major inputs applied in the valuation. The valuation is reviewed and approved by the finance head.
The fair values of the financial assets and liabilities are included at the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale.
The carrying amounts and fair values of Lynway Vision’s financial instruments are as
follows:
As at 30 September 2021
Carrying amounts Fair values
RMB’000 RMB’000
Financial assets
Financial assets at FVTPL ............................ 86,300 86,300
Fair value hierarchy
The following table illustrate the fair value measurement hierarchy of Lynway Vision’s
financial instruments.
Assets measured at fair value
As at 30 September 2021
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value through
profit or loss .................. – 86,300 — 86,300
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-38 –


--- page 653 ---
During the Pre-acquisition Period, there were no transfers of fair value measurements
between Level 1 and Level 2 and no transfers into or out of Level 3 for financial assets.
24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Lynway Vision’s principal financial instruments comprise finance assets at FVTPL and cash
and cash equivalents. The main purpose of these financial instruments is to raise finance for the
Lynway Vision’s operations. Lynway Vision has various other financial assets and liabilities such
as trade receivables and trade payables, which arise directly from its operations.
The main risks arising from Lynway Vision’s financial instruments are credit risk and
liquidity risk. The board of directors reviews and agrees policies for managing each of these risks
and they are summarised below.
Credit risk
An impairment analysis was performed at end of the Pre-acquisition Period using a provision
matrix to measure expected credit losses. The provision rates are based on ageing for groupings of
various customer segments with similar loss patterns. The calculation reflects the
probability-weighted outcome, the time value of money and reasonable and supportable
information that is available at the reporting date about past events, current conditions and
forecasts of future economic conditions.
Maximum exposure and period-end staging
The table below shows the credit quality and the maximum exposure to credit risk based on
Lynway Vision’s credit policy, which is mainly based on ageing information unless other
information is available without undue cost or effort, and year-end staging classification as at the
end of the Pre-acquisition Period. The amounts presented are gross carrying amounts for financial
assets.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-39 –


--- page 654 ---
As at 30 September 2021
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables ........ — — — 17,071 17,071
Financial assets included
in prepayments, other
receivables and other
assets ............... 4 2———4 2
Pledged deposits ........ 16,76 1——— 16,761
Cash and cash equivalents . 2,781——— 2,781
Total ................. 19,584 — — 17,071 36,655
Liquidity risk
Lynway Vision monitors its risk to a shortage of funds using a recurring liquidity planning
tool. This tool considers the maturity of both its financial instruments and financial assets (e.g.,
trade receivables) and projected cash flows from operations.
The maturity profile of Lynway Vision’s financial liabilities as at end of the Pre-acquisition
Period, based on the contractual undiscounted payments, is as follows:
As at 30 September 2021
Less than
1 year 1 to 3 years Over 3 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables .................. 66,362 — — 66,362
Other payables and accruals ........ 232,123 — — 232,123
Total .......................... 298,485 — — 298,485
Capital management
The primary objective of Lynway Vision’s capital management is to ensure that it maintains a
strong credit profile and healthy capital ratios in order to support its business and maximise
shareholders’ value.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-40 –


--- page 655 ---
Lynway Vision manages its capital structure and makes adjustments to it in light of changes
in economic conditions. To maintain or adjust the capital structure, Lynway Vision may adjust the
dividend payment to shareholders, return capital to shareholders or issue new shares. No changes
were made in the objectives, policies or processes for managing capital during the period.
25. EVENTS AFTER THE PRE-ACQUISITION PERIOD
There were no significant events after the end of the Pre-acquisition Period that require
additional disclosure or adjustments.
APPENDIX IB ACCOUNTANTS’ REPORT OF LYNW AY VISION
– IB-41 –


--- page 656 ---
The following information does not form part of the Accountants’ Report from Ernst & Young,
Certified Public Accountants, Hong Kong, the Company’ s reporting accountants, as set out in
Appendix IA and Appendix IB to this prospectus, and is included for information purposes only.
The pro forma financial information should be read in conjunction with the “Financial
Information” section in this prospectus and the Accountants’ Report set out in Appendix IA and
Appendix IB to this prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
The following unaudited pro forma adjusted consolidated net tangible assets has been
prepared in accordance with Rule 4.29 of the Hong Kong Listing Rules and with reference to
Accounting Guideline 7 “Preparation of Pro Forma Financial Information for inclusion in
Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants for
illustration purposes only, and is set out here to illustrate the effect of the Global Offering on our
consolidated net tangible assets as of May 31, 2024 as if it had taken place on May 31, 2024.
The unaudited pro forma adjusted statement of consolidated net tangible assets of the Group
attributable to the owners of the Company has been prepared for illustrative purposes only and
because of its hypothetical nature, it may not give a true picture of the financial position of the
Group had the Global Offering been completed as of May 31, 2024 or any future date. It is
prepared based on our consolidated net tangible assets attributable to the owners of the Company
as of May 31, 2024 as set out in the Accountants’ Report of the Group as set out in Appendix IA
to this prospectus, and adjusted as described below. The unaudited pro forma adjusted statement of
consolidated net tangible assets attributable to the owners of the Company does not form part of
the Accountants’ Report as set out in Appendix IA and Appendix IB to this prospectus.
Consolidated
net tangible
assets
attributable
to owners of
the Company
as at May
31, 2024
Estimated
net proceeds
from the
Global
Offering
Unaudited
pro forma
adjusted
consolidated
net tangible
assets as at
May 31, 2024
Unaudited pro forma
adjusted consolidated net
tangible assets attributable
to owners of the Company
per Share as at
May 31, 2024
RMB’000 RMB’000 RMB’000 RMB
(HK$
equivalent)
(Note 1) (Note 2) (Note 4) (Note 4)
Based on an Offer Price of
HK$3.61 per Share ........ 1,065,632 76,687 1,142,319 2.15 2.35
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 657 ---
Notes:
(1) The consolidated net tangible assets attributable to owners of the Company as at May 31, 2024 is extracted from
“Appendix IA — Accountants’ Report of the Group”, which is based on the consolidated equity attributable to
owners of the Company as of May 31, 2024 of approximately RMB1,104,781,000, less other intangible assets and
goodwill of approximately RMB39,149,000 as of May 31, 2024.
(2) The estimated net proceeds from the Global Offering are based on the Offer Price of HK$3.61 per Share, after
deduction of the underwriting fees and other related expenses payable by the Company (excluding the listing
expense that have been charged to profit or loss during the Relevant Periods) and does not take into account of any
Shares which may be issued upon the exercise of the Over-allotment Option. The estimated net proceeds from the
Global Offering are converted from Hong Kong dollars into Renminbi at an exchange rate of HK$1.00 to
RMB0.9136 prevailing on the Latest Practicable Date.
(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is calculated based on 532,106,709
Shares in issue immediately following the completion of the Global Offering and does not take into account of any
Shares which may be issued upon the exercise of the Over-allotment Option.
(4) The unaudited pro forma adjusted consolidated net tangible assets per Share is converted into Hong Kong dollars at
an exchange rate of HK$1.00 to RMB0.9136 prevailing on the Latest Practicable Date.
(5) No adjustment has been made to reflect any trading result or other transactions of the Group entered into
subsequent to 31 May 2024.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 658 ---
B. INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong
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To the Directors of APT Electronics Co., Ltd.
We have completed our assurance engagement to report on the compilation of pro forma
financial information of APT Electronics Co., Ltd. (the “ Company ”) and its subsidiary (hereinafter
collectively referred to as the “ Group ”) by the directors of the Company (the “ Directors ”) for
illustrative purposes only. The pro forma financial information consists of the pro forma
consolidated net tangible assets as at 31 May 2024 and related notes as set out on pages II-1 to
II-2 of the prospectus dated 31 October 2024 (the “ Prospectus ”) issued by the Company (the “ Pro
Forma Financial Information ”). The applicable criteria on the basis of which the Directors have
compiled the Pro Forma Financial Information are described in Appendix II of the Prospectus.
The Pro Forma Financial Information has been compiled by the Directors to illustrate the
impact of the global offering of shares of the Company on the Group’s financial position as at 31
May 2024 as if the transaction had taken place at 31 May 2024. As part of this process,
information about the Group’s financial position has been extracted by the Directors from the
Group’s financial statements for the period ended 31 May 2024, on which an accountants’ report
has been published.
Directors’ responsibility for the Pro Forma Financial Information
The Directors are responsible for compiling the 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 (“ AG”) 7 Preparation of Pro Forma Financial Information for Inclusion in Investment
Circulars issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA”).
Our independence and quality control
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 behavior.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 659 ---
Our firm applies Hong Kong Standard on Quality Management 1 Quality Management for
Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related
Services Engagements 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 accountants’ responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing
Rules, on the 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 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 accountants plan and perform procedures to obtain reasonable assurance about whether
the Directors have compiled the 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 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 Pro Forma Financial Information.
The purpose of the Pro Forma Financial Information included in the Prospectus is solely to
illustrate the impact of the global offering of shares of the Company on unadjusted financial
information of the Group as if 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 transaction would have been as presented.
A reasonable assurance engagement to report on whether the 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 Pro Forma
Financial Information provide a reasonable basis for presenting the significant effects directly
attributable to the transaction, and to obtain sufficient appropriate evidence about whether:
 the related pro forma adjustments give appropriate effect to those criteria; and
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 660 ---
 the Pro Forma Financial Information reflects the proper application of those adjustments
to the unadjusted financial information.
The procedures selected depend on the reporting accountants’ judgment, having regard to the
reporting accountants’ understanding of the nature of the Group, the transaction in respect of
which the Pro Forma Financial Information has been compiled, and other relevant engagement
circumstances.
The engagement also involves evaluating the overall presentation of the Pro Forma 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:
(a) the Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the Pro Forma Financial Information
as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Yours faithfully,
Certified Public Accountants
Hong Kong
31 October 2024
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 661 ---
TAXATION FOR HOLDERS OF SECURITIES
The taxation of income and capital gains of holders of H Shares is subject to the laws and
practices of the PRC and of jurisdictions in which holders of H Shares are residents or otherwise
subject to tax. The discussion is based upon laws and relevant interpretations currently in force as
of the Latest Practicable Date, which are subject to change or adjustment and may have
retrospective effect and therefore do not constitute any opinion or recommendation. The discussion
has no intention to cover all possible tax consequences resulting from the investment in H Shares,
nor does it take the specific circumstances of any particular investor into account, some of which
may be subject to special regulations. Accordingly, prospective investors should consult their own
tax advisors regarding the tax consequences of an investment in H Shares.
No issues on PRC or Hong Kong taxation other than income tax, capital income and profit
tax, business tax/V AT, stamp duty and estate duty are addressed in this discussion. Prospective
investors shall consult their own advisors regarding the PRC, Hong Kong and other tax
consequences of purchasing, owning and disposing of H Shares.
PRC TAXATION
Taxation on Dividends
Individual Investors
In accordance with the Individual Income Tax Law of the People’s Republic of China ( ʕശ
) (hereinafter referred to as “ IIT Law ”) issued by the Standing
Committee of the National People’s Congress on September 10, 1980, amended on August 31,
2018 and effective on January 1, 2019, and the Regulations for the Implementation of the
Individual Income Tax Law of the People’s Republic of China (ྼ
ૢԷ) amended by the State Council on December 18, 2018 and effective on January 1, 2019,
dividends paid by Chinese companies to individual investors shall generally be subject to
withholding tax at a rate of 20%. Meanwhile, according to the Notice on Issues concerning the
Implementation of Differential Individual Income Tax Policies on Dividends and Bonuses of Listed
Companies (Cai Shui [2015] No. 101) (ഄϞᗫਪᕚ
(ৌ೼[2015]101 ໮)) issued by the MOF, the SAT and the CSRC on September 7, 2015,
where an individual acquires the stocks of a listed company from public offering of the company
or from the stock market, if the stock holding period is more than one year, the dividend incomes
shall be exempted from personal income tax. Where an individual acquires the stocks of a listed
company from public offering of the company or from the stock market, if the stock holding
period is one month or less, the income from dividends shall be included into the taxable incomes
in full amount; if the stock holding period is more than one month and up to one year, 50% of the
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-1 –


--- page 662 ---
dividend income shall be included into the taxable incomes. The individual income tax rate on the
aforesaid income is imposed at the 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 applicable tax treaty. In practice, the withholding rate on non-resident
individuals’ dividends may be lower than 20% in certain circumstances, as described in “Risk
Factors — Holders of our H Shares may be subject to income tax obligations in China.”
Pursuant to the Arrangement between 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 (ᅄ೼ձԣ˟ਊဍ
τર) signed on August 21, 2006, the PRC government may impose tax on dividends paid to
a Hong Kong resident (including natural person and legal entity) by a PRC company, but such tax
shall not exceed 10% of the total amount of the dividends payable. The Fifth Protocol of the
Arrangement between 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 issued by the SAT (׵< ᅄ೼
τર >) effective on December 6, 2019 states that such provisions
shall not apply to arrangements or transactions made for the primary purpose of gaining such tax
benefit.
Enterprise Investors
In accordance with the Enterprise Income Tax Law of the People’s Republic of China ( ʕശ
) (hereinafter referred to as “ EIT Law ”) amended and effective on
December 29, 2018, and the Implementing Regulations of the Enterprise Income Tax Law of the
People’s Republic of China (ૢԷ ) amended and effective on
April 23, 2019, a non-resident enterprise is generally subject to a 10% EIT on PRC-sourced
income, including dividends received from a Chinese resident enterprise whose shares are issued
and listed in Hong Kong, if such non-resident enterprise does not have an establishment or
premises in the PRC or has an establishment or premises in the PRC but the PRC-sourced income
is not actually connected with such establishment or premises in the PRC. The aforesaid income
tax payable by non-resident enterprises shall be withheld at source, with the payer of the income
being the withholding agent. Such withholding tax may be reduced or eliminated under an
applicable treaty for the avoidance of double taxation.
The Circular of the SAT on Issues Relating to the Withholding of Enterprise Income Tax by
Chinese Resident Enterprises on Dividends Paid to Overseas Non-Chinese Resident Enterprise
Shareholders of H Shares (͏ΆุΣྤ̮ Hࢹٰ
) issued by the SAT and effective on November 6, 2008,
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-2 –


--- page 663 ---
further clarified that a Chinese resident enterprise must withhold EIT at a rate of 10% on
dividends paid to non-Chinese resident enterprise H Shareholders which are derived out of profit
generated after January 1, 2008. The Reply of the SAT on Imposition of Enterprise Income Tax on
B-share and Other Dividends of Non-resident Enterprises (͏Άุ՟੻ B
ҭᔧ ) issued by the SAT and effective on July 24, 2009
further provides that any Chinese-resident enterprise that is listed on overseas stock exchanges
must withhold EIT at a rate of 10% on dividends that it distributes to non-Chinese resident
enterprise shareholders. Such tax rates may be further modified pursuant to the tax treaty or
agreement that China has concluded with a relevant jurisdiction, where applicable.
Pursuant to the Arrangement between 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 (ᅄ೼ձԣ˟ਊဍ
τર) signed on August 21, 2006, the PRC government may impose tax on dividends paid to
a Hong Kong resident (including natural person and legal entity) by a PRC company, but such tax
shall not exceed 10% of the total amount of the dividends payable. If a Hong Kong resident
directly holds 25% or more of equity interest in a PRC company, such tax shall not exceed 5% of
the total amount of dividends payable by that PRC company. The Fifth Protocol of the
Arrangement between 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 issued by the SAT (׵< ᅄ೼
τર >) effective on December 6, 2019 states that such provisions
shall not apply to arrangements or transactions made for the primary purpose of gaining such tax
benefit.
Tax Treaties
Non-Chinese resident investors residing in countries which have entered into treaties for the
avoidance of double taxation with the PRC or residing in Hong Kong or Macau SAR may be
entitled to preferential tax rates on dividends from the PRC company. The PRC has entered into
arrangements for the avoidance of double taxation with Hong Kong and Macau SAR, respectively,
and has entered into treaties for the avoidance of double taxation with certain other countries,
including but not limited to Australia, Canada, France, Germany, Japan, Malaysia, Netherlands,
Singapore, the United Kingdom and the United States. A non-Chinese resident enterprise which is
entitled to a preferential tax rate under a relevant income tax treaty or arrangement may apply to
the PRC tax authorities for a refund of the difference between the amount of tax withheld and tax
computed based on the treaty rate.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-3 –


--- page 664 ---
Taxation on Gains from Share Transfer
Individual Investors
In accordance with the IIT Law and its implementation rules, individuals are subject to
individual income tax at the rate of 20% on gains realized on the sale of equity interests in
Chinese resident enterprises. Under the Circular of the MOF and SAT on Declaring that Individual
Income Tax Continues to Be Exempted over Individual Income from Transfer of Shares (Cai Shui
Zi [1998] No. 61) (ஷ
(ৌ೼ο[1998]61 ໮)) (hereinafter referred to as “ No. 61 Circular ”) issued by the MOF and
SAT on March 30, 1998, from January 1, 1997, gains of individuals from the transfer of shares of
listed companies continue to be exempted from individual income tax. According to Announcement
about the Catalog of Preferential Individual Income Tax Policies with Continued Effect (MOF and
SAT Announcement [2018] No. 177) (݁
ʮѓ (௅e೼ਕᐼ҅ʮѓ [2018]177 ໮)) issued by the MOF and SAT on December
29, 2018, the No. 61 Circular will continue to be effective.
Enterprise Investors
In accordance with the EIT Law and its implementation rules, a non-Chinese resident
enterprise is generally subject to EIT at the rate of 10% with respect to PRC-sourced income,
including gains derived from the disposition of shares in a Chinese resident enterprise, if it does
not have an establishment or premises in the PRC or has an establishment or premises in the PRC
but the PRC-sourced income is not actually connected with such establishment or premises in the
PRC. The aforesaid income tax payable by non-resident enterprises shall be withheld at source,
with the payer of the income being the withholding agent. Such tax may be reduced or eliminated
under applicable tax treaties or arrangements.
Taxation Policy of Shanghai-Hong Kong Stock Connect
Under the Notice of the Ministry of Finance, the State Administration of Taxation and the
China Securities Regulatory Commission on the Tax Policies Related to the Pilot Program of the
Shanghai-Hong Kong Stock Connect (Cai Shui [2014] No. 81) (೼ਕᐼ҅eʕ਷ᗇ
 ( ৌ೼
[2014]81 ໮)) which came into effect on November 17, 2014, for dividends and bonus obtained by
mainland individual investors investing in H shares listed on the Hong Kong Stock Exchange
through Shanghai-Hong Kong Stock Connect, the H-share companies shall apply to CSDC for
provision by CSDC to the H-share companies register of mainland individual investors, and the
H-share companies shall withhold individual income tax at the rate of 20%.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
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Gains on price difference from transfer of shares derived by mainland enterprise investors
from investing in shares listed on the Hong Kong Stock Exchange through Shanghai-Hong Kong
Stock Connect are included in their total income and subject to enterprise income tax according to
law. In particular, EIT will be exempted according to law for dividend and bonus income obtained
by mainland resident enterprises which hold H shares for at least 12 consecutive months. For
dividend and bonus income obtained by mainland enterprises, the H-share companies will not
withhold dividend and bonus income tax for mainland enterprises. The tax payable shall be
declared and paid by the enterprises themselves.
Taxation Policy of Shenzhen-Hong Kong Stock Connect
Under the Notice on the Tax Policies Related to the Pilot Program of the Shenzhen-Hong
Kong Stock Connect (Cai Shui [2016] No. 127) (ʝᑌʝஷዚՓ༊ᓃϞᗫ
(ৌ೼[2016]127 ໮)) which came into effect on December 5, 2016, for dividends
and bonus obtained by mainland individual investors investing in H shares listed on the Hong
Kong Stock Exchange through Shenzhen-Hong Kong Stock Connect, the H-share companies shall
apply to CSDC for provision by CSDC to the H-share companies register of mainland individual
investors, and individual income tax shall be withheld by H-share companies at the tax rate of
20%.
Transfer spread income derived by mainland enterprises from investing in shares listed on the
Hong Kong Stock Exchange through Shenzhen-Hong Kong Stock Connect are included in their
total income and subject to enterprise income tax according to law. In particular, EIT will be
exempted according to law for dividend and bonus income obtained by mainland resident
enterprises which hold H shares for at least 12 consecutive months. For dividend and bonus
income obtained by mainland enterprises, the H-share companies will not withhold dividend and
bonus income tax for mainland enterprises. The tax payable shall be declared and paid by the
enterprises themselves.
PRC Stamp Duty
Under the Stamp Tax Law of the People’s Republic of China ()
which came into effect on July 1, 2022, (i) the entities and individuals that conclude taxable
vouchers or conduct securities trading within the territory of the People’s Republic of China are
taxpayers of stamp tax, and shall pay PRC stamp tax; (ii) the entities and individuals that conclude
outside the territory of the People’s Republic of China the taxable vouchers that are used inside
China shall pay PRC stamp tax.
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Estate Duty
The PRC currently has not imposed any estate duty.
EIT
Under the EIT Law, the EIT rate in the PRC is 25% and is in line with the rate applicable to
foreign investment enterprises and foreign enterprises.
According to the Measures for the Administration of Recognition of High and New
Technology Enterprises (), which was promulgated by the Ministry
of Science and Technology, the Ministry of Finance and the State Administration of Taxation on
April 14, 2008, amended on January 29, 2016 and became effective on January 1, 2016, an
enterprise recognized as a high and new technology enterprise may apply for a preferential
enterprise income tax rate of 15% pursuant to the relevant requirements of the EIT Law. According
to the Notice on Promoting Nationwide the Enterprise Income Tax Policies for Advanced
Technology Service Enterprises Across the Country (ഄપᄿ
), which was promulgated by the Ministry of Finance, the State Administration
of Taxation, the Ministry of Commerce, the Ministry of Science and Technology and the NDRC on
November 2, 2017 and became effective on January 1, 2018 (with the stipulated relevant
Preferential Policies for Enterprise Income Tax implemented from January 1, 2017), the enterprise
income tax shall be levied on certified advanced technology service enterprises at a reduced tax
rate of 15% across the country. The portion of the employee educational expenses of a certified
advanced technology service enterprise not exceeding 8% of its total salaries and wages shall be
allowed to be deducted in calculating its taxable income; and the excess portion shall be allowed
to be carried forward to the subsequent tax years for deduction.
Pursuant to the Circular of the MOF and SAT on the Preferential Policies for Enterprise
Income Tax in Guangzhou Nansha (Cai Shui [2022] No. 40) (ӍΆุ
(ৌ೼[2022]40 ໮)), which was published on November 3, 2022 and
implemented on January 1, 2022, a reduced EIT rate of 15% shall apply to qualified enterprises in
the encouraged industries located in Nansha pioneering areas.
V alue-added Tax
Before August 2013 and pursuant to applicable Mainland China tax regulations, any entity or
individual conducting business in the service industry is generally required to pay a business tax at
the rate of 5% on the revenue generated from providing services. However, if the services
provided are related to technology development and transfer, the business tax may be exempted
subject to approval by the relevant tax authorities.
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In November 2011, MOF and SAT promulgated the Pilot Plan for Imposition of Value-Added
Tax to Replace Business Tax (). In May and December 2013, April
2014, March 2016 and July 2017, MOF and SAT promulgated five circulars to further expand the
scope of services that are to be subject to V AT instead of business tax. Pursuant to these tax rules,
from August 1, 2013, V AT was imposed to replace the business tax in certain service industries,
including technology services and advertising services, and from May 1, 2016, V AT replaced
business tax in all industries, on a nationwide basis. On November 19, 2017, the State Council
further amended the Provisional Regulations of the People’s Republic of China on Value-Added
Tax (೼ᅲБૢԷ) to reflect the normalization of the pilot program. The
V AT rates generally applicable are simplified as 17%, 11%, 6% and 0%, and the V AT rate
applicable to the small-scale taxpayers is 3%. Unlike business tax, a taxpayer is allowed to offset
the qualified input V AT paid on taxable purchases against the output V AT chargeable on the
revenue from services provided.
Pursuant to the Circular on Adjusting Value-Added Tax Rates (Cai Shui [2018] No. 32) ( ᗫ
(ৌ೼[2018]32 ໮)) issued by the MOF and SAT on April 4, 2018 and
effective on May 1, 2018, for taxpayer engaging in V AT taxable sales or import of goods, the
previously applicable rates of 17% and 11% shall be adjusted to 16% and 10%, respectively.
Pursuant to the Announcement on Policies Related to Deepening Value-Added Tax Reform
(ʮѓ ) issued by the MOF, SAT and General Administration of
Customs on March 20, 2019 and effective on April 1, 2019, for taxpayer engaging in V AT taxable
sales or import of goods, the previously applicable rates of 16% and 10% shall be adjusted to 13%
and 9%, respectively.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
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THE PRC LEGAL SYSTEM
The PRC legal system is based on the Constitution of the People’s Republic of China ( ʕശ
) revised and took effect on March 11, 2018 (hereinafter referred to as the
“Constitution ”) and is made up of written laws, administrative regulations, local regulations,
autonomous regulations, separate regulations, rules and regulations of State Council departments,
rules and regulations of local governments, laws of special administrative regions, international
treaties of which the PRC government is the signatory and other regulatory documents. Court
judgments do not constitute legally binding precedents, although they are used for the purposes of
judicial reference and guidance.
According to the Constitution and the Legislation Law of the People’s Republic of China
() which was last revised and published on March 13, 2023 and took
effect on March 15, 2023 (hereinafter referred to as the “ Legislation Law ”), the NPC and its
Standing Committee are empowered to exercise the legislative power of the State. The NPC has
the power to formulate and amend basic laws governing State organs, civil, criminal and other
matters. The Standing Committee of the NPC formulates and amends the laws other than those
required to be enacted by the NPC and to supplement and amend parts of the laws enacted by the
NPC during the adjournment of the NPC, provided that such supplements and amendments are not
in conflict with the basic principles of such laws.
The State Council is the highest organ of state administration and has the power to formulate
administrative regulations based on the Constitution and laws. The people’s congresses of the
provinces, autonomous regions and municipalities and their standing committees may formulate
local regulations based on the specific circumstances and actual needs of their respective
administrative areas, provided that such regulations do not contravene any provision of the
Constitution, laws or administrative regulations. The people’s congresses of cities divided into
districts and their respective standing committees may formulate local regulations on aspects such
as urban and rural construction and management, environmental protection and historical and
cultural protection based on the specific circumstances and actual needs of such cities, provided
that such local regulations do not contravene any provision of the Constitution, laws,
administrative regulations and local regulations of their respective provinces or autonomous
regions. If the law provides otherwise on the formulation of local regulations by cities divided into
districts, those provisions shall prevail. Such local regulations will become enforceable after being
reported to and approved by the standing committees of the people’s congresses of the relevant
provinces or autonomous regions. The standing committees of the people’s congresses of the
provinces or autonomous regions shall examine the legality of local regulations submitted for
approval, and such approval shall be granted within four months if they are not in conflict with the
Constitution, laws, administrative regulations and local regulations of the relevant provinces or
autonomous regions. Where, during the examination for approval of local regulations of cities
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divided into districts by the standing committees of the people’s congresses of the provinces or
autonomous regions, conflicts are identified with the rules and regulations of the people’s
governments of the provinces or autonomous regions, a decision should be made to resolve the
issue. People’s congresses of national autonomous areas have the power to enact autonomous
regulations and separate regulations in light of the political, economic and cultural characteristics
of the ethnic groups in the areas concerned.
The ministries and commissions of the State Council, PBOC, the National Audit Office and
the subordinate institutions with administrative functions directly under the State Council may
formulate departmental rules and regulations within the permissions of their respective
departments based on the laws and administrative regulations, and the decisions and orders of the
State Council. Provisions of departmental rules should be the matters related to the enforcement of
the laws and administrative regulations, and the decisions and orders of the State Council. The
people’s governments of the provinces, autonomous regions, municipalities and cities or
autonomous prefectures divided into districts may formulate rules and regulations based on the
laws, administrative regulations and local regulations of such provinces, autonomous regions and
municipalities.
The NPC has the power to amend or repeal any inappropriate laws enacted by the Standing
Committee of the NPC, and to repeal any autonomous regulations and separate rules approved by
the Standing Committee of the NPC that are in conflict with the Constitution and the Legislation
Law. The Standing Committee of the NPC has the power to repeal any administrative regulations
that are in conflict with the Constitution and the laws, and to repeal any local regulations that are
in conflict with the Constitution, the laws, and the administrative regulations, and to repeal
autonomous regulations and separate rules approved by the standing committees of the people’s
congresses of the relevant provinces, autonomous regions or municipalities directly under the
central government as being in conflict with the Constitution and the Legislation Law. The State
Council has the right to amend or repeal any inappropriate departmental and local government
regulations. The people’s congresses of the provinces, autonomous regions and municipalities
directly under the central government have the right to amend or repeal any inappropriate local
laws or regulations promulgated or approved by their respective standing committees, and the local
people’s congresses have the right to amend or repeal any inappropriate local laws or regulations
promulgated or approved by their respective standing committees. The people’s congresses of
provinces, autonomous regions and municipalities directly under the central government have the
right to amend or repeal any inappropriate local regulations promulgated or approved by their
respective standing committees. The standing committees of local people’s congresses have the
right to repeal any inappropriate rules promulgated by the people’s governments at the same level,
and the people’s governments of provinces and autonomous regions have the right to amend or
repeal any inappropriate rules promulgated by the people’s governments at lower levels.
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Pursuant to the Resolution of the Standing Committee of the NPC Providing an Improved
Interpretation of the Law (Ӕᙄ ) passed
on June 10, 1981, in cases where the scope of provisions of laws or decrees needs to be further
defined or additional stipulations need to be made, the Standing Committee of the NPC shall
provide interpretations or make stipulations by means of decrees. Issues related to the application
of laws and decrees in a court trial should be interpreted by the Supreme People’s Court, issues
related to the application of laws and decrees in a prosecution process of the procuratorate should
be interpreted by the Supreme People’s Procuratorate, and issues related to the application of laws
and decrees other than the abovementioned should be interpreted by the State Council and the
competent authorities. The State Council and its ministries and commissions are also vested with
the power to give interpretations of the administrative regulations and departmental rules which
they have promulgated. At the regional level, the power to interpret regional regulations is vested
in the regional legislative and administrative authorities which promulgate such regulations.
THE PRC JUDICIAL SYSTEM
Under the Constitution, the Law of Organization of the People’s Court of the People’s
Republic of China (2018 Revision) (ج2018ࠈࡌ)) and the Law
of Organization of the People’s Procuratorate of the People’s Republic of China (2018 Revision)
(ج2018ࠈࡌ)), the people’s courts of the PRC are divided
into the Supreme People’s Court, the local people’s courts at all levels and special people’s courts.
The local people’s courts at all levels are divided into three levels, namely, the basic people’s
courts, the intermediate people’s courts and the higher people’s courts. The basic people’s courts
may set up certain people’s tribunals based on the status of the region, population and cases. The
Supreme People’s Court shall be the highest judicial organ of the state. The Supreme People’s
Court shall supervise the administration of justice by the local people’s courts at all levels and by
the special people’s courts. The people’s courts at a higher level shall supervise the judicial work
of the people’s courts at lower levels. The people’s procuratorates of the PRC are divided into the
Supreme People’s Procuratorate, the local people’s procuratorates at all levels, Military
Procuratorates and other special people’s procuratorates. The Supreme People’s Procuratorate shall
be the highest procuratorial organ. The Supreme People’s Procuratorate shall direct the work of the
local people’s procuratorates at all levels and of the special people’s procuratorates; the people’s
procuratorates at higher levels shall direct the work of those at lower levels.
The people’s courts employ a two-tier appellate system, i.e., judgments or rulings of the
second instance at the people’s courts are final. A party may appeal against the judgment or ruling
of the first instance of a local people’s courts. The people’s procuratorate may present a protest to
the people’s courts at the next higher level in accordance with the procedures stipulated by the
laws. In the absence of any appeal by the parties and any protest by the people’s procuratorate
within the stipulated period, the judgments or rulings of the people’s courts are final. Judgments or
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rulings of the second instance of the intermediate people’s courts, the higher people’s courts and
the Supreme People’s Court and those of the first instance of the Supreme People’s Court are final.
However, if the Supreme People’s Court finds any definite errors in a legally effective final
judgment or ruling of a people’s court at any lower level, the people’s courts at the next higher
level finds any definite errors in a legally effective final judgment or ruling of the people’s court
at a lower level, or if the chief judge of a people’s court at any level finds any definite errors in a
legally effective final judgment or ruling of such court, the case can be retried according to
judicial supervision procedures.
The Civil Procedure Law of the People’s Republic of China ()
(hereinafter referred to as the “ PRC Civil Procedure Law ”) adopted on April 9, 1991, latest
amended on September 1, 2023 and took effect on January 1, 2024, prescribes the conditions for
instituting a civil action, the jurisdiction of the people’s court, the procedures for conducting a
civil action, and the procedures for enforcement of a civil judgment or ruling. All parties to a civil
action conducted within the PRC must abide by the PRC Civil Procedure Law. A civil case is
generally under the jurisdiction of the court located in the defendant’s place of domicile. As far as
civil litigation is concerned, the parties to a contract may agree in writing to choose the
jurisdiction of a people’s court at the place of domicile of the defendant, the place of performance
of the contract, the place of conclusion of the contract, the place of domicile of the plaintiff, the
place of the subject-matter, and other places which have a real connection with the dispute,
provided that any of the above does not contravene the provisions on hierarchical jurisdiction and
exclusive jurisdiction.
A foreign individual, a person without nationality, a foreign enterprise or a foreign
organization is given the same litigation rights and obligations as a citizen, a legal person or other
organizations of the PRC when initiating actions or defending against litigations at a people’s
court. Should a foreign court limit the litigation rights of PRC citizens or enterprises, a people’s
court of the PRC may apply the same limitations to the citizens or enterprises of such foreign
country. A foreign individual, a person without nationality, a foreign enterprise or a foreign
organization must engage a PRC lawyer in case he or it needs to engage a lawyer for the purpose
of initiating actions or defending against litigations at a people’s court. In accordance with the
international treaties to which the PRC is a signatory or participant or according to the principle of
reciprocity, a people’s court and a foreign court may request each other to serve documents,
conduct investigation and collect evidence and conduct other actions on its behalf. A people’s
court shall not accommodate any request made by a foreign court which will result in the violation
of sovereignty, security or public interests of the PRC.
All parties to a civil action shall perform the legally effective judgments and rulings. If any
party to a civil action refuses to abide by a judgment or ruling made by a people’s court or an
award made by an arbitration tribunal in the PRC, the other party may apply to the people’s court
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--- page 672 ---
for the enforcement of the same within two years subject to application for postponed enforcement
or revocation. Suspension or disruption of the time limit for applying for such enforcement shall
comply with the provisions of the applicable law concerning the suspension or disruption of the
time-barring of actions. If a party fails to satisfy within the stipulated period a judgment which the
court has granted an enforcement approval, the court may, upon the application of the other party,
mandatorily enforce the judgment against such party.
Where a party requests for enforcement of an effective judgment or ruling made by a people’s
court, but the opposite party or his property is not within the territory of the People’s Republic of
China, the party may directly apply to the foreign court with jurisdiction for recognition and
enforcement of the judgment or ruling, or the people’s court may, in accordance with the
provisions of international treaties to which the PRC is a signatory or in which the PRC is a
participant or according to the principle of reciprocity, request for recognition and enforcement by
the foreign court. Similarly, for an effective judgment or ruling made by a foreign court that
requires recognition and enforcement by a people’s court of the PRC, a party may directly apply to
an intermediate people’s court of the PRC with jurisdiction for recognition and enforcement of the
judgment or ruling, or the foreign court may, in accordance with the provisions of international
treaties to which its country and the PRC are signatories or in which its country is a participant or
according to the principle of reciprocity, request for recognition and enforcement by the people’s
court, unless the people’s court considers that the recognition or enforcement of such judgment or
ruling would violate the basic legal principles of the PRC, its sovereignty or national security or
would not be in social and public interest.
THE COMPANY LA W OF THE PEOPLE’S REPUBLIC OF CHINA, THE TRIAL
MEASURES FOR THE ADMINISTRATION ON OVERSEAS SECURITIES OFFERING
AND LISTING BY DOMESTIC COMPANIES AND THE GUIDELINES ON THE ARTICLES
OF ASSOCIATION OF LISTED COMPANIES
The Company Law of the People’s Republic of China ()
(hereinafter referred to as the “ PRC Company Law ”) was adopted by the Standing Committee of
the Eighth NPC at its Fifth Session on December 29, 1993 and came into effect on July 1, 1994. It
was successively amended on December 25, 1999, August 28, 2004, October 27, 2005, December
28, 2013, October 26, 2018 and December 29, 2023. The latest revision of the PRC Company Law
took effect on July 1, 2024.
On February 17, 2023, the CSRC promulgated the Trial Measures for Overseas Listing, which
took effect on March 31, 2023. The Trial Measures for Overseas Listing apply to both direct and
indirect overseas share subscription and listing of domestic enterprises, and also set out the filing
and administration methods and regulatory requirements for the overseas issuance of securities and
listing of domestic enterprises.
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On December 15, 2023, the CSRC promulgated the newly revised Guidelines on the Articles
of Association of Listed Companies (the “ Articles of Association Guidelines ”), which came into
effect on the same date. Pursuant to the Trial Measures for Overseas Listing and its supporting
Guidelines for the Application of Regulatory Rules — Overseas Issuance and Listing Category No.
1, domestic enterprises that directly issue and list overseas shall formulate articles of association
and standardize corporate governance with reference to the Articles of Association Guidelines and
other relevant provisions of the CSRC on corporate governance.
The key provisions of the PRC Company Law (2023 Revision), the Trial Measures for
Overseas Listing and the Articles of Association Guidelines currently in force are summarized
below.
GENERAL
A “joint stock limited company” (hereinafter referred to as the “ company ”) refers to a
corporate legal person incorporated in China under the PRC Company Law with independent legal
person properties and entitlements to such legal person properties. The liability of the company for
its own debts is limited to the total amount of all assets it owns and the liability of its shareholders
for the company is limited to the extent of the shares they subscribe for.
A company must conduct its business in accordance with laws as well as public and
commercial ethics. A company may invest in other limited liability companies. The liabilities of
the company to such invested companies are limited to the amount invested. Unless otherwise
provided by laws, a company cannot be the capital contributor who has the joint and several
liabilities associated with the debts of the invested enterprises.
INCORPORATION
A company may be established by promotion or subscription. A company shall have a
minimum of one but no more than 200 people as its promoters, over half of which must have a
domicile within the PRC. The registered capital of the company is the total share capital
subscribed for by all the promoters registered with the company’s registration authorities. No share
offering shall be made before the shares subscribed for by promoters are fully paid up. If laws,
administrative regulations and State Council decisions provide otherwise on paid-in registered
capital and the minimum registered capital, a company should follow such provisions.
For companies incorporated by way of promotion, the promoters shall subscribe for the
shares required to be subscribed for by them under the articles of association. Procedures relating
to the transfer of titles to non-monetary assets shall be duly completed if such assets are to be
contributed as capital. If the promoters fail to pay up monies for the shares they subscribe for, or if
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the actual value of the non monetary property used as capital contribution is significantly lower
than the subscribed shares, the other promoters shall be jointly and severally liable with the
promoter to the extent of the shortfall in capital contribution. The board of directors shall
authorize representatives to apply to the company registration authority for registration of the
establishment within 30 days after the conclusion of the inauguration meeting of the company.
Where companies are incorporated by subscription, not less than 35% of their total number of
shares must be subscribed for by the promoters, unless otherwise provided by laws or
administrative regulations. A promoter who offers shares to the public must publish a prospectus
and prepare a subscription letter to be completed, signed and sealed by subscribers, specifying the
number and amount of shares to be subscribed for and the subscribers’ addresses. The subscribers
shall pay up monies for the shares they subscribe for. Where a promoter is offering shares to the
public, such offer shall be underwritten by security companies established under PRC law, and
underwriting agreements shall be entered into. A promoter offering shares to the public shall also
enter into agreements with banks in relation to the receipt of subscription monies. The receiving
banks shall receive and keep in custody the subscription monies, issue receipts to subscribers who
have paid the subscription monies and is obliged to furnish evidence of receipt of those
subscription monies to relevant authorities in accordance with the agreement. After the
subscription monies for the share issue have been paid in full, a capital verification institution
established under PRC laws must be engaged to conduct a capital verification and furnish a
certificate thereof. The promoters shall preside over and convene an inauguration meeting within
30 days from the date of the full payment of subscription money, and shall notify the subscribers
of the date of such meeting or make an announcement 15 days before the inauguration meeting.
The inauguration meeting shall be composed of the promoters and subscribers representing a
majority of the total number of shares. The powers and functions of the inauguration meeting shall
include but not limited to adopting the Articles of Association and electing the members of the
board of directors and the supervisory committee. Resolutions on the foregoing matters at the
inauguration meeting shall be passed by a majority of the votes held by the subscribers present at
the meeting. Where the shares issued remain undersubscribed by the deadline stipulated in the
prospectus, or where the promoter fails to convene an inauguration meeting within 30 days of the
subscription monies for the shares issued being fully paid up, the subscribers may demand that the
promoters refund the subscription monies so paid together with the interest at bank rates of a
deposit for the same period. Within 30 days after the conclusion of the inauguration meeting, the
board of directors shall apply to the company registration authority for registration of the
establishment of the company. A company is formally established and has the capacity of a legal
person after approval of registration has been given by the relevant company registration authority
for industry and commerce and a business license has been issued. A joint stock limited company
established by subscription shall obtain approval for a public offering from the securities
regulatory authority of the State Council and submit relevant approval to the company registration
authority.
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A company’s promoters shall be liable for: (1) the debts and expenses incurred in the
establishment process jointly and severally if the company cannot be incorporated; (2) the
subscription monies paid by the subscribers together with interest at bank rates of deposit for the
same period jointly and severally if the company cannot be incorporated; and (3) the compensation
of any damages suffered by the company in the course of its establishment as a result of the
promoters’ fault. Pursuant to the Interim Regulations on the Administration of Share Issuance and
Trading (၍ଣᅲБૢԷ) promulgated by the State Council on April 22, 1993
(only applicable to the issuance and trading of shares and related activities in the PRC), if a
company is established by means of subscription, the promoters of such company are required to
provide signatures on the documents to ensure that they are free from any misrepresentation,
serious misleading statements or material omissions, and assume joint and several liability for such
documents.
SHARE CAPITAL
The promoters may make a capital contribution in currencies, or non-monetary assets such as
in kind or intellectual property rights or land use rights which can be appraised with monetary
value and transferred lawfully, except for assets which are prohibited from being contributed as
capital by the laws or administrative regulations. If a capital contribution is made with
non-monetary assets, a valuation and verification of the asset contributed must be carried out
without any overvaluation or undervaluation. Where the law or administrative regulations in place
have any other provisions on valuation, such provisions shall prevail.
The issuance of shares shall be conducted in a fair and equitable manner. Each share of the
same class must carry equal rights. Shares issued at the same time and within the same class must
be issued on the same conditions and at the same price. The same price per share shall be paid by
any share subscriber (whether an entity or an individual). The share offering price may be equal to
or greater than the nominal value of the share, but may not be less than the nominal value.
Under the PRC Company Law, a company issuing registered share certificates shall maintain
a shareholder registry which sets forth the following matters: (1) the name and domicile of each
shareholder; (2) the number of shares held by each shareholder; (3) the serial numbers of shares
held by each shareholder; and (4) the date on which each shareholder acquired the shares.
According to the Trial Measures for Overseas Listing, a domestic enterprise may raise funds
and pay dividends in foreign currency or RMB when listing overseas. Under certain circumstances,
such as equity incentives and the acquisition of assets through the issuance of securities, a
domestic enterprise is allowed to issue securities to specific domestic targets when it directly
issues and lists overseas. According to the Trial Measures, the shareholders of unlisted domestic
shares of a domestic enterprise that directly issues securities and is listed overseas shall comply
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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with the relevant regulations promulgated by the CSRC when applying for the conversion of such
shares to shares listed and traded on overseas trading venues, and shall authorize the domestic
enterprise to make a filing with the CSRC on their behalf, submit the filing report, a legal opinion
and other relevant materials, and provide a true, accurate, and complete information of its
shareholders and other matters. The unlisted domestic shares referred to in the preceding paragraph
represent shares issued by a domestic enterprise but not yet listed or traded on a domestic
exchange. Unlisted domestic shares shall be centrally registered and deposited with the domestic
securities depository and clearing institutions. The registration and settlement arrangements for
shares listed overseas shall be implemented in accordance with the regulations of the place of
overseas listing. Where a domestic enterprise is indirectly listed overseas, the issuer shall appoint
a major domestic business entity to file with the CSRC on its behalf.
INCREASE IN SHARE CAPITAL
Pursuant to the relevant provisions of the PRC Company Law, where a company is issuing
new shares, resolutions shall be made at the shareholders’ meeting in accordance with the articles
of association in respect of the class and amount of the new shares, the issue price of the new
shares, the commencement and end dates for the issue of the new shares and the class and amount
of the new shares to be issued to existing shareholders. When a company launches a public issue
of new shares upon the approval by the securities regulatory authority of the State Council, a new
share offering prospectus and financial accounting report must be announced and a subscription
letter must be prepared. After the new shares issued by the company has been paid up, the change
must be registered with the company registration authority and a public announcement must be
made accordingly.
In addition, the Securities Law also requires the following conditions for a company to issue
new shares to the public: (1) the company is a complete and well-operated organization; (2) the
company is able to operate on a going concern; (3) the financial and accounting reports of the
company for the last three years were issued with unqualified audit opinion; (4) the issuer, its
controlling shareholder, and actual controller have not been involved in corruption, bribery,
embezzlement, misappropriation of property, or criminal offences that disrupt the socialist market
economic order in the past three years; and (5) the company is able to fulfill any other
requirements as prescribed by the securities regulatory authority of the State Council as approved
by the State Council. After payment in full for the new shares issued, a company must modify its
registration with the relevant company registration authority and issue an announcement
accordingly.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 677 ---
REDUCTION OF SHARE CAPITAL
A company shall reduce its registered capital in accordance with the following procedures
prescribed by the PRC Company Law: (1) the company shall prepare a balance sheet and an
inventory of assets; (2) the reduction of registered capital must be approved by shareholders at the
shareholders’ meeting; (3) the company shall notify its creditors within 10 days and publish an
announcement in newspapers or on the National Enterprise Credit Information Publicity System
within 30 days from the day on which the resolution approving the reduction was made; (4) the
creditors of the company are entitled to require the company to repay its debts or provide
guarantees for such debts within 30 days from receipt of the notification or within 45 days from
the date of the announcement if he/she/it has not received any notification; and (5) the company
must apply to the company registration authority for change in registration.
REPURCHASE OF SHARES
Pursuant to the PRC Company Law, a company may not repurchase the shares of the
Company other than for any of the following purposes: (1) reducing its registered capital; (2)
merging with other companies which hold the shares of the Company; (3) carrying out an
employee stock ownership plan or equity incentive plan; (4) acquiring its shares at the request of
its shareholders who vote in a shareholders’ meeting against a resolution regarding a merger and
division; (5) utilizing the shares for conversion of listed corporate bonds which are convertible
into shares; and (6) where it is necessary for the listed company to safeguard the value of the
company and the interests of its shareholders. The acquisition by a company of the shares of the
Company on the grounds set out in item (1) to (2) above shall be approved by way of a resolution
of a shareholders’ meeting; the acquisition by a company of its own shares in circumstances as set
out in items (3), (5) and (6) above may be approved by way of a resolution at a board meeting
with more than two-thirds of the directors present in accordance with the provisions of the articles
of association or the authorization of the shareholders’ meeting.
Following the acquisition by a company of the shares of the Company in accordance with
these requirements, such shares shall be canceled within 10 days from the date of the acquisition
under the circumstance in item (1); such shares shall be transferred or canceled within six months
under the circumstances in items (2) or (4); the total shares of the Company held by the company
shall not exceed 10% of the total shares issued by the Company and such shares shall be
transferred or canceled within three years under the circumstances in items (3), (5) or (6).
A listed company shall perform its information disclosure obligations in accordance with the
provisions of the PRC Securities Law when acquiring the shares of the Company. The acquisition
by a listed company of the shares of the Company in circumstances as set out in items (3), (5) and
(6) of this article shall be conducted through open centralized trading.
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--- page 678 ---
The Company shall not accept the shares of the Company as the subject of pledge.
TRANSFER OF SHARES
Shares held by shareholders may be transferred legally. Pursuant to the PRC Company Law, a
shareholder should effect a transfer of its shares on a stock exchange established in accordance
with laws or by any other means as required by the State Council. Registered shares may be
transferred after the shareholders endorse the back of the share certificates or in other manner
specified by laws and administrative regulations. Following the transfer, the company shall enter
the names and addresses of the transferees into its share register. No changes of registration in the
share register described above shall be effected during a period of 20 days prior to convening a
shareholders’ meeting or 5 days prior to the record date for the purpose of determining
entitlements to dividend distributions, unless otherwise stipulated by laws on the registration of
changes in the share register of listed companies.
Pursuant to the PRC Company Law, no changes of registration in the share register due to
share transfer shall be effected during a period of 20 days prior to convening a shareholders’
meeting or 5 days prior to the record date for the purpose of determining entitlements to dividend
distributions, unless otherwise stipulated by laws on the registration of changes in the share
register of listed companies.
Pursuant to the PRC Company Law, shares issued prior to the public offering of shares by a
company shall not be transferred within one year from the date the shares of the company were
listed on the stock exchange(s). Directors, supervisors and senior management of the company
shall report to the company their shareholdings and changes therein and shall not transfer more
than 25% per year of the total number of shares held by them during their terms of office. The
shares of the company held by them shall not be transferred within one year from the date the
share certificates of the company being listed and traded. The aforesaid person(s) shall not transfer
the shares of the company held by them within six months commencing from the termination of
their service. The articles of association may set out other restrictive provisions in respect of the
transfer of shares of the Company held by its directors, supervisors and the senior management.
According to the Trial Measures for Overseas Listing, where a domestic enterprise directly
issues and lists overseas, shareholders who hold unlisted shares in the domestic enterprise and
apply to convert their unlisted shares in the domestic enterprise into listed shares overseas and to
list and circulate them on overseas trading venues shall comply with the relevant provisions of the
CSRC and entrust the domestic company to make a filing with the CSRC.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 679 ---
SHAREHOLDERS
Under the PRC Company Law and the Articles of Association Guidelines, the rights of
shareholders include the rights: (1) to receive a return on assets, participate in significant
decision-making and select management personnel; (2) to petition the people’s court to revoke any
resolution passed on a shareholders’ meeting or a meeting of the board of directors that has been
convened or whose voting has been conducted in violation of the laws, administrative regulations
or the articles of association, or any resolution the contents of which is in violation of the articles
of association, provided that such petition shall be submitted within 60 days of the passing of such
resolution; (3) to transfer the shares of the shareholders legally; (4) to attend or appoint a proxy to
attend shareholders’ meetings and exercise the voting rights; (5) to inspect the articles of
association, share register, counterfoil of company debentures, minutes of shareholders’ meetings,
board resolutions, resolutions of the supervisory committee and financial and accounting reports,
and to make suggestions or inquiries in respect of the company’s operations; (6) to receive
dividends in respect of the number of shares held; (7) to participate in distribution of residual
properties of the company in proportion to their shareholdings upon the liquidation of the
company; and (8) any other shareholders’ rights provided for in laws, administrative regulations,
other normative documents and the articles of association.
The obligations of shareholders include the obligation to abide by the company’s articles of
association, to pay the subscription monies in respect of the shares subscribed for, to be liable for
the company’s debts and liabilities to the extent of the amount of subscription monies agreed to be
paid in respect of the shares taken up by them, not to abuse shareholders’ rights to impair the
interests of the company or other shareholders, not to abuse the independent status of legal person
or shareholders’ limited liabilities to impair the interests of the creditors of the company and any
other shareholder obligation specified in the articles of association.
According to the Trial Measures for Overseas Listing, a domestic enterprise that issues and
lists overseas shall make a filing with the CSRC in accordance with such measures, submit a filing
report, a legal opinion and other relevant materials, and provide a true, accurate and complete
information of its shareholders and other matters.
SHAREHOLDERS’ MEETINGS
The shareholders’ meetings are the organ of power of the company and shall exercise its
powers according to the PRC Company Law. The shareholders’ meeting may exercise its powers:
(1) to elect and change the directors and supervisors and to decide on the matters relating to the
remuneration of directors and supervisors; (2) to review and approve the reports of the board of
directors; (3) to review and approve the reports of the supervisory committee; (4) to review and
approve the company’s profit distribution proposals and loss recovery proposals; (5) to decide on
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--- page 680 ---
any increase or reduction of the company’s registered capital; (6) to decide on the issue of
corporate bonds; (7) to decide on merger, division, dissolution and liquidation of the company or
change of its corporate form; (8) to amend the articles of association; and (9) to exercise any other
authority stipulated in the articles of association.
Pursuant to the PRC Company Law and the Articles of Association Guidelines, a
shareholders’ meeting is required to be held once every year within six months after the end of the
previous accounting year. An extraordinary meeting is required to be held within two months upon
the occurrence of any of the following: (1) the number of directors is less than the number
required by law or less than two-thirds of the number specified in the articles of association; (2)
the outstanding losses of the company amounted to one-third of the company’s total paid-in share
capital; (3) shareholders individually or in aggregate holding more than 10% of the company’s
shares request to convene an extraordinary meeting; (4) the board deems necessary; (5) the
supervisory committee so proposes; or (6) other circumstances as provided for in the articles of
association.
A shareholders’ meeting shall be convened by the board of directors and presided over by the
chairman of the board of directors. In the event that the chairman is incapable of performing or is
not performing his duties, the meeting shall be presided over by the vice chairman. In the event
that the vice chairman is incapable of performing or is not performing his duties, a director
recommended by more than half of the directors shall preside over the meeting. Where the board
of directors is incapable of performing or is not performing its duties to convene a shareholders’
meeting, the supervisory committee shall convene and preside over the shareholders’ meeting in a
timely manner. If the supervisory committee fails to convene and preside over the shareholders’
meeting, shareholders individually or in aggregate holding more than 10% of the company’s shares
for over 90 days consecutively may unilaterally convene and preside over the shareholders’
meeting.
In accordance with the PRC Company Law, a notice of the shareholders’ meeting stating the
date and venue of the meeting and the matters to be considered at the meeting shall be given to all
shareholders 20 days prior to the meeting. A notice of extraordinary meeting shall be given to all
shareholders 15 days prior to the meeting. Shareholders individually or jointly holding more than
one percent of the shares of the company may submit an interim proposal in writing to the board
of directors within 10 days before the shareholders’ meeting. The board of directors shall notify
other shareholders within two days upon receipt of the proposal, and submit the interim proposal
to the shareholders’ meeting for deliberation. The contents of the interim proposal shall fall within
the scope of powers of the shareholders’ meeting, and the proposal shall provide clear agenda and
specific matters for a resolution is to be made. A shareholders’ meeting shall not make any
resolution in respect of any matter not set out in the notices.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 681 ---
Pursuant to the Official Reply of the State Council regarding Adjusting the Application of
Provisions to Matters Including the Notice Period for Convention of Shareholders’ Meetings by
Overseas Listed Companies (ഃԫධ
ҭᔧ(Guo Han [2019] No. 97)), which came into effect on October 17, 2019, for those
joint stock limited companies registered in the PRC but listed outside the PRC, the requirements
for the notice period for convening a shareholders’ meeting, shareholders’ proposal right, and the
procedures for convening a shareholders’ meeting shall be collectively governed by the relevant
provisions of the PRC Company Law.
Pursuant to the PRC Company Law, shareholders present at a shareholders’ meeting have one
vote for each share they hold, save that the Company’s shares held by the company are not entitled
to any voting rights.
An accumulative voting system may be adopted for the election of directors and supervisors
at the shareholders’ meeting pursuant to the provisions of the articles of association or a resolution
of the shareholders’ meeting. Under the accumulative voting system, each share shall be entitled to
the number of votes equivalent to the number of directors or supervisors to be elected at the
shareholders’ meeting, and shareholders may consolidate their votes for one or more directors or
supervisors when casting a vote.
Pursuant to the PRC Company Law, resolutions of the shareholders’ meeting must be passed
by more than half of the voting rights held by shareholders present at the meeting, with the
exception of resolutions relating to merger, division or dissolution of the company, increase or
reduction of registered share capital, change of corporate form or amendments to the articles of
association, in each case of which must be passed by more than two-thirds of the voting rights
held by the shareholders present at the meeting. A shareholder may entrust a proxy to attend the
shareholders’ meeting on his/her behalf. The proxy shall present the shareholders’ power of
attorney to the company and exercise voting rights within the scope of authorization.
Minutes shall be prepared in respect of matters considered at the shareholders’ meeting and
the chairperson and directors attending the meeting shall endorse such minutes by signature. The
minutes shall be kept together with the shareholders’ attendance register and the proxy forms.
BOARD OF DIRECTORS
A company shall have a board of directors, which shall consist of over three members.
Members of the board of directors may include staff representatives, who shall be democratically
elected by the company’s staff at a staff representative assembly, general staff meeting or
otherwise. The term of a director shall be stipulated in the articles of association, provided that no
term of office shall last for more than three years. A director may serve consecutive terms if
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– IV-14 –


--- page 682 ---
re-elected. A director shall continue to perform his/her duties as a director in accordance with the
laws, administrative regulations and the articles of association until a duly re-elected director takes
office, if re-election is not conducted in a timely manner upon the expiry of his/her term of office
or if the resignation of director results in the number of directors being less than the quorum.
Under the PRC Company Law, the board of directors may exercise its powers:
(1) to convene shareholders’ meetings and report on its work to the shareholders’ meetings;
(2) to implement the resolutions passed by the shareholders at the shareholders’ meetings;
(3) to decide on the company’s operational plans and investment proposals;
(4) to formulate the company’s profit distribution proposals and loss recovery proposals;
(5) to formulate proposals for the increase or reduction of the company’s registered capital
and the issue of corporate bonds;
(6) to formulate proposals for the merger, division or dissolution of the company or change
of corporate form;
(7) to decide on the setup of the company’s internal management organs;
(8) to appoint or dismiss the company’s manager and decide on his/her remuneration and,
based on the manager’s recommendation, to appoint or dismiss any deputy general
manager and financial officer of the company and to decide on their remunerations;
(9) to formulate the company’s basic management system; and
(10) to exercise any other authority stipulated in the articles of association.
Meetings of the board of directors shall be convened at least twice each year. Notices of
meeting shall be given to all directors and supervisors 10 days before the meeting. Interim board
meetings may be proposed to be convened by shareholders representing more than 10% of the
voting rights, more than one-third of the directors or the supervisory committee. The chairman
shall convene the meeting within 10 days of receiving such proposal, and preside over the
meeting. The board of directors may otherwise determine the means and the period of notice for
convening an interim board meeting. Meetings of the board of directors shall be held only if more
than half of the directors are present. Resolutions of the board of directors shall be passed by more
than half of all directors. Each director shall have one vote for a resolution to be approved by the
board. Directors shall attend board meetings in person. If a director is unable to attend for any
reason, he/she may appoint another director to attend the meeting on his/her behalf by a written
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
– IV-15 –


--- page 683 ---
power of attorney specifying the scope of authorization. Meanwhile, the board of directors shall
keep minutes of resolutions passed at board meetings. The minutes shall be signed by the directors
present at the meeting.
If a resolution of the board of directors violates the laws, administrative regulations or the
articles of association or resolutions of the shareholders’ meeting, and as a result of which the
company sustains serious losses, the directors participating in the resolution are liable to
compensate the company. However, if it can be proved that a director expressly objected to the
resolution when the resolution was voted on, and that such objection was recorded in the minutes
of the meeting, such director shall be relieved from that liability.
Under the PRC Company Law, the following person may not serve as a director in a
company: (1) a person who is unable or has limited ability to undertake any civil liabilities; (2) a
person who has been convicted of an offense of corruption, bribery, embezzlement,
misappropriation of property or destruction of the socialist economic order, or who has been
deprived of his political rights due to his crimes, in each case where less than five years have
elapsed since the date of completion of the sentence and less than two years have elapsed since the
date of the completion of the probation period if probation is announced; (3) a person who has
been a former director, factory manager or manager of a company or an enterprise that has entered
into insolvent liquidation and who was personally liable for the insolvency of such company or
enterprise, where less than three years have elapsed since the date of the completion of the
bankruptcy and liquidation of the company or enterprise; (4) a person who has been a legal
representative of a company or an enterprise that has had its business license revoked due to
violations of the law or has been ordered to close down by law and the person was personally
responsible, where less than three years have elapsed since the date of such revocation; and (5) a
person who is listed as a defaulter by a people’s court since he is personally liable for a substantial
loan which is due for payment but remains unpaid.
Where a company elects or appoints a director to which any of the above circumstances
applies, such election or appointment shall be null and void. A director to which any of the above
circumstances applies during his/her term of office shall be released of his/her duties by the
company.
Under the PRC Company Law, the board shall appoint a chairman and may appoint a vice
chairman. The chairman and the vice chairman shall be elected with approval of more than half of
all the directors. The chairman shall convene and preside over board meetings and review the
implementation of board resolutions. The vice chairman shall assist the chairman to perform
his/her duties. Where the chairman is incapable of performing, or is not performing his/her duties,
the duties shall be performed by the vice chairman. Where the vice chairman is incapable of
performing, or is not performing his/her duties, a director jointly elected by more than half of the
directors shall perform his/her duties.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 684 ---
SUPERVISORY COMMITTEE
A company shall have a supervisory committee composed of not less than three members. A
joint stock limited company may establish an audit committee composed of directors under the
board of directors in accordance with the articles of association, exercising the powers of the
supervisory committee stipulated in this law, without setting up a supervisory committee or
supervisors. A joint stock limited company with smaller scale or fewer shareholders may not
establish a supervisory committee, but appoint one supervisor to exercise the powers of the
supervisory committee under the Company Law. The supervisory committee shall consist of
representatives of the shareholders and an appropriate proportion of representatives of the
company’s staff, among which the proportion of representatives of the company’s staff shall not be
less than one-third, and the actual proportion shall be determined in the articles of association.
Representatives of the company’s staff at the supervisory committee shall be democratically
elected by the company’s staff at the staff representative assembly, general staff meeting or
otherwise. The supervisory committee shall appoint a chairman and may appoint a vice chairman.
The chairman and the vice chairman of the supervisory committee shall be elected by more than
half of all the supervisors. Directors and senior management members shall not act concurrently as
supervisors.
The chairman of the supervisory committee shall convene and preside over meetings of the
supervisory committee. Where the chairman of the supervisory committee is incapable of
performing, or is not performing his/her duties, the vice chairman of the supervisory committee
shall convene and preside over meetings of the supervisory committee. Where the vice chairman of
the supervisory committee is incapable of performing, or is not performing his/her duties, a
supervisor elected by more than half of the supervisors shall convene and preside over meetings of
the supervisory committee.
According to the PRC Company Law, the supervisory committee shall meet at least once
every six months. The supervisor may propose to hold an extraordinary meeting of the supervisory
committee. The resolution of the supervisory committee shall be adopted by more than half of the
members of the supervisory committee. Meanwhile, the supervisory committee shall keep minutes
of resolutions passed at the meetings. The minutes shall be signed by the supervisors present at the
meeting.
Each term of office of a supervisor is three years and he/she may serve consecutive terms if
re-elected. A supervisor shall continue to perform his/her duties as a supervisor in accordance with
the laws, administrative regulations and the articles of association until a duly re-elected
supervisor takes office, if re-election is not conducted in a timely manner upon the expiry of
his/her term of office or if the resignation of supervisor results in the number of supervisors being
less than the quorum.
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--- page 685 ---
The supervisory committee may exercise its powers:
(1) to review the company’s financial position;
(2) to supervise the directors and senior management in their performance of their duties
and to propose the removal of directors and senior management who have violated laws,
regulations, the articles of association or resolutions of the shareholders’ meetings;
(3) when the acts of a director or a senior management personnel are detrimental to the
company’s interests, to require the director and senior management to correct these acts;
(4) to propose the convening of extraordinary shareholders’ meetings and to convene and
preside over shareholders’ meetings when the board fails to perform the duty of
convening and presiding over shareholders’ meetings under the PRC Company Law;
(5) to submit proposals to the shareholders’ meetings;
(6) to bring actions against directors and senior management personnel pursuant to the
relevant provisions of the PRC Company Law; and
(7) to exercise any other authority stipulated in the articles of association.
Supervisors may be present at board meetings and make inquiries or proposals in respect of
the resolutions of the board. The supervisory committee may investigate any irregularities
identified in the operation of the company and, when necessary, may engage an accounting firm to
assist its work at the cost of the company.
MANAGER AND SENIOR MANAGEMENT
Under the relevant requirements of the PRC Company Law, a company shall have a manager
who shall be appointed or removed by the board of directors. The manager shall be accountable to
the board of directors and shall exercise his/her functions and powers in accordance with the
provisions of the articles of association or as authorized by the board of directors. The manager
shall be present at board meetings.
Other provisions in the articles of association on the manager’s powers shall also be complied
with. The manager shall be present at meetings of the board of directors. However, the manager
shall have no voting rights at meetings of the board of directors unless he/she concurrently serves
as a director.
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--- page 686 ---
According to the PRC Company Law, senior management refers to manager, deputy manager,
financial officer, secretary to the board of a listed company and other personnel as stipulated in the
articles of association.
DUTIES OF DIRECTORS, SUPERVISORS, GENERAL MANAGERS AND OTHER SENIOR
MANAGEMENT
Directors, supervisors and senior management are required under the PRC Company Law to
comply with the relevant laws, administrative regulations and the articles of association, and shall
be obliged to be faithful and diligent towards the Company. Directors, supervisors and
management personnel are prohibited from abusing their authority in accepting bribes or other
unlawful income and from embezzling the company’s property. Furthermore, directors and senior
management are prohibited from:
(1) embezzling company’s properties and misappropriating company’s funds;
(2) depositing company funds into accounts under their own names or the names of other
individuals;
(3) bribing or accepting other illegal income using their position;
(4) accepting for their own benefit commissions from a third party for transactions
conducted with the company;
(5) unauthorized divulgence of confidential information of the company; and
(6) other acts in violation of their duty of loyalty to the company.
Income generated by directors or senior management in violation of aforementioned shall be
returned to the company.
A director, supervisor or senior management who contravenes law, administrative regulation
or the articles of association in the performance of his/her duties resulting in any loss to the
company shall be liable to the company for compensation.
Where a director, supervisor or senior management is required to attend a shareholders’
meeting, such director, supervisor or senior management shall attend the meeting and answer the
inquiries from shareholders. Directors and senior management shall furnish all true information
and data to the supervisory board, without impeding the discharge of duties by the supervisory
board or supervisors.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
– IV-19 –


--- page 687 ---
Where a director or senior management contravenes laws, administrative regulations or the
articles of association in the performance of his/her duties resulting in any loss to the company,
shareholder(s) holding individually or in aggregate more than 1% of the company’s shares
consecutively for more than 180 days may request in writing that the supervisory board institute
litigation at the people’s court. Where the supervisory violates the laws or administrative
regulations or the articles of association in the discharge of its duties resulting in any loss to the
company, such shareholder(s) may request in writing that the board of directors institute litigation
at the people’s court on its behalf. If the supervisory board or the board of directors refuses to
institute litigation after receiving this written request from the shareholder(s), or fails to institute
litigation within 30 days of the date of receiving the request, or in case of emergency where failure
to institute litigation immediately will result in irrecoverable damage to the company’s interests,
such shareholder(s) shall have the power to institute litigation directly at the people’s court in its
own name for the company’s benefit. For other parties who infringe the lawful interests of the
company resulting in loss to the company, such shareholder(s) may institute litigation at the
people’s court in accordance with the procedure described above. Where a director or senior
management contravenes any laws, administrative regulations or the articles of association in
infringement of shareholders’ interests, a shareholder may also institute litigation at the people’s
court.
The Trial Measures for Overseas Listing stipulates that the filing materials for overseas
issuance and listing of domestic enterprises shall be true, accurate and complete, and shall not
contain false records, misleading statements or material omissions. Domestic enterprises, their
controlling shareholders, de facto controllers, directors, supervisors and senior management shall
fulfill their information disclosure obligations in accordance with the laws, be honest, trustworthy
and diligent, and ensure that the filing materials are true, accurate and complete.
FINANCE AND ACCOUNTING
Under the PRC Company Law, a company shall establish its own financial and accounting
systems according to the laws, administrative regulations and the regulations of the financial
departments under the State Council. At the end of each accounting year, a company shall prepare
its financial and accounting reports which shall be audited by an accounting firm in accordance
with laws. The financial and accounting reports shall be prepared in accordance with laws,
administrative regulations and the regulations of the financial departments under the State Council.
The company’s financial and accounting reports shall be made available for shareholders’
inspection at the company within 20 days before the convening of an annual meeting. A joint stock
limited company that makes public stock offerings shall announce its financial and accounting
reports.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 688 ---
When distributing each year’s profits after taxation, the company shall set aside 10% of its
profits after taxation for the company’s statutory common reserve fund until the fund has reached
more than 50% of the company’s registered capital. When the company’s statutory common
reserve fund is not sufficient to make up for the company’s losses for the previous years, the
current year’s profits shall first be used to make good the losses before any allocation is set aside
for the statutory common reserve fund. After the company has made allocations to the statutory
common reserve fund from its profits after taxation, it may, upon passing a resolution at a
shareholders’ meeting, make further allocations from its profits after taxation to the discretionary
common reserve fund. After the company has made good its losses and made allocations to its
discretionary common reserve fund, the remaining profits after taxation shall be distributed in
proportion to the number of shares held by the shareholders, except for those which are not
distributed in a proportionate manner as provided by the articles of association.
Shares held by the company shall not be entitled to any distribution of profits.
The premium over the nominal value of the shares of a joint stock limited company from the
issue of shares, the amount of proceeds from issuing non-par-value shares not included in
registered capital and other incomes required by the financial department of the State Council to
be treated as the capital reserve fund shall be accounted for as the capital reserve fund of the
company.
Profits distributed to shareholders by a resolution of a shareholders’ meeting or the board of
directors before losses have been made good and allocations have been made to the statutory
common reserve fund in violation of the requirements described above must be returned to the
company. The company shall not be entitled to any distribution of profits in respect of its own
shares held by it.
The premium over the nominal value per share of the company on issue, the amount of
proceeds from issuing non-par-value shares not included in registered capital and other income as
required by relevant governmental department to be treated as the capital reserve fund shall be
accounted for as the capital reserve fund. The common reserve fund of a company shall be applied
to make good the company’s losses, expand its business operations or increase its capital. Where
the reserve funds are used to make up losses, the discretionary reserve funds and statutory reserve
funds shall be used in priority; if not sufficient, the capital reserve funds may be used according to
regulations. Upon the transfer of the statutory common reserve fund into capital, the balance of the
fund shall not be less than 25% of the registered capital of the company before such transfer.
The company shall have no accounting books other than the statutory books. The company’s
assets shall not be deposited in any account opened under the name of an individual.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 689 ---
APPOINTMENT AND DISMISSAL OF AUDITORS
Pursuant to the PRC Company Law, the engagement or dismissal of an accounting firm
responsible for the company’s auditing shall be determined by a shareholders’ meeting, the board
of directors or the supervisory committee in accordance with the articles of association. The
accounting firm should be allowed to make representations when the shareholders’ meeting, the
board of directors or the supervisory committee conducts a vote on the dismissal of the accounting
firm. The company should provide true and complete accounting evidence, accounting books,
financial and accounting reports and other accounting information to the engaged accounting firm
without any refusal or withholding or falsification of data.
The Guidelines for Articles of Association provides that the company shall guarantee to
provide true and complete accounting evidence, accounting books, financial and accounting reports
and other accounting data to the engaged accounting firm without any refusal or withholding or
falsification of data. The audit fees of the accounting firm shall be decided by a shareholders’
meeting.
PROFIT DISTRIBUTION
According to the PRC Company Law, a company shall not distribute profits before losses are
covered and the statutory common reserve fund is provided. Also, the Overseas Listing Trial
Measures provides that domestic enterprises that are listed overseas may raise funds and distribute
dividends in foreign currencies or Renminbi.
AMENDMENTS TO THE ARTICLES OF ASSOCIATION
Pursuant to the PRC Company Law, the resolution of a shareholders’ meeting regarding any
amendment to a company’s articles of association requires affirmative votes by more than
two-thirds of the votes held by shareholders attending the meeting.
DISSOLUTION AND LIQUIDATION
Under the PRC Company Law, a company shall be dissolved for any of the following
reasons:
(1) the term of its operation set out in the articles of association has expired or other events
of dissolution specified in the articles of association have occurred;
(2) the shareholders have resolved at a shareholders’ meeting to dissolve the company;
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--- page 690 ---
(3) the company shall be dissolved by reason of its merger or division;
(4) the business license of the company is revoked or the company is ordered to close down
or to be dissolved in accordance with the laws; or
(5) the company is dissolved by the people’s court in response to the request of
shareholders holding shares that represent more than 10% of the voting rights of all
shareholders of the company, on the grounds that the operation and management of the
company has suffered serious difficulties that cannot be resolved through other means,
rendering ongoing existence of the company a cause for significant losses to the
shareholders’ interests.
In the event of paragraph (1) and (2) above, and has yet to distribute its property to its
shareholders, the company may continue to exist by amending the articles of association or by a
shareholders’ meeting resolution. The amendments to the articles of association in accordance with
the provisions described above or the approval of the shareholders’ meeting resolution shall
require the approval of more than two-thirds of voting rights of shareholders attending a
shareholders’ meeting.
Where the company is dissolved under the circumstances set forth in paragraph (1), (2), (4)
or (5) above, it should establish a liquidation committee within 15 days of the date on which the
dissolution matter occurs. The liquidation committee shall be composed of directors, unless the
articles of association provide otherwise or the shareholders’ meeting resolved to elect another
person. If a liquidation committee is not established within the stipulated period, the company’s
creditors can apply to the people’s court for setting up a liquidation committee with designated
relevant personnel to conduct the liquidation. The people’s court should accept such application
and form a liquidation committee to conduct liquidation in a timely manner.
The liquidation committee may exercise following powers during the liquidation:
(1) to sort out the company’s assets and to prepare a balance sheet and an inventory of
assets;
(2) to notify the company’s creditors or publish announcements;
(3) to deal with any outstanding business related to the liquidation;
(4) to pay any overdue tax together with any tax arising during the liquidation process;
(5) to settle the company’s claims and liabilities;
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--- page 691 ---
(6) to handle the company’s remaining assets after its debts have been paid off; and
(7) to represent the company in any civil procedures.
The liquidation committee shall notify the company’s creditors within 10 days of its
establishment, and publish an announcement in newspapers or on the National Enterprise Credit
Information Publicity System within 60 days.
A creditor shall lodge his claim with the liquidation committee within 30 days of receipt of
the notification or within 45 days of the date of the announcement if he has not received any
notification.
A creditor shall report all matters relevant to his claimed creditor’s rights and furnish relevant
evidence. The liquidation committee shall register such creditor’s rights. The liquidation committee
shall not make any settlement to creditors during the period of the claim.
Upon disposal of the company’s property and preparation of the required balance sheet and
inventory of assets, the liquidation committee shall draw up a liquidation plan and submit this plan
to a shareholders’ meeting or a people’s court for endorsement. The remaining part of the
company’s assets, after payment of liquidation expenses, employee wages, social insurance
expenses and statutory compensation, outstanding taxes and the company’s debts, shall be
distributed to shareholders in proportion to shares held by them. The company shall continue to
exist during the liquidation period, although it cannot conduct operating activities that are not
related to the liquidation. The company’s property shall not be distributed to shareholders before
repayments are made in accordance with the requirements described above.
Upon liquidation of the company’s property and preparation of the required balance sheet and
inventory of assets, if the liquidation committee becomes aware that the company does not have
sufficient assets to meet its liabilities, it must apply to a people’s court for a declaration of
bankruptcy in accordance with the laws. Following such declaration by the people’s court, the
liquidation committee shall hand over the administration of the liquidation to the receiver
appointed by the people’s court.
Upon completion of the liquidation, the liquidation committee shall prepare a liquidation
report and submit it to the shareholders’ meeting or the people’s court for verification, and to the
company registration authority for the cancellation of company registration, and an announcement
of its termination shall be published. Members of the liquidation committee shall be faithful in the
discharge of their duties and shall perform their liquidation duties in compliance with laws.
Members of the liquidation committee shall be prohibited from abusing their authority in accepting
bribes or other unlawful income and from misappropriating the company’s properties. Members of
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
– IV-24 –


--- page 692 ---
the liquidation committee who have caused the company or its creditors to suffer from any loss
due to intentional fault or gross negligence, should be liable for making compensations to the
company or its creditors. In addition, liquidation of a company declared bankrupt according to
laws shall be processed in accordance with the laws on corporate bankruptcy.
OVERSEAS LISTING
Pursuant to the Overseas Listing Trial Measures, “securities” refers to the stocks, depositary
receipts, corporate bonds convertible into stocks or other equity securities that are directly or
indirectly offered and listed overseas by domestic enterprises. Direct overseas offering and listing
by a domestic enterprise refers to overseas offering and listing by a joint stock limited company
registered and formed in China. Indirect overseas offering and listing by a domestic enterprise
refers to overseas offering and listing by an enterprise in the name of an overseas registered
company, whereas the enterprise’s main business activities are in China and such offering and
listing is based on the equity, assets, earnings or other similar rights and interests of a domestic
enterprise.
The Overseas Listing Trial Measures also provides for the conditions for overseas offering
and listing. No overseas offering and listing shall be conducted under any of the following
circumstances:
(1) financing through listing is expressly prohibited by laws, administrative regulations or
relevant rules of the state;
(2) the overseas offering and listing may endanger national security as determined by the
relevant competent department under the State Council after examination according to
the law;
(3) a domestic enterprise or its controlling shareholder or actual controller has committed a
criminal crime of corruption, bribery, embezzlement, misappropriation of property or
disrupting the economic order of the socialist market in the last three years;
(4) a domestic enterprise is under formal investigation according to the law for being
suspected of any crime or major violation of laws and regulations, but no clear
conclusions have been made;
(5) there is a major dispute over ownership of the equity held by the controlling shareholder
or a shareholder controlled by the controlling shareholder or the actual controller.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 693 ---
In addition, pursuant to the Overseas Listing Trial Measures, a Chinese domestic enterprise
submitting an IPO application to an overseas competent regulatory authority or an overseas stock
exchange shall file with the CSRC within 3 working days after submission of the application
documents. Upon offering and listing overseas, such issuer who offers securities in the same
overseas market shall file with the CSRC within 3 working days upon completion of the offering.
Where an issuer, upon offering and listing overseas, offers its shares in other overseas markets,
such issuer shall file in accordance with provision 1 of this article. In addition, upon receipt of all
compliant filing materials, the CSRC shall complete the filing procedures within 20 working days
from the date of receipt of such filing data, and make public the filing information on its website.
If the filing materials so submitted were identified as incomplete or non-compliant, the CSRC shall
make a request to the issuer for supplementary information within 5 working days from the date of
receipt of such filing information. The issuer shall submit such supplementary information within
30 working days.
Upon the occurrence of the following major events subsequent to the overseas listing of a
Chinese domestic enterprise, it shall report the specific situation to the CSRC within 3 working
days from the date of occurrence and announcement of the relevant matters:
(1) a change of control;
(2) any investigation or punishment initiated by overseas securities regulatory authorities or
relevant competent departments;
(3) a change of listing status or listing venue;
(4) voluntary or involuntary delisting of shares.
On August 10, 2023, the CSRC revised the Guidelines for the Application of “Full
Circulation” of Domestic Unlisted Shares of H-share Companies (SFC Announcement No.
[2023]50) ( H΅͡ሗ “ஷ”ˏ(ᗇ္ึʮѓ[2023]50 ໮)) (the “ Full
Circulation Guidelines ”), effective from the same date. Such provisions aim to regulate the
circulation of domestic unlisted shares of domestic joint stock limited companies (including the
unlisted domestic shares held by domestic shareholders before overseas listing, the unlisted domestic
shares issued domestically after overseas listing and the unlisted shares held by foreign shareholders)
listed on the Hong Kong Stock Exchange (hereinafter referred to as the “H-share Companies”) on the
Hong Kong Stock Exchange (hereinafter referred to as the “ Full Circulation ”).
Pursuant to the Full Circulation Guidelines, upon compliance with relevant laws and
regulations, state-owned assets management, foreign investment and industry-specific supervision
and other policy requirements, holders of domestic unlisted shares may independently negotiate to
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
– IV-26 –


--- page 694 ---
determine the number and proportion of shares applied for circulation, and entrust the H-share
Companies to file with the CSRC on Full Circulation. A domestic joint stock limited company that
has not yet been listed may file with the CSRC on Full Circulation when applying for an overseas
initial public offering and listing.
According to the Notice for the Administration of Filing of the Overseas Offering and Listing
of Domestic Enterprises ( ) issued by the
CSRC on February 17, 2023 and effective from the same day, domestic enterprises that have
offered its shares and listed overseas prior to March 31, 2023 are stock enterprises (“ Stock
Enterprises ”). Stock Enterprises are not required to file immediately, and shall file subsequently
as required for other purposes for which filing is required such as refinancing. Domestic
enterprises that have obtained approval from the CSRC on overseas public offering of shares and
listing (including placement) in respect of joint stock limited companies may continue to proceed
with overseas offering and listing within the effective period of such approval. Where such
overseas offering and listing were not completed before the expiration of the effective period, the
entity shall file as required.
In accordance with the Provisions on Strengthening the Confidentiality and Archives
Administration Concerning the Overseas Securities Offering and Listing by Domestic Enterprises
( ) promulgated by the
CSRC, the Ministry of Finance, the National Administration of State Secrets Protection and the
National Archives Administration on February 24, 2023 and effective from March 31, 2023, where
a domestic enterprise provides or publicly discloses, either directly or through its overseas listed
entities, documents and data involving state secrets and working secrets of state organs to relevant
securities companies, securities service agencies, and overseas regulatory agencies, it shall obtain
approval from the competent authorities according to laws and file with the confidentiality
administrative department at the same level for record. Where a domestic enterprise provides
accounting archives or copies of accounting archives to relevant securities companies, securities
service agencies, overseas regulatory agencies and other bodies and individuals, it shall perform
corresponding procedures in accordance with relevant state regulations.
LOSS OF SHARE CERTIFICATES
A shareholder may, in accordance with the public notice procedures set out in the PRC Civil
Procedure Law, apply to a people’s court if his share certificate(s) in registered form is either
stolen, lost or destroyed, for a declaration that such certificate(s) will no longer be valid. After the
people’s court declares that such certificate(s) will no longer be valid, the shareholder may apply
to the company for the issue of a replacement certificate(s).
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 695 ---
SUSPENSION AND TERMINATION OF LISTING
The Company Law has deleted provisions governing suspension and termination of listing.
The Securities Law (as revised on December 28, 2019) has also deleted provisions regarding
suspension of listing. Where listed securities fall under the delisting circumstances stipulated by
the stock exchange, the stock exchange shall terminate its listing and trading in accordance with
the business rules.
According to the Overseas Listing Trial Measures, in case of active or compulsory
termination of listing, the issuer shall report the specific situation to the CSRC within 3 working
days from the date of occurrence and announcement of the relevant matters.
MERGER AND DIVISION
Under the PRC Company Law, a merger agreement shall be signed by merging companies
and the involved companies shall prepare respective balance sheets and inventory of assets. The
companies shall within 10 days of the date of passing the resolution approving the merger notify
their respective creditors and publicly announce the merger in newspapers or on the National
Enterprise Credit Information Publicity System within 30 days. A creditor may, within 30 days
from the date of reception of the notification, or within 45 days from the date of the announcement
if he has not received such notification, request the company to settle any outstanding debts or
provide corresponding guarantees.
In case of a merger, the credits and debts of the merging parties shall be assumed by the
surviving or the new company. In case of a division, the company’s assets shall be divided and a
balance sheet and an inventory of assets shall be prepared. When a resolution regarding the
company’s division is approved, the company should notify all its creditors within 10 days of the
date of passing such resolution and publicly announce the division in newspapers or on the
National Enterprise Credit Information Publicity System within 30 days.
Unless an agreement in writing is reached with creditors before the company’s division in
respect of the settlement of debts, the liabilities of the company which have accrued prior to the
division shall be jointly borne by the divided companies.
Changes in the registration as a result of the merger or division shall be registered with the
company registration authority in accordance with the laws.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 696 ---
THE PRC SECURITIES LA WS, REGULATIONS AND REGULATORY REGIMES
The PRC has promulgated a series of regulations that relate to the issue and trading of the
shares and disclosure of information. In October 1992, the State Council established the Securities
Committee and the CSRC. The Securities Committee is responsible for coordinating the drafting of
securities regulations, formulating securities-related policies, planning the development of
securities markets, directing, coordinating and supervising all securities-related institutions in the
PRC and administering the CSRC. The CSRC is the regulatory arm of the Securities Committee
and is responsible for the drafting of regulatory provisions governing securities markets,
supervising securities companies, regulating public offerings of securities by PRC companies in
the PRC or overseas, regulating the trading of securities, compiling securities-related statistics and
undertaking relevant research and analysis. In April 1998, the State Council consolidated the
Securities Committee and the CSRC and reformed the CSRC.
On April 22, 1993, the State Council promulgated the Provisional Regulations Concerning the
Issue and Trading of Shares (၍ଣᅲБૢԷ), which regulates the application
and approval procedures for public offerings of shares, issuing of and trading of shares, the
acquisition of listed companies, deposit, clearing and transfer of shares, the disclosure of
information, investigation, penalties and dispute resolutions with respect to a listed company.
On December 25, 1995, the State Council promulgated the Regulations of the State Council
Concerning Domestic Listed Foreign Shares of Joint Stock Limited Companies (΅
). These regulations principally regulate the issue, subscription,
trading and declaration of dividends and other distributions of domestic listed foreign shares and
disclosure of information of joint stock limited companies having domestic listed foreign shares.
The PRC Securities Law took effect on July 1, 1999 and was revised on August 28, 2004,
October 27, 2005, June 29, 2013, August 31, 2014 and December 28, 2019, respectively. The latest
Securities Law was implemented on March 1, 2020. It was the first national securities law in the
PRC, and is divided into 14 chapters and 226 articles comprehensively regulating activities in the
PRC securities market, including the issue and trading of securities, takeovers by listed companies
and the duties and responsibilities of the stock exchanges, securities companies, securities clearing
institutions and securities regulatory authorities. Article 224 of the Securities Law provides that
domestic enterprises shall satisfy the relevant requirements of the State Council when it issues
shares or lists shares outside the PRC directly or indirectly. Currently, the issue and trading of
foreign issued securities (including shares) are principally governed by the regulations and rules
promulgated by the State Council and the CSRC.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 697 ---
ARBITRATION AND ENFORCEMENT OF ARBITRAL A W ARDS
The Arbitration Law of the PRC (2017 Amendment) (ج2017͍))
(the “ PRC Arbitration Law ”) was enacted by the Standing Committee of the NPC on August 31,
1994, which became effective on September 1, 1995 and was amended on August 27, 2009 and
September 1, 2017. It is applicable to, among other matters, economic disputes involving foreign
parties where all parties have entered into a written agreement to resolve disputes by arbitration
before an arbitration committee constituted in accordance with the PRC Arbitration Law. The PRC
Arbitration Law provides that an arbitration committee may, before the promulgation of arbitration
regulations by the PRC Arbitration Association, formulate interim arbitration provisions in
accordance with the PRC Arbitration Law and the PRC Civil Procedure Law. Where the involved
parties have agreed to settle disputes by means of arbitration, a people’s court will refuse to handle
a legal proceeding initiated by one of the parties at such people’s court, unless the arbitration
agreement has lapsed.
Under the PRC Arbitration Law and PRC Civil Procedure Law, an arbitral award shall be
final and binding on the parties involved in the arbitration. If one party fails to comply with the
arbitral award, the other party to the award may apply to a people’s court for its enforcement.
However, the people’s court may refuse to enforce an arbitral award made by an arbitration
commission if there is any procedural irregularity (including but not limited to irregularity in the
composition of the arbitration tribunal, or the making of an award on matters beyond the scope of
the arbitration agreement or outside the jurisdiction of the arbitration commission).
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 698 ---
Any party seeking to enforce a legally effective arbitration award of a foreign affairs
arbitration organ against a party who or whose property is not located within the PRC may apply
to a foreign court with jurisdiction over the relevant matters for recognition and enforcement of
the award. Likewise, a people’s court may also request a foreign court to recognize and enforce an
arbitral award made by an overseas arbitration institution in accordance with the principle of
reciprocity or any international treaties concluded or acceded to by the PRC.
The PRC acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards () (the “ New Y ork Convention ”) passed on June 10,
1958 pursuant to a resolution passed by the Standing Committee of the NPC on December 2, 1986.
The New York Convention provides that all arbitral awards made in a state which is a party to the
New York Convention shall be recognized and enforced by other parties thereto subject to their
rights to refuse enforcement under certain circumstances, including where the enforcement of the
arbitral award is against the public policy of that state. At the time of the PRC’s accession to the
Convention, the Standing Committee of the NPC declared that (1) the PRC will only apply the
New York Convention to the recognition and enforcement of arbitral awards made in the territories
of other parties based on the principle of reciprocity; and (2) the New York Convention will only
apply to disputes deemed under PRC laws to be arising from contractual or non-contractual
mercantile legal relations.
An arrangement for mutual enforcement of arbitral awards between Hong Kong and the
Supreme People’s Court of China was reached. The Supreme People’s Court of China adopted the
Arrangements on the Mutual Enforcement of Arbitral Awards between the Mainland and the Hong
Kong Special Administrative Region (τર )o n
June 18, 1999, which went into effect on February 1, 2000, which was amended by the
Supplemental Arrangement of the Supreme People’s Court for the Mutual Enforcement of Arbitral
Awards between the Mainland and the Hong Kong Special Administrative Region (৫
໾̂τર ) implemented in November 27, 2020
and the Supplemental Arrangement of the Supreme People’s Court for the Mutual Enforcement of
Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (2021)
(໾̂τર(2021ϋ)) implemented in
May 19, 2021. The arrangements reflects the spirit of the New York Convention. Under the
arrangements, the awards by the Mainland arbitral bodies recognized by Hong Kong may be
enforced in Hong Kong and the awards by the Hong Kong arbitral bodies may also be enforced in
the Mainland China. If the Mainland court finds that the enforcement of awards made by the Hong
Kong arbitral bodies in the Mainland will be against public interests of the Mainland, the awards
may not be enforced.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
– IV-31 –


--- page 699 ---
JUDICIAL JUDGMENT AND ITS ENFORCEMENT
Under the Supreme People’s Court’s 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 Pursuant to Choice of Court Agreements between Parties Concerned ( ௰৷ɛ͏
ٙ
τર) promulgated by the Supreme People’s Court on July 3, 2008 and effective on August 1, 2008 and
was abolished on January 29, 2024, as for an enforceable final judgment made by a court in Mainland
China or Hong Kong court concerning a civil and commercial case under a written agreement on
jurisdiction, in which payment must be made, the party concerned may, under the Arrangement, apply to a
court in Mainland China or a Hong Kong court for recognition and enforcement. The term “written
agreement on jurisdiction” refers to agreements clearly stipulated in written form by parties concerned
that a court in Mainland China or Hong Kong court has sole jurisdiction as to the effectiveness of the
Arrangement, so as to settle disputes relevant to a certain legal relationship that has either arisen or
might arise. Therefore, the party concerned may apply to the court in Mainland China or the court
of the Hong Kong Special Administrative Region to recognize and enforce the final judgment
made in Mainland China or Hong Kong that meet certain conditions of the aforementioned
regulations.
On January 25, 2024, the Supreme People’s Court promulgated the Arrangement on
Reciprocal Recognition and Enforcement of Judgements in Civil and Commercial Matters by the
Courts of the Mainland and of the Hong Kong Special Administrative Region (ಥ
τર ) , which takes into effect on January 29,
2024 and seeks to establish a mechanism with further clarification on and certainty for recognition
and enforcement of judgements in a wider range of civil and commercial matters between Hong
Kong Special Administrative Region and the China. The New Arrangement discontinued the
requirements for a choice of court agreement for bilateral recognition and enforcement.
SHANGHAI-HONG KONG STOCK CONNECT
On April 10, 2014, the CSRC and the Hong Kong SFC issued the Joint Announcement of
China Securities Regulatory Commission and Hong Kong Securities and Futures Commission —
Principles that Should be Followed when the Pilot Programme that Links the Stock Markets in
Shanghai and Hong Kong is Expected to be Implemented (ಥᗇՎʿ
ࡡٙ
) and approved in principle the launch of the pilot programme that links the stock markets in
Shanghai and Hong Kong (hereinafter referred to as the “ Shanghai-Hong Kong Stock Connect ”)
by the Shanghai Stock Exchange (hereinafter referred to as the “ SSE”), the Stock Exchange, the
CSDC and the HKSCC. Shanghai-Hong Kong Stock Connect comprises the two portions of
Northbound Trading Link and Southbound Trading Link. Southbound Trading Link refers to the
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
– IV-32 –


--- page 700 ---
entrustment of China securities houses by China investors to trade stocks listed on the Stock
Exchange within a stipulated range via filing by the securities trading service company established
by the SSE with the Stock Exchange. During the initial period of the pilot programme, the stocks
of Southbound Trading Link consist of constituent stocks of the Stock Exchange Hang Seng
Composite Large Cap Index and the Hang Seng Composite MidCap Index as well as stocks of
A+H stock companies concurrently listed on the Stock Exchange and the SSE. The total limit of
Southbound Trading Link is RMB250 billion and the daily limit is RMB10.5 billion. During the
initial period of the pilot programme, it is required by SFC that China investors participating in
Southbound Trading Link are only limited to institutional investors and individual investors with a
securities account and capital account balance of not less than RMB500,000.
On November 10, 2014, the CSRC and the SFC issued a Joint Announcement, approving the
official launch of Shanghai-Hong Kong Stock Connect by SSE, the Stock Exchange, the CSDCC
and the HKSCC. Pursuant to the Joint Announcement, trading of stocks under Shanghai-Hong
Kong Stock Connect will commence on November 17, 2014.
On September 30, 2016, the CSRC issued the Filing Provision on the Placement of Shares by
Hong Kong Listed Companies with Domestic Original Shareholders under Southbound Trading
Link ( ) which came into effect
on the same day. The act of the placement of shares by Hong Kong listed companies with domestic
original shareholders under Southbound Trading Link shall be filed with the CSRC. Hong Kong
listed companies shall file the application materials and approved documents with the CSRC after
obtaining approval from the Stock Exchange for their share placement applications. The CSRC
will carry out supervision based on the approved opinion and conclusion of the Hong Kong side.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS
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--- page 701 ---
This Appendix contains a summary of the principal provisions of the Articles of Association,
which was adopted on 19 January 2024 and will become effective on the date of Listing of the H
Shares on the Stock Exchange. As the principal objective of this Appendix is to provide potential
investors with an overview of the Articles of Association, it may not contain all the information
that is important to potential investors. The full text of the Articles of Association in Chinese is
available for inspection, as discussed in the Appendix to the document entitled “Appendix VII —
Documents Delivered to the Registrar of Companies and Available on Display.”
I. DIRECTORS AND THE BOARD
(I) Composition of the Board
The Company shall have a Board which comprises nine Directors including one chairperson.
The Directors shall be elected at the shareholders’ meeting for a term of three years. Upon expiry
of the term, a Director shall be eligible for re-election.
The Company shall have at least three independent non-executive Directors, and not less than
one-third of the total number of Directors. Except as otherwise provided by this section, the
provisions relating to the qualifications and obligations of Directors in the Articles of Association
shall apply to independent non-executive Directors. At least one independent non-executive
Director of the Company shall be an accounting professional. Independent non-executive Directors
shall have sufficient business or professional experience for competency, to perform their duties
honestly and faithfully, safeguard the Company’s interest and in particular, preventing
encroachment of the legitimate rights and interests of public shareholders, so as to ensure the
sufficient representation of the interests of all Shareholders. At least one independent
non-executive Director shall reside in Hong Kong on a regular basis.
(II) Directors’ Qualifications and Duties
1. Directors’ Qualifications
A Director, Supervisor, president or other officers of the Company shall cease to act as such
if any of the following circumstances applies:
(1) a person has no capacity for civil conduct, or has limited capacity for civil conduct;
(2) a person has committed an offence of corruption, bribery, infringement of property,
misappropriation of property or sabotaging the social economic order and has been
punished because of committing such offence; or who has been deprived of his/her political
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
–V - 1–


--- page 702 ---
rights, in each case where less than five years have elapsed since the date of the completion
of implementation of such punishment or deprivation and less than two years have elapsed
since the date of the completion of the probation period if probation is announced;
(3) a person acts as a Director, or factory head or manager who assumes individual
responsibility for the bankruptcy or liquidation of such company or enterprise where
three years have not lapsed following the date of completion of such bankruptcy or
liquidation;
(4) a person is the legal representative of a company or enterprise that had its business
license revoked and was ordered to be closed for violation of the laws, and assumes
personal responsibility, where three years have not lapsed following the date of
revocation of the business license;
(5) a person has been listed as a defaulter by a people’s court since he is personally liable
for a substantial loan which is due for payment but remains unpaid;
(6) a person is under criminal investigation or prosecution by judicial organisation for
violation of the criminal law which is not yet concluded;
(7) a person is not eligible for enterprise leadership according to laws and administrative
regulations;
(8) a person is a non-natural person;
(9) a person is convicted of the contravention of provisions of relevant securities
regulations by competent authorities, and such conviction involves a finding that he/she
has acted fraudulently or dishonestly, where five years have not lapsed following the
date of the conviction;
(10) the circumstances specified by the laws, administrative regulations, the listing rules or
relevant laws and regulations of the place where the shares of the Company are listed.
Any election, appointment or employment by the Company of any Directors, Supervisors or
officers in violation of the preceding provision shall be invalid.
2. Directors’ Duties
Each of the Director, Supervisor, manager and other officers of the Company shall exercise
his/her powers or carry on his/her duties in accordance with the principle of fiduciary and shall not
put himself/herself in a position where his/her duty and his/her interest may conflict.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 703 ---
This principle includes (without limitation) discharging the following obligations:
(1) to act honestly in the best interests of the Company;
(2) to exercise powers within the scope of his/her powers and not to exceed those powers;
(3) to exercise the discretion vested in him/her personally and not to allow himself/herself
to act under the control of another and, unless and to the extent permitted by laws,
administrative regulations or with the informed consent of shareholders’ meeting, not to
delegate the exercise of his/her discretion;
(4) to treat shareholders of the same class equally and to treat shareholders of different
classes fairly;
(5) except in accordance with the Articles of Association of the Company or with the
informed consent of shareholders’ meeting, not to enter into any contract, transaction or
arrangement with the Company;
(6) without the informed consent of shareholders’ meeting, not to use the Company’s
property for his/her own benefit;
(7) not to exploit his/her position to accept bribes or other illegal income or expropriate the
Company’s property by any means, including (without limitation) opportunities
advantageous to the Company;
(8) without the informed consent of shareholders’ meeting, not to accept commissions in
connection with the Company’s transactions;
(9) to abide by the Articles of Association of the Company, faithfully execute his/her
official duties and protect the Company’s interests, and not to exploit his/her position
and power in the Company to advance his/her own private interests;
(10) not to compete with the Company in any form unless with the informed consent of
shareholders’ meeting;
(11) not to misappropriate the Company’s funds or lend such funds to others, not to open
accounts in his/her own name or other names for the deposit of the Company’s assets
and not to provide a guarantee for debts of a shareholder of the Company or other
individual(s) with the Company’s assets;
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--- page 704 ---
(12) unless otherwise permitted with the informed consent of shareholders’ meeting, to keep
in confidence information acquired by him/her in the course of and during his/her tenure
and not to use the information other than in furtherance of the interests of the Company,
save that disclosure of such information to the court or other governmental authorities is
permitted if:
1) disclosure is made under compulsion of laws;
2) the interests of the public require disclosure;
3) the interests of the relevant Director, Supervisor, president and other officers
require disclosure.
(13) to provide relevant true information and materials to the Supervisory Committee and not
to interfere with the duties and powers exercised by the Supervisory Committee or
Supervisors.
The Company shall not directly or indirectly make a loan to, or provide any loan guarantees
in connection with, the making of a loan to a Director, Supervisor, president and other officers of
the Company or of the Company’s controlling shareholder(s) or any of their respective associates.
The preceding provision shall not apply to the following circumstances:
(I) the provision by the Company of a loan or a loan guarantee of a loan to a company
which is a subsidiary of the Company;
(II) the provision by the Company of a loan or a loan guarantee in connection with the
making of a loan or any other funds to any of its Director, Supervisor, president and
other officers to meet expenditure incurred or to be incurred by him/her for the purposes
of the Company or for the purpose of enabling him/her to perform his/her duties
properly, in accordance with the terms of a service contract approved by the
shareholders’ meeting;
(III) the provision of a loan or a loan guarantee by another person to any of its Director,
Supervisor, president and other officers or respective associates by the Company in the
ordinary course of its business on normal commercial terms, where the ordinary course
of business of the Company includes providing loans and providing loan guarantees.
A loan made by the Company in breach of the preceding provisions shall be forthwith
repayable by the recipient of the loan regardless of the terms of the loan.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 705 ---
A loan guarantee provided by the Company in breach of the preceding provisions shall be
unenforceable against the Company, unless:
1. the loan was provided to an associate of the Directors, Supervisors, president and other
officers of the Company or of its parent where the lender did not know the relevant
circumstances;
2. the collateral provided by the Company has been lawfully disposed of by the lender to a
bona fide purchaser.
(III) Duty of the Board
The Board shall be responsible to the shareholders’ meeting and shall exercise the following
duties:
1. to be responsible for the convening of the shareholders’ meeting and to report on its
work to the shareholders’ meeting;
2. to implement the resolutions of shareholders’ meetings;
3. to determine operation plans and investment plans of the Company;
4. to formulate annual preliminary and final financial budgets of the Company;
5. to formulate the profit distribution plans and plans for recovery of losses of the
Company;
6. to formulate proposals of the Company regarding increase or reduction of the registered
capital and issuance of bonds of the Company;
7. to formulate plans for material acquisitions, purchase of shares of the Company, or
merger, division, dissolution or transformation of the Company;
8. to decide on matters relating to the Company’s external investment, acquisitions or
disposal of assets, mortgage of assets, external guarantee, entrusted wealth management,
related party transactions and external donations as authorized by shareholders’
meetings;
9. to decide on the establishment of the Company’s internal management structure;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 706 ---
10. to appoint or dismiss the Company’s manager, and pursuant to the manager’s
nominations to appoint or dismiss the deputy manager and other officers of the
Company (including financial controller) and decide their remunerations;
11. to formulate the basic management system of the Company;
12. to formulate proposals for any amendments to the Articles of Association of the
Company;
13. to manage the disclosure of information of the Company;
14. to propose to shareholders’ meetings the appointment or change of the accounting firm
acting as the auditor of the Company;
15. to hear the work report of the Company’s manager and to review the work of the
manager;
16. other powers and functions conferred by the Articles of Association of the Company.
For the above matters, except for items 6, 7, 12 which shall be approved by voting of more
than two-thirds of the Directors, others may be approved by voting by over one half of the
Directors. The Board shall perform its duties in accordance with the state’s laws, administrative
regulations, the listing rules of the place where the shares of the Company are listed, these Articles
of Association and resolutions of the shareholders’ meeting.
(IV) The Procedural Rules of the Board
The board meeting comprises regular meetings and extraordinary meetings. The board
meetings shall be held at least 4 times per year, and shall be convened by the Chairperson of the
Board. The notice of a regular board meeting shall be given at least 14 days before the meeting,
while the notice of an extraordinary meeting shall be given at least 5 days before the meeting. The
time limit for notice of the above extraordinary meetings may be waived with the consent of each
of the Directors of the Company. When the situation is urgent and an extraordinary board meeting
needs to be convened as soon as possible, the notice may be given by telephone or other verbal
methods. at any time, but it is necessary for the convener to give explanations at the meeting.
In case of any of the following circumstances, an extraordinary board meeting may be
convened:
(I) when the shareholders representing over one-tenth of the voting power put forward a
proposal;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 707 ---
(II) when over one-third of the Directors put forward a proposal;
(III) when the Supervisory Committee puts forward a proposal;
(IV) when the Chairperson of the Board thinks it necessary;
(V) when over one-second independent non-executive Directors put forward a proposal;
(VI) when the president puts forward a proposal;
(VII) other circumstances stipulated by laws, regulations, rules and the Articles of Association
of the Company.
The board meeting may not be held unless not less than half of the Directors (including
proxies) are present.
Each Director shall have one vote. Unless otherwise required by laws, administrative
regulations and these Articles of Association, resolutions of the Board shall be passed by more
than half of all Directors.
II. SHAREHOLDERS AND SHAREHOLDERS’ MEETING
(I) Shareholders
Shareholders shall enjoy the rights and have the obligations according to the class and
number of shares held by them. Shareholders holding shares of the same class shall enjoy equal
rights and have the same obligations.
The ordinary shareholders of the Company shall be entitled to the following rights:
1. the right to dividends and other distributions in proportion to the number of shares held;
2. the right to legally request, convene, preside over, attend or appoint shareholder’s proxy
to attend the shareholders’ meeting and to exercise the corresponding voting rights;
3. the right to supervise and manage the business operation activities of the Company and
to put forward proposals and raise inquiries;
4. the right to transfer, bestow or pledge the shares they hold according to the laws,
administrative regulations and the Articles of Association of the Company;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
–V - 7–


--- page 708 ---
5. the right to obtain relevant information in accordance with the provisions of the Articles
of Association of the Company, including:
(1) the right to obtain a copy of the Articles of Association of the Company, subject to
payment of the cost of such copy;
(2) the right to inspect and make copies, subject to payment of a reasonable charge:
1) all parts of the register of shareholders;
2) personal particulars of each of the Company’s Directors, Supervisors,
managers and other officers, including:
① present forename and surname and any former forename or surname and
any aliases;
② principal address (residence);
③ nationality;
④ full-time and all other part-time occupations and duties;
⑤ identification document and its number;
3) the status of the Company’s share capital;
4) the latest audited financial statement, the report of the Board, the report of
auditors, and the report of the Supervisory Committee of the Company;
5) special resolutions of the Company;
6) reports showing the aggregate par value, quantity, highest and lowest prices in
respect of each class of shares repurchased by the Company since the last
accounting year, and the aggregate amount paid by the Company for this
purpose;
7) a copy of the annual inspection report that has been filed with the
administration of industry and commerce or other competent authorities in
China; and
8) minutes of shareholders’ meetings.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
–V - 8–


--- page 709 ---
6. in the event of termination or liquidation of the Company, the right to participate in the
distribution of the remaining assets of the Company in accordance with the number of
shares held;
7. the shareholders who disagree with the resolutions in respect of the merger or division
of the Company adopted at a shareholders’ meeting are entitled to ask the Company to
acquire their shares;
8. other rights conferred by laws, administrative regulations, departmental rules and
Articles of Association of the Company.
The ordinary shareholders of the Company shall have the following obligations:
1. to abide by the Articles of Association of the Company;
2. to contribute to the share capital according to the number of shares subscribed by them
and the methods of capital contribution;
3. not to withdraw their contributed share capital save in such circumstances stipulated by
the laws and regulations;
4. not to abuse shareholders’ rights to harm the interests of the Company or other
shareholders, and not to abuse the Company’s independent status as a legal person and
the shareholders’ limited liability to harm the interests of the creditors of the Company;
Where shareholders of the Company abuse shareholders’ rights, causing loss to the
Company or other shareholders, such shareholders shall be liable for compensation in
accordance with the laws.
Where shareholders of the Company abuse the Company’s independent status as a legal
person and the shareholders’ limited liability to evade from debts, resulting in a material
damage to the interests of the creditors of the Company, such shareholders shall be
jointly and severally liable for the debts of the Company.
5. other obligations to be assumed as stipulated by the laws, administrative regulations and
these Articles of Association.
The controlling shareholders and the de facto controllers of the Company shall not take
advantage of their related relationship to harm the interests of the Company. If they have violated
provisions and caused loss to the Company, they shall be liable for compensation.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
–V - 9–


--- page 710 ---
The controlling shareholders and the de facto controllers of the Company shall have fiduciary
duties towards the Company and the public shareholders of the Company. The controlling
shareholder shall exercise the rights as a subscriber in strict compliance with the laws and shall
not impair the legitimate interests of the Company and the public shareholders of the Company by
taking advantage of profit distributions, asset reorganizations, external investments, possession of
funds, loan guarantees and other means, and shall not impair the interests of the Company and the
public shareholders of the Company by using its controlling status in the Company.
(II) Shareholders’ Meeting
The shareholders’ meeting is the organ of authority of the Company and shall exercise the
functions and powers in accordance with the laws. The shareholders’ meeting shall exercise the
following functions and powers:
1. to decide the Company’s operational policies and investment plans;
2. to elect and replace Directors and decide on matters relating to their remuneration;
3. to elect and replace Supervisors who are appointed from the shareholders’
representatives and decide on matters relating to their remuneration;
4. to consider and approve the reports of the Board;
5. to consider and approve the reports of the Supervisory Committee;
6. to consider and approve proposals on the annual preliminary and final financial budgets
of the Company;
7. to consider and approve the profit distribution plans and plans for recovery of losses of
the Company;
8. to decide on the increase or reduction of the Company’s registered capital;
9. to decide on the issuance of bonds by the Company;
10. to decide on the merger, division, dissolution, liquidation or transformation of the
Company;
11. to decide on the issuance of bonds by the Company;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-10 –


--- page 711 ---
12. to decide on the appointment, dismissal and non-reappointment of the accounting firms
of the Company;
13. to amend the Articles of Association of the Company;
14. to consider and approve matters relating to guarantees specified in Article 60 of these
Articles of Association;
15. to consider the motions raised by shareholders who represent more than 1% (inclusive)
of the total number of voting shares of the Company;
16. to consider and approve matters relating to the purchases and disposals of material
assets or provision of guarantee by the Company within one year in an amount
exceeding 30% of the latest audited total assets of the Company;
17. to consider the share incentive scheme and employee stock ownership plan;
18. to consider other matters as required by laws, administrative regulations, departmental
rules or these Articles of Association to be determined at the shareholders’ meeting.
The guarantee offered by the Company to a shareholder or de facto controller of the
Company shall be resolved by the shareholders’ meeting.
Shareholders’ meetings are divided into annual meetings and extraordinary meetings.
Shareholders’ meetings are convened by the Board, and the annual meeting is held once a year and
shall be held within six months after the end of the preceding accounting year.
The Board shall convene an extraordinary meeting within two months in any one of the
following circumstances:
1. when the number of Directors is less than the number required by the Company Law or
less than two-thirds of the number prescribed in the Articles of Association of the
Company;
2. when the unrecovered losses of the Company reach one-third of the total amount of its
paid-up share capital;
3. when Shareholders who individually or jointly hold more than 10% (inclusive) of the
Company’s issued voting shares make request(s) in writing for the convening of an
extraordinary meeting;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
–V - 1 1–


--- page 712 ---
4. when the Board considers it necessary or the Supervisory Committee proposes to
convene such a meeting;
5. other circumstances as required by laws, administrative regulations, departmental rules
or the Articles of Association of the Company.
(III) Rules of Procedure of the Shareholders’ Meeting
1. Convening of the Shareholders’ Meeting
Shareholders’ meetings shall be convened by the Board. If the Board is unable to or fails to
perform its duty of convening the shareholders’ meeting, the Supervisory Committee shall convene
and preside over such meeting in a timely manner; if the Supervisory Committee cannot convene
such meeting, shareholders individually or jointly holding over 10% of the Company’s shares for
more than 90 consecutive days may convene and preside over such meeting on their own.
Shareholders individually or jointly holding over 10% of the Company’s shares have the right
to make a request to the Board for convening an extraordinary meeting and such request shall be
made to the Board in writing. The Board shall give a written reply on whether or not it agrees to
convene such extraordinary meeting within 10 days after receiving the request in accordance with
the requirements under the laws, administrative regulations and these Articles of Association.
If the Board agrees to convene the extraordinary meeting, a notice to convene the
shareholders’ meeting shall be issued within 5 days after the adoption of the resolution of the
Board, and any change to the original request in the notice shall be subject to the consent of the
relevant Shareholders.
If the Board disagrees to convene the extraordinary meeting or fails to give a reply within 10
days after receiving the request, Shareholders individually or jointly holding over 10% of the
Company’s shares shall have the right to propose to the Supervisory Committee to convene the
extraordinary meeting and such proposal shall be made to the Supervisory Committee in writing.
The Supervisory Committee is entitled to propose to the Board to convene an extraordinary
meeting and such proposal shall be made in writing to the Board. The Board shall give a written
reply on whether or not it agrees to convene such extraordinary meeting within 10 days after
receiving the proposal in accordance with the requirements under the laws, regulations, normative
documents and these Articles of Association.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-12 –


--- page 713 ---
If the Board agrees to convene the extraordinary meeting, a notice to convene the
shareholders’ meeting shall be issued within 5 days after the adoption of the resolution of the
Board, and any change to the original proposal in the notice shall be subject to the consent of the
Supervisory Committee.
If the Board disagrees to convene the extraordinary meeting or fails to give a reply within 10
days after receiving the proposal, it shall be deemed to be unable to perform or fail to perform the
duty of convening the shareholders’ meeting, and the Supervisory Committee may convene and
preside over such meeting on their own.
If the shareholders’ meeting is convened by the Supervisory Committee or shareholders on
their own, a written notice shall be issued to the Board.
With regard to the shareholders’ meeting convened by the Supervisory Committee or
Shareholders by themselves, the Board shall cooperate. The Board shall provide the register of
shareholders on the shareholding record date.
With regard to the shareholders’ meeting convened by the Supervisory Committee or
Shareholders by themselves, the necessary expenses of the meeting shall be assumed by the
Company.
2. Proposals of the Shareholders’ Meeting
When the Company convenes a shareholders’ meeting, the Board, the Supervisory Committee
and shareholders individually or jointly holding over 1% of the Company’s shares are entitled to
put forward a proposal to the Company.
Shareholders individually or jointly holding over 1% of the Company’s shares can put
forward a temporary proposal 10 days before convening the shareholders’ meeting and submit the
proposal in writing to the convener. The provisional proposals should have clear topics and
specific resolutions. The convener shall issue a supplemental notice for the shareholders’ meeting
within 2 days upon receiving the proposal, inform other Shareholders and, if within the terms of
reference of the shareholders’ meeting, add such a proposal to the agenda thereof for
consideration; however, interim proposal in violation of laws, administrative regulations or the
Articles of Associations, or not with in the terms of reference of the shareholders’ meeting shall
not be included. The Company shall not increase the shareholding of the shareholders putting
forward such interim proposal.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-13 –


--- page 714 ---
Except for the circumstances prescribed in the preceding paragraph, the convener shall not
amend the proposals stated in the notice of the shareholders’ meeting or add new proposals upon
the issuance of the notice of the shareholders’ meeting.
The shareholders’ meeting shall not vote and resolve on proposals not stated in the notice of
the shareholders’ meeting or not in compliance with the requirements of these Articles of
Association.
3. Notices of the Shareholders’ Meeting
Notice of annual meetings shall be given to all shareholders by the convener 20 days before
the meeting; notice of extraordinary meetings shall be given to all shareholders 15 days before the
meeting. Where otherwise provided by laws, regulations and the securities regulatory authorities of
the place where the Company is listed, such provisions shall apply.
Notices of shareholders’ meetings to shareholders of overseas listed shares may be published
through the designated websites of the Stock Exchange and the Company’s website, and upon
announcement, all shareholders of overseas listed shares shall be deemed to have received notice
of the relevant shareholders’ meeting.
Notice of the shareholders’ meeting shall:
(I) be given in writing;
(II) specify the venue, date and duration of the meeting;
(III) set out the matters to be discussed at the meeting;
(IV) provide the shareholders with such information and explanation as necessary for them to
make informed decisions in connection with the matters to be discussed; this principle
shall include (but not be limited to) when proposals are made to merge the Company, to
repurchase shares of the Company, to reorganize its share capital or to effect any other
reorganization of the Company, the specific conditions and contracts (if any) of the
proposed transaction shall be provided, and the causes and consequences of any such
proposals shall also be properly explained;
(V) disclose the nature and extent of the material interests, if any, of any Director,
Supervisor, manager and other officer in the matters to be discussed; and provide an
explanation of the differences, if any, between the way in which the matter to be
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-14 –


--- page 715 ---
discussed will affect such Director, Supervisor, manager and other officer in his/her
capacity as shareholders and the way in which such matter will affect other shareholders
of the same class;
(VI) contain the full text of any special resolution proposed to be passed at the meeting;
(VII) contain a conspicuous statement that all shareholders are entitled to attend the
shareholders’ meeting, and the shareholder may appoint a proxy in writing to attend the
meeting and vote, and that a proxy need not be a shareholder of the Company;
(VIII) specify the time and place for lodging the power of attorney for the voting proxy for the
meeting;
(IX) specify the record date of equity of shareholders entitled to attend the shareholders’
meeting;
(X) specify the name and telephone number of the standing contact person of the meeting;
(XI) specify the time and procedures for voting online or through other means.
4. Holding of the Shareholders’ Meeting
Any shareholder who is entitled to attend and vote at a shareholders’ meeting shall be entitled
to appoint one or more persons (who may not be a shareholder) as his/her proxy to attend and vote
on his/her behalf. A proxy so appointed can exercise the following rights pursuant to the
authorization from such shareholder:
(I) such shareholder’s right to speak at the shareholders’ meeting;
(II) the right to demand a poll alone or jointly with others;
(III) the right to vote by show of hands or on a poll; however, a proxy of a shareholder who
has appointed more than one proxy may only vote on a poll.
If the shareholders’ meeting is convened by the Board, the chairperson of the Board shall
serve as the chairman of the meeting; if the chairperson of the Board is unable or fails to perform
his/her duties for any reason, more than half of the Directors shall jointly elect a Director of the
Company to serve as the chairman of the meeting; if the chairman of the meeting is not elected,
the shareholders attending the meeting may elect a person to act as the chairman of the meeting; if
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-15 –


--- page 716 ---
for any reason, shareholders are unable to elect the chairman, the shareholder (including
shareholder proxies) attending the meeting holding the largest number of voting shares shall serve
as the chairman of the meeting.
The shareholders’ meeting convened by the Supervisory Committee shall be presided over by
the chairperson of the Supervisory Committee. If the chairperson of the Supervisory Committee is
unable or fails to perform his/her duties, a Supervisor shall be jointly elected by more than half of
the Supervisors to preside over the meeting.
The shareholders’ meeting convened by shareholders on their own shall be presided over by a
representative elected by the conveners.
The shareholders’ meeting shall have minutes, which shall be recorded by the Board
secretary.
The minutes of the meeting shall specify:
(I) the date, venue and agenda of the meeting, and the name of the convener;
(II) the names of the chairman of the meeting, and the Directors, Supervisors, manager and
other officers attending or present at the meeting;
(III) the number of shareholders and proxies attending the meeting, the total number of
voting shares held by them and the proportion of the total number of shares of the
Company;
(IV) the process of discussion in respect of each proposal, highlights of speeches and the
voting result;
(V) details of inquiries or suggestions of the shareholders, and the corresponding response
or explanations;
(VI) the name of the counting officer and monitoring officer;
(VII) other contents that shall be recorded in the minutes in accordance with these Articles of
Association.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-16 –


--- page 717 ---
5. V oting of the Shareholders’ Meeting
Resolutions of a shareholders’ meeting are divided into ordinary resolutions and special
resolutions.
For ordinary resolutions made at a shareholders’ meeting, they shall be approved by more
than half of the voting rights held by the shareholders (including the proxies) who attend the
shareholders’ meeting.
For special resolutions made at a shareholders’ meeting, they shall be approved by more than
two-thirds of the voting rights held by the shareholders (including the proxies) who attend the
shareholders’ meeting.
The following matters shall be approved by an ordinary resolution at a shareholders’ meeting:
(I) the work reports of the Board and the Supervisory Committee;
(II) the profit distribution plans and plans for recovery of losses formulated by the Board;
(III) removal of members of the Board and the Supervisory Committee (except for staff
representative), and their remuneration and method of payment thereof;
(IV) the Company’s annual financial budgets and final accounts, balance sheets, income
statements and other financial statements;
(V) any matters other than those that shall be approved by special resolutions as required by
the laws, the administrative regulations, the listing rules of the place where the shares of
the Company are listed or the Articles of Association of the Company.
The following matters shall be approved by an special resolution at a shareholders’ meeting:
(I) increase or decrease of the registered capital and issue of any class of shares, warrants
and other similar securities of the Company;
(II) issuance of bonds of the Company;
(III) division, merger, dissolution, liquidation or transformation of the Company;
(IV) amendments to the Articles of Association of the Company;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-17 –


--- page 718 ---
(V) when the Company within one year purchases and disposals material assets or provides
guarantees whose amount has exceeded 30% of the latest audited total assets of the
Company;
(VI) any other matters approved by ordinary resolution at a shareholders’ meeting as having a
material impact on the Company and are required to be approved by a special
resolution;
(VII) any matters other than those that shall be approved by special resolutions as required by
the laws, the administrative regulations, the listing rules of the place where the shares of
the Company are listed or the Articles of Association of the Company.
Shareholders (including proxies) shall exercise their voting rights in accordance with the
number of shares with voting rights represented by them, and each share entitles the shareholder
one voting right at the shareholders’ meeting. When a poll is taken at a meeting, a shareholder
(including his/her proxy) entitled to two or more votes need not cast all his/her votes in the same
way.
Where any member is, under the Rules Governing the Listing of Securities on the Stock
Exchange, required to abstain from voting on any particular resolution or restricted to vote only
for or against any particular resolution, such shareholder should waive his/her voting right or
abstain from voting in accordance with the provisions therein; any votes cast by or on behalf of
such member in contravention of such requirement or restriction shall not be counted into the poll
result.
The shares of the Company held by the Company do not carry voting rights and are excluded
from the total number of voting shares present at the shareholders’ meeting.
The voting right of the same shares shall be exercised only either by on-site voting or other
means of voting. In case of multiple voting by the same shares, only the first vote will be deemed
as valid.
III. SUPERVISORY COMMITTEE
The Company shall establish a Supervisory Committee. The Supervisory Committee shall
comprise three Supervisors, including one chairman. Each term of office of a Supervisor is three
years. The term of office of Supervisors shall be renewable upon reelection and reappointment.
The Supervisory Committee shall be accountable to the shareholders’ meeting and shall
exercise the following functions and powers in accordance with the laws:
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-18 –


--- page 719 ---
1. to check the financial condition of the Company;
2. to supervise the Company’s Directors, the managers and other officers to see whether
they have violated any laws, administrative regulations or the Articles of Association of
the Company in performing their duties, and to propose the removal of Directors and
officers who have violated laws, administrative regulations, these Articles of Association
or resolutions of shareholders’ meeting;
3. when the acts of a Director, manager and other officers are detrimental to the
Company’s interests, to require him/her to correct such acts;
4. to verify financial information such as financial reports, business reports and profit
distribution plans that the Board intent to submit to the shareholders’ meeting and, if in
doubt, a registered accountant or practicing auditor shall be appointed in the name of
the Company to assist in reviewing such information;
5. to propose the convening of extraordinary shareholders’ meetings and to convene and
preside over shareholders’ meetings when the Board fails to perform the duty of
convening and presiding over shareholders’ meetings;
6. to negotiate with Directors on behalf of the Company or to initiate litigation against
Directors, presidents, and other officers in accordance with the laws and these Articles
of Association;
7. to conduct investigation if there is any unusual circumstance in the Company’s
operations; and if necessary, to engage an accounting firm, law firm or other
professional institutions to assist in their work at the expenses of the Company;
8. to exercise other powers authorised by shareholders’ meetings.
IV . PRESIDENT
The Company shall have one president, who shall be appointed or removed by the Board.
The president of the Company shall report to the Board and have the following duties and
powers:
1. to be in charge of the production, operation and management of the Company, and to
organize and implement the resolutions adopted by the Board;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-19 –


--- page 720 ---
2. to organize and implement the annual business plans and investment plans of the
Company;
3. to draft schemes for the establishment of the Company’s internal management
departments;
4. to draft the basic management systems of the Company;
5. to formulate the basic rules and regulations of the Company;
6. to make proposals regarding the appointment or removal of the vice president and other
officers (including financial controller) of the Company;
7. to appoint or remove managerial officers other than those to be appointed or removed by
the Board;
8. other duties and powers authorized by the Articles of Association of the Company and
the Board.
V . BOARD SECRETARY
The Board secretary shall be a natural person with the necessary professional knowledge and
experience and shall be appointed by the Board. Its principal responsibilities include:
1. ensure that the Company has complete organizational documents and records; keep and
manage shareholders’ data; assist the Directors in handling the daily work of the Board;
2. organize and make preparations for meetings of the Board and the shareholders’
meeting, prepare documents for such meetings, make relevant arrangements for such
meetings, take minutes of meetings and ensure the accuracy of such minutes, make and
keep documents and minutes of such meetings, keep an eye on the implementation of
relevant resolutions on his/her own initiative, report and make recommendations to the
Board on any material issue arising in such implementation;
3. act as the liaison between the Company and the securities regulatory authorities, to be
responsible for organizing the preparation and prompt submission of the reports and
documents required by the regulatory authorities, and for accepting and organizing the
implementation of any assignment from the regulatory authorities;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-20 –


--- page 721 ---
4. to be responsible for coordinating and organizing the Company’s disclosure of
information; establishing and improving the information disclosure system; participating
in the Company’s meetings involving the disclosure of information; and keeping
informed of the Company’s material operation decisions and related information in a
timely manner;
5. ensure that the register of members of the Company is properly established, and ensure
that the person that has the right to receive relevant records and documents from the
Company will receive such records and documents timely;
6. exercise other functions and powers as conferred by the Board, as well as other
functions and powers as required by the laws, regulations and the stock exchanges on
which the Company’ shares are listed.
VI. CHANGES IN SHARES
The Company may approve capital increase based on the needs of operation and development
and in accordance with the Articles of Association of the Company.
The Company may increase its capital by the following methods:
1. offering new shares for subscription to unspecified investors;
2. issuance of shares to specific recipients;
3. distribution of new shares to the existing shareholders;
4. other ways as permitted by laws and administrative regulations and approved by CSRC.
The Company’s increase of capital by issuing new shares shall be conducted in accordance
with the procedures provided in the relevant laws and administrative regulations of the state, after
being approved according to the procedures provided in the Articles of Association of the
Company.
Unless otherwise provided by laws or administrative regulations, the shares of the Company
are transferable in accordance with the laws, without any lien.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-21 –


--- page 722 ---
In accordance with the provisions of the Articles of Association of the Company, the
Company may reduce its registered capital. Where the Company reduces its registered capital, it
shall be conducted in accordance with the Company Law and other relevant provisions as well as
procedures stipulated in these Articles of Association.
The Company shall not repurchase its shares, except for one of the following circumstances:
1. to reduce the registered capital of the Company;
2. to merge with other companies which hold the shares of the Company;
3. to utilize its shares in the employee stock ownership plan or for equity incentive;
4. to acquire its shares at the request of its shareholders who vote in a shareholders’
meeting against a resolution regarding a merger and division of the Company;
5. to utilize the shares for conversion of corporate bonds which are convertible into share
certificates issued by the listed company;
6. where it is necessary for the listed company to safeguard the value of the company and
the interests of its shareholders;
7. other circumstances permitted by laws, administrative regulations and regulatory
authority.
Except for the above-mentioned circumstances, the Company may not trade its shares.
Shares issued prior to the public issuance of shares by the Company shall not be transferred
within one year from the date the share certificates of the Company were listed on the stock
exchange(s).
Directors, Supervisors and officers of the Company shall report to the Company their
shareholdings (including the preference shares) and changes therein and shall not transfer more
than 25% per year of the total number of the same class shares held by them during their terms of
office. The shares held by them shall not be transferred within one year from the date the share
certificates of the Company being listed and traded. The aforesaid person(s) shall not transfer the
shares of the Company held by them within six months commencing from the termination of their
service.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-22 –


--- page 723 ---
If any of the Company’s shareholders, Directors, Supervisors or officers holding more than
5% of the total number of the Company’s shares sells the Company’s shares or other securities of
an equity nature held by him/her within six months after he/she buys the same, or buys the
Company’s shares held by him/her within six months after he/she sells the same, the proceeds
therefrom shall be owned by the Company and taken back by the Board. However, where a
securities company holds more than five percent of the total number of the Company’s shares as a
result of purchase and underwriting of all the left-over shares and other circumstances stipulated
by the securities regulatory authorities of the State Council shall be exempted.
The share certificates or other securities of an equity nature held by Directors, Supervisors,
officers, and natural person shareholders referred to in the preceding paragraph include the share
certificates or other securities of an equity nature held by their spouses, parents, children and those
held by using others’ accounts.
VII. APPOINTMENT OF ACCOUNTANTS
The Company shall retain an independent accounting firm that fulfills the requirements
provided by the relevant regulations of China to audit the Company’s annual financial report and
review the Company’s other financial reports. For the purposes of the Articles of Association, the
accounting firm retained by the Company at any time shall be the Company’s auditor.
The retaining of the first accounting firm of the Company may occur at the inauguration
meeting prior to the first annual meeting of shareholders. The term of such accounting firm shall
terminate upon the conclusion of the first annual meeting of shareholders.
Should the inauguration meeting not exercise the powers under the preceding paragraph, the
Board shall exercise those powers.
The term of an accounting firm retained by the Company shall be one year, and may be
renewed.
The accounting firm engaged by the Company shall have the following rights:
(I) to inspect books, records and vouchers of the Company at any time, and to require the
Directors, manager and other officers of the Company to provide relevant information
and explanations;
(II) to require the Company to take all reasonable steps to obtain from its subsidiaries any
information and explanations necessary for the discharge of its duties;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-23 –


--- page 724 ---
(III) to attend any shareholders’ meeting and to receive all notices of, and other
communications relating to, any shareholders’ meeting which any shareholder is entitled
to receive, and to speak at any shareholders’ meeting in relation to matters concerning
its role as the Company’s retained accounting firm.
Irrespective of the provisions in the contract concluded between the Company and the
accounting firm, the shareholders’ meeting may remove the accounting firm by an ordinary
resolution before the term of any accounting firm expires. Notwithstanding such provisions, the
accounting firm’s entitlement to claim for damages arising out of its removal shall not be affected
thereby.
The remuneration of an accounting firm or the manner in which such firm is to be
compensated shall be decided by the shareholders’ meeting.
The shareholders’ meeting shall decide to retain, remove or discontinue the retention of an
accounting firm.
In the event that a resolution at shareholders’ meeting is passed to retain an accounting firm
other than the incumbent accounting firm to fill any casual vacancy in the office of the accountant,
or to remove an accounting firm prior to the expiration of its term, the following provisions shall
apply:
(I) the retaining or removal motion shall be sent (before a notice of shareholders’ meeting
is given) to the accounting firm that is proposed to be retained or to leave or the
accounting firm which has left in the relevant accounting year (including any accounting
firm leaving due to removal, resignation and retirement).
(II) in the event that the accounting firm that is proposed to leave makes written
representations and requests that the Company give notice to shareholders of such
representations, the Company shall (unless the representations have been received too
late) take the following measures: (1) in any aforementioned notice for making a
resolution, the Company shall state the representations made by such accounting firm
which is to leave; (2) to attach a copy of the representations to the notice and deliver it
to every shareholder entitled to receive the notice in the manner as provided in the
Articles of Association.
(III) in the event that the Company fails to send the accounting firm’s representations in the
manner set out in paragraph (II) above, such accounting firm may (in addition to its
right to be heard) make further appeal.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-24 –


--- page 725 ---
(IV) a leaving accounting firm has the right to attend the following meetings:
(1) shareholders’ meeting at which its term would otherwise have expired;
(2) shareholders’ meeting at which the said accounting firm is proposed to fill the
vacancy caused by its removal;
(3) shareholders’ meeting which is convened as a result of the resignation of the said
accounting firm.
The leaving accounting firm is entitled to receive all notices of, and other communications
relating to any meeting referred to in paragraph (IV), and to speak at any such meeting which it
attends on any matters with respect to its capacity as the former accounting firm of the Company.
Notice shall be given to the accounting firm 3 days in advance should the Company decide to
remove such accounting firm or not to reappoint it. Such accounting firm shall be entitled to make
representations at the shareholders’ meeting. Where the accounting firm resigns from its position,
it shall clarify to the shareholders at the shareholders’ meeting on any irregularities on the part of
the Company.
VIII. LIQUIDATION
The Company shall be dissolved and liquidated according to laws upon any of the following
circumstances:
(I) a special resolution on dissolution is passed at a shareholders’ meeting;
(II) dissolution is necessary due to a merger or division of the Company;
(III) the Company’s business license is revoked or it is ordered to close down or deregistered
according to laws;
(IV) the Company is ordered to be close down for violation of laws and administrative
regulations in accordance with the laws;
(V) where the Company suffers severe difficulties in its operation and management and its
continued existence will bring heavy losses to the interest of shareholders, and provided
that such difficulties cannot be resolved otherwise, the shareholders holding not less
than 10% of all shareholders’ voting rights in the Company may apply to the People’s
Court for dissolution of the Company;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-25 –


--- page 726 ---
(VI) where the Company is adjudged insolvent in accordance with the applicable laws as a
result of its inability to pay its debts when due;
(VII) the term of business operation as prescribed in the Articles of Association expires or
other matters as prescribed in the Articles of Association for dissolution occur.
When dissolution event in accordance with preceding paragraph occurred to the Company, the
Company shall publicly announce the dissolution event on the National Enterprise Credit
Information Publicity System within 10 days.
In the event of the situation set forth in paragraph (I) of Article 168 of the Articles of
Association, and has yet to distribute its property to its shareholders, the Company may continue
to exist by amending the Articles of Association or by a shareholders’ meeting resolution.
Amendments to the Articles of Association in accordance with preceding paragraph or the
approval of the shareholders’ meeting resolution shall be approved by more than two-thirds of the
voting rights held by the shareholders present at the shareholders’ meeting.
Where the Company is dissolved pursuant to paragraph (I), (III), (V) and (VII) of Article 168
of these Articles of Association, a liquidation committee shall be set up within 15 days since
dissolution events has occurred to start liquidation process. The liquidation committee shall be
composed of personnels decided by an ordinary resolution at the shareholders’ meeting. If no
liquidation committee has been set up to conduct liquidation within the time limit, the creditors
may request the People’s Court to designate the relevant personnel to form a liquidation committee
to carry out the liquidation.
Where the Company is dissolved pursuant to paragraph (I), (II), (IV), (VI) and (VII) of the
preceding article, a liquidation committee comprising shareholders, the relevant competent
authorities and relevant professionals shall be arranged by the relevant supervisory authority to
carry out the liquidation.
Where the Company is dissolved pursuant to paragraph (I), (II), (VI) and (VII) of the
preceding article, a liquidation committee comprising shareholders, the relevant authorities and
relevant professionals shall be arranged by the People’s Court in accordance with relevant laws to
carry out the liquidation.
The liquidation committee shall, within ten days of its establishment, notify the creditors,
and, within sixty days of its establishment, publish an announcement on newspapers or on the
National Enterprise Credit Information Publicity System.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-26 –


--- page 727 ---
Creditors shall, within thirty days after receipt of the written notice, or for those who do not
receive the notice, within forty-five days from the date of the announcements, declare their claims
to the liquidation committee. In declaring claims, a creditor shall explain the relevant particulars
of the claims with supporting materials. The liquidation committee shall register the creditor’s
claims in accordance with laws.
During the period of declaration of claims, the liquidation committee shall not repay any
debts to the creditors.
The liquidation committee shall exercise the following functions and powers during the
liquidation:
(I) to go through the assets of the Company and prepare a balance sheet and an inventory
of assets separately;
(II) to inform or make an announcement to the creditors;
(III) to deal with the Company’s outstanding business in connection with the liquidation;
(IV) to settle any taxes payable;
(V) to go through the claims and debts;
(VI) to handle the Company’s assets remaining after the settlement of its debts;
(VII) to participate in civil litigation on behalf of the Company.
The members of the liquidation committee shall be devoted to their duties and perform their
liquidation obligations in accordance with laws.
The members of the liquidation committee shall not accept any bribes or other illegal income
by making use of his/her functions and powers nor seize any assets of the Company.
Where a member of the liquidation committee causes losses to the Company or its creditors
intentionally or through gross negligence, he or she shall be liable for compensation.
After going through the Company’s assets and preparing a balance sheet and an inventory of
assets, the liquidation committee shall formulate a liquidation plan and submit the same at the
shareholders’ meeting or to the relevant competent authorities for confirmation.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-27 –


--- page 728 ---
The Company’s assets shall be distributed in accordance with the order stipulated by laws
and regulations. If there is no applicable law, such distribution shall be carried out in accordance
with a fair and reasonable order determined by the liquidation committee.
Any assets of the Company remaining after repayment of debts in accordance with the
preceding provisions shall be distributed to the shareholders of the Company according to the class
of shares and the proportion of shares held.
During the liquidation period, the Company shall continue to exist, but shall not commence
any new business activities.
The assets of the Company shall not be distributed to the shareholders before the discharge is
made as provided for in the previous paragraph.
If the Company is to be dissolved by liquidation, the liquidation committee, after going
through the Company’s assets and preparing a balance sheet and an inventory of assets, discovers
that the Company’s assets are insufficient to repay its debts, it shall apply to the People’s Court for
a declaration of insolvency.
After the Company is declared insolvency by a ruling of the People’s Court, the liquidation
committee shall transfer the liquidation matters to the People’s Court.
Upon conclusion of the liquidation of the Company, the liquidation committee shall prepare a
liquidation report and statement of receipts and expenditures and financial records for the period
of liquidation which shall, upon being audited by an accountant registered in the PRC, be
submitted to the shareholders’ meeting or to the relevant competent authorities for confirmation.
The liquidation committee shall, within thirty days of the date of confirmation by the
shareholders’ meeting or relevant competent authorities, submit the said documents to the
Company registration department, and apply for the cancellation of registration of the Company
and to make public announcement in respect of the termination of the Company.
IX. ESSENTIAL PROVISIONS OF THE COMPANY
(I) General Provisions
The Company shall be a perpetually existing company limited by shares.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-28 –


--- page 729 ---
The Articles of Association of the Company (including the future amendment to these
Articles of Association) shall become a legally binding public document that regulates the
organization and activities of the Company as well as the rights and obligations between the
Company and its shareholders and among the shareholders, from the date on which they become
effective.
According to the provisions of the Constitution of the Communist Party of China, the
Company shall establish an organization of the Communist Party of China and carry out the
activities of the Communist Party of China. The Company shall provide necessary conditions for
the activities of the organization of the Party.
(II) Profit Distribution
The Company will annually give full consideration to the interests of shareholders and make
the implementation of a reasonable profit distribution policy according to business situation and
market environment. The Company shall distribute dividends in form of cash or share certificates.
When distributing each year’s profits after taxation, the Company shall set aside 10% of its
profits after taxation for the Company’s statutory common reserve fund until the fund has reached
more than 50% of the Company’s registered capital.
When the Company’s statutory common reserve fund is not sufficient to make up for the
Company’s losses for the previous years, the current year’s profits shall first be used to make good
the losses before any allocation is set aside for the statutory common reserve fund.
After the Company has made allocations to the statutory common reserve fund from its
profits after taxation, it may, upon passing a resolution at a shareholders’ meeting, make further
allocations from its profits after taxation to the discretionary common reserve fund.
After the Company has made good its losses and made allocations to its discretionary
common reserve fund, the remaining profits after taxation shall be distributed in proportion to the
number of shares held by the shareholders, except for those which are not distributed in a
proportionate manner as provided by the Articles of Association.
Profits distributed to shareholders by a resolution of a shareholders’ meeting or the board of
directors before losses have been made good and allocations have been made to the statutory
common reserve fund in violation of the requirements described above must be returned to the
Company.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-29 –


--- page 730 ---
The Company shall not be entitled to any distribution of profits in respect of its own shares
held by it.
The common reserve fund of the Company shall be applied to make good the Company’s
losses, expand its business operations or increase its capital. Where the reserve funds are used to
make up losses, the discretionary reserve funds and statutory reserve funds shall be used in
priority; if not sufficient, the capital reserve funds may be used according to regulations.
Upon the transfer of the statutory common reserve fund into capital, the balance of the fund
shall not be less than 25% of the registered capital of the Company before such transfer.
(III) Financial and Accounting System
At the end of each accounting year, the Company shall prepare a financial report reviewed
and certified in accordance with laws.
The Board shall place before the shareholders at each annual meeting such financial reports
as relevant laws, administrative regulations and normative documents promulgated by the local
government and the authorities-in-charge require the Company to prepare.
The financial reports of the Company shall be made available for inspection by shareholders
twenty days prior to an annual meeting. Each shareholder of the Company shall have the right to
obtain a copy of the financial reports referred to in this chapter.
The financial statements of the Company shall, in addition to being prepared in accordance
with the accounting standards and regulations of the People’s Republic of China, be prepared in
accordance with either international accounting standards or such accounting standards in the place
of listing overseas. If there is any material difference between the financial statements prepared
respectively in accordance with the two accounting standards, explanations shall be given in the
financial statements. When the Company distributes its profits after taxation for that accounting
year, the lower of the profits after taxation as shown in (i) the financial statement prepared in
accordance with the accounting standards and regulation of the People’s Republic of China, or (ii)
the international accounting standards or such accounting standards in the place of listing overseas,
shall be adopted.
The interim results or financial information published or disclosed by the Company shall be
prepared in accordance with the accounting standards and regulations of the People’s Republic of
China as well as the international accounting standards or such accounting standards in the place
of listing overseas.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-30 –


--- page 731 ---
The Company shall publish its financial statements twice every accounting year, that is, the
interim financial report shall be published within sixty days after the expiration of the first six
months of each accounting year and the annual financial report shall be published within one
hundred and twenty days after the expiration of each accounting year.
If the securities regulatory authorities of the place where the Company’s shares are listed or
listing rules of the place where the Company’s shares are listed provide otherwise, such provisions
shall prevail.
The Company may not establish any account books other than statutory account books. No
accounts shall be opened in the name of any individual for deposit of the assets of the Company.
(IV) Financial Assistance for Acquisition of Shares of the Company
The Company or its subsidiaries (including affiliates) shall not provide any assistance to
persons who purchase or intend to purchase the shares of the Company, in the form of gift,
advance, guarantee, compensation or loan.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-31 –


--- page 732 ---
FURTHER INFORMATION ABOUT OUR COMPANY AND OUR SUBSIDIARIES
Incorporation
Our Company was established as a limited liability company in the PRC on August 30, 2006
and was converted into a joint stock limited company on December 3, 2015 under the laws of the
PRC. As of the Latest Practicable Date, the total share capital of the Company was
RMB498,506,709 comprising 498,506,709 Shares of nominal value RMB1.00 each.
Our principal place of business in Hong Kong is at Unit 322, 3/F, 19W, Science Park West
Avenue, Hong Kong Science Park, Pak Shek Kok, New Territories, Hong Kong. Our Company has
been registered as a non-Hong Kong company under Part 16 of the Companies Ordinance with the
Registrar of Companies in Hong Kong on March 6, 2024. Ms. YU Anne ( Яτ֋) has been
appointed as the authorized representative of our Company for the acceptance of service of process
in Hong Kong whose address for service of process is 40/F Dah Sing Financial Centre, 248
Queen’s Road East, Wanchai, Hong Kong.
As the Company was incorporated in the PRC, its operations are subject to the relevant laws
and regulations of the PRC. A summary of the relevant aspects of laws and regulations of the PRC
and the Articles of Association is set out in the section headed “Regulatory Overview” and
Appendix V , respectively.
Changes in Share Capital
On August 30, 2006, our Company was incorporated with a registered capital of
HKD7,000,000.
The following sets out the changes in the share capital of our Company within two years
immediately preceding the date of this prospectus:
(a) Pursuant to an agreement for asset purchase by share issue dated November 27, 2023,
Yaoning Technology subscribed for 68,582,573 Shares in consideration of our
acquisition in the 49.00% interest in Lynway Vision. As a result, our total share capital
was increased to RMB480,078,011 on December 4, 2023. See “History, Development
and Corporate Structure — Major Acquisitions, Disposals and Mergers”;
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-1 –


--- page 733 ---
(b) Pursuant to a capital increase agreement dated December 4, 2023, Jingrui Investment
and Jingshi Investment subscribed for an increased share capital of RMB5,279,328 and
RMB6,581,700 at a total consideration of RMB11,614,521 and RMB14,479,740,
respectively. As a result, our total share capital was increased to RMB491,939,039 on
December 14, 2023. See “History, Development and Corporate Structure — Issue and
Allotment of New Shares”;
(c) Pursuant to a capital increase agreement dated December 8, 2023, Jingling Investment
subscribed for an increased share capital of RMB6,567,670 at a total consideration of
RMB17,075,942. As a result, our total share capital was increased to RMB498,506,709
on December 27, 2023. See “History, Development and Corporate Structure — Issue and
Allotment of New Shares”;
Save as disclosed above, there has been no alteration in the share capital of the Company
within two years immediately preceding the date of this prospectus.
Resolutions of our Shareholders and Board members
At the general meeting of the Shareholders held on January 19, 2024 and the Board meetings
held on June 27, 2024 and October 21, 2024, respectively, the following resolutions, among other
things, were duly passed:
(a) the issue by the Company of H Shares with a 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 shall be no more than 25% of the total issued share
capital of our Company as enlarged by the Global Offering, and the grant of the Offer
Size Adjustment Option in respect of no more than 15% of the number of H Shares
issued pursuant to the Global Offering;
(c) subject to the CSRC’s approval, upon completion of the Global Offering, 215,506,643
Domestic Unlisted Shares will be converted into H Shares on a one-for-one basis;
(d) authorization of the Board or its authorized individual to handle all matters relating to,
among other things, the Global Offering, the issue and the listing of H Shares on the
Hong Kong Stock Exchange; and
(e) subject to the completion of the Global Offering, the conditional adoption of the revised
Articles of Association, which shall become effective on the Listing Date.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-2 –


--- page 734 ---
Changes in the Share Capital of our Subsidiaries
A summary of the corporate information and the particulars of our subsidiaries are set out in
Note 1 to the Accountants’ Report of the Group as set out in Appendix IA to this prospectus.
Guangzhou Lynway Automotive Lighting Co., Ltd. (ʮ̡ ), a
wholly-owned subsidiary of our Company, was established in Guangdong Province, the PRC on
October 24, 2022 with the registered capital of RMB10 million.
Lynway Vision (Guangzhou), a wholly-owned subsidiary of our Company, was established in
Guangdong Province, the PRC on June 17, 2024 with the registered capital of RMB250 million.
Save as disclosed above, there has been no alteration in the share capital of the subsidiaries
of the Company within two years immediately preceding the date of this prospectus.
FURTHER INFORMATION ABOUT OUR BUSINESS
Summary of Material Contracts
The following contracts (not being contracts entered into in the ordinary course of business)
have been entered into by members of our Group within the two years preceding the date of this
prospectus and are or may be material:
(a) the equity transfer agreement dated May 5, 2023, and entered into among Shenzhen
Guomin Innovation Venture Capital (L.P.) ( ଉέ̹਷͏௴อ௴ุҳ༟Άุ (Υྫ))
(“Publics Venture Capital ”), Ningbo Meishan Bonded Area Jiamu Ronghe Investment
Partnership (Limited Partnership) (೼ಥਜྗ˝ፄΥҳ༟ΥྫΆุ (Υ
ྫ)) (“ Jiamu Ronghe ”), YE Zhiyu ( ໢қρ), YE Zhixiong ( ໢қඪ) and the Company,
pursuant to which Publics Venture Capital agreed to transfer (i) 9,488,486 Shares it held
to Jiamu Ronghe at a consideration of RMB20,000,000.95, (ii) 9,393,602 Shares it held
to YE Zhiyu at a consideration of RMB19,800,000.94 and (iii) 94,885 Shares it held to
YE Zhixiong at a consideration of RMB200,000.01;
(b) the equity transfer agreement dated June 2, 2023, and entered into among Ningbo
Meishan Bonded Area Jiamu Ronghe Investment Partnership (Limited Partnership) ( ྐྵ
೼ಥਜྗ˝ፄΥҳ༟ΥྫΆุ (Υྫ)) (“ Jiamu Ronghe ”), Shenzhen
Shidiya Investment Co., Ltd. (ʮ̡ )( “ Shidiya ”) and the
Company, pursuant to which Jiamu Ronghe agreed to transfer 7,000,000 Shares it held
to Shidiya at a consideration of RMB27,230,000;
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-3 –


--- page 735 ---
(c) the equity transfer agreement dated August 25, 2023, and entered into among Ningbo
Fengyan Equity Investment Partnership (L.P.) (ᛆҳ༟ΥྫΆุ (Υྫ))
(“Fengyan Investment ”), HUANG Dinghe ( රཻ൭) and the Company, pursuant to
which Fengyan Investment agreed to transfer 0.2430% of then issued Shares of the
Company (equivalent to the registered capital of the Company of RMB1,000,000) to
HUANG Dinghe at a consideration of RMB3,000,000;
(d) the agreement for asset purchase by share issue dated November 27, 2023, and entered
into among the Company and Yaoning Technology, pursuant to which the Company
agreed to issue 68,582,573 Shares to Yaoning Technology to acquire the 49.00% equity
interest in Lynway Vision held by Yaoning Technology;
(e) the capital increase and share capital enlargement agreement dated December 4, 2023,
and entered into among the Company, Guangzhou Jingshi Investment Partnership
(Limited Partnership) ( ᄿψ౺ྼҳ༟ΥྫΆุ (Υྫ)) (“ Jingshi Investment ”) and
Guangzhou Jingrui Investment Partnership (Limited Partnership) ( ᄿψ౺๿ҳ༟ΥྫΆ
ุ(Υྫ)) (“ Jingrui Investment ”), pursuant to which Jingshi Investment and
Jingrui Investment agreed to subscribe for 11,861,028 new Shares (the newly increased
registered capital of the Company of RMB11,861,028) at a total consideration of
RMB26,094,261.60;
(f) the capital increase and share capital enlargement agreement dated December 8, 2023,
and entered into among the Company and Guangzhou Jingling Investment Partnership
(Limited Partnership) ( ᄿψ౺ჯҳ༟ΥྫΆุ (Υྫ)) (“ Jingling Investment ”),
pursuant to which Jingling Investment agreed to subscribe for 6,567,670 new Shares
(the newly increased registered capital of RMB6,567,670) at a consideration of
RMB17,075,942.00; and
(g) the Hong Kong Underwriting Agreement.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-4 –


--- page 736 ---
Intellectual Property Rights
Trademarks
As at the Latest Practicable Date, we had registered the following trademarks which we
consider to be or may be material to our business:
No. Trademark Place of registration Rights holder Category Registration number Expiration date
1.
 PRC APT Electronics 11 7979534 April 6, 2031
2.
 PRC APT Electronics 42 7979567 January 20, 2032
3.
 Malaysia APT Electronics 9 2018053801 February 22, 2028
4.
 Malaysia APT Electronics 11 2018053802 February 22, 2028
5.
 EU APT Electronics 9, 11 017721333 January 22, 2028
6.
 Mexico APT Electronics 9 1877906 January 26, 2028
7.
 Mexico APT Electronics 11 1877908 January 26, 2028
8.
 HK APT Electronics 11 301321037AB April 7, 2029
9.
 HK APT Electronics 11, 42 301514231 January 3, 2030
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-5 –


--- page 737 ---
No. Trademark Place of registration Rights holder Category Registration number Expiration date
10.
 US APT Electronics 9, 11 6267052 February 8, 2031
11.
 PRC APT Electronics 11 7816732 March 20, 2031
12.
 Malaysia APT Electronics 9 2018053796 February 22, 2028
13.
 Malaysia APT Electronics 11 2018053798 February 22, 2028
14.
 HK APT Electronics 9, 11,
42
301483092 November 23, 2029
15.
 US APT Electronics 9 6102619 July 13, 2030
16.
 EU APT Electronics 9, 11 017721341 January 22, 2028
17. LEDis PRC APT Electronics 11 7877397 March 27, 2031
18. ᑌ౺ PRC APT Electronics 42 26461113 September 6, 2028
19. ᑌ౺౽ঐ PRC APT Electronics 9 27884281 November 20, 2029
20. ᑌ౺ PRC APT Electronics 9 34091669 June 20, 2030
21. LEDIS PRC APT Electronics 9, 11 41196983A February 6, 2031
22. LEDIS PRC APT Electronics 9 41196983 June 13, 2031
23.
Indonesia APT Electronics 9 IDM000761806 January 15, 2028
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-6 –


--- page 738 ---
No. Trademark Place of registration Rights holder Category Registration number Expiration date
24.
 Indonesia APT Electronics 11 IDM000761805 January 15, 2028
25.
 Indonesia APT Electronics 9 IDM000761775 January 15, 2028
26.
 Indonesia APT Electronics 11 IDM000761776 January 15, 2028
27. ᑌ౺ PRC Linlux 11 35361105 September 27, 2030
28.
 PRC Linlux 9 35352843 December 6, 2030
29.
 PRC Lynway Vision 11 48678865 April 13, 2031
30.
 PRC Lynway Vision 11 49014669 April 20, 2031
31.
 PRC Lynway Vision 11 49032296 April 6, 2031
32.
 PRC Lynway Vision 12 48671079 April 20, 2031
33.
 PRC Lynway Vision 12 49017717 April 6, 2031
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-7 –


--- page 739 ---
Patents
As at the Latest Practicable Date, we had registered the following patents which we consider
to be or may be material to our business:
No. Patent Name Category Patentee
Place of
registration Patent number Grant date
1. Convex point light-emitting diodes
and their manufacturing methods
(ج)
Invention patent APT Electronics PRC ZL200710029219.4 March 2, 2011
2. Surface mounted LED structure
and packaging method of
integrating functional circuits on
a silicon (ණϓϞ̌
ٙLED൨ༀഐ࿴ʿՉ
ج)
Invention patent APT Electronics US US 13/024,083 &
US 8 138 515 B2
March 20, 2012
3. Light emitting device and TV
back-light module with wide
color gamut ( ᄿЍਹLEDΈኜ΁
Έʩ΁ )
Invention patent APT Electronics US US 14/584,482 &
US 9496 464 B2
November 15, 2016
4. High-reliability LED bracket and
its LED devices (׌
LEDʿՉLEDኜ΁)
Invention patent APT Electronics PRC ZL201310317058.4 April 27, 2016
5. Chip-level LED light source
module and its projection and
production method ( ɓ၇౺˪ॴ
LEDج)
Invention patent APT Electronics PRC ZL201510617715.6 June 12, 2018
6. Flip-chip white LED device and
its production method (ༀ
ͣΈLEDج)
Invention patent APT Electronics PRC ZL201510733494.9 August 31, 2018
7. LED packaging device with deep
ultraviolet lamps and its
preparation method ( ɓ၇ଉഓ̮
ዱLEDج)
Invention patent APT Electronics PRC ZL201611228510.X July 19, 2019
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-8 –


--- page 740 ---
No. Patent Name Category Patentee
Place of
registration Patent number Grant date
8. Red luminophor, LED device and
method for making the LED
device (Ѝ೯Έ᜗e LED
ج)
Invention patent APT Electronics US US 16/934,312 &
US 11271142 B2
March 8, 2022
9. White light emitting diode and
backlight module ( ͣΈ೯Έɚ฽
Έᅼଡ଼ )
Invention patent APT Electronics US US 16/884,087 &
US 11367811 B2
June 21, 2022
10. LCD devices and driving methods
based on Mini LED backlight
and local dimming (׵Mini
LED૰౺ᜑ
ج)
Invention patent APT Electronics PRC ZL202111683264.8 June 30, 2023
11. Packaging substrate and
semiconductor device and its
production method (ༀਿ
ج)
Invention patent APT Electronics PRC ZL201811433165.2 November 3, 2023
12. Light guide element and vehicle
with irregular-shaped automotive
lamps ( ɓ၇ମҖԓዱΈኬଡ଼΁
ձԓሿ)
Invention patent Lynway Vision PRC ZL202310952218.6 December 15, 2023
13. Uniform light-guiding automotive
signal light and automobile ( ɓ
໮ዱձӛ
ԓ)
Invention patent Lynway Vision PRC ZL202310952209.7 October 31, 2023
14. Automatic gluing assembly line
and gluing assembly method for
automotive lamps (ٙ
Іਗ෩ᇭༀৣᇞʿ෩ᇭༀৣ˙
ج)
Invention patent Lynway Vision PRC ZL201810260399.5 July 28, 2020
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-9 –


--- page 741 ---
Domain names
As of the Latest Practicable Date, we owned the following domain names which we consider
to be or may be material to our business:
No. Domain names Obligee Expiration date
1. apt-hk.com ..................... Our Company September 14, 2026
2. apt-hk.com.cn ................... Our Company March 31, 2026
3. apt-hk.net ...................... Our Company March 31, 2026
4. apt-hk.net.cn .................... Our Company March 31, 2026
5. apte.xyz ........................ Our Company February 1, 2026
6.߅cn .................... Our Company February 2, 2026
7.߅com ................... Our Company February 2, 2026
8.߅.ʕ਷ ................... Our Company February 2, 2026
9.߅.ʮ̡ ................... Our Company February 2, 2026
10.ཥɿ.cn .................... Our Company March 31, 2026
11.ཥɿ.com ................... Our Company April 11, 2026
12.ཥɿ.ʕ਷ ................... Our Company March 31, 2026
13. linlux-hk.com ................... Linlux April 16, 2025
14. lynway.cn ...................... Lynway Vision July 22, 2030
15. lynway.net ...................... Lynway Vision August 24, 2030
16. lynway.com.cn ................... Lynway Vision August 24, 2030
Save as aforesaid, as of the Latest Practicable Date, there were no other trade or service
marks, patents, intellectual or industrial property rights which were material in relation to our
business.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-10 –


--- page 742 ---
FURTHER INFORMATION ABOUT OUR DIRECTORS, SUPERVISORS, MANAGEMENT
AND SUBSTANTIAL SHAREHOLDERS
Particulars of the Service Contracts
We have entered into a contract with each of our Directors and Supervisors in respect of,
among other things (i) compliance of relevant laws and regulations, (ii) observance of the Articles
of Association, and (iii) provisions on dispute resolution.
Save as disclosed above, none of the Directors or Supervisors has entered into any service
contracts as a director or supervisor with any member of the Group (excluding contracts expiring
or determinable by the employer within one year without payment of compensation (other than
statutory compensation)).
Directors’ and Supervisors’ Remuneration
The Directors and Supervisors receive remuneration in the forms of salaries, allowances and
benefits in kind, performance related bonuses, share-based payment expenses, and pension scheme
contributions.
The aggregate amount of remuneration (including salaries, allowances and benefits in kind,
performance related bonuses, share-based payment expenses, and pension scheme contributions)
paid to our Directors and Supervisors for the three years ended December 31, 2021, 2022 and 2023
and the five months ended May 31, 2024 were approximately RMB4.1 million, RMB3.8 million,
RMB5.0 million and RMB2.4 million, respectively.
Disclosure of interests
Immediately following completion of the Global Offering (assuming the Offer Size
Adjustment Option is not exercised), the interests and/or short positions of our Directors,
Supervisors and chief executive in our Shares, underlying shares and debentures of our Company
and its associated corporations, within the meaning of Part XV of the SFO, which will have to be
notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the
SFO (including interests and short positions which he/she is 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
recorded in the register referred to therein, or which will be required to be notified to our
Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by
Directors of Listed Companies contained in the Listing Rules, will be as follows:
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-11 –


--- page 743 ---
Interest in Shares
Approximate percentage of Shareholding
following the completion of the Global
Offering (%)
Name of Director, Supervisor or
Chief Executive Nature of Interests
Number and
Description of Shares (1)
In the Domestic
Unlisted Shares/
H Shares
In the total issued
share capital of
our Company
Mr. Xiao (2)(3)(4) .......... Interest held jointly
with other persons
171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
Mr. Chan (2)(3)(5) .......... Interest held jointly
with other persons
171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
Mr. Yuan(2)(3) ........... Interest held jointly
with other persons
171,316,739 Domestic
Unlisted Shares
60.54 32.20
63,524,835 H Shares 25.50 11.94
Mr. HOU Yu (6) .......... Interest of spouse 3,500,000 Domestic
Unlisted Shares
1.24 0.66
1,500,000 H Shares 0.60 0.28
Notes:
(1) All interests are long positions.
(2) As of the Latest Practicable Date, Advanced Photoelectronic was held as to (i) 10.50% by Mr. Xiao, (ii) 17.76% by
APTESS, which is wholly owned by Mr. Xiao, (iii) 32.02% by Giant Power Limited, which is wholly owned by Mr.
Yuan, (iv) 3.78% by Mr. Chan, (v) 1.62% by Ms. Loh, spouse of Mr. Chan, and (vi) 34.32% by other shareholders,
none of which held more than one third therein.
(3) Pursuant to the acting-in-concert agreement dated January 1, 2021, Mr. Xiao, Mr. Chan, Mr. Yuan, APTESS and
Giant Power Limited are parties acting in concert in respect of their shareholding interests in Advanced
Photoelectronic and/or our Company. Therefore, each of Mr. Xiao, Mr. Chan, Mr. Yuan, APTESS and Giant Power
Limited is deemed to be interested in the interest of each other under the SFO.
(4) As of the Latest Practicable Date, Mr. Xiao was the general partner of Jingyu Investment, Jingling Investment,
Jingrui Investment and Jingshi Investment. Therefore, Mr. Xiao is deemed to be interested in the 14,105,000,
6,567,670, 5,279,328 and 6,581,700 Shares held by each of Jingyu Investment, Jingling Investment, Jingrui
Investment and Jingshi Investment in the Company. Pursuant to the acting-in-concert agreement dated December 8,
2023, Advanced Photoelectronic, Jingyu Investment, Jingling Investment, Jingrui Investment and Jingshi Investment
are parties acting in concert. Therefore, each of Advanced Photoelectronic, Jingyu Investment, Jingling Investment,
Jingrui Investment and Jingshi Investment is deemed to be interested in the interest of each other under the SFO.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-12 –


--- page 744 ---
(5) Mr. Chan and Ms. Loh are spouses, and hence are deemed to be interested in the interest of each other under the
SFO.
(6) Mr. HOU Yu and Ms. GAO Tao are spouses, and hence are deemed to be interested in the interest of each other
under the SFO.
Save as disclosed above, none of the Directors, Supervisors or the chief executive officer of
the Company will, immediately following completion of the Global Offering, has any interests
and/or short positions in the Shares, underlying Shares and debentures of our Company’s
associated corporations (within the meaning of Part XV of the SFO), which will have to be
notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the
SFO (including interests and short positions which he/she is 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
recorded in the register referred to therein, or which will be required to be notified to our
Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by
Directors of Listed Companies contained in the Listing Rules.
Substantial Shareholders
For information on the persons who will, immediately following the completion of the Global
Offering, having or be deemed or taken to have beneficial interests or short position in our Shares
or underlying Shares which would fall to be disclosed to our Company and the Stock Exchange
under the provisions of Divisions 2 and 3 of Part XV of the SFO, see the section headed
“Substantial Shareholders” in this prospectus.
Save as disclosed herein, our Directors are not aware of any other person who will,
immediately following the Global Offering and the Conversion of Domestic Unlisted Shares into H
Shares (and the offering of any additional H Shares pursuant to the Offer Size Adjustment Option),
have an interest or short position in Shares or underlying Shares of the Company, which would be
required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions
2 and 3 of Part XV of the SFO or will, directly or indirectly, be interested in 10% or more of the
nominal value of any class of share capital carrying rights to vote in all circumstances at general
meeting of the Group.
Share Incentive Schemes
A. Share Incentive Scheme I
The following is a summary of the principal terms of the Share Incentive Scheme I adopted
on May 31, 2019 and renewed on December 8, 2023. Under the Share Incentive Scheme I, the
eligible participants as approved may indirectly hold our Company’s interest by holding
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-13 –


--- page 745 ---
partnership interest in our employee shareholding platform, namely, Jingyu Investment. As of the
Latest Practicable Date, Jingyu Investment directly held 14,105,000 Shares. For details, see
“History, Development and Corporate Structure” in this prospectus. The Share Incentive Scheme I
is not subject to the provisions of Chapter 17 of the Listing Rules.
(a) Purposes
The purpose of the Share Incentive Scheme I is to further establish and improve the
Company’s long-term incentive mechanism, attract and retain talents, fully promote the positivity
of the Directors, senior management, middle-level management and core employees of the
Company, and direct the focus of all parties to the Company’s long-term development by
effectively combining the interests of the Shareholders, the Company and core individuals.
(b) The Number and Price of Shares
A total of 14,105,000 restricted shares, with grant price per restricted share of RMB1.85 were
granted under the Share Incentive Scheme I, representing approximately 2.83% of the share capital
in issue of the Company immediately prior to the completion of the Global Offering and
approximately 2.65% of the share capital in issue of the Company immediately following the
completion of the Global Offering (assuming the Offer Size Adjustment Option is not exercised).
(c) Participants
The participants under the Share Incentive Scheme I shall be our regular employees (the
“Participants ”), who are formally registered with the Company for 12 months or more, and are
ranked above deputy manager as of December 31, 2018, as determined by the Board.
Restricted share unit(s) is/are granted under the Share Incentive Scheme I to the Participants
as an award. The award incentive shares are directly held by Jingyu Investment. After the grant of
the awards, the Participants have become limited partners of Jingyu Investment and are indirectly
interested in the incentive shares under the terms and conditions contained in relevant agreements
of Share Incentive Scheme I.
(d) Administration
The Share Incentive Scheme I is managed and executed by the Board subject to the
authorization by the Shareholders and the supervision by the Supervisory Committee.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-14 –


--- page 746 ---
(e) Rights and Restrictions as Attached in the Award
The awards are subject to regulatory lock-up requirement and a stipulated lock-up period
commencing from the grant date until two years after listing of the Company. During the lock-up
period of the Share Incentive Scheme I, the Participants shall not dispose of, or request to dispose
of, or transfer to external parties or the other Participants under the Share Incentive Scheme I,
their limited partnership interests in Jingyu Investment.
After the expiration of the lock-up period of the Share Incentive Scheme I, the Participants
are entitled to dispose of their limited partnership interests in Jingyu Investment in the following
two methods: (1) by applying to the general partner of Jingyu Investment (the “ General
Partner ”), namely Mr. Xiao, for disposal of such interests and, upon the approval by the General
Partner, transfer such interests to the General Partner or third party Participants as designated by
the General Partner or other third party Participants, subject to the Share Incentive Scheme I and
the laws and regulations of the place where the Shares are listed; or (2) by applying to Jingyu
Investment for the reduction of the corresponding Shares held by Jingyu Investment, the proceeds
of which will be distributed to the applying Participants.
(f) Lapse of the Award
The Participants may be required to withdraw from the Share Incentive Scheme I and reduce
all of the limited partnership interests held by them under certain circumstances, including but not
limited to (1) inability to perform the employment contract (for instance, incapacity for work)
prior to the Listing; and (2) resignation or dismissal due to personal reasons (for instance,
violation of the Company’s stipulations) within the lock-up period.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-15 –


--- page 747 ---
(g) Details of the Awards Granted
As of the Latest Practicable Date, details of the awards granted under the Share Incentive
Scheme I are set out as below.
Name of grantees Position held in our Group
Number of
incentive shares
held
Approximate percentage of shareholding
immediately following 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
Connected Persons and Senior Management
Mr. Xiao ............... Chairperson of the Board,
executive Director and chief
strategic officer of our
Company
3,920,000 0.74% 0.73%
Mr. HOU Yu (ρ) ........ President of our Company,
the general manager of
Linlux and the supervisor of
Lynway Vision (Guangzhou)
1,800,000 0.34% 0.34%
Mr. ZENG Zhaoming
(׼)..............
Vice president of our
Company
1,590,000 0.30% 0.30%
Ms. ZHOU Baiyun
(մͣථ) ..............
Vice president and financial
controller of our Company
and supervisor of Lynway
Vision
1,550,000 0.29% 0.29%
Mr. OU Weineng
(ਜਃঐ) ..............
Supervisor of our Company 540,000 0.10% 0.10%
Others
28 qualified Participants ...... 4,705,000 0.88% 0.88%
B. Share Incentive Scheme II
The following is a summary of the principal terms of the Share Incentive Scheme II adopted
on December 4, 2023. Under the Share Incentive Scheme II, the eligible participants as approved
may indirectly hold our Company’s interest by holding partnership interest in our employee
shareholding platforms. The Share Incentive Scheme II is not subject to the provisions of Chapter
17 of the Listing Rules.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-16 –


--- page 748 ---
As of the Latest Practicable Date, our Company have established two employee shareholding
platforms under the Share Incentive Scheme II, namely Jingrui Investment and Jingshi Investment,
which in aggregate directly held 11,861,028 Shares. For details, see “History, Development and
Corporate Structure” in this prospectus.
(a) Purposes
The purpose of the Share Incentive Scheme II is to further establish and improve the
Company’s long-term incentive mechanism, attract and retain talents, fully promote the positivity
of the Directors, senior management, middle-level management and core employees of the
Company, and direct the focus of all parties to the Company’s long-term development by
effectively combining the interests of the Shareholders, the Company and core individuals.
(b) The Number and Price of Shares
A total of 11,861,028 restricted shares, with grant price per restricted share of RMB2.20 were
granted under the Share Incentive Scheme II, representing approximately 2.38% of the share
capital in issue of the Company immediately prior to the completion of the Global Offering and
approximately 2.23% of the share capital in issue of the Company immediately following the
completion of the Global Offering (assuming the Offer Size Adjustment Option is not exercised).
(c) Participants
The participants under the Share Incentive Scheme II (the “ Participants ”) shall be regular
employees, who are formally registered with the Company for 12 months or more, and are ranked
above deputy manager as of December 31, 2023, as determined by the Board.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-17 –


--- page 749 ---
Restricted share unit(s) is/are granted under the Share Incentive Scheme II to the Participants
as an award. The award incentive shares are directly held by Jingrui Investment and Jingshi
Investment as to 5,279,328 and 6,581,700 Shares, respectively. After the grant of the awards, the
Participants have become limited partners of Jingrui Investment or Jingshi Investment and are
indirectly interested in the incentive shares under the terms and conditions contained in relevant
agreements of Share Incentive Scheme II.
(d) Administration
The Share Incentive Scheme II is managed and executed by the Board subject to the
authorization by the Shareholders and the supervision by the Supervisory Committee.
(e) Rights and Restrictions as Attached in the Award
The awards are subject to regulatory lock-up requirement and a stipulated lock-up period
commencing from the grant date until two years after listing of the Company. During the lock-up
period of the Share Incentive Scheme II, the Participants shall not dispose of, or request to dispose
of, or transfer to external parties or the other Participants under the Share Incentive Scheme II,
their limited partnership interests in the employee shareholding platforms.
After the expiration of the lock-up period of the Share Incentive Scheme II, the Participants
are entitled to dispose of their limited partnership interests in the employee shareholding platforms
in the following two methods: (1) by applying to the general partner of the employee shareholding
platforms (the “ General Partner ”), namely Mr. Xiao, for disposal of such interests and, upon the
approval by the General Partner, transfer such interests to the General Partner or third party
Participants as designated by the General Partner or other third party Participants, subject to the
Share Incentive Scheme II and the laws and regulations of the place where the Shares are listed; or
(2) by applying to the employee shareholding platforms for the reduction of the corresponding
Shares held by the employee shareholding platforms, the proceeds of which will be distributed to
the applying Participants.
(f) Lapse of the Award
The Participants may be required to withdraw from the Share Incentive Scheme II and reduce
all of the limited partnership interests held by them under certain circumstances, including but not
limited to (1) inability to perform the employment contract (for instance, incapacity for work)
prior to the Listing; and (2) resignation or dismissal due to personal reasons (for instance,
violation of the Company’s stipulations) within the lock-up period.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-18 –


--- page 750 ---
(g) Details of the Awards Granted
As of the Latest Practicable Date, details of the awards granted under the Share Incentive
Scheme II are set out as below.
Name of grantees Position held in our Group
Number of
incentive shares
held
Approximate percentage of shareholding
immediately following 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
Connected Persons and Senior Management
Mr. Xiao ............... Chairperson of the Board,
executive Director and chief
strategic officer of our
Company
3,500,500 0.66% 0.65%
Mr. HOU Yu (ρ) ......... President of our Company,
general manager of Linlux
and the supervisor of
Lynway Vision (Guangzhou)
400,000 0.08% 0.07%
Mr. ZENG Zhaoming
(׼)..............
Vice president of our
Company
600,000 0.11% 0.11%
Ms. ZHOU Baiyun
(մͣථ) ..............
Vice president and financial
controller of our Company
and supervisor of Lynway
Vision
400,000 0.08% 0.07%
Mr. ZHENG Longfeng
(ቍᎲቜ) ..............
Board secretary of our
Company
700,000 0.13% 0.13%
Others
53 qualified Participants ...... 6,260,528 1.18% 1.17%
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-19 –


--- page 751 ---
C. Share Incentive Scheme III
The following is a summary of the principal terms of the Share Incentive Scheme III adopted
on December 8, 2023. Under the Share Incentive Scheme III, the eligible participants as approved
may indirectly hold our Company’s interest by holding partnership interest in our employee
shareholding platform, namely, Jingling Investment. As of the Latest Practicable Date, Jingling
Investment directly held 6,567,670 Shares. For details, see “History, Development and Corporate
Structure” in this prospectus. The Share Incentive Scheme III is not subject to the provisions of
Chapter 17 of the Listing Rules.
(a) Purposes
The purpose of the Share Incentive Scheme III is to further establish and improve the
Company’s long-term incentive mechanism, attract and retain talents, fully promote the positivity
of the Directors, senior management, middle-level management and core employees of Lynway
Vision, and direct the focus of all parties to the Company’s long-term development by effectively
combining the interests of the Shareholders, the Company and core individuals.
(b) The Number and Price of Shares
A total of 6,567,670 restricted shares, with grant price per restricted share of RMB2.60 were
granted under the Share Incentive Scheme III, representing approximately 1.32% of the share
capital in issue of the Company immediately prior to the completion of the Global Offering and
approximately 1.23% of the share capital in issue of the Company immediately following the
completion of the Global Offering (assuming the Offer Size Adjustment Option is not exercised).
(c) Participants
The participants under the Share Incentive Scheme III shall be key management members of
Lynway Vision as considered and approved by the Board of the Company (the “ Participants ”)
based on the terms and indexes as specified in the Share Incentive Scheme III.
Restricted share unit(s) is/are granted under the Share Incentive Scheme III to the
Participants as an award. The award incentive shares are directly held by Jingling Investment.
After the grant of the awards, the Participants have become limited partners of Jingling Investment
and are indirectly interested in the incentive shares under the terms and conditions contained in
relevant agreements of Share Incentive Scheme III.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-20 –


--- page 752 ---
(d) Administration
The Share Incentive Scheme III is managed and executed by the Board subject to the
authorization by the Shareholders and the supervision by the Supervisory Committee.
(e) Rights and Restrictions as Attached in the Award
The awards are subject to regulatory lock-up requirement and a stipulated lock-up period
commencing from the grant date until two years after listing of the Company. During the lock-up
period of the Share Incentive Scheme III, the Participants shall not dispose of, or request to
dispose of, or transfer to external parties or the other Participants under the Share Incentive
Scheme III, their limited partnership interests in Jingling Investment.
After the expiration of the lock-up period of the Share Incentive Scheme III, the Participants
are entitled to dispose of their limited partnership interests in Jingling Investment in the following
two methods: (1) by applying to the general partner of Jingling Investment (the “ General
Partner ”), namely Mr. Xiao, for disposal of such interests and, upon the approval by the General
Partner, transfer such interests to the General Partner or third party Participants as designated by
the General Partner or other third party Participants, subject to the Share Incentive Scheme III and
the laws and regulations of the place where the Shares are listed; or (2) by applying to Jingling
Investment for the reduction of the corresponding Shares held by Jingling Investment, the proceeds
of which will be distributed to the applying Participants.
(f) Lapse of the Award
The Participants may be required to withdraw from the Share Incentive Scheme III and
reduce all of the limited partnership interests held by them under certain circumstances, including
but not limited to (1) inability to perform the employment contract (for instance, incapacity for
work) prior to the Listing; and (2) resignation or dismissal due to personal reasons (for instance,
violation of the Company’s stipulations) within the lock-up period.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-21 –


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(g) Details of the Awards Granted
As of the Latest Practicable Date, details of the awards granted under the Share Incentive
Scheme III are set out as below.
Name of grantees Position held in our Group
Number of
incentive shares
held
Approximate percentage of shareholding
immediately following 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
Connected Persons and Senior Management
Mr. Xiao ............... Chairperson of the Board,
executive Director and chief
strategic officer of our
Company
656 0.0001% 0.0001%
Mr. LIU Tie ( ᄎ᚛) ......... General manager of Lynway
Vision and the executive
director and manager of
Lynway Vision (Guangzhou)
1,075,615 0.2021% 0.2002%
Others
14 qualified Participants ...... 5,491,399 1.0320% 1.0223%
Disclaimers
(a) Save as disclosed in the section headed “History, Development and Corporate Structure,”
none of the Directors nor any of the experts referred to in “— Other Information —
Qualifications and Consents of Experts” below has any direct or indirect interest in the
promotion of, or in any assets which have been, within the two years immediately preceding
the date of this prospectus, acquired or disposed of by, or leased to, any member of the
Group, or are proposed to be acquired or disposed of by, or leased to, any member of the
Group.
(b) Save in connection with the Underwriting Agreements, none of the Directors nor any of the
experts referred to in “— Other Information — Qualifications and Consents of Experts”
below, is materially interested in any contract or arrangement subsisting at the date of this
prospectus which is significant in relation to the business of the Group.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-22 –


--- page 754 ---
(c) No cash, securities or other benefit has been paid, allotted or given within the two years
preceding the date of this prospectus to any promoter of the Company nor is any such cash
securities or benefit intended to be paid, allotted or given on the basis of the Global Offering
or related transactions as mentioned.
OTHER INFORMATION
Estate Duty
Our Directors have been advised that no material liability for estate duty is likely to fall on
our Group.
Litigation
Save as disclosed in this prospectus, to the knowledge of our Directors, there was no other
litigation, arbitration or administrative proceeding pending or threatened against us or any of our
Directors that could cause a material and adverse effect on our business, financial conditions or
results of operations during the Track Record Period and up to the Latest Practicable Date.
Sole Sponsor
The Sole Sponsor has made an application on our behalf to the Listing Committee for the
listing of, and permission to deal in, our Shares in issue, our Shares to be issued pursuant to the
Global Offering (including any Shares which may fall to be issued pursuant to the exercise of the
Offer Size Adjustment Option).
CITIC Securities (Hong Kong) Limited 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 the Company and the Sole Sponsor,
we have agreed to pay the Sole Sponsor a fee of US$600,000 to act as the sponsor of our
Company in connection with the proposed listing on the Hong Kong Stock Exchange.
Qualifications and Consents of Experts
The following experts have each given and have not withdrawn their respective written
consents to the issue of this prospectus with copies of their reports, letters, opinions or summaries
of opinions (as the case may be) and the references to their names included herein in the form and
context in which they are respectively included.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-23 –


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Name Qualification
CITIC Securities
(Hong Kong) Limited ...
Licensed corporation to conduct Type 4 (advising on securities) and
Type 6 (advising on corporate finance) regulated activities under
the SFO
Ernst & Young .......... Certified Public Accountants and Registered Public Interest Entity
Auditor
AllBright Law Offices .... PRC legal advisor
China Insights Industry
Consultancy Limited ....
Independent industry consultant
As of the Latest Practicable Date, none of the experts named above has any shareholding
interest in our Company or any of our subsidiaries 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.
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.
BILINGUAL PROSPECTUS
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).
PROMOTERS
The promoters of our Company comprised all of the five then shareholders of our Company
as of December 3, 2015 before our conversion into a joint stock limited liability company.
No. Name
1. .................... Advanced Photoelectronic
2. .................... Guangdong Yueke Finance Investment Co., Ltd.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-24 –


--- page 756 ---
No. Name
3. .................... Shenzhen Guomin Innovation Venture Capital (L.P.)
4. .................... Episky Corporation (Xiamen) Ltd.
5. .................... Jiangyin Haohan Photoelectronic Technology Co., Ltd.
Within the two years immediately preceding the date of this prospectus, no cash, securities or
benefit has been paid, allotted or given, or is proposed to be paid, allotted or given to the
promoters named above in connection with the Global Offering or the related transactions
described in this prospectus.
PRELIMINARY EXPENSES
The Company did not incur material preliminary expenses for the purpose of the Listing
Rules.
MISCELLANEOUS
(a) Save as disclosed in “Changes in Share Capital” above, within the two years immediately
preceding the date of this prospectus:
(i) no share or loan capital or debenture of our Company or any of our subsidiaries has
been issued or agreed to be issued or is proposed to be issued for cash or as fully or
partly paid other than in cash or otherwise;
(ii) no share or loan capital of our Company or any of our subsidiaries is under option or is
agreed conditionally or unconditionally to be put under option; and
(iii) no commissions, discounts, brokerages or other special terms have 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.
(b) there are no founder, management or deferred shares nor any debentures in our Company or
any of our subsidiaries.
(c) no share or loan capital or debenture of our Company or any of our subsidiaries is under
option or is agreed conditionally or unconditionally to be put under option.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-25 –


--- page 757 ---
(d) no commissions, discounts, brokerages or other special terms have been granted in connection
with the issue or sale of any share or loan capital of our Company or any of its subsidiaries
by our Company for subscribing or agreeing to subscribe, or procuring or agreeing to procure
subscriptions, for any shares in or debentures of our Company or any of our subsidiaries.
(e) Save as disclosed in the paragraph headed “Further Information about our Business–Summary
of Material Contracts” in this section, none of our Directors or proposed Directors or experts
(as named in this prospectus), have any interest, direct or indirect, in any assets which have
been, within the two years immediately preceding the date of this prospectus, 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. Save as disclosed in this prospectus,
no equity or debt securities of any company within our Group is presently listed on any stock
exchange or traded on any trading system nor is any listing or permission to deal being or
proposed to be sought.
(f) Our Company has no outstanding convertible debt securities or debentures.
(g) There is no arrangement under which future dividends are waived or agreed to be waived.
(h) 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.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-26 –


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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) the written consents referred to in “ Appendix VI — Statutory and General Information
— Other Information — Qualifications and Consents of Experts ”; and
(b) a copy of each of the material contracts referred to in “ Appendix VI — Statutory and
General Information — Further Information about our Business — Summary of Material
Contracts ”.
DOCUMENTS A V AILABLE ON DISPLAY
Copies of the following documents will be available on display on the website of the Stock
Exchange at www.hkexnews.hk
and our website at www.apt-hk.com during a period of 14 days
from the date of this document:
1. the Articles of Association;
2. the Accountants’ Reports prepared by Ernst & Young, the text of which is set forth in
Appendices IA and IB to this prospectus;
3. the audited consolidated financial statements of our Company for the financial years
ended December 31, 2021, 2022 and 2023 and the five months ended May 31, 2024;
4. the report from Ernst & Young on the unaudited pro forma financial information of our
Group, the text of which is set forth in Appendix II to this prospectus;
5. the material contracts in “ Appendix VI — Statutory and General Information — Further
Information about our Business — Summary of Material Contracts ”;
6. the written consents referred to in “ Appendix VI — Statutory and General Information
— Other Information — Qualifications and Consents of Experts ”;
7. the service contracts referred to in “ Appendix VI — Statutory and General Information
— Further Information about our Directors, Supervisors, Management and Substantial
Shareholders — Particulars of the Service Contracts ”;
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY
– VII-1 –


--- page 759 ---
8. the legal opinions issued by AllBright Law Offices, our PRC Legal Advisor, in respect
of, among other things, the general matters and property interests of our Group under
PRC law;
9. the terms of the Share Incentive Scheme I, the Share Incentive Scheme II and the Share
Incentive Scheme III;
10. the industry report issued by China Insights Industry Consultancy Limited, the summary
of which is set forth in the section headed “ Industry Overview ” in this prospectus; and
11. a copy of the PRC Company Law, together with unofficial English translations.
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY
– VII-2 –


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APT Electronics Co., Ltd.
廣東晶科電子股份有限公司
APT Electronics Co., Ltd.
廣東晶科電子股份有限公司
(A joint stock company incorporated in the People’s Republic of China with limited liability)
Stock Code:  2551
Sole Sponsor, Sole Overall Coordinator,
Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
GLOBAL
OFFERING
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
