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GLOBAL
OFFERING
Joint Sponsors
Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
ʮ̡
JIANGSU LOPAL TECH. CO., LTD.
(a joint stock company incorporated in the People’s Republic of China with limited liability)
Stock code: 2465
Joint Bookrunners and Joint Lead Managers
ʮ̡
JIANGSU LOPAL TECH. CO., LTD.
ʮ̡
JIANGSU LOPAL TECH. CO., LTD.


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IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
Jiangsu Lopal Tech. Co., Ltd.
江 蘇 龍 蟠 科 技 股 份 有 限 公 司
(a joint stock company incorporated in the Peopl e’s Republic of China with limited liability)
GLOBAL OFFERING
Number of Offer Shares under the
Global Offering
: 100,000,000 H Shares (subject to the Over-allotment
Option)
Number of Hong Kong Offer Shares : 10,000,000 H Shares (subject to adjustment)
Number of International Offer Shares : 90,000,000 H Shares (subject to adjustment and the
Over-allotment Option)
Maximum Offer Price : HK$7.00 per H Share, plus 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 in full on application in Hong
Kong dollars and subject to refund)
Nominal value : RMB1.00 per H Share
Stock code : 2465
Joint Sponsors
Overall Coordinators, 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 Li mited 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 an y loss howsoever
arising from or in reliance upon the whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in ‘‘Documents Delivered to the Registrar of Companies and Available on Di splay’’ in
Appendix V, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities a nd Futures Commission of Hong Kong and the Registrar of Companies in Hong K ong
take no responsibility for the contents of this prospectus or any of the other documents referred to above.
The Offer Price is expected to be determined by agreement between the Sponsor-OCs (for themselves and on behalf of the Underwriters) and our Company on or before
Monday, October 28, 2024 and, in any event, not later than 12 : 00 noon on Mond ay, October 28, 2024. The Offer Price will be not more than HK$7.00 per Offer S hare
and is currently expected to be not less than HK$4.50 per Offer Share, unless otherwise announced. Investors applying for the Hong Kong Offer Shares ar e required to
pay, on application (subject to application channel), the maximum Offer Price of HK$7.00 per Offer Share, together with brokerage of 1.0%, SFC transa ction levy of
0.0027%, Stock Exchange trading fee of 0.00565% and AFRC transaction levy of 0.00015%, subject to refund if the Offer Price is less than HK$7.00 per Off er Share. If,
for any reason, the Offer Price is not agreed between our Company and the Sponsor-OCs (for themselves and on behalf of the Underwriters) by 12 : 00 noon on Monday,
October 28, 2024 (Hong Kong time), the Global Offering (incl uding the Hong Kon g Public Offering) will not proceed and will lapse.
The Sponsor-OCs (for themselves and on behalf of the Underwriters), with the consent of our Company, may reduce the indicative Offer Price range state di nt h i s
prospectus and/or reduce the number of Offer Shares being offered pursuant to the Global Offering at any time on or prior to the morning of the last day fo r lodging
applications under the Hong Kong Public Offering. In such a case, an announcement will be published on the website of the Company at www.lopal.com.cn and on the
website of the Hong Kong Stock Exchange at www.hkexnews.hk as soon as practicable following the decision to make such reduction, not later than the morning of the
last day for lodging applications under the Hong Kong Public Offering.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus, includin g the risk factors set out
in ‘‘Risk Factors.’’ The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure subscr ibers for, the
Hong Kong Offer Shares, are subject to termination by the Sponsor-OCs (for themselves and on behalf of the Hong K ong Underwriters) if certain events oc cur prior to
8 : 00 a.m. on the Listing Date. Such grounds are set out in ‘‘Underwriting — Underwriting Arrangements and Expenses — Hong Kong Public Offering — Ground sf o r
termination’’ in this prospectus. It is important that you refer to that section for further details.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offe red, sold,
pledged or transferred within the United States. The Offer Shares may be o ffered, sold or delivered outside the United States in offshore transaction s in accordance with
Regulation S.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering pursuant to Rule 12.11 of the Hong Kong Listing Rules. We will n ot
provide printed copies of this prospectus to the public in relation to the Hong Kong Public Offering.
This prospectus is available at the websites of the Hong Kong Stock Exchange ( www.hkexnews.hk ) and our Company ( www.lopal.com.cn ). If you require a printed
copy of this prospectus, you may download and print from the website addresses above.
October 22, 2024
IMPORTANT


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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. We
will not provide printed copies of this prospectus in relation to the Hong Kong Public Offering.
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.lopal.com.cn. If you require a printed copy of this prospectus, you may download and print
from the website addresses above.
To apply for the Hong Kong Offer Shares, you may:
(1) apply online via the White Form eIPO service at www.eipo.com.hk ;o r
(2) apply electronically through the HKSCC EIPO channel and cause HKSCC Nominees
to apply on your behalf by instructing your broker or custodian who is a HKSCC
Participant to give electronic application instructions via HKSCC’s FINI system to
apply for the Hong Kong Offer Shares on your behalf.
We will not provide any physical channels to accept any application for the Hong Kong
Offer Shares by the public. The contents of the electronic version of this prospectus are identical
to the prospectus as registered with the Registr ar of Companies in Hong Kong pursuant to Section
342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients or
principals, as applicable, that this prospectus is available online at the website addresses stated
above.
Please refer to the section headed ‘‘How to A pply for Hong Kong Offer Shares’’ in this
prospectus for further details on the procedures through which you can apply for the Hong Kong
Offer Shares.
IMPORTANT
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Your application through the White Form eIPO service or the HKSCC EIPO channel must be
made for a minimum of 500 Hong Kong Offer Shares a nd in multiples of that number of Hong Kong
Offer Shares as set out in the table below. No application for any other number of Hong Kong Offer
Shares will be considered and such an a pplication is liable to be rejected.
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 app lication for Hong Kong Offer Shares.
If you are applying through the HKSCC EIPO channel, you are required to pre-fund your
application based on the amount specified by your broker or custodian, 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
H K $H K $H K $H K $
500 3,535.30 7,000 49,494.16 50,000 353,529.76 700,000 4,949,416.50
1,000 7,070.60 8,000 56,564.75 60,000 424,235.70 800,000 5,656,476.00
1,500 10,605.89 9,000 63,635.35 70,000 494,941.66 900,000 6,363,535.50
2,000 14,141.19 10,000 70,705.96 80,000 565,647.60 1,000,000 7,070,595.00
2,500 17,676.49 15,000 106,058.93 90,000 636,353.56 2,000,000 14,141,190.00
3,000 21,211.79 20,000 141,411.90 100,000 707,059.50 3,000,000 21,211,785.00
3,500 24,747.08 25,000 176,764.88 200,000 1,414,119.00 4,000,000 28,282,380.00
4,000 28,282.38 30,000 212,117.86 300,000 2,121,178.50 5,000,000
(1) 35,352,975.00
4,500 31,817.68 35,000 247,470.83 400,000 2,828,238.00
5,000 35,352.98 40,000 282,823.80 500,000 3,535,297.50
6,000 42,423.56 45,000 318,176.78 600,000 4,242,357.00
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is 50% of the Hong Kong Offer
Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and
AFRC transaction levy. If your application is su ccessful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee
and AFRC transaction levy will be paid to the Stock Exchange (in the case of the SFC transaction levy,
collected by the Stock Exchange on behalf of the SFC; and in the case of the AFRC transaction levy,
collected by the Stock Exchange on behalf of the AFRC).
IMPORTANT
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If there is any change in the following expected timetable of the Global Offering, we
will issue an announcement in Hong Kong to be published on the websites of Stock Exchange
at
www.hkexnews.hk and our Company at www.lopal.com.cn .
H o n gK o n gP u b l i cO f f e r i n gc o m m e n c e s .......................... 9 : 0 0a . m .o n
Tuesday, October 22, 2024
Latest time to complete elect ronic applications under
White Form eIPO service through the designated
website at www.eipo.com.hk (2) ............................... 1 1 : 3 0a . m .o n
Friday, October 25, 2024
Application lists open (3) ..................................... 1 1 : 4 5a . m .o n
Friday, October 25, 2024
Latest time for (a) completing payment of White Form
eIPO applications by effecting internet banking
transfer(s) or PPS payment transfer(s) and (b) giving
electronic application instructions to HKSCC
(4) ..................1 2 : 0 0n o o no n
Friday, October 25, 2024
If you are instructing your broker or custodian who is a HKSCC Participant who will
submit an electronic application instruction on your behalf through HKSCC’s FINI system
in accordance with your instruction, you are advised to contact your broker or custodian for
the earliest and latest time for giving such i nstructions, as this may vary by broker or
custodian.
Application lists close (3) ...................................1 2 : 0 0n o o no n
Friday, October 25, 2024
E x p e c t e dP r i c eD e t e r m i n a t i o nD a t e .................. a to rb e f o r e1 2 : 0 0n o o no n
Monday, October 28, 2024
Announcement of:
. the final Offer Price;
. the level of applications in the Hong Kong Public Offering;
. the level of indications of interest in the International Offering; and
. the basis of allocation of the Hong Kong Offer
Shares to be published on our website at
www.lopal.com.cn (5) and the website of the Stock
Exchange at www.hkexnews.hk ..................... a to rb e f o r e1 1 : 0 0p . m .o n
Tuesday, October 29, 2024
EXPECTED TIMETABLE (1)
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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:
. in the announcement to be published on our website
at
www.lopal.com.cn (5) and the website of the Stock
Exchange at www.hkexnews.hk .................... n ol a t e rt h a n1 1 : 0 0p . m .o n
Tuesday, October 29, 2024
. from the designated results of allocations website
at www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment )w i t h
a‘ ‘ s e a r c hb yI D ’ ’f u n c t i o nf r o m ............................. 1 1 : 0 0p . m .o n
Tuesday, October 29, 2024 to
12 : 00 midnight on
Monday, November 4, 2024
. from the allocation results telephone enquiry by
calling +852 2862 8555 between 9 : 00 a.m. and
6 : 0 0p . m .o n .............................. W e d n e s d a y ,O c t o b e r3 0 ,2 0 2 4 ,
Thursday, October 31, 2024,
Friday, November 1, 2024
and Monday, November 4, 2024
H Share certificates in respect of wholly or partially
successful applications to be dispatched or deposited
i n t oC C A S So no rb e f o r e
(6)(8) ...................... T u e s d a y ,O c t o b e r2 9 , 2024
White Form e-Refund payment instructions/refund
cheques in respect of wholly or partially unsuccessful
applications under the Hong Kong Public Offering
to be dispatched on or before
(7)(8) ................. W e d n e s d a y ,O c t o b e r3 0 , 2024
Dealings in H Shares on the Hong Kong Stock
E x c h a n g ee x p e c t e dt oc o m m e n c ea t ............................ 9 : 0 0a . m .o n
Wednesday, October 30, 2024
EXPECTED TIMETABLE (1)
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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 fo r submitting applications. If you
have already submitted your application and obt ained 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 : 0 0 noon on the last day for submitting applications,
when the application lists close.
(3) If there is/are a Bad Weather Signal in force in Hong Kong at any time between 9 : 00 a.m. and 12 : 00 noon
on Friday, October 25, 2024, the application lists will not open and will close on that day. For further
details, please see the section headed ‘‘How to Apply for Hong Kong Offer Shares — E. Bad Weather
Arrangements’’ in this prospectus.
(4) Applicants who instruct their broker or custodi an to apply for the Hong Kong Offer Shares on their
behalf through the HKSCC EIPO channel should refer to the section headed ‘‘How to Apply for Hong
Kong Offer Shares — A. Application for Hong Kong Offer Shares — 2. Application Channels’’ in this
prospectus.
(5) None of the website or any of the information contained on the website forms part of this prospectus.
(6) No temporary documents of title will be issued in re spect of the Offer Shares. H Share certificates for the
Hong Kong Offer Shares will only become valid evidence of title provided that (i) the Global Offering has
become unconditional in all respects and (ii) neither o f the Underwriting Agreements has been terminated
in accordance with their terms prior to 8 : 00 a.m. on t he Listing Date. Investors who trade H Shares on the
basis of publicly available allocation details prior t o the receipt of H Share certificates or prior to the H
Share certificates becoming valid evid ence of title do so at their own risk.
(7) White Form e-Refund payment instructions/refund cheques w ill be issued in respect of wholly or partially
unsuccessful applications pursuant to the Hong Kong Public Offering. Part of the applicant’s Hong Kong
identity card number or passport number, or, if the a pplication is made by joint applicants, part of the
Hong Kong identity card number or passport numbe r of the first-named applicant, provided by the
applicant(s) may be printed on the refund check, if a ny. Such data would also be transferred to a third
party for refund purposes. Banks may require verifi cation of an applicant’s Hong Kong identity card
number or passport number before encashment of t he refund check. Inaccurate completion of an
applicant’s Hong Kong identity card number or pass port number may invalidate or delay encashment of
the refund check.
(8) Applicants being individuals who are eligible for per sonal collection may not authorize any other person
to collect on their behalf. If you are a corporate applic ant which is eligible for personal collection, your
authorized representative must be ar a letter of authorization from your corporation stamped with your
corporation’s chop. Both individuals and authorized re presentatives must produce evidence of identity
acceptable to our H Share Registrar at the time of collection.
Applicants who have applied for Hong Kong Offer Shares through HKSCC EIPO channel should refer to
the section headed ‘‘How to Apply for Hong Kong Of fer Shares — D. Despatch/Collection of Share
Certificates and Refund of Application M onies’’ in this prospectus for details.
EXPECTED TIMETABLE (1)
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Applicants who have applied through the White Form eIPO service and paid their applications monies
through single bank accounts may ha ve refund monies (if any) despatc hed to the bank account in the form
of White Form e-Refund payment instructions. Appl icants who have applied through the White Form
eIPO service and paid their application monies throug h multiple bank accounts may have refund monies
(if any) despatched to the address as specified in thei r application instructions in the form of refund checks
by ordinary post at their own risk.
Any uncollected H share certificates and/or refund checks will be despatched by ordinary post, at the
applicants’ risk, to the addresses specified in the relevant applications.
Further information is set out in the sections he aded ‘‘How to Apply for Hong Kong Offer Shares — D.
Despatch/Collection of Share Certific ates and Refund of Application Monies.’’
The H Share certificates will only become valid evid ence of title provided that the Global Offering has
become unconditional in all respects and neither t he Hong Kong Underwriting Agreement nor the
International Underwriting Agreement is terminate d in accordance with their respective terms prior to
8 : 00 a.m. on the Listing Date. The Listing Date i s expected to be on or about Wednesday, October 30,
2024. Investors who trade the H Shares on the basis of publicly available allocation details 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 above expected timetabl e 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, please see the sections headed ‘‘Structure of the Global Offering’’ and
‘‘How to Apply for Hong Kong Offer Shares’’ in this prospectus, respectively.
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, the Company will make
an announcement as soon as practicable thereafter.
EXPECTED TIMETABLE (1)
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IMPORTANT NOTICE TO 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 buy any security other than the Hong Kong Offer Shares offered
by this prospectus pursuant to the Hong Kong Public Offering. This prospectus may not be
used for the purpose of making, and does not constitute, an offer or invitation in any other
jurisdiction or in any other circumstances. No action has been taken to permit a public
offering of the Offer Shares in any jurisdiction other than Hong Kong and no action has been
taken to permit the distribution of this prospectus in any jurisdiction other than Hong Kong.
The distribution of this prospectus and the offering 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 jurisd ictions pursuant to registration with or authorization by the
relevant securities regulatory aut horities or an exemption therefrom.
You should rely only on the information contained in this prospectus to make your
investment decision. The Hong Kong Public Offering is made solely on the basis of the
information contained and the representations made in this prospectus. We have not
authorized anyone to provide you with information that is different from what is contained in
this prospectus. Any information or representation not made in this prospectus must not be
relied on by you as having been authorized by us, the Joint Sponsors, the Joint Global
Coordinators, the Overall Coordinators, the Capital Market Intermediaries, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, any of our or their respective
directors, officers, representatives, affiliates, employees, agents or any other person or party
involved in the Global Offering. Information contained in our website, located at
www.lopal.com.cn , does not form part of this prospectus.
Page
Expected Timetable ................................................................ i i i
Contents ........................................................................... v i i
Summary .......................................................................... 1
Definitions ........................................................................ 3 2
Glossary of Technical Terms ....................................................... 4 5
Forward-looking Statements ....................................................... 4 8
Risk Factors ....................................................................... 5 0
Waivers from Strict Compliance with the Hong Kong Listing Rules and
Exemptions from Compliance with the Companies
(Winding Up and Miscellaneous Provisions) Ordinance ........................... 9 1
CONTENTS
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Page
Information about this Prospectus and the Global Offering ......................... 1 0 5
Directors, Supervisors and Parties Involved in the Global Offering .................. 1 1 0
Corporate Information ............................................................. 1 1 7
Industry Overview ................................................................. 1 1 9
Regulatory Overview ............................................................... 1 4 8
History and Development .......................................................... 1 7 6
Business ........................................................................... 2 1 8
Relationship with Our C ontrolling Shareholders .................................... 3 3 2
Connected Transactions ............................................................ 3 3 9
Directors, Supervisors and Senior Management ..................................... 3 6 5
Substantial Shareholders ........................................................... 3 8 3
Share Capital ...................................................................... 3 8 5
Financial Information .............................................................. 3 8 9
Future Plans and Use of Proceeds .................................................. 4 5 7
Cornerstone Investor ............................................................... 4 6 4
Underwriting ...................................................................... 4 6 8
Structure of the Global Offering ................................................... 4 8 4
How to Apply for Hong Kong Offer Shares ........................................ 4 9 6
Appendix IA — Accountants’ Report .............................................. I A - 1
Appendix IB — Accountants’ Report of Tianjin Beiterui Nano .................... I B - 1
Appendix IC — Accountants’ Report of Jiangsu Beiterui Nano .................... I C - 1
Appendix ID — Accountants’ Report of Shandong Meiduo ........................ I D - 1
Appendix II — Unaudited Pro Forma Financial Information ...................... I I - 1
Appendix III — Summary of the Articles of Association ........................... I I I - 1
Appendix IV — Statutory and General Information ............................... I V - 1
Appendix V — Documents Delivered to the Registrar of Companies and
Available on Display ......................................... V - 1
CONTENTS
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This summary aims to give you an overview of the information contained in this
prospectus. As this is a summary, it does not contain all the information that may be
important to you and is qualified in its entirety by, and should be read in conjunction with
the full text of this prospectus. You should read the whole document before you decide to
invest in our H Shares.
There are risks associated with any investment. Some of the particular risks in
investing in our H Shares are set forth in ‘‘Risk Factors’’ in this prospectus. You should read
that section carefully before you decide to invest in our H Shares.
You should note that we completed the acquisitions of Tianjin Beiterui Nano and
Jiangsu Beiterui Nano on June 11, 2021 and have consolidated their results of operations
since June 1, 2021. We have also conditionally agreed to acquire all equity interests in
Shandong Meiduo, completion of which was not taken place as of the Latest Practicable
Date. For details of the acquisitions, see ‘‘History and Development — Major Acquisitions
and Disposals’’ Unless otherwise stated, the historical results of operations and financial
position of our Group for the five months ended May 31, 2021 presented and discussed in this
prospectus only included the data of the Group prior to the acquisitions, whereas the
historical results of operations and financial position of our Group also included the data of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano from June 1, 2021 to June 30, 2024.
OVERVIEW
We are a major LFP cathode material manu facturer in the world and a renowned
automotive specialty chemical manufacturer in mainland China. We primarily operate in
the following two segments:
. LFP cathode materials . We primarily engage in the production and sale of LFP
cathode materials. LFP cathode material s are currently the most extensively used
cathode materials for producing lithium-ion batteries used in a wide variety of end
markets, including NEV and energy storage industries.
. Automotive specialty chemicals . We primarily engage in the production and sale of
a diverse portfolio of automotive specialty chemical products covering diesel
exhaust fluids, automobile and industrial lubricants, coolants and car
maintenance products, which are widely used in the automobile manufacturing
market, automotive aftermarket, and engineering equipment market.
SUMMARY
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The table below sets forth the breakdown of our revenue by product and service types,
each expressed in an absolute amount and as a percentage of total revenue, for the periods
indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’000 % RMB’ 000 % RMB’000 % RMB’000 %
(unaudited)
LFP Cathode materials ...... 1 , 8 7 6 , 8 4 2 4 6 . 3 1 2 , 2 4 1 , 8 7 3 8 7 . 0 6 , 7 5 3 , 6 2 8 7 7 . 4 2 , 8 5 1 , 5 2 3 7 4 . 8 2 , 4 7 5 , 5 8 0 6 9 . 4
Without procurement of
lithium carbonate and
raw materials from
c u s t o m e r s.......... 1 , 8 7 6 , 8 4 2 4 6 . 3 1 2 , 0 8 4 , 8 8 7 8 5 . 9 6 , 1 8 6 , 6 8 1 7 0 . 9 2 , 6 7 3 , 6 6 5 7 0 . 1 1 , 6 9 6 , 9 7 7 4 7 . 6
With procurement of
lithium carbonate and
raw materials from
customers
(1) ......... — — 1 5 6 , 9 8 6 1 . 1 5 6 6 , 9 4 7 6 . 5 1 7 7 , 8 5 8 4 . 7 7 7 8 , 6 0 3 2 1 . 8
Automotive specialty chemicals . 2,118,725 52.3 1,762,814 12.5 1,903,212 21.8 938,057 24.6 970,147 27.2
D i e s e le x h a u s tf l u i d ...... 7 9 0 , 6 3 0 1 9 . 5 6 8 8 , 8 6 1 4 . 9 6 2 5 , 7 3 8 7 . 1 3 2 3 , 1 0 2 8 . 5 3 0 6 , 6 0 7 8 . 6
Automobile and industrial
l u b r i c a n t ........... 8 4 4 , 4 0 2 2 0 . 8 6 2 3 , 5 5 3 4 . 4 7 0 6 , 6 1 6 8 . 1 3 6 2 , 9 4 8 9 . 5 3 6 7 , 6 2 3 1 0 . 3
C o o l a n t ............. 4 0 3 , 7 0 8 1 0 . 0 3 8 2 , 6 6 1 2 . 7 4 8 4 , 7 0 1 5 . 6 2 0 3 , 2 4 6 5 . 3 2 4 8 , 9 4 8 7 . 0
Car maintenance products . . 61,955 1.5 58,330 0.4 70,240 0.8 35,978 0.9 36,988 1.0
Other products
(2) ........ 1 8 , 0 3 0 0 . 5 9 , 4 0 9 0 . 1 1 5 , 9 1 7 0 . 2 1 2 , 7 8 3 0 . 4 9 , 9 8 1 0 . 3
Processing income from lithium
carbonate ............ — — — — — — — — 4 2 , 6 8 5 1 . 2
Others (3) ............... 5 7 , 9 3 8 (4) 1.4 66,956 0.5 72,639 0.8 24,624 0.6 80,200 2.2
Total ................. 4,053,505 100.0 14,071,643 100.0 8,729,479 100.0 3,814,204 100.0 3,568,612 100.0
Notes (1) to (3): See notes (1) to (3) under ‘‘Financial Information — Description of Key Components of our
Results of Operations — Revenue — Reve nue by types of products and services.’’
(4): Including revenue from selling of small am ounts of LFP cathode materials produced by
third party contract manufacturers we engage d. During the Track Record Period and prior
to the acquisitions of Tianjin Beiterui Nano a nd Jiangsu Beiterui Nano, revenue generated
from selling of such LFP cathode material s amounted to RMB4.2 million in 2021.
We enjoy major market positions in the LFP cathode material industry and multiple
sub-segments of the automotive specialty chemical industry. According to Frost & Sullivan,
in terms of sales volume in 2023, we are China’s and the world’s fourth largest LFP cathode
material manufacturer, with a global market share of 6.5%, while the three largest
manufacturers held market shares of 30.5%, 12.9% and 10.5%, respectively; the third
largest diesel exhaust fluid manufacturer in mainland China, with a market share of 9.1%,
while the two largest manufacturers held mark et shares of 29.1% and 12 .9%, respectively;
and the third largest coolant manufacturer i n mainland China, with a market share of 5.8%,
while the two largest manufacturers held mark et shares of 12.3% and 8.8%, respectively.
The history of our Group can be traced back to 2003 when our Company was
established, initially offering lubricants and e ngine coolants. Through strategic growth over
the years, we successfully expanded and streng thened our product portfolio to also include
other automotive specialty chemicals such as diesel exhaust fluids and car maintenance
products. This has enabled us to form a diverse portfolio of automotive specialty chemical
products for our customers. Our Company comple ted the initial public offering and listing
SUMMARY
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of our A Shares on the Shanghai Stock Exchange in April 2017. Leveraging our long-term
development strategies tailored to developments within the automotive industry, we
engaged third party contract manufacturers to produce small amounts of LFP cathode
materials in 2020 and the first half of 2021. Th is allowed us to start building knowledge and
relationships in the emerging NEV supply chain. Then in June 2021, we expanded our
presence in the LFP cathode material industry through the acquisitions of Tianjin Beiterui
N a n oa n dJ i a n g s uB e i t e r u iN a n ow h i c ha r ee n g a g e di nb u s i n e s s e si nt h ef i e l do fL F P
cathode materials. This move was driven by tw o key considerations. First, the automotive
industry’s shift from ICE vehicles to NEVs. A s a longtime supplier of automotive specialty
chemicals, we felt the need to evolve with the market by entering the NEV supply chain
focusing on the most extensively used lithium-ion battery cathode material. Second, we
considered LFP cathode materials to be the optimal long-term technology pathway
compared to cobalt-based cathodes, given LFP’s innate advantages in cost, safety and
stability. We were also confident that Chi na’s supportive policies for NEV were to
significantly increase demand for LFP cathode materials. Our decision to acquire Tianjin
Beiterui Nano and Jiangsu Beiterui Nano was made after careful evaluation of their
technical capabilities and market dominance. B efore we acquired Tianjin Beiterui Nano and
Jiangsu Beiterui Nano from it, the BTR Group had over a decade of experience researching
and developing LFP cathode materials, culti vating robust technology and knowledge,
demonstrating stable industry leadership position.
We achieved strong growth from 2021 to 2022. Our revenue increased by 247.1% from
RMB4,053.5 million for the year ended Decemb er 31, 2021 to RMB14,071.6 million for the
year ended December 31, 2022. In addition, our net profit increased by 137.6% from
RMB433.4 million for the year ended Decemb er 31, 2021 to RMB1,029.9 million for the
year ended December 31, 2022. This was primarily attributable to the strong growth of our
LFP cathode material business since we acquired it in June 2021, in terms of both sales
volume and average selling pri ces, driven by the rapid devel opment and growth in demand
of downstream NEV and energy storage industries and the significant increase in the price
of principal raw materials, such as lithium car bonate, which was attributable to tightness in
upstream supply.
However, we recorded a net loss of RMB1,5 14.2 million for the year ended December
31, 2023 as compared to a net profit of RMB1, 029.9 million for the year ended December
31, 2022. This was primarily driven by the unpr ecedented volatility in lithium carbonate
market prices. Specifically, we recorded a gr oss loss of RMB57.5 million for the year ended
December 31, 2023 compared to a gross prof it of RMB2,433.3 million for the year ended
December 31, 2022 as lithium carbonate market prices undergoing an unprecedented sharp
d e c l i n ei n2 0 2 3a f t e ra ne x t e n d e dh i g hp r i c eenvironment created a temporary mismatch
between cost of sales of LFP cathode materials and its revenue contribution for the year
ended December 31, 2023. We recorded a 44.8% year-on-year decrease in revenue from
sales of LFP cathode materials in 2023, mainly attributable to a significant decrease in
average selling price of LFP cathode material s which closely follows the prevailing lithium
carbonate market price which experienced sharp decreases during the year. Due to the
overall decline of lithium carbonate market prices through 2023, our cost of sales for LFP
cathode materials stayed elevat ed relative to the selling prices which had to be lowered to
reflect the sharp decline in lithium carbonate prices during the year. In addition, we
SUMMARY
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recognized provision for impairment loss of inventories of RMB554.5 million in the 2023 as
a result of the decrease in recoverable amounts of inventories attributable to the declining
raw material prices.
The market challenges we faced in 2023 continued into the first half of 2024, although
we saw some signs of improvement. For the six months ended June 30, 2024, we recorded a
total revenue of RMB3,568.6 million, represen ting a decrease from RMB3,814.2 million for
the same period in 2023. Our LFP cathode material segment revenue decreased from
RMB2,851.5 million in the first half of 2023 to RMB2,475.6 million in the first half of 2024.
This decrease was mainly attributable to two fac tors affecting average selling price of our
LFP cathode materials, including (i) the continued decline in lithium carbonate market
prices, and (ii) an increase in sales of LFP ca thode materials with procurement of lithium
carbonate and raw materials from customers w hich result in lower revenue recognized and
lower average selling price. Desp ite these challenges, we saw an improvement in our gross
profit, recording RMB344.0 million in the fi rst half of 2024 compared to a gross loss of
RMB241.4 million in the first half of 2023. Our net loss also decreased from RMB811.5
million in the first half of 2023 to RMB260 .2 million in the first half of 2024. These
improvements were primarily due to the increased sales of LFP cathode materials with
procurement of lithium carbonate and raw materials from customers, partially reducing the
Group’s exposure to raw material price fluctuations.
We recorded revenue from sales of automotive specialty chemicals of RMB2,118.7
million, RMB1,762.8 million, RMB1,903.2 million, RMB938.1 million and RMB970.1
million in 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024,
respectively. The decrease in revenue from sales of automotive specialty chemicals in 2022
was primarily due to (i) the declined demand for our products as transportation and
logistics in mainland China were affected during the COVID-19 pandemic, and (ii) the more
intense market competition, such as bundle sales employed by our competitors as sales and
marketing strategies. Revenue from sales of automotive specialty chemicals increased by
8.0% in 2023, primarily due to the increases in revenue from sales of automobile and
industrial lubricant, coolants and car maintenance products as a result of resumed demand
for such products following the recovery of transportation and logistics in mainland China,
partially offset by a decrease in revenue fro m diesel exhaust fluid in light of heightened
market competition.
Despite the current challenges in the LFP cathode material industry, we believe
prevailing downstream prospects and growing demand are in our favor. According to Frost
& Sullivan:
. driven by the PRC government’s dual obje ctives of ‘‘carbon emission peak’’ (碳達
峰) and ‘‘carbon neutrality’’ (碳中和), the NEV industry experienced fast growth,
resulting in significant growth in demand for NEV batteries. Specifically,
shipment volume of NEV batteries in mainland China is expected to reach
1,860.5 GWh in 2028 from 816.6 GWh in 2024, representing a CAGR of 22.9%;
SUMMARY
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. shipment volume of the ESS battery industry in mainland China is expected to
reach 863.3 GWh in 2028 from 300.4 GWh in 2024, representing a CAGR of
30.2%; and
. automobile ownership in mainland China, which closely relates to our automotive
specialty chemical business, is expect ed to reach 430.5 million units in 2028 from
354.3 million units in 2024, representing a CAGR of 5.0%.
As a result, according to Frost & Sullivan, sales volume of LFP cathode material in
mainland China is expected to further grow at a CAGR of 17.2% from 2,056.0 thousand
tons in 2024 to 3,884.0 thousand tons in 2028, and the sales volumes of diesel exhaust fluids,
automotive lubricants, coolants and car maintenance products in mainland China are
expected to increase at CAGRs of 9.4%, 1.8% , 8.5% and 4.0%, respectively, from 2024 to
2028. Leveraging our market position, diverse product portfolio, manufacturing
capabilities, research and development capab ilities, product quality and quality customer
base, we believe we are well positioned to seize market opportunities and benefit from the
expected growth in the end markets of our products.
OUR BUSINESSES
LFP Cathode Materials
LFP cathode materials are currently the mos t extensively used cathode materials for
the production of lithium-ion batteries used in a wide variety of end markets including NEV
and energy storage industries. Customers of our LFP cathode material business include
major lithium-ion battery manufacturer s such as CATL, REPT BATTERO, Sunwoda and
EVE. We sell our LFP cathode material products directly to customers after passing their
stringent verification processes, including on -site visits of our production facilities and
sample tests of our products. The following table sets forth a breakdown of the revenue
contribution, percentage of revenue contribution, sales volume and average selling price of
our LFP cathode material products for the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
(Revenue
unaudited)
Revenue (RMB’000) . . . . . . . . . . . 1,876,842 12,241,873 6,753,628 2,851,523 2,475,580
% of total revenue (%) . . . . . . . . 46.3 87.0 77.4 74.8 69.4
S a l e sv o l u m e( t o n ) ............ 30,505 95,120 108,120 37,427 74,503
Average selling price (RMB/ton) . . . 61,526 128,699 62,464 76,189 33,228
Note: Revenue from selling of small amounts of LFP cat hode materials produced by third party contract
manufacturers we engaged was categorized under oth ers, and therefore is not shown under the table
above. During the Track Record Period and prior to the acquisitions of Tianjin Beiterui Nano and
Jiangsu Beiterui Nano, revenue generated from s elling of such LFP cathode materials amounted to
RMB4.2 million in 2021.
SUMMARY
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Since the prices and supply of LFP cathode materials are closely linked to the prices
and supply of lithium carbonate, our LFP cathode material business is subject to the
cyclicality of lithium carbonate driven b y supply-demand dynamics in the lithium-ion
battery industry. For further details of the cyclicality of lithium carbonate, see ‘‘Industry
Overview — Average Price Analysis of LFP Cathode Material — Raw materials and
products.’’ The increase in the sales volume of our LFP cathode materials from 2021 to 2022
was primarily driven by the rapid development and growth in demand of downstream NEV
and energy storage industries, while the inc rease in the average selling price of our LFP
cathode materials in the same period was primarily due to the increased prices of our
principal raw materials, lithium carbonate and iron phosphate, in 2022. The decrease in the
average selling price of our LFP c athode materials in 2023 was collectively contributed by
(i) the decline in principal raw material pri ces and (ii) the increase in sales of LFP cathode
materials with procurement of lithium carbonate and raw materials from customers from
RMB157.0 million in 2022 to RMB566.9 million in 2023, cost of which was deducted
directly upon the recognition of such revenue . Nevertheless, despite the unprecedented
volatility in lithium carbonat e market prices leading to significant decrease in average
selling price of our LFP cathode materials from 2022 to 2023, sales volume of our LFP
cathode materials increased from 95,120 ton s in 2022 to 108,120 tons in 2023. This trend
continued into the first half of 2024 with sales volume of our LFP cathode material
increasing from 37,427 tons in the first half of 2023 to 74,503 tons in the first half of 2024,
representing a 99.1% increase.
Production capacity and utilization
As of the Latest Practicable Date, we opera ted five LFP cathode material production
facilities in (i) Jintan, Jiangsu Province, ( ii) Baodi, Tianjin Municipality, (iii) Pengxi,
Sichuan Province, (iv) Heze, Shandong Province and (v) Xiangyang, Hubei Province. The
following table sets forth the key operating information of our LFP cathode material
production during the periods indicated:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
D e s i g n e dc a p a c i t y( t o n ) ....... 2 3 , 6 4 5 . 8 9 1 , 4 9 9 . 0 2 0 0 , 6 7 0 . 2 1 1 0 , 6 3 3 . 4
A c t u a lp r o d u c t i o n( t o n ) ....... 2 5 , 2 8 1 . 3 8 9 , 0 3 9 . 9 1 1 5 , 5 0 9 . 8 7 8 , 9 1 4 . 0
Utilization rate (%) . . ....... 1 0 6 . 9 9 7 . 3 5 7 . 6 7 1 . 3
The decrease in utilization rate for the year ended December 31, 2023 was primarily
due to (i) a significant increase in our total designed production capacity in 2023, mainly
attributable to the capacity expansion at ou r Pengxi Plant; and (ii) underutilization of
certain of our new production lines owing to ongoing supplier verification procedures of
some customers which are specific to product ion plants and ramp-up period for increased
capacity. In addition, our production volume of 115,509.8 tons in 2023 exceeded total
designed capacity of 91,499.0 tons in 2022. In the first half of 2024, our overall LFP cathode
material production utilization rate improved to 71.3% from 57.6% for the year ended
December 31, 2023. This improvement was mai nly driven by significant increases in
SUMMARY
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utilization at our newer facilities, with the Pengxi Plant increasing to 90.8%, Heze Plant to
65.7%, and Xiangyang Plant to 69.1%. For details, see ‘‘Business — Our Businesses — LFP
Cathode Materials — Production capacity and utilization.’’
Research and development
In order to cope with developments in the lithium-ion battery industry and other
battery materials industries, it is critical that we maintain our ability to develop new
technologies to meet customers’ evolving demands and specifications and to establish and
strengthen our market position. We have three strategically located research and
development centers and a research and development team composed of 270 members
dedicated to product and technology development of LFP cathode materials, as of June 30,
2024. Our Shenzhen center focuses on fundamental technologies and latest trends in the
industry such as those related to LMFP and sodium materials. The Changzhou center
directly addresses customer-related researc h topics. Our Nanjing center focuses on, among
others, low cost LFP cathode materials, su ch as our Z series products. For details, see
‘‘Business — Our Businesses — LFP Cathode Ma terials — Research and development.’’
Automotive Specialty Chemicals
We provide a diverse product portfolio of automotive specialty chemicals mainly
including diesel exhaust fluids, automobile and i ndustrial lubricants, coolants and a variety
of car maintenance products under our Lopal (龍蟠),K e l a s (可蘭素)a n d Teec (迪克)
brands. By helping to reduce harmful emissions from vehicles and enhance vehicle
efficiency, these products contribute to en vironmental sustainability. Our automotive
specialty chemicals are primarily offered to dis tributors of automotive chemical products,
automobile manufacturers, engineering equ ipment manufacturers, automotive chemical
brands and retail consumers in China.
The table below sets forth a breakdown of our revenue by product types of the
automotive specialty chemical bus iness for the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
Diesel exhaust fluid . . . . 790,630 37.3 688,861 39.1 625,738 32.9 323,102 34.4 306,607 31.6
Automobile and
industrial lubricant . . 844,402 39.9 623,553 35.4 706,616 37.1 362,948 38.7 367,623 37.9
C o o l a n t ........... 4 0 3 , 7 0 8 1 9 . 1 3 8 2 , 6 6 1 2 1 . 7 4 8 4 , 7 0 1 2 5 . 5 2 0 3 , 2 4 6 2 1 . 7 2 4 8 , 9 4 8 2 5 . 7
Car maintenance
p r o d u c t s......... 6 1 , 9 5 5 2 . 9 5 8 , 3 3 0 3 . 3 7 0 , 2 4 0 3 . 7 3 5 , 9 7 8 3 . 8 3 6 , 9 8 8 3 . 8
Other products Note . . . . . 18,030 0.8 9,409 0.5 15,917 0.8 12,783 1.4 9,981 1.0
Total ............. 2,118,725 100.0 1,762,814 100.0 1,903,212 100.0 938,057 100.0 970,147 100.0
Note: Mainly comprising sales of filling equipment and packaging containers for automotive specialty
chemical products.
SUMMARY
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The following table sets forth a breakdow n of our sales volume and average selling
price for our automotive specialty chemicals by product type for the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Sales
volume
Average
selling
price
per ton
Sales
volume
Average
selling
price
per ton
Sales
volume
Average
selling
price
per ton
Sales
volume
Average
selling
price
per ton
Sales
volume
Average
selling
price
per ton
ton RMB ton RMB ton RMB ton RMB ton RMB
Diesel exhaust fluid . . . . 449,808 1,758 373,821 1,843 331,370 1,888 172,281 1,875 171,095 1,792
Automobile and
industrial lubricant . . 56,087 15,055 37,262 16,734 39,577 17,854 21,023 17,264 20,428 17,996
C o o l a n t ........... 8 0 , 1 0 2 5 , 0 4 0 7 3 , 8 7 4 5 , 1 8 0 9 9 , 3 7 2 4 , 8 7 8 4 1 , 2 6 7 4 , 9 2 5 5 3 , 6 4 2 4 , 6 4 1
Car maintenance
p r o d u c t s......... 1 3 , 1 2 6 4 , 7 2 0 1 1 , 7 5 8 4 , 9 6 1 1 5 , 1 4 4 4 , 6 3 8 6 , 9 0 4 5 , 2 1 1 7 , 9 7 7 4 , 6 3 7
Notes:
(1) The sales volume and average selling prices of ot her products are not meaningful and therefore are not
illustrated due to a number of different types of products combined in this category.
(2) Sales volume includes products produced under subc ontracting arrangements. See ‘‘Business — Our
Businesses — Automotive Specialty Chemicals — Subcontracting.’’
Revenue from sales of automotive specialty chemicals increased by 14.8% in 2021,
primarily due to the increases in the sales vol ume of our products, especially the increased
demand for diesel exhaust fluid resulting from the enforcement of stricter emissions
regulations. Revenue from sales of automotive specialty chemicals decreased by 16.8% in
2022, primarily due to decrease in sales volume of our products, which was mainly
attributable to the declined demand for our products as affected by the COVID-19
pandemic and the more intense market competition. The decrease in revenue from sales of
automotive specialty chemicals in 2022 was pa rtially offset by an increase in the average
selling prices of our products resulted from th e increased raw material prices. Revenue from
sales of automotive specialty chemicals increased by 8.0% in 2023, primarily due to the
increases in revenue from sales of automobile and industrial lubricant, coolants and car
maintenance products as a result of resumed demand for such products following the
recovery of transportation and logistics in ma inland China, partially offset by a decrease in
revenue from diesel exhaust fluid. Revenue from sales of automotive specialty chemicals
increased slightly by 3.4% from RMB938.1 m illion for the six months ended June 30, 2023
to RMB970.1 million for the six months ended June 30, 2024, primarily due to the increase
in revenue from sales of coolants, partially offset by the decrease in revenue from sales of
diesel exhaust fluid.
For detailed analysis, see ‘‘Financial In formation — Period to Period Comparison of
Results of Operations.’’
SUMMARY
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--- page 19 ---
Production capacity and utilization
As of the Latest Practicable Date, we opera ted seven production facilities for our
automotive specialty chemical business in t he PRC. Our production facilities are equipped
with automated production systems allowing us to standardize the production processes of
our products and enabling our manufacturing personnel to focus on maintenance and
supervisory functions. The following table sets forth a summary of our production capacity
in terms of designed production capacity and u tilization rates of automotive specialty
chemicals by product type for the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2024
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
(ton) % (ton) % (ton) % (ton) %
D i e s e le x h a u s tf l u i d ......... 337,666.7 363,866.4 107.8 531,500.0 353,761.2 66.6 690, 132.1 318,723.2 46.2 412,912.5 157,751.8 38.2
Automobile and industrial
l u b r i c a n t ............. 8 3 , 0 0 0 . 0 5 6 , 3 3 9 . 9 6 7 . 9 8 3 , 000.0 36,067.7 43.5 82,875.0 (4) 41,189.7 49.7 42,530.0 21,779.2 51.2
C o o l a n t ................ 100,000.0 83,418.9 83.4 100,000.0 70,745.1 70.7 113, 067.0 106,200.5 93.9 64,796.0 52,147.5 80.5
C a rm a i n t e n a n c ep r o d u c t s ..... 1 0 , 0 0 0 . 0 1 4 , 2 9 6 . 9 143.0 21,220.0 11,189.5 52.7 25,000 15,704.1 62.8 10,000.0 10,065.2 100.7
Notes:
(1) The designed production capacity of the period repre sents the effective production capacity accumulated
by months, which is calculated based on the optimal hourly production rate of production lines operating
ten hours a day, for 250 working days a year, adjuste d pro rata according to the actual days of operation
for respective production lines in a period.
(2) The actual production during the period is the total volume of the products manufactured during that
period.
(3) The utilization rate equals to the actual producti on volume divided by the de signed production capacity
during the same period.
(4) The slight decrease in designed capacity for automobile and industrial lubricants in 2023 was due to the
decommissioning of an aging facility in Zhangjiaga ng in June 2023 that had been in operation for over ten
years.
The utilization rates of our automotive speci alty chemicals fluctuated during the Track
Record Period primarily due to (i) increased working hours adopted from time to time to
cope with strong demand for diesel exhaust fluid and car maintenance products in 2021; (ii)
reduced automobile usage and lower demand for automotive chemical products during the
COVID-19 pandemic in 2022; (iii) addition al production capacity that was gradually
released in 2022; and (iv) resumed demand for automotive chemical products following the
recovery from the COVID-19 pandemic in 2023 except for diesel exhaust fluids which
experienced reduced sales in light of heightened market competition. For details, see
‘‘Business — Our Businesses — Automotive Sp ecialty Chemicals — Production capacity
and utilization.’’
SUMMARY
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Sales and distribution network
We have a multi-channel sales and distribution network for our automotive specialty
chemical business, encompassing a number of online and offline sales channels. Our
extensive sales and distribution network for o ur automotive specialty chemical business
comprised mainly of (i) distributors including g as stations, vehicle repair plants and vehicle
service centers, as well as distributors who sell t o these customers, (ii) direct sales targeting
corporate clients including automobile manufacturers (including their respective 4S
dealership stores) and engineering equipme nt manufacturers, (iii) OEM customers which
are mainly automotive chemical brands and (iv) online channels targeting retail customers
which helps enhance the visibility of our brands and products. The table below sets forth a
breakdown of our revenue from automotive specialty chemical business by sales channel for
the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
D i s t r i b u t o r s ......... 1 , 0 6 5 , 8 5 2 5 0 . 3 8 9 4 , 7 4 0 5 0 . 8 8 3 9 , 4 9 7 4 4 . 1 4 6 6 , 5 8 9 4 9 . 7 4 4 0 , 5 8 5 4 5 . 4
Corporate clients. . . . . . 822,112 38.8 735,612 41.7 853,251 44.8 390,448 41.6 460,094 47.4
OEM Customers . . . . . . 196,539 9.3 105,740 6.0 176,939 9.3 66,337 7.1 52,514 5.4
Online channels . . . . . . 34,222 1.6 26,722 1.5 33,525 1.8 14,683 1.6 16,954 1.8
Total ............. 2,118,725 100.0 1,762,814 100.0 1,903,212 100.0 938,057 100.0 970,147 100.0
Lithium Carbonate Processing Services
In the first half of 2024, we recorded revenue for the provision of lithium carbonate
processing service, albeit to a limited extent. In the first half of 2024, the majority of the
output of our Yichun facility was utilized in-house for our LFP cathode materials
manufacturing, which we subsequently supp lied to CATL Group. The remaining portion
were processed for a company designated by CATL. Revenue generated from lithium
carbonate processing for this company amo unted to approximately RMB42.7 million in the
first half of 2024 while we recorded negative gross margin for this transaction primarily due
to lack of economies of scale at the early produc tion phase of the facility for the relevant
batches.
Under the relevant agreement, we have committed the production capacity of the
Yichun facility to CATL. The pricing structure f or our lithium carbonate processing service
under this agreement generally accounts for our costs and operational expenses and an
agreed-upon profit component. After fulf illing our initial commitment to CATL, we may
explore opportunities to expand our customer base for lithium carbonate processing. In the
event we sell lithium carbonate or provide pr ocessing services to any customer other than
CATL or its designated companies, our pricing will be based on a market approach taking
into account prevailing market conditions a nd competitive factors. For details, see
‘‘Business — Our businesses — Lithium carbonate processing services.’’
SUMMARY
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--- page 21 ---
STRENGTHS
Our competitive strengths include:
. We are a major LFP cathode material manufacturer in the world and a renowned
automotive specialty chemical manufact urer in mainland China benefiting from
growing industries;
. We have a strong customer base for our LFP cathode material business and an
extensive sales and distribution network for our automotive specialty chemical
business;
. Our strong research and development capabilities contribute to our competitive
and diverse product portfolio; and
. We have an experienced and visionary management team.
See ‘‘Business — Strengths’’ for details.
STRATEGIES
Our development strategies include:
. Further increase our LFP cathode material production capacity to seize growing
downstream demand, expand our customer base and achieve economies of scale to
solidify our position in the LFP cathode material industry;
. Further expand upstream along the LFP cathode material production value chain;
. Strengthen our research and development capabilities and attract high-caliber
talents; and
. Further reinforce our brand and channel strategies to solidify our market position
in the automotive specialty chemicals industry.
See ‘‘Business — Strategies’’ for details.
MAJOR SUPPLIERS AND CUSTOMERS
In the years ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2024, purchase amount from our five largest suppliers in each period during the Track
Record Period amounted to RMB1,106. 5 million, RMB3,526.3 million, RMB2,791.7
million and RMB1,029.1 million, respectively, representing 34.9%, 26.4%, 37.3% and
35.9% of our total purchase amount for the respective periods.
SUMMARY
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In the years ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2024, the aggregate revenue generated from our five largest customers in each period
during the Track Record Period amounted to RMB1,739.2 million, RMB11,253.8 million,
RMB5,627.4 million and RMB2,159.8 million, re spectively, representing 42.9%, 80.0%,
64.5% and 60.5% of our total revenue for the respective periods.
Customer Concentration
For years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, revenue generated from CATL Gr oup amounted to RMB1,160.4 million,
RMB7,486.9 million, RMB2,648.0 million a nd RMB1,123.1 million, respectively,
representing 28.6%, 53.2%, 30.3% and 31.5% of our revenue for the respective periods.
The relatively high revenue contribution of CATL Group was mainly due to its large
demand for LFP cathode materials as it is one of the leading lithium-ion battery
manufacturers in the world in the highly concentrated lithium-ion battery industry. Our
Directors are of the view that the reliance between our major customers and us is bilateral
and our LFP cathode material business is sustainable despite such customer concentration
and that we are not the exclusive supplier of LFP cathode materials to our major customers,
primarily because customer concentration is an industry norm in the LFP cathode material
industry according to Frost & Sullivan and we h ave developed bilateral relationships with
our customers.
Being the holding company of Yichun Times (a substantial shareholder of Lopal
Times, a subsidiary of our Company), CATL will become our connected person upon the
Listing. As we expect to continue selling and pr ocuring raw materials and other products to
and from CATL Group after the completion of the Global Offering, we have entered into
the CATL Sales Framework Agreement and CA TL Purchase Framework Agreement with
CATL, which will constitute our partially exempt continuing connected transaction under
Chapter 14A of Listing Rules upon the Listing. For details, see ‘‘Business — Major
Suppliers and Customers — Customer Concentration’’ and ‘‘Connected Transactions —
Partially Exempt Continuing Connected Transactions.’’
Average Price Analysis of LFP Cathode Materials
Lithium carbonate and iron phosphate are the primary raw materials for LFP cathode
materials. The price of lithium carbonate heavily relies on imported lithium, mainly sourced
from South America and Australia. The price of lithium carbonate in China has undergone
two major cyclical fluctuations over the past decade driven by supply-demand dynamics in
the lithium-ion battery industry. For details, see ‘‘— Industry Overview — Overview of
Lithium-ion Battery Industry — Average Pr ice Analysis of LFP Cathode Material.’’ The
diagrams below set forth the historical and expected price trends of lithium carbonate, iron
phosphate and LFP cathode material for the periods indicated.
SUMMARY
–1 2–


--- page 23 ---
Average Price of Lithium Carbonate, 2000–2028E
Thousand RMB/Ton
Average Price of Lithium Carbonate
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
0
50
100
150
200
250
300
350
400
450
500
37.0
12.3 13.2 12.8 14.2 12.0 18.5 26.9 30.9 40.6 47.0 51.3 56.4 61.2 67.4 75.0 86.0 94.2
124.5
71.0
48.0
119.8
482.4
272.3
95.5 93.8 92.6 91.8 91.5
Source: Frost & Sullivan
Note: Due to the lack of comprehensive lithium carbona te pricing data in China prior to 2018, the prices
used in this report for the period before 2018 have been derived based on global pricing estimates.
Average Price of Iron Phosphate and LFP Cathode Materials, 2018–2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
18.3
12.4
10.4
14.3
20.8
14.0
10.2 10.0 9.9 9.8 9.8
Thousand RMB/Ton
Average Price of Iron Phosphate
0
5
10
15
20
25
30
SUMMARY
–1 3–


--- page 24 ---
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
62.7
41.7
29.8
55.0
125.0
72.2
35.5 37.0 38.6 39.1 39.5
Average Price of LFP Cathode Material
0
40
20
60
80
100
120
140
Thousand RMB/Ton
Source: Frost & Sullivan
CHALLENGES TO OUR INDUSTRIES AND OUR BUSINESSES
Our Industries
The lithium-ion battery industry, includ ing the LFP cathode material industry,
experienced substantial growth in shipment volume, increasing from 250.1 GWh in 2019 to
1,226.8 GWh in 2023, with a CAGR of 48.8%, driven by surging demand and supportive
policies in the NEV and energy storage indust ries. This significant downstream demand
growth led to upstream supply tightness fo r principal raw materials such as lithium
carbonate. Upstream supply chain disruptions caused by the COVID-19 pandemic also
constrained lithium resource supply from overseas origins. As a result, lithium carbonate
prices spiked. According to Frost & Sullivan, the average price of lithium carbonate
increased sharply from RMB119.8 thousand per ton in 2021 to RMB482.4 thousand per ton
in 2022, and average LFP cathode material pri ces increased significantly from RMB55.0
thousand per ton in 2021 to RMB125.0 thousand per ton in 2022.
Since late 2022, as new lithium carbonate production capacity gradually released,
supply increased to meet downstream demand. Specifically, numerous companies across
mainland China announced their plans to es tablish or expand their lithium carbonate
production in late 2022 which have materialized in early 2023. According to the Ministry of
Industry and Information Technology of the PRC ( 中華人民共和國工業和信息化部),
lithium carbonate production soared by appro ximately 36.7% year-on-year, escalating
from 150,000 tons in the first half of 2022 to 205,000 tons in the same period in 2023.
However, softening of near-term demand sentiments along with the broader global
economic slowdown in 2023 have impacted the downstream lithium-ion battery and NEV
industries. On the one hand, in December 2022, China discontinued direct purchase
subsidies for NEVs temporarily affecting lithium-ion battery and component demand in
early 2023. On the other hand, while long-term demand is expected to remain healthy,
concerns over potential further lithium carbonate price declines led downstream players
including lithium-ion battery and NEV manufacturers to temporarily resort to inventory
destocking measures. Coupled with rising lithium carbonate supply, lithium carbonate
SUMMARY
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prices plunged in 2023 which had led to a significant decrease in average LFP cathode
material prices from RMB125.0 thousand per ton in 2022 to RMB72.2 thousand per ton in
2023 and further to RMB37.4 thousand per ton in the first half of 2024.
In contrast, the automotive specialty chemical industry, which is relatively more
mature, has experienced relatively stable growth in recent years.
O u rB u s i n e s sP e r f o r m a n c e
We achieved strong growth from 2021 to 2022. Our revenue increased by 247.1% from
RMB4,053.5 million for the year ended Decemb er 31, 2021 to RMB14,071.6 million for the
year ended December 31, 2022. In addition, our net profit increased by 137.6% from
RMB433.4 million for the year ended Decemb er 31, 2021 to RMB1,029.9 million for the
year ended December 31, 2022. This growth was primarily attributable to the strong growth
of our LFP cathode material business.
However, we recorded a net loss of RMB1,5 14.2 million for the year ended December
31, 2023 as compared to a net profit of RMB1, 029.9 million for the year ended December
31, 2022, primarily due to the changes i n supply and demand dynamics along the
lithium-ion battery value chain and the unprecedented volatility in lithium carbonate
market prices in 2023. Nevertheless, compared to the significant drop in average selling
prices, sales volume of our LFP cathode material products increased from 95,120 tons for
the year ended December 31, 2022 to 108,120 t ons for the year ended December 31, 2023.
Additionally, our traditional automotive specialty chemical business recorded increasing
revenue for the year ended December 31, 2023 compared to the year ended December 31,
2022.
The market challenges we faced in 2023 continued into the first half of 2024, although
we saw some signs of improvement. For the six months ended June 30, 2024, we recorded a
total revenue of RMB3,568.6 million, repres enting a decrease from RMB3,814.2 million in
the same period of 2023. Revenue generated fr om sales of LFP cathode material decreased
from RMB2,851.5 million in the first half of 2023 to RMB2,475.6 million in the first half of
2024. This decrease was mainly a ttributable to a significant de crease in the average selling
price of LFP cathode materials. Despite these challenges, we experienced positive trends in
terms of sales volume. Sales volume of our LFP cathode material increased from 37,427
tons in the first half of 2023 to 74,503 tons in the first half of 2024, representing a 99.1%
increase. We also saw an improvement in our gross profit, recording RMB344.0 million in
the first half of 2024 compared to a gross loss of RMB241.4 million in the first half of 2023.
As a result, our net loss decreased from RMB811.5 million in the first half of 2023 to
RMB260.2 million in the first half of 2024. Additionally, revenue from our automotive
specialty chemical business increased from RMB938.1 millio n in the first half of 2023 to
RMB970.1 million in the first half of 2024.
In response to the current challenges in th eL F Pc a t h o d em a t e r i a li n d u s t r y ,w ep l a nt o
adopt a number of measures to weather short-term fluctuations while capitalizing on the
considerable growth opportunities in the LFP cathode material industry, including: (i)
improving resilience to fluctuations in raw m aterial prices, including (a) improve
procurement practices and organization, (b) further expand upstream along the LFP
SUMMARY
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cathode material value chain and (c) leverage lithium carbonate futures to hedge against
price fluctuations of lithium carbonate; (ii) improving production efficiency; and (iii)
increasing sales revenue and expanding customer base, including (a) enhance loyalty of
existing customers, (b) expand customer base, (c) execute our overseas expansion plan, (d)
enhance research and development of new pr oducts and production techniques, and (e)
continue development of our automotive specialty chemical business.
See ‘‘Business — Challenges to our Industries and our Businesses’’ for further details.
COMPETITION
LFP Cathode Material Industry
The global LFP cathode material market is highly competitive and concentrated with
the top five LFP cathode material manufacture rs accounting for approximately 66.7% of
the global market share in terms of sales volu me in 2023, and the three largest LFP cathode
material manufacturers accounting for 30.5% , 12.9% and 10.5%, respectively. According
to Frost & Sullivan, we ranked fourth in the global LFP cathode material market,
accounting for 6.5% of the market share. At th e same time, sales of LFP cathode materials
in mainland China accounted for around 99% of the global LFP cathode materials sales
volume. As such, we generally compete wit h other large-scale LFP cathode material
manufacturers in mainland China.
Automotive Specialty Chemical Industry
According to Frost & Sullivan, various sub-segments of mainland China’s automotive
specialty chemical industry is characterized by significant presence of large state-owned
enterprises and multi-national foreign companies. In terms of sales volume in mainland
China in 2023, the top two companies in the diesel exhaust fluid and coolants markets were
large state-owned enterprise s. Together they accounted for over 40% and 20% market share
of the respective markets. A ccording to Frost & Sullivan, in terms of sales volume in
mainland China in 2023, we are the third largest diesel exhaust fluid manufacturer, with a
market share of 9.1% and the third largest coolant manufacturer in mainland China, with a
market share of 5.8%. As such, we genera lly compete with similar products of the
aforementioned large state-owned enterprise s, other large and small companies, including
well-known domestic and global competitors, on a product-by-product basis.
For further details on the competitive la ndscapes of relevant industries and our
competitive strengths, see ‘‘Industry Overview’ ’ and ‘‘Business — Strengths’’ and ‘‘Business
— Competition.’’
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables set forth a summary of our consolidated results of operations for
the periods indicated. This information sh ould be read together with our consolidated
financial statements and related notes included elsewhere in this prospectus. The results of
operations in any particular period are not necessarily indicative of our future trends.
SUMMARY
–1 6–


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Summary of Consolidated Statements of Profit or Loss and Other Comprehensive Income
The following table sets forth a summary of our consolidated statements of profit or
loss and other comprehensive income for the periods indicated:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue .................. 4,053,505 14,071,643 8,729, 479 3,814,204 3,568,612
Cost of sales . . . . . . . . . . . . . . . (2,973,747) (11,638, 338) (8,786,960) (4,055,637) (3,224,638)
Gross profit/(loss) ............ 1,079,758 2,433,305 (57,481) (241,433) 343,974
Other income, gains and losses . . . . 37,316 95,335 92,288 72,711 134,067
(Impairment losses)/reversal of
impairment losses on financial
assets . . . . . . . . . . . . . . . . . . (23,134) (70,362) (18,966) 36,334 30,458
Selling and distribution expenses. . . ( 172,759) (176,859) (196,537) (105,676) (80,664)
Administrative expenses . . . . . . . . (156,470 ) (319,796) (868,973) (350,699) (262,110)
Research and development expenses. (207, 953) (615,549) (485,724) (265,631) (203,587)
Share of results of associates . . . . . (279) 16,956 (23,583) (2,657) (11,877)
Finance costs . . . . . . . . . . . . . . . (49,757) ( 202,143) (261,377) (108,457) (130,395)
Listing expenses . . . . . . . . . . . . . — — (10,216) (7,030) (13,395)
Profit/(loss) before taxation ...... 506,722 1,160,887 (1,830,569) (972,538) (193,529)
Income tax (expense)/credit . . . . . . (73,304) (130,941) 316,368 161,051 (66,691)
Profit/(loss) for the year/period .... 433,418 1,029,946 (1,514,201) (811,487) (260,220)
Profit/(loss) for the year/period
attributable to:
Owners of the Company . . . . . . . . 351,103 752, 897 (1,233,291) (654,008) (217,820)
Non-controlling interests . . . . . . . . 82,315 277,049 (280,910) (157,479) (42,400)
433,418 1,029,946 (1,514,201) (811,487) (260,220)
SUMMARY
–1 7–


--- page 28 ---
Cost of sales
Our cost of sales primarily consists of cost of raw materials, manufacturing overheads,
depreciation of production facilities and mach inery, employee benefit expenses and other
costs such as transportation costs, tax charges and subcontracting service fees. The
following table sets forth a breakdown of our cost of sales by nature for the periods
indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
Cost of raw materials. . . 2,391,727 80.4 10,519,529 90.4 7,465,178 85.0 3,545,899 87.4 2,327,372 72.1
— Lithium carbonate . . . 751,633 25.3 7,476,947 64.3 4,846,536 55.2 2,461,665 60.7 945,203 29.3
— Iron phosphate . . . . . 404,725 13.6 1,425,686 12.2 1,162,913 13.2 478,437 11.8 652,364 20.2
—B a s eo i l ......... 2 9 4 , 5 0 9 9 . 9 2 4 7 , 4 8 9 2 . 1 2 6 9 , 6 5 4 3 . 1 1 4 7 , 4 3 1 3 . 6 1 3 1 , 7 3 2 4 . 1
— Ethylene glycol . . . . . 139,254 4.7 145,084 1.2 170,832 1.9 76,259 1.9 96,179 3.0
—U r e a ........... 2 8 4 , 1 9 6 9 . 6 2 9 9 , 2 4 6 2 . 6 2 5 0 , 8 7 2 2 . 9 1 3 2 , 2 2 8 3 . 3 1 1 0 , 2 1 7 3 . 4
— Other raw materials
(1) 517,410 17.3 925,077 8.0 764,371 8.7 249,879 6.1 391,677 12.1
Manufacturing overheads 216,820 7.3 486,801 4.2 643,297 7.3 208,681 5.1 459,766 14.3
D e p r e c i a t i o n ........ 5 8 , 6 3 9 2 . 0 1 4 2 , 8 0 2 1 . 2 2 7 3 , 5 3 4 3 . 1 1 1 0 , 7 3 6 2 . 7 2 0 5 , 2 9 0 6 . 4
Employee benefit expenses 54,362 1.8 88,032 0.8 125,966 1.4 48,977 1.2 83,880 2.6
Others
(2) ........... 2 5 2 , 1 9 9 8 . 5 4 0 1 , 1 7 4 3 . 4 2 7 8 , 9 8 5 3 . 2 1 4 1 , 3 4 4 3 . 6 1 4 8 , 3 3 0 4 . 6
Total ............. 2,973,747 100.0 11,638,338 100.0 8,786,960 100.0 4,055,637 100.0 3,224,638 100.0
Notes:
(1) Including other raw materials used in our produc tion and raw materials procured from third-party
manufacturers for subc ontracting purposes.
(2) Including without limitation tr ansportation costs, tax charges and subcontracting service fees.
SUMMARY
–1 8–


--- page 29 ---
Gross profit/(loss) and gross profit/(loss) margin
The following table sets forth a break down of our gross profit/(loss) and gross
profit/(loss) margins by types of major products for the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
Gross
profit/
(loss)
Gross
profit/
(loss)
margin
Gross
profit/
(loss)
Gross
profit/
(loss)
margin
Gross
profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
LFP cathode materials . . 453,678 24.2 1,996,846 16.3 (544,319) (8.1) (477,662) (16.8) 77,239 3.1
— Without procurement
of lithium carbonate
and raw materials
from customers . . . 453,678 24.2 1,960,487 16.2 (624,744) (10.1) (480,670) (18.0) (6,728) (0.4)
— With procurement of
lithium carbonate
and raw materials
from customers . . . — — 36,359 23.2 80,425 14.2 3,008 1.7 83,967 10.8
Automotive specialty
c h e m i c a l s ........ 6 1 6 , 1 5 5 2 9 . 1 4 1 5 , 2 4 2 2 3 . 6 4 8 4 , 2 2 6 2 5 . 4 2 3 2 , 6 7 4 2 4 . 8 2 7 1 , 9 2 4 2 8 . 0
— Diesel exhaust fluid . . 188,463 23.8 154,871 22.5 137,396 22.0 87,134 27.0 85,449 27.9
— Automobile and
industrial lubricant . 308,181 36.5 148,794 23.9 191,992 27.2 80,900 22.3 109,372 29.8
—C o o l a n t .......... 1 0 0 , 1 1 0 2 4 . 8 8 9 , 7 2 6 2 3 . 4 1 2 7 , 8 3 2 2 6 . 4 5 3 , 4 3 2 2 6 . 3 6 3 , 6 6 8 2 5 . 6
— Car maintenance
p r o d u c t s ........ 1 7 , 0 9 2 2 7 . 6 1 9 , 9 0 6 3 4 . 1 2 1 , 0 8 9 3 0 . 0 9 , 0 6 2 2 5 . 2 1 2 , 1 8 2 3 2 . 9
Lithium carbonate
p r o c e s s i n g s e r v i c e s . . . —— —— —— —— ( 6 0 4 ) ( 1 . 4 )
The gross profit margin of LFP cathode materials decreased in 2022, primarily because
the growth of our cost of sales in the year outpaced that of our revenue due to our purchases
of lithium carbonate in the fourth quarter of 2022 when its price was high. The decrease in
raw material prices in 2023 resulted in gross loss of LFP cathode material products in the
year, as LFP cathode material prices gener ally closely follow the prevailing lithium
carbonate prices listed on the SMM, rendering the initial procurement cost of consumed
raw materials higher than the selling price of our LFP cathode materials when the price of
lithium carbonate is in a decline cycle. We recorded gross profit of LFP cathode materials
of RMB77.2 million for the six months ended Jun e 30, 2024, primarily due to the increased
sales of LFP cathode materials with procurement of lithium carbonate and raw materials
from customers, partially reducing the Group’s exposure to raw material price fluctuations.
The decrease in the gross profit margin of diesel exhaust fluid from 2021 to 2022 was
primarily due to the intense market competition and the increase in raw material prices. The
gross profit margin of diesel exhaust fluid then remained relatively stable in 2023. The
decrease in the gross profit margin of automobile and industrial lubricant in 2022 was
primarily due to an increase in raw material pr ices, especially base oil. The relatively low
gross profit margin of car maintenance products in 2021 was primarily due to the change in
product mix as we promoted and sold more products with relatively low gross profit
margin, which also contributed to further decrease in the gross profit margin of car
maintenance products in 2023. In the first half of 2024, the increase in gross profit margin
SUMMARY
–1 9–


--- page 30 ---
of automobile and industrial lubricant was primarily due to the decrease in raw material
prices, and the increase in gross profit margin of car maintenance products was primarily
due to change in product mix.
We recorded negative gross margin of 1.4% for lithium carbonate processing services
in the first half of 2024, primarily due to lack of economies of scale at the early production
phase of the facility for the relevant batches.
The following table sets forth a break down of our gross profit/(loss) and gross
profit/(loss) margins by sales channels for the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
Gross
profit/
(loss)
Gross
profit/
(loss)
margin
Gross
profit/
(loss)
Gross
profit/
(loss)
margin
Gross
profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
D i s t r i b u t o r s ......... 3 6 5 , 6 3 0 3 4 . 3 2 5 2 , 9 6 5 2 8 . 3 2 3 6 , 6 6 2 2 8 . 1 1 0 6 , 1 2 8 2 2 . 7 1 4 4 , 6 7 3 3 2 . 0
Corporate clients. . . . . . 649,997 23.6 2,156,843 16.5 (344,057) (4.5) (360,380) (11.0) 181,462 6.0
OEM customers . . . . . . 48,231 24.5 10,441 9.9 32,389 16.6 5,799 8.7 9,115 16.9
Online channels . . . . . . 15,900 46.5 13,056 48.9 17,525 52.4 7,020 47.8 8,724 50.2
Total ............. 1,079,758 26.6 2,433,305 17.3 (57,481) (0.7) (241,433) (6.3) 343,974 9.6
During the Track Record Period, the fluctuations in gross profit/(loss) of sales to
distributors and corporate clients were gener ally in line with that in gross profit/(loss) of
automotive specialty chemicals and L FP cathode materials, respectively.
The decrease in gross profit of sales to distributors in 2022 was primarily due to more
intense competition in the automotive speci alty chemical market and the increase in raw
material market prices in the year. The gross profit of sales to distributors then remained
relatively stable in 2023. The gross profit of sales to distributors increased in the first half of
2024, primarily due to change in product mix, as we sold more coolants to distributors that
had relatively higher gross profit margin compared with other types of products sold to
distributors.
The gross profit/(loss) of sales to corporate clients was largely affected by the changes
in raw material prices of LFP cathode mater ials, especially lithium carbonate, as LFP
cathode material prices closely followed the pr evailing lithium carbonate prices listed on the
SMM.
The gross profit of sales to OEM customer s decreased in 2022, primarily due to an
increase in the proportion of sales to OEM cus tomers who provided us with raw materials
for production. The gross profit of sales to OEM customers then increased in 2023
primarily due to a decrease in raw material market prices in the year. The decrease in raw
material prices further contributed to the increase in gross profit margin of sales to OEM
customers in the first half of 2024.
SUMMARY
–2 0–


--- page 31 ---
The gross profit of sales through online cha nnels remained relatively stable during the
Track Record Period and the continuous increase in gross profit margin of online sales from
2021 to 2023 was primarily due to change in product mix, especially the increased online
sales of certain high-priced products. The increase in gross profit margin of online sales in
the first half of 2024 compared with that in the same period in 2023 was primarily due to the
increased online sales of diesel exhaust fluid that had relatively higher gross profit margin
compared with other types of products sold online.
Summary of 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 June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
N o n - c u r r e n ta s s e t s .......... 2 , 5 8 6 , 9 9 0 5 , 4 2 0 , 9 6 8 8 , 8 3 9 , 5 2 9 9 , 0 0 9 , 9 1 8
— Property, plant and equipment 1,606 ,051 3,535,014 6,359,929 6,806,366
C u r r e n ta s s e t s ............. 3 , 5 1 8 , 1 0 0 9 , 2 6 9 , 7 0 4 8 , 3 8 9 , 3 0 5 8 , 2 1 5 , 3 3 2
—I n v e n t o r i e s .............. 1 , 1 0 0 , 5 8 6 3 , 0 0 7 , 2 7 5 1 , 6 1 0 , 2 3 8 1 , 6 4 7 , 7 8 7
— Trade and other receivables . . 1,556 ,172 4,195,192 3,395,047 3,337,159
— Financial assets at fair value
through profit or loss . . . . 431 30,738 59,527 841,126
— Cash and cash equivalents . . . 833,133 1,529,373 2,958,603 2,285,939
Current liabilities . . . . ....... 2 , 2 8 5 , 1 5 8 7 , 1 0 1 , 1 1 1 9 , 6 4 4 , 7 6 7 8 , 7 9 0 , 0 0 2
— Trade and other payables . . . 927,502 2,246,764 2,902,805 2,431,671
— Bank and other borrowings . . 1,075,631 4,039,370 6,405,976 6,071,229
Net current assets/(liabilities) ... 1,232,942 2,168,593 (1,255,462) (574,670)
Total assets less current liabilities 3,8 19,932 7,589,561 7,584,067 8,435,248
Non-current liabilities . ....... 1 , 3 0 4 , 6 6 9 1 , 9 8 0 , 0 9 7 3 , 4 0 3 , 0 0 1 4 , 4 2 2 , 8 7 1
— Bank and other borrowings . . 1,072,973 1,586,476 2,520,719 3,406,324
Net assets ................ 2,515,263 5,609,464 4,181,066 4,012,377
Our net current assets increased from R MB1,232.9 million as of December 31, 2021 to
RMB2,168.6 million as of December 31, 2022, p rimarily due to the increases in both
inventories and trade and other receivables mainly attributable to the expansion of our LFP
cathode material business after the acquisitions of Tianjin Beiterui Nano and Jiangsu
Beiterui Nano in June 2021. Such increase was p artially offset by the increases in trade and
other payables and bank and other borrowings during the corresponding period. We then
recorded net current liabilities of RMB1,25 5.5 million as of December 31, 2023, primarily
due to (i) a decrease in inventories of RMB1,397 .0 million attributable to impairment losses
on inventories in view of the sharp decline of lithium carbonate prices in 2023, (ii) a
SUMMARY
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decrease in trade and other receivables of R MB800.1 million as a result of the decreased
sales in 2023 and (iii) an increase in bank an d other borrowings of RMB2,366.6 million as
we relied on short-term bank borrowings to finance our working capital needs, partially
offset by (iv) an increase in cash and cas h equivalent of RMB1,429.2 million. Our net
current liabilities decreased by 54.2% from RMB1,255.5 million as of December 31, 2023 to
RMB574.7 million as of June 30, 2024, primarily due to (i) a decrease in trade and other
payables of RMB471.1 million, mainly attribut able to the settlement of part of our bills
payable and (ii) a decrease in bank and other b orrowings of RMB334.7 million as we repaid
some of our short-term bank loans.
Our net assets increased from RMB2, 515.3 million as of December 31, 2021 to
RMB5,609.5 million as of December 31, 2022, prim arily attributable to our profit and total
comprehensive income of RMB1,029.9 m illion generated in 2022 and proceeds from
issuance of shares of RMB2,175.5 million as a result of a non-public offering of the
Company in May 2022, partially offset by di vidends paid of RMB129.3 million. Our net
assets then decreased to RMB4,181.1 million as of December 31, 2023, primarily
attributable to our loss and total compre hensive expenses of RMB1,514.2 million
incurred in 2023. Our net assets remained re latively stable at RMB4,181.1 million as of
December 31, 2023 and RMB 4,012.4 million as of June 30, 2024, respectively.
For more details, see ‘‘Financial Information — Working Capital’’ and ‘‘Consolidated
Statements of Changes in Equity’’ in the Accountants’ Report set out in Appendix IA to this
prospectus.
Summary of Consolidated Statements of Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Net cash from/(used in) operating
activities . . . . . . . . . . . . . . . . (823,847) (1,863,457) 1,408,230 (439,687) 71,400
Net cash used in investing acti vities. (828,430) (2,596,083) (2,6 41,508) (3,019,795) (1,073,174)
Net cash from financing activities . . 1,592,020 5,154,730 2,6 49,637 3,720,217 330,193
Net (decrease)/increase in cash and
cash equivalents ............ (60,257) 695,190 1,416,359 260,735 (671,581)
Cash and cash equivalents at
beginning of the year/period . . . . 893,531 833,133 1,529,373 1,529,373 2,958,603
Effect of foreign exchange rate
changes, net . . . . . . . . . . . . . . (141) 1,050 12,871 2,570 (1,083)
Cash and cash equivalents at end of
year/period, representing bank
balances and cash ........... 833,133 1,529,373 2,958, 603 1,792,678 2,285,939
SUMMARY
–2 2–


--- page 33 ---
We recorded net cash used in operating activities in 2021 and 2022, primarily due to
the significant increase in inventories for purchases of lithium carbonate when its prices
were on the rise and the significant increase in trade and other receivables along with the
expansion of our LFP cathode material business. We recorded net cash used in operating
activities in the first half of 2023, primarily due to a significant decrease in average selling
price of LFP cathode materials which close ly follows the prevailing lithium carbonate
market price which experienced sharp decreases during the period.
For detailed analysis, see ‘‘Financial Inform ation — Liquidity and Capital Resources.’’
Key Financial Ratios
The following table sets forth our key financial ratios for the periods/as of the dates
indicated:
For the year ended/As of December 31,
For the
six months
ended/As of
June 30,
2021 2022 2023 2024
Gross profit/(loss) margin (%) . . 26.6 17.3 (0.7) 9.6
Return on equity (1) ( % ) ....... 1 7 . 2 1 8 . 4 ( 3 6 . 2 ) ( 6 . 5 )
Return on assets (2) ( % )....... 7 . 1 7 . 0 ( 8 . 8 ) ( 1 . 5 )
Current ratio (3) ( t i m e s ) ....... 1 . 5 1 . 3 0 . 9 0 . 9
Quick ratio (4) ( t i m e s ) ......... 1 . 1 0 . 9 0 . 7 0 . 7
Gearing ratio (5) ( % ) ......... 9 9 . 2 1 1 2 . 0 2 3 9 . 6 2 6 4 . 0
Notes:
(1) Return on equity is calculated base d on profit/(loss) for the year/peri od divided by the ending balance of
total equity of the year/period and multiplied by 100%.
(2) Return on assets is calculated bas ed on profit/(loss) for the year/per iod divided by the ending balance of
total assets of the year/period and multiplied by 100%.
(3) Current ratio is calculated based on current assets di vided by current liabilitie s as of the date indicated.
(4) Quick ratio is calculated based on current assets less inventories divided by current liabilities as of the date
indicated.
(5) Gearing ratio is calculated based on total debt, including total bank and other borrowings and lease
liabilities, divided by total equity as of the date indicated and multiplied by 100%.
The increase in our gearing ratio during th e Track Record Period was primarily due to
(i) the increase in our bank borrowing from 2021 to 2023 attributable to working capital
needs of our LFP cathode materials business and capital needs for the
construction/expansion of production facilit ies and (ii) the increase in other borrowings
at fair value through profit or loss with reference to valuation carried out by an
independent professional valuer.
SUMMARY
–2 3–


--- page 34 ---
For detailed analysis, see ‘‘Financial In formation — Description of Key Components
of Our Results of Operations — Gross Profit/( Loss) and Gross Profit/(Loss) Margin’’ and
‘‘Financial Information — Key Financial Ratios.’’
Summary of Financial Information of Tianjin Beiterui Nano and Jiangsu Beiterui Nano
The following table sets forth the pre-acquisition financial information of Tianjin
Beiterui Nano and Jiangsu Beiterui Nano, which is derived from the pre-acquisition
financial information of Tianjin Beiterui Nano and Jiangsu Beiterui Nano set out in
Appendix IB and IC to this prospectus.
Summary of statements of profit or loss and other comprehensive income
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
For the
five months
ended
May 31,
2021
Period from
January 28,
2021 to
May 31,
2021
RMB’000 RMB’000
R e v e n u e ...................................... 2 2 2 , 5 0 7 2 6 8 , 8 4 8
C o s to fs a l e s .................................. ( 1 6 5 , 8 2 4 ) ( 2 3 6 , 5 4 1 )
G r o s sp r o f i t ................................... 5 6 , 6 8 3 3 2 , 3 0 7
O t h e ri n c o m e ,g a i n sa n dl o s s e s ...................... 1 , 1 6 4 4 9 5
I m p a i r m e n tl o s s e so nf i n a n c i a la s s e t s ................. ( 2 , 6 1 2 ) ( 2 , 9 0 2 )
Selling and distribution expenses . ................... ( 5 6 ) ( 2 0 )
A d m i n i s t r a t i v ee x p e n s e s .......................... ( 2 , 3 9 3 ) ( 2 , 6 9 6 )
R e s e a r c ha n dd e v e l o p m e n te x p e n s e s.................. ( 1 6 , 6 0 4 ) ( 4 , 9 0 7 )
F i n a n c ec o s t s.................................. ( 6 1 6 ) ( 1 , 2 6 5 )
P r o f i tb e f o r et a x a t i o n............................ 3 5 , 5 6 6 2 1 , 0 1 2
I n c o m et a xc r e d i t / ( e x p e n s e s ) ....................... ( 2 , 4 7 8 ) ( 4 , 2 9 0 )
Profit and total comprehensive income
for the period ................................. 33,088 16,722
Summary of statements of financial position
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
As of
May 31,
2021
As of
May 31,
2021
RMB’000 RMB’000
N o n - c u r r e n ta s s e t s .............................. 1 0 0 , 6 7 7 3 4 9 , 3 9 3
C u r r e n ta s s e t s ................................. 5 0 3 , 7 6 2 3 6 9 , 1 1 9
Current liabilities . . . . ........................... 3 0 9 , 7 2 4 3 8 5 , 3 4 9
Net current assets/(liabilities) ....................... 194,038 (16,230)
Total assets less current liabilities . ................... 2 9 4 , 7 1 5 3 3 3 , 1 6 3
Non-current liabilities . ........................... 7 2 4 1 6 , 4 4 1
Net assets .................................... 293,991 316,722
SUMMARY
–2 4–


--- page 35 ---
RISK FACTORS
T h e r ea r ec e r t a i nr i s k sa n dc o n s i d e r a t i o n sr e l a t i n gt oa ni n v e s t m e n ti no u rHS h a r e s .
These risks can be summarized into three categories: (i) risks relating to our industry and
business; (ii) risks relating to doing business in the countries and regions where we operate;
and (iii) risks relating to the Global Offering . Additional risks and uncertainties not
presently known to us, or not expressed or implied below, or that we deem immaterial,
could also harm our business, financial condition and operating results. We believe that the
following are some of the major risks that we face:
. Price fluctuation of our raw materials could adversely affect our business,
financial condition and results of operations;
. We depend on a stable and adequate supply of raw materials. Inadequate or
interrupted supply for our raw materials could adversely affect our business,
financial condition and results of operations;
. We are exposed to risk relating to our inventory, and our inventory of principal
raw materials, including lithium carbonate and iron phosphate, is exposed to risk
arising from price fluctuation;
. We rely on the market demand for our products from their downstream end
markets. Any slowdown or decrease in downstream demand, or technological
developments resulting in substitute pro ducts, may have a material impact on us;
. We have a limited operating history in the LFP cathode material industry, which
may make it difficult to evaluate our current business and predict our future
performance;
. The majority of our revenue was genera ted from a relatively small number of
customers during the Track Record Period;
. We may be required to purchase raw materials under long-term agreements
containing purchase commitments, which may exceed our production needs;
. We had negative operating cash flow, gross loss, net loss and deteriorating net
current assets during the Track Record Period, which may expose us to liquidity
risks and affect our ability to achieve or su bsequently maintain profitability in the
future;
. Our international strategy and ability to c onduct business in the international
markets is subject to uncertainties and risks; and
. We will release our 2024 third quarter consolidated financial results on the
Shanghai Stock Exchange no later than October 31, 2024, which is shortly after
the Listing. If such quarterly consolidated financial results fail to meet investors’
expectation, the trading price of our H Share may be adversely affected.
SUMMARY
–2 5–


--- page 36 ---
OUR CONTROLLING SHAREHOLDERS
Immediately following the completion of the Global Offering (assuming the
Over-allotment Option is not exercised and the options granted under the 2023 Share
Option Scheme are not exercised), Mr. Shi, Ms. Zhu (Mr. Shi’s wife) and Nanjing Bailey
will directly own approximately 31.98%, 3.55% and 0.29% respectively of the total issued
share capital of our Company, representing approximately 32.08%, 3.56% and 0.29%,
respectively, of the voting rights of the Com pany (which excluded the 2,082,400 A shares
held by the Company as treasury shares). Lopal International was the general partner of
Nanjing Bailey and was owned as to 90% by Mr. Shi and as to 10% by Ms. Zhu as of the
Latest Practicable Date. Accordingly, Mr. Shi, Ms. Zhu, Lopal International and Nanjing
Bailey will be a group of Controlling Sharehold ers controlling in aggregate approximately
35.81% of the total issued share capital of our Company, representing approximately
35.93% of the voting rights of our Company (which excluded the 2,082,400 A shares held by
the Company as treasury shares), upon Listing.
F U T U R EP L A N SA N DU S EO FP R O C E E D S
We estimate that we will receive net proceeds from the Global Offering of
approximately HK$520.0 million, after deduc ting underwriting fees and commissions and
other estimated expenses paid and payable by us in relation to the Global Offering,
assuming an Offer Price of HK$5.75 per H Share, being the mid-point of the Offer Price
range from HK$4.50 to HK$7.00 per H Share, and that the Over-allotment Option is not
exercised. We currently intend to use thes e net proceeds for the purposes and in the
amounts set forth below:
. approximately 40.0%, or HK$208.0 million, is expected to be used to pay partial
expenses for the phase II of the Indonesia Plant;
. approximately 40.0%, or HK$208.0 million, is expected to be used to pay partial
expenses for new LMFP production lines at our Xiangyang Plant in Hubei
Province;
. approximately 10.0%, or HK$52.0 million, is expected to be used to repay certain
interest-bearing bank borrowings; and
. approximately 10.0%, or HK$52.0 million, is expected to be used for our working
capital and other general corporate purposes.
For details, see ‘‘Future Plans and Use of Proceeds.’’
SUMMARY
–2 6–


--- page 37 ---
GLOBAL OFFERING STATISTICS
B a s e do nt h e
Offer Price of
HK$4.50 per
Share
B a s e do na nO f f e r
Price of
HK$7.00 per
Share
Market capitalization of our H Shares (1)(2) .......... H K $ 4 5 0 . 0
million
HK$700.0
million
Market capitalization of our Company upon completion of
the Global Offering (1)(3) ......................
HK$6,278.5
million
HK$6,528.5
million
Unaudited pro forma adjusted consolidated net tangible
asset value per Share (4) ......................
HK$5.14 HK$5.51
Notes:
(1) All statistics in the table are based on the assumpt ion that the Over-allotment Option is not exercised.
(2) The calculation of market capitalization is based on the assumption that 100,000,000 H Shares expected to
be in issue immediately after completion of the Global Offering.
(3) The calculation of market capitalization is bas ed on the assumption that 100,000,000 H Shares will be in
issue immediately after completion of the Global Off ering and 562,996,503 A Sha res (excluding treasury
shares) will be in issue immediately after completion of the Global Offering with an average closing price
of RMB9.42 during the five trading days of A Shares immediately preceding and including October 14,
2024 (assuming the Over-allotment Option is not exercised and the options granted under the 2023 Share
Option Scheme are not exercised).
(4) The unaudited pro forma adjusted consolidated net tan gible assets per Share is calculated after making the
a d j u s t m e n t sr e f e r r e dt oi nt h es e c t i o nh e a d ed ‘‘Appendix II — Unaudited Pro Forma Financial
Information’’ in this prospectus.
DIVIDEND POLICY
On May 10, 2021, we paid a final dividend of RMB61.0 million in respect of the year
ended December 31, 2020. On September 30, 2022, we paid an interim dividend of
RMB105.1 million in respect of the six months ended June 30, 2022. We did not declare any
dividend for the year ended December 31, 2023 and the six months ended June 30, 2024.
Any declaration and payment, as well as th e amount of dividends, will be subject to
our Articles of Association and the relevan t PRC laws. We currently do not have any fixed
dividend pay-out ratio. No dividend shall be declared or payable except out of our profits
and reserves lawfully available for distributi on. According to relevant PRC laws, any future
net profit that we make will have to be first applied to make up for our historically
accumulated losses, after which we will be obl iged to allocate 10% of our net profit to our
statutory common reserve fund until such fund has reached more than 50% of our
registered capital. We will, therefore, only be able to declare dividends after: (i) all our
historically accumulated losses have been made up for; and (ii) we have allocated sufficient
net profit to our statutory common reserve fu nd as described above. Our ability to declare
and pay dividends will also depend on the availability of dividends received from group
SUMMARY
–2 7–


--- page 38 ---
companies in the PRC and other jurisdictions . Distributions from our group companies
may be restricted if they incur losses or in acco rdance with any restrictive covenants in bank
borrowing or financing agreements that we or our subsidiaries may enter into in the future.
RECENT DEVELOPMENTS AND ADVERSE MATERIAL CHANGE
Set forth below are certain material developments on our business operations after
June 30, 2024, which is the end of the Track Record Period.
We experienced steady growth in sales volume of our LFP cathode material products.
The sales volume of our LFP cathode materia ls for July, August and September 2024 was
approximately, 15,600 tons, 18,300 tons and 18,800 tons, exceeding those of the same
months in 2023. The market price for LFP cathode materials for July, August and
September 2024 experienced slight decrease, amounting to approximately RMB33.8
thousand per ton, RMB31.8 thousand per ton and RMB30.1 thousand per ton,
respectively. The movement in the average selling price of our LFP cathode material
products during the same period was in line with the industry average. As a result of the
growth in sales volume and despite fluctuations in lithium carbonate and LFP cathode
material prices during the nine months ended September 30, 2024, the monthly average
revenue of our LFP cathode materials for the period from July to September 2024 was
higher than that of the first half of 2024.
We experienced slight growth in sales volume and revenue of our automotive specialty
chemical products.
The sales volume of our diesel exhaust fluid for July, August and September 2024 was
approximately 19,000 tons, 22 ,000 tons and 30,000 tons, respe ctively. The average selling
price of our diesel exhaust fluid slightly decreased during this period averaging at
approximately RMB1,900 per ton. Revenue attributable to diesel exhaust fluid for the nine
months ended September 30, 2024 was lower th an that of the same period of 2023 primarily
due to a decrease in average selling price of dies el exhaust fluid mainly attributable to the
decrease in the market price of urea, the major raw material of diesel exhaust fluid, in the
period.
The sales volume of our automobile and industrial lubricant for July, August and
September 2024 was approximately 2,300 tons, 2,900 tons and 3,500 tons, respectively. The
average selling price of our automobile and i ndustrial lubricant slightly experienced
fluctuations during this period averaging at approximately RMB19,000 per ton. Revenue
attributable to automobile and industrial lubricant for the nine months ended September
30, 2024 exceeded that of the same period of 2023.
The sales volume of our coolants for July, August and September 2024 was
approximately 7,100 tons, 7,600 tons and 7,9 00 tons, respectively. The average selling
price of our coolants experienced fluctuations during this period averaging at
approximately RMB5,500 per ton. Revenue attributable to coolants for the nine months
ended September 30, 2024 exceeded that of the same period of 2023.
SUMMARY
–2 8–


--- page 39 ---
The sales volume of our car maintenance products for July, August and September
2024 was approximately 1,300 tons, 1,800 tons and 1,800 tons, respectively. The average
selling price of our car maintenance products experienced fluctuations during this period
averaging at approximately RMB2,800 per ton. Revenue attributable to car maintenance
products for the nine months ended September 30, 2024 exceeded that of the same period of
2023.
As a result of our performances during the period from July to September 2024 as
described above, our overall gross margin during this period remained positive.
Despite the above, our results are affected by many various factors, including among
others, market demand for our p roducts, volatility of price of raw materials (i.e. lithium
carbonate and iron phosphate) and LFP cathod e materials, our ability to raise the average
selling price of our products, and the effectiv eness of our cost control measures. Given our
loss making position in the first half of 2024, we expect there is a possibility that we may not
be able to turn our losses into profits and we m ay remain loss-making for the year ending
December 31, 2024.
Since late September 2024, our lithium-mica concentrate provider has suspended its
supply to us considering lithium carbonate market conditions. We have utilized this
opportunity to initiate a comprehensive maintenance overhaul at Lopal Times (i.e. our
Yichun facility for lithium carbonate processing) since October 2024. To the best knowledge
of our Directors, such activities are tempora ry and are currently expected to last for one
month. Upon completion of the overhaul, we plan to engage in discussions with our lithium
mica concentrate provider regarding subsequent production arrangements, including the
resumption of our lithium carbonate processing operations. In the event that the
resumption extends beyond our current expectations, we will engage further discussions
covering options for procuring lithium-mica concentrate, either from this current provider
or from external sources, as well as any other po tential alternative cooperation models. In
the first half of 2024, we processed approxima tely 220,000 tons of lithium-mica concentrate
from the lithium-mica concentrate provider, representing approximately RMB162.2 million
in value with which our facility produced 6,495.0 tons of lithium carbonate. The majority of
this output of approximately 5,753.3 tons was utilized in-house for the production of
approximately 23,000 tons of LFP cathode mate rials (representing approximately 30.9% of
the sales volume of LFP cathode materials in th e first half of 2024), which we subsequently
supplied to the lithium-mica concentrate pro vider generating approximately RMB665.5
million in revenue (representing approximate ly 26.9% of revenue from sales of LFP cathode
materials in the first half of 2024). The remaining 741.7 tons of lithium carbonate were
processed for a company designated by the lithium-mica concentrate provider generating
approximately RMB42.7 million in revenue for lithium carbonate processing for the first
half of 2024. Our lithium-mica concentrate provider has contractual obligations to fulfill
our requirements for lithium-mica concentrate or to otherwise negotiate alternative
cooperation methods with us, as outlined under several agreements including the Lopal
Times Transfer Agreement. These agreements also provide that if the supplier cannot meet
our full production needs and does not allow us to source from third parties, or if an
alternative cooperation model cannot be agreed upon, the supplier shall compensate us for
economic losses due to idle capacity. As such, our Directors believe that such temporary
SUMMARY
–2 9–


--- page 40 ---
suspension will not have a material adverse impact on the long-term business operations of
Lopal Times. Furthermore, considering that we have already obtained comparable
indicative orders for October 2024 from the same supplier as our customers for our LFP
cathode materials, relative to actual orders obtained in August and September 2024, and
that we have been primarily and continuously obtaining sufficient lithium carbonate from
external sources throughout the Track Record Period and up to the Latest Practicable Date
(and expect to continue in doing so to support our LFP cathode material production needs,
whether or not we produce any lithium carbonate in-house), and that revenue attributable
to our lithium carbonate processing services was insignificant to our overall operations
during the Track Record Period, our Director s believe that the temporary suspension at
Lopal Times will not have a material adverse impact on the business operations of our LFP
cathode material business. For further details of our lithium carbonate processing business,
see ‘‘Business — Our Businesses — Lith ium Carbonate Processing Service’’.
In September 2024, our Board has resolved that Changzhou Liyuan, our subsidiary,
will inject capital in the aggregate sum of RMB500 million into two of its wholly-owned
subsidiaries, namely Hubei Liyuan and Sha ndong Liyuan. As of the Latest Practicable
Date, the injection to Hubei Liyuan has completed and injection to Shandong Liyuan had
not been completed.
In line with our strategy to expand our production capacity overseas, we are in talks
with investors and business partners in identifying and exploring suitable potential
investments and business cooperations in Indonesia. For our production expansion plan in
Indonesia, discussions and negotiations on introducing LGES as an investor to PT LBM,
our subsidiary in Indonesia further to the memorandum of understanding we entered into
with LGES in September 2023 regarding the non-binding joint cooperation of producing
LFP cathode materials in Indonesia are still on-going as of the Latest Practicable Date. In
addition, in October 2024, our Company, Changzhou Liyuan and LBM New Energy
entered into a non-legally binding term sheet with the SG Investors, namely Indonesia
Investment Authority and BRV Lotus International Limited in relation to the potential
investment by the SG Investors in LBM New Energy in the aggregate sum of up to US$200
million by way of subscription of shares in LBM New Energy. For details, please see
‘‘History and Development — Development after the Track Record Period.’’
We will release our 2024 third quarter consolidated financial results on the Shanghai
Stock Exchange shortly after the Listing, but in no event later than October 31, 2024, in
accordance with applicable disclosure requ irements for A-share listed companies. Our
historical quarterly consolidated financial results may not be indicative of any of our future
quarterly financial results. If our 2024 third quarter consolidated financial results fail to
meet investors’ expectation, the trading price of our H Shares may be adversely affected.
See ‘‘Risk Factors — Risks Relating to the G lobal Offering — We will release our 2024
third quarter consolidated financial results on the Shanghai Stock Exchange no later than
October 31, 2024, which is shortly after the Listing. If such quarterly consolidated financial
results fail to meet investors’ expectation, the trading price of our H Share may be adversely
affected.’’
SUMMARY
–3 0–


--- page 41 ---
Our Directors have confirmed that, up to th e date of this prospectus and other than as
set forth above, there has been no material adverse change in our financial, operational or
trading position, indebtedness, contingent li abilities or prospects since June 30, 2024, being
the end date of our latest audited financial st atements, and there has been no event since
June 30, 2024 that would materially affect the information shown in the Accountants’
Report set out in Appendix IA to this prospectus.
LISTING EXPENSES
Listing expenses to be borne by us are estimated to be approximately HK$55.0 million
or 9.6% of the gross proceeds of the Global Offering (including underwriting commission of
approximately HK$15.8 million, and non-underw riting related expenses of approximately
HK$39.2 million which consist of fees and expenses of legal advisors and the Reporting
Accountants of approximately HK$21.0 million and other fees and expenses of
approximately HK$18.2 million, assuming an Offer Price of HK$5.75 per H Share, being
the mid-point of the indicative Offer Price ra nge), assuming the Over-allotment Option is
not exercised. We incurred listing ex penses of RMB23.6 m illion (equivalent to
approximately HK$25.9 million) by June 30, 2024 and had prepaid listing expenses of
RMB2.9 million (equivalent to approximately HK$3.1 million) as of June 30, 2024
recognized in the consolidated statements of our Group. Subsequent to the Track Record
Period, we expect to further incur listing expenses of RMB23.6 million (equivalent to
approximately HK$26.0 million) prior to and upon completion of the Global Offering, of
which (i) RMB7.9 million (equivalent to app roximately HK$8.7 million) is expected to be
recognized as expenses in our consolidated statements of profit or loss and other
comprehensive income, and (ii) RMB15.7 million (equivalent to approximately HK$17.3
million) is expected to be accounted for as a de duction from equity upon Listing under the
relevant accounting standard.
APPLICATION FOR LISTING ON THE HONG KONG STOCK EXCHANGE
We have applied to the Hong Kong Stock Exchange for the Listing pursuant to the
market capitalization/revenue test u nder Rule 8.05(3) of the Listing Rules.
We satisfy the market capitalization/revenue test under Rule 8.05(3) of the Listing
Rules with reference to (i) our revenue for the year ended December 31, 2023, being
approximately RMB8,729.5 million (equivale nt to approximately HK$9,513.4 million),
which is over HK$500 million; and (ii) our expe cted market capitalization at the time of
Listing, which, based on the low-end of the indicative Offer Price range of HK$4.50 per H
Share, exceeds HK$4 billion.
SUMMARY
–3 1–


--- page 42 ---
In this prospectus, unless the context otherwise requires, the following terms shall have
the meanings set out below.
‘‘A Share(s)’’ ordinary share(s) issued by our Company, with a nominal value
of RMB1.00 each, which is/are subscribed for or credited as paid
in Renminbi and is/are listed for trading on the Shanghai Stock
Exchange
‘‘A Shareholder(s)’’ holder(s) of the A Share(s)
‘‘affiliate’’ any other person, directly or indirectly, controlling or controlled
by or under direct or indirect common control with such
specified person
‘‘AFRC’’ Accounting and Financial Reporting Council ( 會計和財務匯報
局)
‘‘Articles’’ or ‘‘Articles
of Association’’
the Articles of Association of our Company, as amended, which
shall become effective on the Listing Date, a summary of which is
set out in Appendix III
‘‘associate(s)’’ has the meaning ascribed thereto under the Hong Kong Listing
Rules
‘‘Board’’ or ‘‘Board of
Directors’’
the board of directors of our Company
‘‘BTR Group’’ BTR New Material Group Co., Ltd. ( 貝特瑞新材料集團股份有限
公司), a joint stock company established in the PRC on August 7,
2000, the shares of which are listed on the Beijing Stock
Exchange (stock code: 835185), and was an Independent Third
Party as of the Latest Practicable Date
‘‘business day’’ any day (other than a Saturday, Sunday or public holiday) on
which banks in Hong Kong are generally open for business
‘‘CAGR’’ compound annual growth rate
‘‘Capital Market
Intermediary(ies)’’
the capital market intermediari es participating in the Global
Offering as listed in the section headed ‘‘Directors, Supervisors
and Parties Involved in the Global Offering’’ in this prospectus
and has the meaning ascribed thereto under the Listing Rules
DEFINITIONS
–3 2–


--- page 43 ---
‘‘CATL’’ Contemporary Amperex Technology Co., Limited ( 寧德時代新能
源科技股份有限公司), a joint stock company established in the
PRC on December 16, 2011, the shares of which are listed on the
Shenzhen Stock Exchange (stock code: 300750), which was an
indirect shareholder controlling (i) 30% equity interest in Lopal
Times, through Yichun Times, and (ii) 5.91% equity interest in
Changzhou Liyuan through its wholly-owned subsidiary Ningbo
Meishan Baoshuigang District Wending Investment Co., Ltd. ( 寧
波梅山保稅港區問鼎投資有限公司) as of the Latest Practicable
Date
‘‘CATL CP Group’’ CATL, its subsidiary(ies) and 30%-controlled company(ies)
(excluding Lopal Times)
‘‘CATL Group’’ CATL and its subsidiaries
‘‘CCASS’’ the Central Clearing and Settlement System established and
operated by HKSCC
‘‘CG Code’’ the Corporate Governance Code as set out in Appendix C1 to the
Hong Kong Listing Rules
‘‘Changzhou Liyuan’’ Changzhou Liyuan New Energy Technology Co., Ltd. ( 常州鋰源
新能源科技有限公司), a limited liability company established in
the PRC on May 12, 2021 and a direct non-wholly owned
subsidiary of our Company which is owned as to approximately
64.03% by our Company as of the Latest Practicable Date
‘‘China’’ or ‘‘PRC’’ the People’s Republic of China
‘‘Companies
Ordinance’’
the Companies Ordinance (Chapter 622 of the laws of Hong
Kong), as amended or supplemented or otherwise modified from
time to time
‘‘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
or supplemented or otherwis e modified from time to time
‘‘Company’’, ‘‘our
Company’’
Jiangsu Lopal Tech. Co., Ltd. ( 江蘇龍蟠科技股份有限公司), a
joint stock company established in the PRC on March 11, 2003
converted from our predecessor Jiangsu Lopal Petrochemical
Co., Ltd. ( 江蘇龍蟠石化有限公司) into a joint stock company
with limited liability under the PRC Company Law on January
23, 2014, the A Shares of which are listed on the Shanghai Stock
Exchange with the stock code of 603906
DEFINITIONS
–3 3–


--- page 44 ---
‘‘Controlling
Shareholders’’
has the meaning ascribed thereto in the Hong Kong Listing
Rules, and unless the context otherwise requires, refers to Mr.
Shi, Ms. Zhu, Lopal International and Nanjing Bailey
‘‘CSRC’’ the China Securiti es Regulatory Commission ( 中國證券監督管理
委員會)
‘‘Director(s)’’ the director(s) of our Company
‘‘EIT Law’’ the PRC Enterprise Income Tax Law ( 《中華人民共和國企業所得
稅法》)
‘‘ESG’’ environmental, social and governance
‘‘Extreme Conditions’’ extreme conditions caused by 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 as announced by the government of Hong
Kong
‘‘FINI’’ or ‘‘Fast
Interface for New
Issuance’’
an online platform operated by HKSCC that is mandatory for
admission to trading and, where applicable, the collection and
processing of specified information on subscription in and
settlement for all new listings
‘‘Frost & Sullivan’’ Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., the
independent industry consultant commissioned by our
Company to prepare the Frost & Sullivan Report
‘‘Frost & Sullivan
Report’’
the independent research report commissioned by our Company
and prepared by Frost & Sullivan
‘‘General Rules of
HKSCC’’
the General Rules of HKSCC as may be amended or modified
from time to time and where the con text so permits, shall include
the HKSCC Operational Procedures
‘‘Global Offering’’ the Hong Kong Public Offering and the International Offering
‘‘Group’’, ‘‘our Group’’,
‘‘we’’, ‘‘our’’ or ‘‘us’’
our Company and its subsidiaries or, where the context so
requires, in respect of the period before our Company became the
holding company of its present subsidiaries at the relevant time,
the business acquired or operated by such subsidiaries or their
predecessors (as the case may be)
DEFINITIONS
–3 4–


--- page 45 ---
‘‘H Share(s)’’ overseas listed foreign Share(s) in the share capital of our
Company with a nominal value of RMB1.00 each, which is/are to
be traded in HK dollars and for which an application has been
made for the granting of listing and permission to deal in on the
Hong Kong Stock Exchange
‘‘H Share Registrar’’ Computershare Hong Kong Investor Services Limited
‘‘H Shareholder(s)’’ holders of the H Shares
‘‘HK$’’, ‘‘Hong Kong
dollars’’, ‘‘HK
dollars’’ or ‘‘cents’’
Hong Kong dollars and cents respect ively, the lawful currency of
Hong Kong
‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited
‘‘HKSCC EIPO ’’ the application for the Hong Kong Offer Shares to be issued in
the name of HKSCC Nominees and deposited directly into
C C A S St ob ec r e d i t e dt oy o u rd e s i g n a t e dH K S C CP a r t i c i p a n t ’ s
stock account through causing HKSCC Nominees to apply on
your behalf, including 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
‘‘HKSCC Nominees’’ HKSCC Nominees Lim ited, a wholly-owned subsidiary of
HKSCC
‘‘HKSCC Operational
Procedures’’
the operational procedures of HKSCC, containing the practices,
procedures and administrative o r other requirements relating to
HKSCC’s services and the operations and functions of CCASS,
FINI or any other platform, facility or system established,
operated and/or otherwise provided by or through HKSCC, as
from time to time in force
‘‘HKSCC Participant’’ 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 People’s
Republic of China
‘‘Hong Kong Listing
Rules’’ or ‘‘Listing
Rules’’
the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited, as amended or supplemented
from time to time
DEFINITIONS
–3 5–


--- page 46 ---
‘‘Hong Kong Offer
Shares’’
the 10,000,000 H Shares being initially offered by our Company
for subscription pursuant to the Hong Kong Public Offering
(subject to adjustments as described in ‘‘Structure of the Global
Offering’’)
‘‘Hong Kong Public
Offering’’
the offer of the Hong Kong Offer Shares for subscription by the
public in Hong Kong (subject to adjustments as described in
‘‘Structure of the Global Offering’’) at the Offer Price on the
terms and conditions described in this prospectus
‘‘Hong Kong Stock
Exchange’’ or ‘‘Stock
Exchange’’
The Stock Exchange of Hong Kong Limited
‘‘Hong Kong
Underwriters’’
the underwriters of the Hong Kong Public Offering listed in
‘‘Underwriting — Hong Kong Underwriters’’
‘‘Hong Kong
Underwriting
Agreement’’
the underwriting agreement dated October 21, 2024, relating to
the Hong Kong Public Offering and entered into by our
Company, our Controlling Shareholders (as warranting
shareholders), Mr. Shi (as warranting director), the Joint
Sponsors, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Capital Market Intermediaries and the Hong
Kong Underwriters
‘‘Hubei Green Melon’’ Hubei Green Melon Biotechnology Co., Ltd. ( 湖北綠瓜生物科技
有限公司), a limited liability company established in the PRC on
April 16, 2021 and a direct wholly-owned subsidiary of our
Company
‘‘Hubei Liyuan’’ Hubei Liyuan New Energy Technology Co., Ltd. ( 湖北鋰源新能
源科技有限公司), a limited liability company established in the
PRC on December 2, 2021 and an indirect non-wholly owned
subsidiary of our Company which is wholly-owned by
Changzhou Liyuan
‘‘IASB’’ International Accounting Standards Board
‘‘IFRS(s)’’ International Accounting Standards, International Financial
Reporting Standards, amendments and the related
interpretations issued by the IASB
‘‘Independent Third
Party(ies)’’
person(s) or company(ies) and their respective ultimate beneficial
owner(s), who/which, to the best of our Directors’ knowledge,
information and belief, having made all reasonable enquiries, is/
are not our connected persons or associates of our connected
persons as defined under the Hong Kong Listing Rules
DEFINITIONS
–3 6–


--- page 47 ---
‘‘Indonesia Legal
Advisor’’
Hanafiah Ponggawa & Partners, legal advisor to our Company
as to Indonesia law
‘‘International Offer
Shares’’
the 90,000,000 H Shares being initially offered by our Company
for subscription pursuant to the International Offering together
with, where relevant, any additional H Shares which may be
issued by our Company pursuant to the exercise of the
Over-allotment Option (subject to adjustments as described in
‘‘Structure of the Global Offering’’)
‘‘International
Offering’’
the conditional placing 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
on and subject to the terms and conditions of the International
Underwriting Agreement, as further described in ‘‘Structure of
the Global Offering — The International Offering’’
‘‘International
Underwriters’’
the underwriters that are expected to enter into the International
Underwriting Agreement to underwrite the International
Offering
‘‘International
Underwriting
Agreement’’
the underwriting agreement relating to the International
Offering, which is expected to be entered into by Mr. Shi (as
warranting director), our Con trolling Shareholders (as
warranting shareholders), the Joint Sponsors, the Overall
Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries, the International Underwriters and our
Company on or about Monday, October 28, 2024 as further
described in ‘‘Underwriting — International Offering —
International Underwriting Agreement’’
‘‘Jiangsu Beiterui
Nano’’
Jiangsu Beiterui Nano Technology Co., Ltd. ( 江蘇貝特瑞納米科
技有限公司), a limited liability company established in the PRC
on January 28, 2021 and an indirect non-wholly owned
subsidiary of our Company which is wholly-owned by
Changzhou Liyuan
‘‘Jiangsu Boyuan’’ Jiangsu Boyuan Catalytic Technology Co., Ltd. ( 江蘇鉑源催化科
技有限公司) (formerly known as Jiangsu Lopal Hydrogen Energy
Technology Co., Ltd. ( 江蘇龍蟠氫能源科技有限公司)a n d
Jiangsu Botan Hydrogen Energy Technology Co., Ltd. ( 江蘇鉑
坦氫能源科技有限公司)), a limited liability company established
in the PRC on May 26, 2020 and a direct wholly-owned
subsidiary of our Company
DEFINITIONS
–3 7–


--- page 48 ---
‘‘Jiangsu Green Melon’’ Jiangsu Green Melon Biotechnology Co., Ltd. ( 江蘇綠瓜生物科
技有限公司), a limited liability company established in the PRC
on July 22, 2020 and an indirect w holly-owned subsidiary of our
Company
‘‘Jiangsu Kelas’’ Jiangsu Kelas Envir onmental Protection Technology Co., Ltd.
(江蘇可蘭素環保科技有限公司), a limited liability company
established in the PRC on August 20, 2009 and a direct
wholly-owned subsidiary of our Company
‘‘Jiangsu Ruilifeng’’ Jiangsu Ruilifen g New Energy Technology Co., Ltd. ( 江蘇瑞利豐
新能源科技有限公司), a limited liability company established in
the PRC on September 17, 2009 and a direct non-wholly owned
subsidiary of our Company which is owned as to 70% by our
Company
‘‘Joint Bookrunners’’ Guotai Junan Securities (Hong Kong) Limited, Halcyon
Securities Limited, ICBC International Securities Limited,
BOCI Asia Limited, CCB International Capital Limited, ABCI
Capital Limited, CMB Internatio nal Capital Limited, TradeGo
Markets Limited and Livermore Holdings Limited
‘‘Joint Global
Coordinators’’
Guotai Junan Securities (Hong Kong) Limited, Halcyon
Securities Limited and ICBC International Securities Limited
‘‘Joint Lead Managers’’ Guotai Junan Securities (Hong Kong) Limited, Halcyon
Securities Limited, ICBC International Securities Limited,
BOCI Asia Limited, CCB International Capital Limited, ABCI
Securities Company Limited, CMB International Capital
Limited, TradeGo Markets Limited and Livermore Holdings
Limited
‘‘Joint Sponsors’’ Guotai Junan Capital Limited and Halcyon Capital Limited
‘‘Latest Practicable
Date’’
October 14, 2024, being the latest practicable date prior to the
printing of this prospectus for the purpose of ascertaining certain
information contained in this prospectus
‘‘LGES’’ LG Energy Solution, Ltd., a company established in 2020 and
listed on the Korea Exchange and mainly engaged in producing
advanced automotive battery, m obility battery, and ESS battery
‘‘Listing’’ the 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
DEFINITIONS
–3 8–


--- page 49 ---
‘‘Listing Date’’ the date, expected to be on or about Wednesday, October 30,
2024, on which the H Shares are listed on the Hong Kong Stock
Exchange and from which dealings in the Shares are permitted to
commence on the Hong Kong Stock Exchange
‘‘LBM New Energy’’ LBM New Energy (AP) Pte. Ltd. (formerly known as Lopal Tech
Singapore Pte. Ltd.), a private company limited by shares
incorporated in Singapore on September 28, 2018, an indirect
non-wholly owned subsidiary of our Company which is
wholly-owned by Changzhou Liyuan
‘‘Lopal International’’ Lopal International Holdings Co., Ltd. ( 龍蟠國際控股有限公司),
previously known as Nanjing Mei duo Investment Management
Co., Ltd. ( 南京美多投資管理有限公司), a limited company
established in the PRC on October 17, 2013, the general
partner of Nanjing Bailey and was owned as to 90% by Mr.
Shi and as to 10% by Ms. Zhu as of the Latest Practicable Date.
Lopal International is one of our Controlling Shareholders
‘‘Lopal Lubrication’’ Lopal Lubrication New Material (Tianjin) Co., Ltd. ( 龍蟠潤滑新
材料（天津）有限公司), a limited liability company established in
the PRC on March 27, 2013 and a direct wholly-owned
subsidiary of our Company
‘‘Lopal New Material’’ Jiangsu Lopal New Material Technology Co., Ltd. ( 江蘇龍蟠新
材料科技有限公司), a limited liability com pany established in the
PRC on January 4, 2023 and a dire ct wholly-owned subsidiary of
our Company
‘‘Lopal Times’’ Yichun Lopal Times Lithium Industry Technology Co., Ltd. ( 宜
春龍蟠時代鋰業科技有限公司) (formerly known as Yifeng Times
New Energy Materials Co., Ltd. ( 宜豐時代新能源材料有限公司)
and Yifeng Times Yongxing New Energy Materials Co., Ltd. ( 宜
豐時代永興新能源材料有限公司)), a limited liability company
established in the PRC on March 2, 2022 and a direct non-wholly
owned subsidiary of our Company which is owned as to 70% by
our Company and 30% by Yichun Times as of the Latest
Practicable Date
‘‘Main Board’’ the stock market (excluding the option market) operated by the
Hong Kong Stock Exchange which is independent from and
operated in parallel with GEM of the Hong Kong Stock
Exchange
‘‘mainland China’’ the People’s Republic of China excluding Hong Kong, the
Macau Special Administrative Region and Taiwan region
DEFINITIONS
–3 9–


--- page 50 ---
‘‘Mr. Shi’’ Mr. Shi Junfeng ( 石俊峰), the chairman of our Board, an
executive Director, the general manager of our Company, one of
our Controlling Shareholders and the spouse of Ms. Zhu
‘‘Ms. Zhu’’ Ms. Zhu Xianglan ( 朱香蘭), a non-executive Director and one of
our Controlling Shareholders and the spouse of Mr. Shi
‘‘NAFR’’ National Administration of Financial Regulation of the PRC
(中華人民共和國國家金融監督管理總局) (which was established
on the basis of the China Banking and Insurance Regulatory
Commission ( 中國銀行保險監督管理委員會))
‘‘Nanjing Bailey’’ Nanjing Bailey Venture Capital Center (Limited Partnership)
(南京貝利創業投資中心（有限合夥）), a limited partnership
e s t a b l i s h e di nt h eP R Co nO c t o b e r2 5 ,2 0 1 3a n do n eo fo u r
Controlling Shareholders
‘‘Offer Price’’ the final offer price per Offer Share (exclusive of brokerage of
1.0%, SFC transaction levy of 0.0027%, Stock Exchange trading
fee of 0.00565% and AFRC transaction levy of 0.00015%)
‘‘Offer Shares’’ the Hong Kong Offer Sha res and the International Offer Shares
together with, where relevant, any additional Shares which may
be issued by our Company pursuant to the exercise of the
Over-allotment Option
‘‘Overall
Coordinator(s)’’
Guotai Junan Securities (Hong Kong) Limited, Halcyon
Securities Limited and ICBC International Securities Limited
‘‘Over-allotment
Option’’
t h eo p t i o ne x p e c t e dt ob eg r a n t e db yo u rC o m p a n yt ot h e
International Underwriters, exercisable by the Sponsor-OCs (on
behalf of the International Underwriters), pursuant to the
International Underwriting Agreement to require our Company
to allot and issue up to an aggregate of 15,000,000 additional H
Shares at the Offer Price representing approximately 15% of the
Offer Shares initially available under the Global Offering, to
cover over-allocations in the International Offering, if any
‘‘PT LBM’’ PT LBM Energi Baru Indonesia, a foreign investment company
incorporated in Indonesia on February 22, 2023, an indirect
non-wholly owned subsidiary of our Company which is indirectly
wholly-owned by Changzhou Liyuan
DEFINITIONS
–4 0–


--- page 51 ---
‘‘Relevant Persons’’ the Joint Sponsors, th e Joint Global Coordinators, the Overall
Coordinators, the Capital Market Intermediaries, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, any
of their or the Company’s respective directors, officers,
employees, partners, agents, advisers and any other parties
involved in the Global Offering
‘‘Reporting
Accountants’’
Moore CPA Limited, the reporting accountants of our Company
‘‘PRC Company Law’’ Company Law of the People’s Republic of China ( 中華人民共和
國公司法), as amended, supplemented or otherwise modified
from time to time
‘‘PRC Government’’ or
‘‘State’’
the central government of the P RC, including all political
subdivisions (including provincial, municipal and other
regional or local government entities) and its organs or, as the
context requires, any of them
‘‘PRC Law’’ the laws and regulations o f the PRC, without reference to the
laws and regulations of Hong Kong, the Macau Special
Administrative Region and the relevant regulations of Taiwan
region
‘‘PRC Legal Advisor’’ Grandall Law Firm (Shanghai), legal advisor to our Company as
to PRC Law
‘‘PRC Securities Law’’ the Securities Law of the PRC ( 《中華人民共和國證券法》), as
amended, supplemented or otherwise modified from time to time
‘‘Price Determination
Agreement’’
the agreement to be entered into by the Sponsor-OCs (for
themselves and on behalf of the Underwriters) and our Company
on the Price Determination Date to record and fix the Offer Price
‘‘Price Determination
Date’’
the date, expected to be on or before Monday, October 28, 2024,
on which the Offer Price will be determined and, in any event,
not later than 12 : 00 noon on Monday, October 28, 2024
‘‘prospectus’’ this prospectus being issued in connection with the Hong Kong
Public Offering
‘‘Receiving Banks’’ Industrial and Comm ercial Bank of China (Asia) Limited and
Bank of China (Hong Kong) Limited
‘‘Regulation S’’ Regulation S under the U.S. Securities Act
‘‘RMB’’ or ‘‘Renminbi’’ Renminbi, the lawful currency of the PRC
DEFINITIONS
–4 1–


--- page 52 ---
‘‘SAFE’’ State Administration of Foreign Exchange of the PRC ( 中華人民
共和國外匯管理局)
‘‘SFC’’ the Securities and Futures Commission of Hong Kong
‘‘SFO’’ or ‘‘Securities
and Futures
Ordinance’’
the Securities and Futures Ordinance (Chapter 571 of the laws of
Hong Kong), as amended or supplemented from time to time
‘‘Shandong Kelas’’ Shandong Kelas Environmental Protection Technology Co., Ltd.
(山東可蘭素環保科技有限公司) (formerly known as Heze Kelas
Environmental Protection Technology Co., Ltd. ( 菏澤可蘭素環
保科技有限公司), a limited liability company established in the
PRC on December 30, 2020 and an indirect wholly-owned
subsidiary of our Company which is wholly owned by Jiangsu
Kelas
‘‘Shandong Liyuan’’ Shandong Liyuan Technology Co., Ltd. ( 山東鋰源科技有限公
司), a limited liability company established in the PRC on
September 10, 2021 and an indirect non-wholly owned subsidiary
of our Company which is wholly-owned by Changzhou Liyuan
‘‘Shandong Meiduo’’ Shandong Meiduo Technology Co., Ltd. ( 山東美多科技有限公
司), a limited liability company established in the PRC on
September 20, 2022 and a company wholly owned by Lopal
International, which was owned as to 90% by Mr. Shi and as to
10% by Ms. Zhu, as of the Latest Practicable Date
‘‘Shanghai-Hong Kong
Stock Connect’’
a securities trading and clearing links program developed by the
Hong Kong Stock Exchange, Shanghai Stock Exchange, HKSCC
and China Securities Depository and Clearing Corporation
Limited for mutual market access between Hong Kong and
Shanghai
‘‘Shanghai Stock
Exchange’’
the Shanghai Stock Exchange ( 上海證券交易所)
‘‘Share(s)’’ ordinary share(s) in the capital of our Company with nominal
value of RMB1.00 each
‘‘Shareholder(s)’’ holder(s) of Share(s)
‘‘Shenzhen-Hong Kong
Stock Connect’’
a securities trading and clearing links program developed by the
Hong Kong Stock Exchange, Shenzhen Stock Exchange,
HKSCC and China Securities Depository and Clearing
Corporation Limited for mutual market access between Hong
Kong and Shenzhen
DEFINITIONS
–4 2–


--- page 53 ---
‘‘Sichuan Liyuan’’ Sichuan Liyuan New Material Co., Ltd. ( 四川鋰源新材料有限公
司), a limited liability company established in the PRC on
October 21, 2020 and an indirect non-wholly owned subsidiary of
our Company which is wholly-owned by Changzhou Liyuan
‘‘Sponsor-OCs’’ Guotai Junan Securities (Hong Kong) Limited and Halcyon
Securities Limited
‘‘Stabilizing Manager’’ Guotai Junan Securities (Hong Kong) Limited
‘‘State Council’’ the State Council of the PRC ( 中華人民共和國國務院)
‘‘Supervisor(s)’’ member(s) of our Supervisory Committee
‘‘Supervisory
Committee’’
the supervisory committee of our Company
‘‘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
‘‘Tianjin Beiterui
Nano’’
Beiterui (Tianjin) Nano Material Manufacturing Co., Ltd. ( 貝特
瑞（天津）納米材料製造有限公司), a limited liability company
established in the PRC on December 28, 2015 and an indirect
non-wholly owned subsidiary of our Company which is
wholly-owned by Changzhou Liyuan
‘‘Track Record Period’’ the period comprisin g the three financial years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024
‘‘Underwriters’’ the Hong Kong Underwriters and the International Underwriters
‘‘Underwriting
Agreements’’
the Hong Kong Underwriting Agreement and the International
Underwriting Agreement
‘‘U.S.’’ or ‘‘United
States’’
the United States of America, its territories, its possessions and
all areas subject to its jurisdiction
‘‘U.S. Securities Act’’ the United States Securities Act of 1933, as amended and
supplemented or otherwise modified from time to time, and the
rules and regulations promulgated thereunder
‘‘US$’’ or ‘‘USD’’ United States dollars, the lawful currency of the United States
‘‘White Form eIPO ’’ the application for the Hong Kong Offer Shares to be issued in
the applicant’s own name by subm itting applications online
through the designated website of White Form eIPO Service
Provider at
www.eipo.com.hk
DEFINITIONS
–4 3–


--- page 54 ---
‘‘White Form eIPO
Service Provider’’
Computershare Hong Kong Investor Services Limited
‘‘Yichun Times’’ Yichun Times New Energy Resources Co., Ltd. ( 宜春時代新能源
資源有限公司), a limited liability company established in the
PRC on November 23, 2021 and a direct wholly owned
subsidiary of CATL as of the Latest Practicable Date
‘‘Zhangjiagang TEEC’’ Zhangjiagang TEEC Automotive Chemicals Co., Ltd. ( 張家港迪
克汽車化學品有限公司), a limited liability company established
in the PRC on May 20, 1996 and an indirect non-wholly owned
subsidiary of our Company which was owned as to 57.01% by
Jiangsu Ruilifeng
‘‘2023 Share Option
Scheme’’
the 2023 share option incentive scheme adopted by our Company
pursuant to resolutions passed by our Shareholders on
September 22, 2023, the principal terms of which are set out in
‘‘Statutory and General Information — A. Further Information
about Our Group — 5. 2023 Share Option Scheme’’ in Appendix
IV
In this prospectus, the terms ‘‘associate’’, ‘‘close associate’’, ‘‘connected person’’,
‘‘connected transaction’’, ‘‘core connected perso n’’, ‘‘controlling shareho lder’’, ‘‘subsidiary’’
and ‘‘substantial shareholder’’ shall have the meanings given to such terms in the Hong Kong
Listing Rules, unless the context otherwise requires.
If there is any inconsistency between the Chinese names of the entities or enterprises
established in the PRC mentioned in this prospectus and their English translations, the Chinese
names shall prevail. The English translations of the Chinese names of such PRC entities or
enterprises are provided for identification purposes only.
DEFINITIONS
–4 4–


--- page 55 ---
This glossary contains definitions of certain technical terms used in this prospectus in
connection with our business. These terms and their given meanings may not correspond to
industry standard definitions or usages of these terms.
‘‘4S dealership store’’ an automobile dealership store authorized by the automobile
manufacturer that integrates the four business elements initiated
by ‘‘S’’, namely, sales, spare parts, services and survey
‘‘CNAS’’ China National Accredit ation Service for Conformity
Assessment ( 中國合格評定國家認可委員會)
‘‘ECO-Label’’ EU Ecolabel, a voluntary labelling system which is recognized
throughout Europe that helps cus tomers to identify products and
services that have a reduced envi ronmental impact throughout
their life cycle, from the extraction of raw materials to
production, use and disposal
‘‘ERP system’’ enterprise resource planning system
‘‘ESS’’ energy storage systems
‘‘GFA’’ gross floor area
‘‘IATF’’ the International Automoti ve Task Force, an ‘‘ad hoc’’ group of
automotive manufacturers and their respective trade
associations, which aim to provide improved quality products
to automotive customers worldwide
‘‘IATF16949’’ a technical specification aimed at the development of a quality
management system which provides for continual improvement,
emphasizing defect prevention and the reduction of variation and
waste in the automotive industry supply chain and assembly
process
‘‘ICE’’ internal combustion engine
‘‘iron phosphate’’ iron phosphate, also known as high iron phosphate and iron
orthophosphate, with molecular formula FePO
4,i saw h i t e ,
off-white monoclinic crystal p owder, and is a compound used to
synthesize lithium iron phosphate battery cathode materials
‘‘ISO’’ the International Organization for Standardization, a
non-government organization b ased in Geneva, Switzerland,
for assessing the quality systems of business organizations
‘‘ISO45001’’ Occupational Health and Safety Management System, which is
released by ISO
GLOSSARY OF TECHNICAL TERMS
–4 5–


--- page 56 ---
‘‘ISO9001’’ International Quality Ma nagement System, which is released by
ISO
‘‘LFP’’ lithium iron phosphate (LiFePO 4)
‘‘LIMS’’ laboratory information management system
‘‘lithium’’ A metal chemical element, of which the element symbol is Li, and
the atomic number is three
‘‘lithium carbonate’’ a common lithium compound with the chemical formula Li
2CO3
that can be dissolved in dilute acid and is commonly used for
lithium-ion battery materials
‘‘lithium-ion battery’’ rechargeable battery that composes of cells in which lithium ions
move from the negative electrode through electrolytes to the
positive electrode during discharging and move reversely when
charging
‘‘lithium-mica
concentrate’’
also called lepidolite, an ore of lithium and typically forms in
granitic masses that contain high amounts of lithium
‘‘LMFP’’ lithium-ion manganese iron phosphate
‘‘MES’’ manufacturing execution system
‘‘MWh’’ megawatt, unit of electricity
‘‘NCM’’ Nickel-cobalt-manganese ternary materials, which can be used as
cathode materials for ternary batteries
‘‘NEV(s)’’ new energy vehicle(s), includ ing battery electric vehicle, plug-in
hybrid electric vehicle and extended range electric vehicle
‘‘OA’’ office automation, a new office solution that combines modern
office affairs with computer technology
‘‘OEM’’ original equipment manufacturer
‘‘R&D’’ research and development
‘‘RoHS’’ Restriction of Hazardous Substances, short for directive on the
restriction of the use of certain hazardous substances in electrical
and electronic equipment, including Lead (Pb), Cadmium (Cd),
Mercury (Hg), Hexavalent chromi um (Hex-Cr), Polybrominated
biphenyls (PBB), and Polybrominated diphenyl ethers (PBDE),
which was adopted in February 2003 by the European Union
‘‘SMM’’ Shanghai Metals Market
GLOSSARY OF TECHNICAL TERMS
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‘‘sq.m.’’ square meter(s)
‘‘TMS’’ transportation management system
‘‘ton’’ a unit of measure
‘‘WMS’’ warehousing management system
GLOSSARY OF TECHNICAL TERMS
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This prospectus contains certain forward-looking statements and information relating
to our Company and our subsidiaries that are based on the beliefs of our management as
well as assumptions made by and information currently available to our management.
When used in this prospectus, the words ‘‘aim’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘expect’’,
‘‘going forward’’, ‘‘intend’’, ‘‘may’’, ‘‘might’’, ‘‘ought to’’, ‘‘plan’’, ‘‘potential’’, ‘‘predict’’,
‘‘project’’, ‘‘seek’’, ‘‘should’’, ‘‘will’’, ‘‘would’’ and the negative of these words and other
similar expressions, as they relate to ou r Group or our management, are intended to
identify forward-looking statements. Such statements reflect the current views of our
management with respect to future events, operations, liquidity and capital resources, some
of which may not materialize or may change. These statements are subject to certain risks,
uncertainties and assumptions, including the other risk factors as described in this
prospectus. You are strongly cautioned that reliance on any forward-looking statements
involves known and unknown risks and uncertainties. The risks and uncertainties facing our
Company which could affect the accuracy of forward-looking statements include, but are
not limited to, the following:
. our operations and business prospects;
. our financial condition and performance;
. our capital expenditure plan;
. our ability to complete the developmen t and obtain the relevant requisite
regulatory approvals of our production plants;
. future developments, trends and conditions in the industry and markets in which
we operate;
. our business strategies and plans to achieve these strategies;
. general economic, political and busines s conditions in the markets in which we
operate;
. changes to the regulatory environment and general outlook in the industry and
markets in which we operate;
. the effects of the global financial markets and economic crisis;
. the ability of third parties to perform in accordance with contractual terms and
specifications;
. our ability to control or reduce costs;
. our dividend policy;
. the amount and nature of, and potential for, future development of our business;
. capital market developments;
FORWARD-LOOKING STATEMENTS
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. the actions and developments of our competitors;
. certain statements in ‘‘Business’’ and ‘‘F inancial Information’’ with respect to
trends in prices, operations, margin s, overall market trends, and risk
management; and
. change or volatility in interest rates, forei gn exchange rates, equity prices, trading
volumes, commodity prices, operations, margins, risk management and overall
market trends.
Subject to the requirements of applicable laws, rules and regulations, we do not have
any and undertake no obligation to update or otherwise revise the forward-looking
statements in this prospectus, whether as a result of new information, future events or
otherwise. As a result of these and other ri sks, uncertainties and assumptions, the
forward-looking events and circumstances d iscussed in this prospectus might not occur in
the way we expect or at all. Accordingly, you should not place undue reliance on any
forward-looking information.
In this prospectus, statements of or references to our intentions or those of the
Directors are made as of the date of this prospectus. Any such information may change in
light of future developments.
All forward-looking statements contained in this prospectus are qualified by reference
to the cautionary statements set out in this section.
FORWARD-LOOKING STATEMENTS
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An investment in the H Shares involves various risks. You should carefully consider all
of the information set out in this prospectus before making an investment in the H Shares,
including the risks and uncertainties described below in respect of our business and our
industry, doing business in the countries and regions where we operate and the Global
Offering. If any of the possible events described below occur, our business, financial
condition or results of operations could be materially and adversely affected and the market
price of the H Shares could fall significantly. You should seek professional advice from your
relevant advisors regarding your prospective investment in the context of your particular
circumstances.
RISKS RELATING TO OUR INDUSTRY AND BUSINESS
Price fluctuation of our raw materials and inadequate or interrupted supply for our raw
materials could adversely affect our business, financial condition and results of operations
We may not be able to obtain stable, high-qua lity raw materials at reasonable prices at
all times. Historically, we experienced signifi cant price fluctuations of certain principal raw
materials needed for our products. As a resul t of such unprecedented volatility in lithium
carbonate market prices, we recorded a net loss of RMB1,514.2 million for the year ended
December 31, 2023. For example, the average price of lithium carbonate has experienced
significant fluctuations during the Track Record Period. According to Frost & Sullivan, in
2021, 2022 and 2023, the average price for lithium carbonate was approximately RMB119.8
thousand per ton, RMB482.4 thousand per ton and RMB272.3 thousand per ton,
respectively. The price increase from 2021 to 2022 was primarily due to a shortage in the
supplies of lithium carbonate resulting from the rising demand for lithium-ion battery
products, and the price drop in 2023 was mainly due to rebalancing between supply and
demand dynamics. Also, the price of base oil and urea granule used in the production of
automotive specialty chemical products experienced significant fluctuation during the
Track Record Period. See ‘‘Industry Overview — Overview of Automotive Specialty
Chemical Industry — Average Price Analysi s of Automotive Specialty Chemical Raw
Materials and Products.’’
We cannot assure you that the prices of principal raw materials needed for our
products would become favorable to us in the future, and also, we cannot assure you that
we will not experience significant fluctuation in the prices of raw materials in the future.
Under such circumstances, we may need to adjust the prices of our products accordingly.
However, we cannot assure you that we will be able to pass all or a portion of our costs to
our customers due to factors such as competit ion, or we will be able to find alternative
sources in a timely and cost-effective manne r, or at all. We factor raw material price
volatility into our product pr icing and generally discuss pricing of our LFP cathode
material products with customers and attempt to make adjustments to align with raw
material price trends. However, since the se lling price of our LFP cathode materials closely
follows the prevailing lithium carbonate prices listed on the SMM in general and the lithium
carbonate prices have experienced significan t fluctuations in recent years, we cannot assure
you that we will be able to respond appropriately to fluctuations in the prices of raw
materials. In such event, the substantial and frequent fluctuation in the prices of raw
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materials may result in us not being able to recover the costs of our raw materials from the
sales of our products. If we are unable to obtain raw materials in quantities, of qualities or
at prices that we require or sell our LFP cathode material products in a timely manner, our
businesses, financial condition and results of operations may be materially and adversely
affected.
We depend on a stable and adequate supply of raw materials. Inadequate or interrupted supply
for our raw materials could adversely affect our business, financial condition and results of
operations
The principal raw materials that we use in the production of our products are lithium
carbonate and iron phosphate for our LFP cathode materials business and urea granule,
ethylene glycol, base oil and lubricant additives for our automotive specialty chemicals
business. During the Track R ecord Period, our costs of r aw materials amounted to
RMB2,391.7 million, RMB10,519.5 million, RMB7,465.2 million and RMB2,327.4 million,
respectively, accounting for approximately 8 0.4%, 90.4%, 85.0% and 72.1% respectively,
of our total cost of sales over the respective periods. As a result, our production volume and
production costs depend on our ability to sourc e principal raw materials at competitive
prices.
The current or expected supply of our principal raw materials may fluctuate depending
on a number of factors beyond our control, inc luding but not limited to the availability of
resources in the raw materials market, market demand, potential speculation, market
disruptions, natural dis asters and other factors.
We currently purchase certain principal raw materials needed for the production of our
products from third parties. However, our current suppliers may be unable to satisfy our
future requirements of quality and quanti ty of raw materials on a timely basis. If our
current suppliers for any particular raw mat erial are unable or unwilling to satisfy our
requirements on a timely basis, we could suffer shortages or significant cost increases. Our
raw material suppliers could fail to satisfy our needs for various reasons beyond our
control, including fires, natur al disasters, weather, manufacturing problems, epidemic,
strikes or transportation interruptions. A failure of supply could also occur due to
suppliers’ financial difficulties, including ban kruptcy. Changing raw material suppliers may
require long lead time, including time required to obtain approval from customers to
change raw material suppliers. We may not be able to locate alternative suppliers in
sufficient quantities, of suitable quality, or at an acceptable price. If that happens, it will
result in increased pressure on our costs and significant delay in our production and
delivery of our products, resulting in liabilit ies of damages and damages to our reputation,
which will adversely and materially affect our bus inesses, financial condition and results of
operations.
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We are exposed to risk relating to our inventory, and our inventory of principal raw materials,
including lithium carbonate and iron phosphate, is exposed to risk arising from price
fluctuation
To operate our business successfully and meet our customers’ demands and
expectations, we must maintain a certain level of finished products inventory to ensure
timely delivery to our customers. We are also r e q u i r e dt om a i n t a i na na p p r o p r i a t el e v e lo f
raw materials (including lithium carbonate, iron phosphate, base oil, ethylene glycol, urea
granule and lubricant additives) for our p roduction. As of December 31, 2021, 2022 and
2023 and June 30, 2024, the balance of our i nventories amounted to RMB1,100.6 million,
RMB3,007.3 million, RMB1,610.2 million and RMB1,647.8 million, respectively, among
which, raw materials amounted to RMB724 .8 million, RMB1,512.3 million, RMB350.7
million and RMB466.6 million as of the same da tes. However, forecasts are inherently
uncertain. If our forecasted demand is lower than what eventually transpires, we may not be
able to maintain an adequate inventory level of our finished products or manufacture our
products in a timely manner, and we may lose sales and market share to our competitors.
On the other hand, we may also be exposed to increased inventory risks due to
accumulated excess inventory of our products, raw materials and auxiliary materials for our
products. Excess inventory levels may lead to increases in inventory costs, risks of inventory
obsolescence and provisions for write downs, wh ich will materially and adversely affect our
business, results of operations, financial condition and prospects. For the years ended
December 31, 2021, 2022 and 2023 and for the six months ended June 30, 2024, we had
recorded provisions for impairment loss recognized of inventories in the amount of RMB2.2
million, RMB72.6 million, RMB554.5 million a nd RMB69.5 million, respectively. The
significant increases in provision for impa irment loss of our inventories in 2022 and 2023
were primarily due to the significant decrease in the average price of lithium carbonate, one
of our principal raw materials, from approxi mately RMB482.4 thousand per ton in 2022 to
RMB272.3 thousand per ton in 2023. For details, see ‘‘Financial Information — Selected
Key Items of Statement of Financial Position — Inventories.’’
In order to maintain an appropriate inventory level of finished products and raw
materials to meet market demand, we adjust our production schedule from time to time
based on the expected delivery schedule of raw ma terials, customers’ orders and anticipated
market demand. We also carry out inventory review and aging analysis and carry out
physical stock take on a regular basis. Further, we have implemented a number of measures
to improve our resilience to fluctuations i n prices of raw materials. See ‘‘Business —
Challenges to Our Industries and Our Busi ness — Measures in Response to Industry
Challenges — Improving resilience to fluctua tions in raw material prices.’’ However, we
cannot guarantee that these measures will alw ays be effective, we will be able to maintain an
appropriate inventory level, or the price of raw materials would not continue to decrease. In
such event, our businesses, re sults of operations and financial condition may be adversely
affected.
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We rely on the market demand for our products from their downstream end markets. Any
slowdown or decrease in downstream demand , or technological developments resulting in
substitute products, may have a material impact on us
Our LFP cathode material products are currently the most extensively used cathode
materials for the production of lithium-ion batteries used for NEV batteries and ESS
batteries. Revenue generated from our LFP cathode material products, which are largely
purchased by lithium-ion battery manufacturers, accounted for 46.3%, 87.0% and 77.4% of
our total revenue in 2021, 2022 and 2023, respectively, and 69.4% of our total revenue
recorded for the six months ended June 30, 2024. Furthermore, during 2023, lithium-ion
battery and NEV manufacturing experienced slower downstream demand growth due to
softening of near-term demand sentiments along with the broader global economic
slowdown in 2023. There is no assurance that the downstream demand for lithium-ion
batteries and NEVs will remain at the same level as in the past or continue to increase in the
future.
In addition, changes in technology, the development of other substitute cathode or
battery material used for lithium-ion batteries, or NEV batteries in general, could adversely
affect the demand for our LFP cathode material products. Other alternatives to our LFP
cathode material products may become more economically attractive as global commodity
prices shift and could potentially render our products and lithium-ion batteries in general
obsolete or less marketable. For example, wh ile still in the early development stage with
gaps to realize mass production and commercialization, sodium-ion batteries are presently
receiving attention as a potential future altern ative to lithium-ion solutions. Additionally,
as NEV technologies advance and s upportive policies promote their wider adoption, NEVs
are expected to gradually gain market share over ICE vehicles in the future. This shift could
soften downstream demand and sales of our automotive specialty chemical products
designed for ICE vehicles.
Any of these events could have a material adverse effect on our businesses, financial
condition and results of operations. For a relevant risk factor, see ‘‘— We may not be able
to keep abreast of the latest development and advancement of technology, which may
materially and adversely impact our ability to a ddress the diverse needs of our customers.’’
We have a limited operating history in the LFP cathode material industry, which may make it
difficult to evaluate our current business and predict our future performance
In 2020, we engaged third party contract manufacturers to produce small amounts of
LFP cathode materials in 2020 and the first half of 2021. In June 2021, we expanded our
presence in the LFP cathode material business through the acquisitions of Tianjin Beiterui
Nano and Jiangsu Beiterui Nano. To a considerable degree, our growth during the Track
Record Period was attributable to our LFP cathode material business. For the years ended
December 31, 2021, 2022 and 2023 and for th e six months ended June 30, 2024, revenue
generated from the sales of LFP cathode material products amounted to RMB1,876.8
million, RMB12,241.9 million, RMB6,753.6 million and RMB2,475.6 million, respectively,
accounting for approximately 46.3%, 87.0%, 77.4% and 69.4% of our total revenue for the
same period, respectively. Our limited oper ating history in the LFP cathode material
RISK FACTORS
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industry may make it difficult to evaluate our future prospects and the risks and
uncertainties associated to the LFP cathode materials business, and our historical
performance may not be indicative of our future prospects and operating results. There
can be no assurance that we will be able to maintain our historical growth rates in the
future. Our revenue growth may slow down and even decline for a number of possible
reasons, some of which are beyond our control, including, among others, slowdown in
downstream demand growth in lithium-ion battery and NEV manufacturing, shifts in
supply and demand dynamics, destocking behavior and economic uncertainties, the
significant fluctuation in prices of principa l raw materials and increasing competition. If
our growth rates decline, investors’ perception of our businesses and prospects may be
adversely affected. You should c onsider our prospects and future profitability in light of the
risks, uncertainties, and difficulties encountered by any new business.
The majority of our revenue was generated from a relatively small number of customers during
the Track Record Period
A significant portion of our revenue was generated from our five largest customers in
each period during the Track Record Period. O ur five largest customers for the years ended
December 31, 2021, 2022 and 2023 and for the s ix months ended June 30, 2024 accounted
for 42.9%, 80.0%, 64.5% and 60.5% of our total revenue for the respective periods. Our
largest customer for the years ended Decem ber 31, 2021, 2022 and 2023 and for the six
months ended June 30, 2024 i.e. CATL G roup amounted to RMB1,160.4 million,
RMB7,486.9 million, RMB2,648.0 million a nd RMB1,123.1 million, respectively,
representing 28.6%, 53.2%, 30.3% and 31.5% of our revenue for the respective periods.
Despite our efforts to mitigate the concentr ation of customers, we may still be affected
by risks arising from customer concentration, especially given that we had a high
concentration of customers in our LFP cathode material business. Therefore, our continued
success requires us to maintain our existing customers. Sales to our customers could be
affected by a number of factors including the respective customers’ business and financial
performance, which could vary according to their respective financial condition, market
demand for their products or from their downstream industries, market supply of similar
products, level of competition in their target markets, industry development and overall
economic climate, which are beyond our control.
We cannot assure you that we will be able to maintain or improve our relationships
with our major customers such as CATL Group. If for any reason our major customers
discontinue or significantly reduce their procurement of our products from us, we may have
difficulties in maintaining our business scale and profitability at optimal levels and our
business and results of operations could be materially and adversely affected.
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We may be required to purchase raw materials under long-term agreements containing
purchase commitments, which may exceed our production needs
To ensure the sufficient and stable supplie s of principal raw materials, we have made
and may continue to make strategic arrangements in the future with major suppliers of raw
materials to secure the supply of our princ ipal raw materials in advance. For example, in
June 2023, we entered into a long-term frame work agreement with a reputable raw material
supplier for lithium carbonate which contains mutually agreed upon purchase commitments
over the three-year contract term expiring in June 2026. See ‘‘Business — Our Businesses —
LFP Cathode Materials — Raw materials an d suppliers — Suppliers.’’ Pursuant to the
terms of these long-term agreements, if market demand for our products is less than
anticipated, we may still be required to pur chase raw materials in accordance with the
purchase commitment which would lead to overs tock of raw materials. Furthermore, such
overstock of raw materials may increase our exp osure to price fluctuations of raw materials
and finished products. In such event, a signifi cant drop in raw material prices could result in
significant impairment losses on our inventor ies, and our business and results of operations
could be materially and adversely affected. We r ecognized a significant amount of provision
for impairment loss of inventories for 2 022 and 2023 as the prices of principal raw
materials, especially lithium carbonate, decreased in the period.
In addition, we may face risks related to lowered liquidity during certain periods, due
to the long-term supply agreem ents that demand the utilizat ion of our working capital
which could instead be used to finance our other expansions and acquisitions. We cannot
assure you that fulfilling the purchase commitments under these long-term supply
agreements would not impede our liquidity that can be used for other purposes. In such
event, our business, financial position, results of operations and prospects and working
capital may be adversely affected.
We may be unable to secure new sales or maintain our customers in the future
Most of our sales are secured on contract basis. As a result, we must periodically seek
to enter into new contracts when our current contracts are completed. We cannot assure
you that we will be able to retain our customers, renew our existing contracts or secure new
contracts with customers of similar quality upon expiry of the contract period or that they
will maintain their current level of busines s with us in the future. As such, any loss of our
major customers or significant decrease in the number or size of contracts with our
customers may materially and adversely affect our financial condition and operating
results. Besides, if any of our customers experiences liquidity issues, it may result in a delay
or default in settling payments to us, which in turn will have an adverse impact on our cash
flows and financial conditions. We cannot guarantee that we will be able to diversify our
customer base by securing contracts with new customers or expand our cooperation with
other customers, in which event our business, financial condition and results of operations
could be materially and adversely affected.
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We had negative operating cash flow, gross loss , net loss and net current liabilities during the
Track Record Period, which may expose us to liquidity risks and affect our ability to achieve
or subsequently maintain profitability in the future
We recorded net cash used in operating activities for the years ended December 31,
2021 and 2022 of RMB823.8 milli on and RMB1,863.5 million, respectively. Our net current
assets decreased from RMB1,232.9 millio n and RMB2,168.6 million as of December 31,
2021 and 2022, respectively to net current lia bilities of RMB1,255.5 million and RMB574.7
million as of December 31, 2023 and June 30, 2024, re spectively. For details, see ‘‘Financial
Information — Liquidity and Capital Resources.’’ In the event that we are unable to
generate sufficient cash flow f or our operations or otherwise unable to obtain sufficient
funds to finance our business, our liquidity and financial condition may be materially and
adversely affected. There is no assurance t hat we will have sufficient cash from other
sources to fund our operations. If we resort to other financing activities to generate
additional cash, we will incur additional financing costs and we cannot guarantee that we
will be able to obtain the financing on terms acceptable to us, or at all.
Furthermore, we recorded gross loss and net loss of R MB57.5 million and RMB1,514.2
million, respectively, for the year ended D ecember 31, 2023. We also recorded a net loss of
RMB260.2 million for the six months ended Jun e 30, 2024. For details, see ‘‘Financial
Information — Summary of Results of Operations during the Track Record Period.’’ As a
result of the net loss recorded, we recorded negative return on assets and return on equity as
of December 31, 2023 and June 30, 2024, respectively. We may continue to incur losses in
the foreseeable future. Even if we achieve pr ofitability in the future, we may not be able to
sustain profitability in subsequent peri ods. Our inability to remain profitable would
decrease the value of our Compa ny and may impair our ability to raise capital, expand our
business or continue our operations as well as maintain the price of our Shares.
Our international strategy and ability to condu ct business in the international markets is
subject to uncertainties and risks
We are in the process of establishing an overseas production plant of LFP cathode
materials in Indonesia. For details, see ‘‘Business — Strategies — Further increase our LFP
cathode material production capacity to sei ze growing downstream demand, expand our
customer base and achieve economies of scale to solidify our position in the LFP cathode
material industry’’ and ‘‘Business — Ou rB u s i n e s s e s—L F PC a t h o d eM a t e r i a l s—
Production expansion plans.’’ Our international operations are subject to various risks and
uncertainties including the following:
. compliance with foreign laws, regulatory requirements and local industry
standards, with which we may not be familiar;
. competition from foreign players or failure to anticipate changes to the
competitive landscape in the internati onal markets due to lack of familiarity
with the local business environment;
. difficulty in managing relationships with foreign customers;
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. political and economic instabilities , incl uding changes in government policies or
regulations affecting foreign investments, economic fluctuations and currency
volatility, geopolitical tensions or conflic ts impacting business operations, and
potential social or civil unrest, especially in Indonesia where we have commenced
building our international operations. For a relevant example regarding recent
changes in foreign government policies, see the risk factor headed ‘‘New
legislations or changes in the regulatory requirements regarding our products or
the end markets of our products may affect our business operations and
prospects’’ below;
. global and regional health crisis;
. lack of familiarity with local ope rating and market conditions;
. difficulties and costs of staffing and managing foreign operations;
. cultural and language difficulties;
. exposure to increased litigation risks in the international markets; and
. foreign exchange rate exposure and risk of foreign exchange regulations.
Any of the above factors could lead to business disruptions and loss of sales, which
could have a material and adverse effect on our business, results of operations and growth
strategies.
We may not be successful in expanding our operations to meet our demands, or we may not be
able to fully utilize our production capacit y due to insufficient or unstable demand
We have experienced significant growth during the Track Record Period. In order to
meet growing demand for our products, in the past few years, we increased our production
capacity and output, and expanded, trained and managed our rapidly growing workforce.
We are currently undertaking certain expans ion projects. In particular, we intend to use
approximately 80.0%, or HK$416.0 million, of our total estimated net proceeds from the
Global Offering to enhance our production network and expand our production capacity
through (a) phase II of the Indonesia Plant and (b) new LMFP production lines at our
Xiangyang Plant in Hubei Province. For details, see ‘‘Business — Our Businesses — LFP
Cathode Materials — Production expansion plans’’ and ‘‘Future Plans and Use of
Proceeds.’’ We may also continue to have other expansion projects based on our future
business planning. For example, we are in the process of expanding our production
capabilities upstream, including building a p roduction facility for lithium carbonate in
Yichun, Jiangxi Province. For details, see ‘‘Business — Our Businesses — LFP Cathode
Materials — Raw materials and suppliers.’’
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The success of our existing and future expansion projects depends on a few factors
beyond our control, such as progress of the construction conducted by third-party
construction companies, local laws and regulations, government support including the
issuance of relevant operation license for the expanded production capacity, and customer
demand for our expanded production capacity. In addition, the integration of future
expansion projects into our existing operations may be subject to unforeseeable delays,
which may, among other things, increase our integration costs, strain our production
capacity at other locations, decrease our produ ction efficiency and cause delays in delivery
of customer orders. We cannot be certain that we will be able to identify additional suitable
acquisition or investment candidates for sale at reasonable prices to consummate any
acquisition or investment. We may encounter intense competition during the expansion
process and we may fail to select or value targets appropriately. In addition, we may be
required to obtain various governmental and regulatory approvals and/or permits before
the construction of upstream raw materials p roduction plants. Any failure to obtain such
approval in a timely manner or at all may also a dversely affect the timely operation of our
expansion projects and our financial performance. Future acquisitions and/or investments
may expose us to potential risks such as failure to integrate any acquired business or
investments into our operations successfully; diversion of management attention from our
existing business; potential loss of our key employees or the key employees of any business
that we acquire; unanticipated changes in bu siness, industry or general economic conditions
that affect the assumptions underlying the acquisition and/or investments; and decline in
the value of acquired assets, companies or assets. These and other risks related to acquiring,
integrating and operating acquired assets and companies or investees could cause us not to
realize the benefits anticipated to result fro m the acquisition of and/or investment in assets
or companies, and could have a material adverse effect on our ability to grow and on our
business, financial condition and results of operations. In addition, we cannot assure you
that our expansion projects would be succe ssful, especially when such new expansion
projects are carried out for the development and production of new products which are not
part of our existing product portfolio. Furthermore, as we expand our business operations
in the future organically or by acquisition, we expect to incur additional depreciation and
operational expenses. These expenses can increase as a percentage of our revenue in the
future and adversely affect our profitabilit y if we cannot manage our growth effectively.
Accordingly, we may not be able to achieve expansion of our operations and production
facilities or the management of our growth in a timely or cost-effect ive manner. If we are
unable to manage our growth effectively or operating our new production facilities in a
timely manner, we may not be able to take advantage of market opportunities, execute our
business strategies or respond to competitive pressures which could have a material adverse
effect on our results of operation and prospects.
Even if our existing and future expansion pr ojects are successful, we cannot assure you
that the sales volume of our products would increase correspondingly. The continuous
operations of our production facilities will have to be supported by continuous increases in
our sales volume, otherwise we may need to par tially shut down our pr oduction facilities
which could result in the reduction of our ut ilization rates and profitability. We cannot
assure you that we can achieve and maintain high levels of utilization in the future. Our
actual production volume varies with the level of demand for our products, which in turn
may be affected by customers’ preferences, market trend, or other factors beyond our
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control. For example, overall production ut ilization rate for our LFP cathode material
products decreased from 97.3% in 2022 to 57.6% in 2023 partially due to slowdown in
downstream demand growth in the first half of 2023 in lithium-ion battery and NEV
manufacturing and ramp-up period for increa sed capacity. If the orders from our existing
customers are not sufficient and there is a lack of new customers for our products for full
utilization of our production capacity, our prod uction facilities might operate at utilization
rates below our desired level, which could adversely affect our business and financial
condition and results of operations.
New legislations or changes in the regulatory requirements regarding our products or the end
markets of our products may affect our business operations and prospects
Our products are used in the production of, or are incorporated into, final products
that are sold into a number of end markets which include NEVs and energy storage
markets. New legislations or changes in the PR C regulatory requirements regarding these
end markets may affect our business, financial condition, results of operations and
prospects. For instance, on November 2, 20 20, the General Office of the State Council
issued the New Energy Automotive Industry Development Plan (2021–2035) ( 《新能源汽車
產業發展規劃（2021–2035 年）》)( 國辦發[2020]39 號), specified the importance to promote the
high-quality development of the NEV industry. On March 11, 2021, the National People’s
Congress passed Outline of the 14th Five-Year Plan for the National Economic and Social
Development and the Long-Range Objectives Through the Year 2035 ( 《中華人民共和國國
民經濟和社會發展第十四個五年規劃和2035 年遠景目標綱要》), which proposed to support
the development of NEVs as a strategic emerging industry and sped up the innovation and
application of the related core technologies. In the energy storage industry, ‘‘Guidance on
Accelerating the Development of New Energy Storage’’ ( 《關於加快推動新型儲能發展的指
導意見》), published by National Development and Reform Commission and National
Energy Administration in 2021, proposed a holis tic approach to foster the development of
new energy storage market. Driven by this market force, mainland China’s NEV battery
market experienced substantial growth, driving growth in NEV battery shipment volume in
mainland China from 71.0 GWh in 2019 to 633.0 GWh in 2023, representing a CAGR of
72.8%. Further, with the initiatives to achieve ‘‘carbon peak’’ and ‘‘carbon neutrality’’ in
mainland China and benefiting from continuous government support on energy storage, the
market size of the ESS battery market by shipment volume in mainland China has increased
from 9.5 GWh in 2019 to 210.1 GWh in 2023, representing a CAGR of 116.9%. Driven by,
among others, the surge in downstream demand, the sales volume of mainland China’s LFP
cathode material industry increased from approximately 101.6 thousand tons in 2019 to
1,645.0 thousand tons in 2023, registering a CAGR of approximately 100.6%. However,
there is no guarantee that such favorable industry policies in mainland China may continue
to exist in the future. We may need to change or adapt our business focuses from time to
time in response to new rules, regulations and policies regarding our products or the end
markets of our products, but we may not be able to do so in a timely and efficiently manner.
Failure to do so may have a material adverse effe ct on our businesses, results of operations
and financial condition.
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Further, global policy changes and upcomin g measures, including bills such as the U.S.
Inflation Reduction Act (the ‘‘ IRA’’), the European Union’s Critical Raw Materials Act
(the ‘‘CRMA ’’), and investigations by U.S. Department of Commerce and European
Commission into whether Chinese lithium-ion battery manufacturers are engaging in unfair
trade practices, may reduce the bargaining power of LFP cathode material manufacturers
that are based in mainland Ch ina as well as leading NEV and ESS battery companies. The
IRA stated that in order for vehicles to apply for tax credits, vehicles must not contain any
battery components manufactured by foreign s ensitive entity companies (including the
mainland China) in 2024, and must not con tain any battery comp onents extracted,
processed or recycled by foreign sensitive entity companies, companies that are owned,
controlled, regulated or directed by foreign g overnments including China, Russia, Iran and
North Korea, in 2025. Meanwhile, the CRMA, since November 13, 2023, established a list
of 34 critical raw materials, including lithium, r are earth, nickel, cobalt, and silicon. It also
sets targets to increase the local contributio n of these critical raw material consumption
(10% for the extraction; 40% for the processing and an increase to at least 25% for the
recycling) by 2030.
In addition to these measures, some regions have implemented or are considering
tariffs on NEV-related products manufactured in the PRC. For instance, on August 26,
2024, Canada announced the introduction of a 100% tariff on Chinese-made EVs and a
25% tariff on certain Chinese steel and aluminum products, which took effect on October 1,
2024. The European Union is also considering various measures to protect its domestic
NEV industry, potentially including tariffs on Chinese EVs. These tariffs and potential
measures could significantly impact the d emand for Chinese-manufactured NEVs and
related components in international markets. As a result, the demand for our products,
some of which are used in the production o f NEVs, could be adversely affected.
In addition, in terms of potential fundraising a ctivities of our overseas subsidiaries, we
may be required to maintain compliance with the aforesaid bills such as IRA and adopt
necessary modifications to corporate governance structures, operational procedures and
any other relevant aspects of our business to ensure ongoing regulatory adherence, in the
event of which our shareholding and interests in our overseas subsidiaries may be affected.
Any of such legislations may affect our ability i n developing overseas markets which focus
on the sales to the U.S. and potentially Europe, and the business operations including
fundraising activities of our overseas subsidiaries, and therefore our business, financial
position and results of operations will be adversely affected.
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We may not be able to keep abreast of the latest development and advancement of technology,
which may materially and adversely impact our ability to address the diverse needs of our
customers
Our ability to offer new products which sui ts the evolving needs of the market depends
largely on our research and development c apabilities. We have continuously made
investments in our research and development activities to develop new products and
relevant technologies, which we believe are crucial to our future development. In 2021, 2022
and 2023 and for the six months ended June 30, 2024, our research and development
expenses accounted for 5.1%, 4.4%, 5.6% and 5.7% of our total revenue during the
respective periods, with Lithium Iron No. 1 ( 鐵鋰壹號) which is developed based on our
nano spherical densification technology technique as one of our recent research and
development highlight.
We cannot assure you that such investments will yield immediate tangible benefits or
our research and development efforts will be ef fective. Even if such efforts are successful, we
may not be able to apply our newly developed technologies to our products in ways that are
accepted by our customers. For example, we are actively developing LMFP cathode
material, an upgraded sub-category of LFP ca thode material that includes manganese.
However, there is no assurance that LMFP cath ode material will be widely welcomed by the
market in the future. Under such circumsta nces, our previous investment in it may be
wasted. If we are unable to maintain or enhanc e our research and devel opment capabilities,
our competitiveness may be undermined, which could adversely affect our business, results
of operations, financial condition and prospects.
In addition, we cannot assure you that our existing and/or potential competitors will
not develop products which are similar or superior to our products or are more
competitively priced. As it is often difficult to project the time frame for developing new
products and the duration of market window for these products, there is a substantial risk
that we may have to abandon a potential product that is no longer commercially viable,
even after we have invested significant reso urces in the development of such product. If we
fail in our product launching efforts, our business, results of operations, financial condition
and prospects may be materially and adversely affected.
We are subject to risks relating to product concentration and our product development efforts
may not be successful
We derived a substantial part of our revenue from sales of LFP cathode materials
during the Track Record Period. In the yea rs ended December 31, 2021, 2022 and 2023 and
the six months ended June 30, 2024, revenue generated from the sales of LFP cathode
material products, accounted for 46.3%, 87.0%, 77.4% and 69.4% of our total revenue,
respectively. We expect that the production a nd sales of LFP cathode m aterial products will
continue to contribute to a large percent age of our total revenue in the near term.
Therefore, market acceptance of our LFP cathode material products is critical to our future
success. Any negative changes in the demand for or prices of these products could have a
material adverse effect on our business, financial condition and results of operations.
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In view of the above, we plan to expand our product portfolio and other businesses in
the future. For example, we intend to build new production lines dedicated to LMFP
cathode materials at our Xiangyang Plant in Hubei Province and will continue to offer and
optimize our automotive specialty chemical s product portfolio. There can be no assurance
that any of our other businesses or products w ill achieve further market acceptance. Any
failure to successfully develop, launch and market our new businesses and products could
jeopardize our ability to recover our inves tments, which in turn may materially and
adversely affect our business, financial condition and results of operations.
Short-term orders from customers and counterparty risks may adversely affect our business
During the Track Record Period, while we have entered into framework agreements
with our major customers, sales of our produc ts with our customers were characterized by
short-term orders placed by our customers from time to time pursuant to such long-term
framework agreements. As such, we primarily rely on ongoing communications with our
customers in order to predict the future volume of our purchase orders since indicative
orders and procurement plans under the framework agreements do not constitute binding
purchase commitment from customers. We cannot guarantee that our existing customers
will continue to place orders with us, place orders of no less than the current volume of
products or not cancel any orders placed with us in the future. A variety of conditions, both
specific to an individual customer and generally affecting the customer’s industry, can cause
a customer to reduce or delay orders previously anticipated by or already placed with us,
which could adversely impact our business. Given the volatility of short-term orders, we
may experience an adverse change in our revenue. If any of these customers terminates their
contracts with us or significantly reduces the amount of purchases from us, we may not be
able to find replacement customers in the near term and our results of operations could be
adversely affected.
We are exposed to credit risk of our customers and the timing of our payment to suppliers may
not match our receipt from customers
In order to maintain competitiveness in the market, it is important that we retain an
adequate level of working capital to ensure the smooth operation of our business and
support its growth. The majority of our purchase orders require a commitment of cash
and/or other resources, including raw materials, packaging materials, and inventories, prior
to receiving any payment s from our customers.
We generally grant credit periods ranging from one month to three months to our
customers and are therefore subject to credit risks of our customers. Our liquidity depends
on our customers making prompt payments to us. As of December 31, 2021, 2022 and 2023
and June 30, 2024, we recorded trade receivables of RMB858.0 million, RMB2,121.0
million, RMB2,174.9 million and RMB1,549.6 m illion, respectively. For the years ended
December 31, 2021, 2022 and 202 3 and June 30, 2024, our trade receivable turnover days
were 49.4 days, 38.6 days, 89.8 days and 93.9 days, respectively. See ‘‘Financial Information
— Selected Key Items of Statement of Financial Position — Trade and Other Receivables.’’
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In the event that the creditworthiness o f our customers deteriorates or that a
significant number of our customers fail to settle their trade receivables in full or in part for
any reason, we may incur impairment losses and our results of operations and financial
condition could be materially and adversely affected. In addition, there may be a risk of
delay in payment by our customers from their r e s p e c t i v ec r e d i tp e r i o d ,w h i c hi nt u r nm a y
result in an impairment loss provision. As of December 31, 2021, 2022 and 2023 and June
30, 2024, loss allowance for trade receivab les amounted to RMB53.1 million, RMB121.6
million, RMB124.0 million and RMB92.2 million, re spectively. There is no assurance that
we will be able to fully recover our trade and other receivables from our customers or that
they will settle our trade receivables in a timely manner.
The credit period offered by suppliers to us generally ranges from one month to three
months. As of December 31, 2021, 2022 and 202 3 and June 30, 2024, our trade payables
amounted to approximately RMB491.8 mi llion, RMB1,195.9 million, RMB1,191.0 million
and RMB1,218.7 million, respect ively. For the years ended December 31, 2021, 2022 and
2023 and for the six months ended June 30, 2024, our trade payable turnover days were 39.5
days, 26.5 days ,49.6 days and 67.3 days, respectively. As such, we may face increased
liquidity risks arising from a mismatch between our trade receivables turnover days and
trade payable turnover days. This discrepancy can lead to a high gearing ratio when we rely
on bank borrowings to alleviate cash flow pressures.
We are exposed to credit risks in relation to our trade and other receivables, which could
adversely affect our results of operations and financial condition
Our trade receivables primarily arise from sales to customer on credit and the credit
period is generally from one month to three mon ths. Our other receiv able mainly comprise
value added tax recoverable, prepayments for p urchases of non-current assets, prepayments
to suppliers and prepayments for advertising and marketing expenses. As of December 31,
2021, 2022 and 2023 and June 30, 2024, our trade and other receivables amounted to
approximately RMB1,662.8 million, RMB4 ,825.2 million, RMB3,621.8 million and
RMB3,402.1 million, respectively. See ‘‘Fina ncial Information — Selected Key Items of
Statement of Financial Position — Trade and Other Receivables.’’
We are exposed to the risks that our customers may delay or even be unable to pay us
in accordance with the payment terms and we c annot assure you that we will be able to fully
recover the outstanding amounts in a timely manner, or at all. In addition, as our businesses
continues to develop, our trade receivables may continue to rise and would increase our
credit risk exposure. Any significant delay in payment or default by our customers may
affect our liquidity and cash flows, which may in turn adversely affect our results of
operations and financial condition.
While we strive to maintain strict control o ver our outstanding trade receivables and
the management of the Group asse ss the collectability of the trade receivables regularly and
on a case-by-case basis, we cannot assure that such measures would always be effective. We
cannot assure you that all of our customers are creditworthy and reputable and will not
default on us in the future, despite our efforts to conduct credit assessments on them. As a
result, we are exposed to risks that our customers may fail to fulfil their obligations to us
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under our contracts. In the event that our customers become unable to pay us in accordance
with the payment terms, we would need to recognize impairment losses on our trade
receivables and our results of operations and financial condition may be adversely affected.
Furthermore, our prepayments to supplie rs and for advertising and marketing
expenses may involve uncertainties. There is no guarantee that the suppliers and service
providers will perform their obligations in accordance with the respective supply contracts
and/or service contracts. If our suppliers and/or service providers fail to provide raw
materials and/or services to us in a timely manner, or at all, we may be exposed to
prepayment default and impairment loss risk in relation to such prepayments, which may
materially and adversely affect our business a nd financial position. In such event, we would
need to recognize impairment losses on our other receivables and our results of operations
and financial condition may be adversely affected.
Our level of indebtedness may adversely aff ect our ability to raise additional capital to fund
our operations, expose us to interest rate risk to the extent of our variable rate debt and
prevent us from meeting our oblig ations under our indebtedness
During the Track Record Period, we, to certa in extent, relied on bank borrowings to
finance our capital expenditures and business operations. We expect that we may continue
to do so in the future and our liquidity risk may increase particularly under a downward
price trend of lithium carbonate. As of December 31, 2021, 2022 and 2023 and June 30,
2024, our fixed-rate bank borrowings amo unted to approximately RMB1,763.6 million,
RMB3,768.6 million, RMB7,905.4 million and RMB7,808.9 million, respectively. As of the
same dates, our gearing ratio was 99.2%, 112.0%, 239.6% and 264.0%, respectively.
We cannot assure you that we will not have a s ubstantial level of bank borrowings in
the future. The high level of bank borrowings and gearing ratio may (i) make it more
difficult for us to satisfy our obligations under our indebtedness, exposing us to the risk of
default, which, in turn, would negatively affect out ability to operate as a going concern, (ii)
require us to allocate a higher portion of our cash flow from operations to fund repayments
of principal and interest on our borrowings, thus reducing the availability of our cash flow
for other purposes (such as working capital, capital expenditure and other corporate
purposes); (iii) increase our vulnerability t o adverse economic or indus try conditions; (iv)
limit our flexibility in planning for, or reacting to, changes in our business or in the industry
in which we operate; (v) potentially restrict us from pursuing potential strategic business
opportunities; (vi) limit our ability to borrow a dditional funds; (vii) in crease our exposure
to interest rate fluctuations; and (viii) incr ease our exposure to unpredictable adverse
events, such as not having enough cash to cover potential product liability and/or expenses
for upgrading technologies or equipment requirement for our production; and (ix) decrease
our sales volume or our rate of expansion, since our marketing and sales budget will be
limited as a result of the repayment of our indebtedness.
As a result of the covenants and restrictions, we are limited in how we conduct our
business, and we may be unable to raise addit ional debt or equity financing to compete
effectively or to take advantage of new business opportunities. A breach of any of the
restrictive covenants could result in a default with respect to the related indebtedness. If a
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default occurs, the relevant lenders could dem and immediate payment. This, in turn, could
cause cross-default or payment acceleration of our other debts. In the event that some or all
of our debts are accelerated and becomes immediately due and payable, we may not have
the funds to repay, or the ability to refinance, such debt.
Our financial assets at fair value through other comprehensive income/profit or loss are
subject to fair value fluctuations and the valuation of such assets is subject to uncertainties due
to the use of valuation techniques and market observable and unobservable inputs, which may
in turn adversely affect our financial performance
During the Track Record Period, our financial assets at fair value through other
comprehensive income/profit or loss include our investments in listed and unlisted equity,
unlisted fund and wealth management products and have experienced fair value
fluctuations. As of December 31, 2021, 2022 and 2023 and June 30, 2024, our financial
assets at fair value through other comprehensive income/profit or loss amounted to
RMB92.9 million, RMB123.2 million, RMB201.0 million and RMB982.6 million,
respectively. See ‘‘Financial Information — Selected Key Items of Statement of Financial
Position — Financial Assets at Fair Value thr ough other Comprehensive Income/Profit or
Loss.’’ During the Track Record Period, we have recorded gains from changes in fair value
of financial assets at fair value through profit or loss. In 2021, 2022 and 2023, we recorded
gain from changes in fair value of financia l assets at FVTPL of RMB8.4 million, RMB16.3
million, RMB46.9 million respectively, and rec orded a loss from changes in fair value of
financial assets at FVTPL of RMB5.5 million f or the six months ended June 30, 2024. In
addition, in 2023, we also recorded loss from cha nges in fair value of financial liabilities at
FVTPL of RMB106.3 million. See ‘‘Financi al Information — Description of Key
Components of Our Results of Operations — Other Income, Gains and Losses.’’
Fair value of our financial assets at fair value through other comprehensive
income/profit or loss is determined by using valuation techniques and on the basis of
market observable and unobservable inputs. For details, see Note 37(d) to Part II of the
Accountant’s Report in Appendix I to this prospectus. Accordingly, such determination
requires us to make significant estimates, w hich may be subject to various variations,
adjustments and alterations, as well as market conditions and other factors, and therefore
inherently involves a certain degree of uncer tainty. Also, we cannot assure you that our
internal control procedures relating to our investment procedures will be effective and
adequate. Considering the inherent uncertainty in the fair value of financial assets at fair
value through other comprehensive income/profit or loss, any significant and adverse
changes in fair value could have an adverse effect on our financial position and results of
operations.
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We may be exposed to risks from our hedging activities in relation to the commodity prices of
our raw materials.
Certain of the principal raw materials are co mmodities such as lithium carbonate, urea,
and ethylene glycol, or are derived from co mmodities such as base oil from crude oil.
During the Track Record Period, we have eng aged in hedging transactions for these raw
materials with a view to mitigate risks associated with price fluctuations. While these
hedging activities potentially reduce our exposure to changes in commodity prices, the use
of such hedging instruments may ultimately lim it our ability to benefit from favorable price
trends. The successful use of hedging instruments depends on our ability to accurately
forecast the direction and extent of market m ovements within a given time frame. To the
extent selling prices remain stable or fluctuate i n a direction opposite to our anticipations,
we may realize losses on hedging transactions that are not offset by decreases in raw
material prices. Furthermore, if we fail to properly monitor and manage our hedging
positions, we may be required to deposit and u tilize additional funds, which could adversely
affect our cash and cash equivalent position. Although we have implemented certain risk
control procedures aimed at mitigating risks related to these hedging transactions, there can
be no assurance that these procedures will be effective and adequate. There is no guarantee
that we will not experience losses from these hedging transactions in the future, or that such
losses will not have a material adverse effect on our business, financial condition, results of
operations and prospects. For details, see ‘‘Business — Our Businesses — LFP Cathode
Materials — Lithium carbonate hedging.’’
Goodwill impairment could negatively affect our results of operations
For the years ended December 31, 2022 and 2023 and for the six months ended June 30,
2024, we recognized provision for impair ment loss of goodwill of RMB28.9 million,
RMB72.8 million and RMB25.2 million, respective ly, as the respective recoverable amounts
of certain subsidiaries acquired during the Track Record Period were estimated to be lower
than their respective carrying amounts . For details, see Note 17 to Part II of the
Accountants’ Report in Appendix IA.
We perform our impairment test of goodwill on an annual basis or more frequently
when there is indication that the unit may be impaired. It should be noted that the goodwill
impairment tests involve our estimates and are based on certain assumptions on future
performance of the relevant cash generating unit and other factors, such as terminal growth.
Many of these factors are neither predictable nor within our control. If actual events in the
future differ adversely from our assumptions resulting in the recoverable amount being
lower than the carrying amount of the cash generating unit, we may need to set aside
impairment provisions, which could adversely affect our financial condition and results of
operations.
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Failure to fulfil our obligations in respect of cont ract liabilities could materially and adversely
affect our results of operation, liquidity and financial position
Our contract liabilities are recognized wh en payment from a customer is received or is
due (whichever is earlier) before we transfer the related goods or services. As of December
31, 2021, 2022 and 2023 and Jun e 30, 2024, we had contract liabilities of RMB60.2 million,
RMB425.7 million, RMB21.9 million and RMB30.1 m illion, respectively. If we are not able
to fulfil our obligations with respect to our c ontract liabilities, the amount of contract
liabilities will not be recognized as revenue. As a result, our results of operations, liquidity
and financial position may be mat erially and adversely affected.
If we fail to maintain an effective distributio n network for our automotive specialty chemical
products or manage the activities of our distributors, our business could be adversely affected
We rely on our distributors to distribute and market our automotive specialty chemical
products. During the Track Record Period, revenue from distributors accounted for
approximately 50.3%, 50.8%, 44.1% and 45.4% of our total revenue from sales of
automotive specialty chemical products.
The performance of the distributors, thei r sales network and their ability to expand
their businesses are crucial to the future growth of our automotive specialty chemical
business and directly affect sales volume and profitability of our automotive specialty
chemical business. If most of our distribution or other agreements are suspended,
terminated or otherwise expired without ren ewal, our profitability could be materially
and adversely affected. W e cannot assure you that we w ill be able to maintain our
agreements with the distributors on favorab le terms or at all. The distributors may not be
able to maintain their competitiveness, or sell and market our products successfully, or we
may not be able to monitor the distributors directly to ensure efficient sales of our
automotive chemical pro ducts to their customers.
Furthermore, if the sales volume of our products cannot be maintained at a
satisfactory level, the distributors may not place orders on our new products with us or
may reduce the quantity of our existing products or may ask for discount on the purchase
price. In addition, we may not have sufficient control over the distributors (or their
sub-distributors), and we cannot assure you that the distributors will not breach their
distribution agreements or will comply with their obligations thereunder, including those
with respect to our pricing policies and designated distribution area. The loss of the
distributors, reduced orders from them, the expiry of distribution agreements without
renewal or breach of the terms of the distri bution agreements, could materially and
adversely affect our business and financial condition and operating results. If we are unable
to maintain or grow our sales and distribution n etwork, our automotive specialty chemicals
business could experience a decline in sales and market share.
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Our business may be adversely affected if we fail to obtain, or experience material delays in
obtaining or renewing requisite government approvals or licenses for carrying out our
operations or our construction and expansion projects
We are required to obtain and maintain cer tain licenses, permit s, registration,
certificates and approvals for our business o perations and throughout multiple stages of our
new construction and production expansion projects. In addition, various completion
inspections may be required before we commen ce production at new production facilities.
We must meet various specific conditions in order for the government authorities to
issue or renew any such license, permits, regis tration, certificates or approvals, or complete
necessary inspections. We cannot guarantee that we will be able to adapt to new rules and
regulations that may come into effect from time to time with respect to our business
operations or that we will not encounter material delays or difficulties in fulfilling the
necessary conditions to obtain and/or renew all necessary license, certificates, permits or
registration for our operations in a timely mann er, or at all, in the future. Therefore, in the
event that we fail to obtain or renew, or encounter significant delays in obtaining or
renewing, the necessary government approvals for any of our operations, we will not be able
to continue with our relevant business development plans or production activities, and our
business, financial condition and results of operations may be adversely affected.
We are subject to environmental, handling of hazardous substances, chemical manufacturing,
health and safety laws and regulations and pro duction standards and any inability to comply
with such requirements and standar ds may subject us to liabilities
Our business and/or operational activities, such as the production and sales of our
products, storage and transportation of our products and raw materials, are governed by
laws and regulations, administrative det erminations, court decisions and similar
constraints, especially the extensive enviro nmental, handling of hazardous substances,
chemical manufacturing, healt h and safety laws and regulations and stringent standards in
relation to the production and sale of our products which are promulgated by the PRC
government.
Meanwhile, to comply with the extensive en vironmental laws and regulations relating
to air and water quality, sewage management and public health and safety in the PRC, we
must obtain approval for environmental impact assessment reports and environmental
acceptance approval of our facilities under construction, and undergo annual inspection of
production facilities by relevant PRC authorities to ensure the safety of our equipment. If
we fail to obtain such environmental approval or complete the annual inspection, our
facilities under construction may be suspended and the relevant authorities may suspend the
operation of our production facilities and impose a fine on us.
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In addition, the relevant laws and regulations, administrative determinations and court
decisions in the PRC and other jurisdictions which we are subject to continue to evolve,
which may involve stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed production
facilities as well as a heightened degree of resp onsibility for companies and their officers,
directors and employees. Any changes or amendments to such laws or regulations may
cause us to incur additional capital expenditures, costs that we may not be able to pass on to
customers, or other obligations or liabilitie s, which could decrease our capital and our
ability to pursue develop ments in other areas.
Given the magnitude, complexity and continuous amendments to these laws and
regulations, compliance therewith may be onerous and may involve substantial financial
resources as well as other resources to establish efficient compliance and monitoring
systems. The liabilities, costs, obligations an d requirements associated with these laws and
regulations may therefore be substantial and may delay the commencement of, or cause
interruptions to, our operations. Non-compliance with the laws and regulations applicable
to our operations may even result in substantia l penalties or fines, suspension or revocation
of our relevant licenses, termination of government contracts or suspension of their
operations. Such events could impact our results of operations, financial condition and
reputation, all of which could adversely aff ect our ability to be profitable and attract new
customers.
Our business and operations require significant capital resources on an ongoing basis and are
subject to uncertainties
We operate in capital intensive industries that require substantial capital and other
long-term expenditures, including expenditures for maintaining production facilities as well
as machinery and equipment in the PRC. We al so require significant capital to build,
maintain, operate and expand our produc tion facilities, purchase machinery and
equipment, and develop new technologies and products. For the years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024, our capital expenditures
were RMB666.1 million, RMB2,233.7 million, RMB3,209.9 million and RMB562.5 million,
respectively. To the extent that we constr uct new production facilities or expand our
production capacities, we expect to fund th e related financial commitments and other
capital and operating expenses from a combination of cash on hand, cash generated from
operations, bank borrowings and net proceeds from the Global Offering. However, no
assurance can be given that we will be able to generate sufficient cash from our operations
or obtain the necessary financing or that such financing will be at interest rates and on other
terms that are reasonable to us or consistent with our expectations. To the extent we cannot
finance our operations, expansions or acquisitions at reasonable rates or at all in the future,
our business may be harmed. In addition, our overall expansion as well as our contractual
obligation to fulfill minimum purchase requirements under some of our long-term supply
agreements may require us to procure more raw materials which may force us to incur
higher working capital needs that may affe ct our working capital operation. We cannot
assure you that we will not experience any higher working capital needs in the future or
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such cost and expenses associated with our exp ansion plans can be offset by corresponding
increases in revenue, and our business, financial position, results of operations and
prospects and working capital may be affected.
Our Controlling Shareholders’ failures to comply with the terms of guarantees for our
borrowings could have a material adverse impact on our business and results of operations
As of the Latest Practicable Date, we had outstanding bank loans for which our Mr.
Shi and/or Ms. Zhu (being our Controlling S hareholders) provided guarantees (the
‘‘Controlling Shareholders’ Guarantees ’’). As of June 30, 2024, the aggregate balance of the
guaranteed loans was approximately RMB1, 796.2 million, representing approximately
23.00% of our total bank borrowings. See ‘‘Rel ationship with Our Cont rolling Shareholders
— Independence from Our Controlling Shareho lders — Financial Independence.’’ Our
Directors are of the view that premature discharge of all outstanding Controlling
Shareholders’ Guarantees before the Listing would be impractical and unduly onerous to
the Group and would not be in the best interests of our Group and our Shareholders,
considering that early discharge of the Contro lling Shareholders’ Guar antees would require
renegotiation of the terms with the relevant banks, and the renegotiation would be
time-consuming and may affect our normal operation. Therefore, the Controlling
Shareholders’ Guarantees will not be released before Listing. If we fail to obtain
financing without guarantees from our Cont rolling Shareholders, our liquidity and
business may be materially adversely affected. Addit ionally, if our Controlling
Shareholders fail to comply with the terms of the guarantees, our creditors may
accelerate the payment sche dule of our banking facilities, which could have a material
adverse effect on our liquidity and business.
The repurchase rights exercised against us could have a material adverse impact on our
financials and results of operations
On October 18, 2021, our Company entered into a capital increase agreement (the
‘‘Liyuan Second Capital Increase Agreement ’’) with the then existing shareholders of
Changzhou Liyuan and certain new investors (the ‘‘ Liyuan New Investors ’’). See ‘‘History
and Development — Our Strategic Cooperatio n — Establishment of Changzhou Liyuan in
2021 and Subsequent Capital Increase.’’ Pursu ant to the terms of the Liyuan Second Capital
Increase Agreement, in the event that, among others, our Company fails to make an
announcement on the spin-off and qualified lis ting (as defined in the Liyuan Second Capital
Increase Agreement) of Changzhou Liyuan with in four years after the completion date of
the capital increase on December 16, 2021 (the ‘‘ Liyuan Completion Date ’’), or Changzhou
Liyuan fails to complete a qualified listing wi thin five years after December 16, 2021, and
the Liyuan New Investors and our Company are unable to reach a consensus on the
progress of the qualified listing (failure to comp lete a qualified listing within five years after
the Liyuan Completion Date as a result of the related party transactions between
Changzhou Liyuan and the Liyuan New Investors excepted), the Liyuan New Investors
shall have the right to deman d our Company or its designated party to repurchase the
equity interest in Changzhou Liyuan held by the Liyuan New Investors.
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Further, on December 31, 2023, our Company e ntered into another capital increase
agreement (the ‘‘ Liyuan Fourth Capital Increase Agreement ’’) with, among others, the
Liyuan New Investors and Jianxin Investment Asset Investment Co., Ltd. ( 建信金融資產投
資有限公司)( ‘ ‘Jianxin Investment ’’, together with the Liyuan New Investors are referred to
as the ‘‘ Liyuan 2023 Investors ’’). See ‘‘History and Development — Our Strategic
Cooperation — Establishment of Changzhou Liyuan in 2021 and Subsequent Capital
Increase.’’ Pursuant to the terms of the Liyu an Fourth Capital Increase Agreement, in the
event that, among others, our Company fails to make an announcement on the spin-off and
qualified listing (as defined in the Liyua n Fourth Capital Increase Agreement) of
Changzhou Liyuan within four years after February 5, 2024 (the ‘‘ Liyuan Fourth Capital
Increase Completion Date ’’), or Changzhou Liyuan fails to complete a qualified listing
within five years after the Liyuan Fourth C apital Increase Comp letion Date, and the
Liyuan 2023 Investors and Changzhou Liyuan are unable to reach a consensus on the
progress of the qualified listing, Jianxin Investment shall have the right to demand our
Company or its designated party to repurchase the equity interest in Changzhou Liyuan
held by it.
In addition, on May 13, 2024, our Company entered into another capital increase
agreement (the ‘‘ Liyuan Fifth Capital Increase Agreement ’’) with, among others, Kunlun
Gongrong Green (Beijing) New Industry I nvestment Fund Partnership (Limited
Partnership) ( 昆侖工融綠色（北京）新興產業投資基金合夥企業（有限合夥）)( ‘ ‘ Kunlun
Gongrong ’’, together with Jianxin Investment, the ‘‘ Series A Liyuan Investors ’’) and the
Liyuan 2023 Investors (collectively, the ‘‘ Liyuan 2024 Investors ’’). See ‘‘History and
Development — Our Strategic Cooperation — Establishment of Changzhou Liyuan in 2021
and Subsequent Capital Increase.’’ Pursuant to the terms of the Liyuan Fifth Capital
Increase Agreement, in the event that, among others, our Company fails to make an
announcement on the qualified listing (as defined in the Liyuan Fifth Capital Increase
Agreement) of Changzhou Liyuan within four years after the Liyuan Fourth Capital
Increase Completion Date, or Changzhou Liyu an fails to complete a qualified listing within
five years after the Liyuan Fourth Capital Increase Completion Date, and the Series A
Liyuan Investors and Changzhou Liyuan are unable to reach a consensus on the progress of
the qualified listing, each of the Series A Liyuan Investors shall have the right to demand
our Company or its designated party to repurchase the equity interest in Changzhou Liyuan
held by it.
In the event that the Liyuan 2024 Investors ex ercise their rights of repurchase against
us, our Company would be required to repurchase the equity interest in Changzhou Liyuan
held by the Liyuan 2023 Investors and our financial condition and operating results may be
materially and adversely affected by the additional payment obligations created thereunder.
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Mr. Shi, one of our Controlling Shareholders, ma y cease to be our Controlling Shareholder in
case of default of his obligations under a bona fide commercial loan, which could have a
negative impact on the control of Mr. Shi in the operations of the Company and in turn our
business, operation and financial results
As of the Latest Practicable Date, Mr. Sh i, one of our Controlling Shareholders,
beneficially owned 212,662,195 A Shares, representing 37.63% of the total issued share
capital of our Company, and, together wi th the 23,618,649 A Shares and 1,901,208
respectively held by Ms. Zhu (Mr. Shi’s wife) a nd Nanjing Bailey, controlled 42.15% of the
voting rights as of the Latest Practicable Date . In order to obtain financing for his personal
needs, Mr. Shi has from time to time pledged the A Shares he owned to certain PRC
financial institutions as collateral. As of th e Latest Practicable Date, Mr. Shi has pledged
56,800,000 A Shares, representing 10.05% of the total issued share capital of our Company
as security in favor of certain PRC financial in stitutions regulated by the NAFR and/or the
CSRC. For further details of the pledge arrangements, see ‘‘Substantial Shareholders —
Share Pledges by Mr. Shi.’’
In the unlikely event of default by Mr. Shi under the said bona fide commercial loan(s),
the lenders can enforce the share pledge arrangement and Mr. Shi may cease to be a
Controlling Shareholder, which could have a n egative impact on the control of Mr. Shi in
the operations of the Company and in turn our business, operation and financial results.
Defects related to certain of our propertie s may adversely affect our ability to use such
properties
Pursuant to the Measures for Administrat ion of Lease of Commodity Properties ( 《商
品房屋租賃管理辦法》), which was promulgated by the Ministry of Housing and
Urban-Rural Development of the PRC ( 中華人民共和國住房和城鄉建設部) on December
1, 2010 and became effective on February 1, 2011, both lessors and lessees are required to
file the lease agreements for registration and obtain property leasing filing certificates for
their leases. As of the Latest Practicable Date, the lease agreements with respect to eight of
the properties we leased were not registered wi th the appropriate government authorities in
mainland China. See ‘‘Business — Legal Pro ceedings and Compliance — Non-compliance
— Non-registration of lease agreements.’’ As advised by our PRC Legal Advisor, we may be
required by relevant governmental authorities t o file these lease agreements for registration
within a time limit, and may be subject to a fine for non-registration exceeding such time
limit, which may range from RMB1,000 to RMB10,000 for each lease agreement. There can
be no assurance that the relevant government authorities would not impose administrative
penalties on us as a result of the non-registrat ion of these lease agreements. If we are liable
for fines because of the non-registration of lease agreements, our business operation could
be adversely affected.
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As of the Latest Practicable Date, there we re defects in some of our owned properties
and leased properties. See ‘‘Busines s — Legal Proceedings and Compliance —
Non-compliance.’’ If we are required to demolish the buildings, relocate our operations
and/or suspend our production activities by the relevant government authorities, or if we
fail to find alternative site in a timely ma nner and on acceptable terms, our facilities,
business, operating and financial results may be adversely affected.
We are exposed to risks in relation to work safety and occurrence of accidents as well as other
operational, transportation, occupational and environmental-related risks, which could
materially and adversely affect our business, financial condition and results of operations
Our business and production are subject to various risks, including operational and
transportation-related risks and occupational and environmental hazards. We may
experience various types of operational difficulties in connection with the production of
our products. Some of our raw materials and chemicals are hazardous and their storage and
use in the production process involve inherent risks. Accidents could materially affect our
production and may give rise to personal injuries and environmental hazards.
Our operations may also be subject to production difficulties such as capacity
constraints, mechanical and systems failures , construction and upgrade delays and delays in
the delivery of machinery, any of which could cause suspension of production and reduced
output. Scheduled and unscheduled maintenance programs may also affect our production
output. Any significant manufacturing disru ption could adversely affect our ability to
produce and sell our products, which could have a material adverse effect on our business,
financial condition and results of operations.
In addition, our business operations are dependent on access to adequate
transportation channels. We rely on road a nd maritime transportation to receive raw
materials from suppliers and deliver our pro ducts to customers. However, there can be no
assurance that the existing or planned transportation systems and service capacity of our
logistics service providers will be sufficient to meet our transportation requirements. Any
shortage, disruption or limitat ion of transportation capacity may limit the volume of supply
delivered to us or products delivered to our c ustomers and may cause us to have shortage in
inventories or accumulate inventories and scale back production. Furthermore, any
disruption to, or decrease in, the availability o r capacity in the transportation networks,
such as outbreak of a contagious or epidemic disease and natural disasters, major highway
accidents, strikes, seasonal congestion during holidays or any significant rise in
transportation costs, may also result in d elay in transportation and delivery of our
products, disruption of raw material supplies, as well as temporary closure of our
production facilities for quarantine or for preve ntive purposes. The time required to rectify
such problems could be lengthy, and could result in significant increases in cost or reduction
in sales which could have a material adverse effect on our businesses and results of
operations.
Due to the nature of our business, we engage in certain inherently risky and hazardous
activities, including, among other things, using heavy machinery and handling hazardous
chemicals. As a result, we are subject to risks asso ciated with these activities, including toxic
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gas and liquid leakages, equipment failures, industrial accidents, fires and explosions. These
risks and hazards may result in personal injuries and fatalities, damage to or destruction of
properties or production facilities, and pollu tion and other environmental damages. Any of
these consequences, if significa nt, could result in business in terruption, legal liability and
damage to our reputation and corporate image.
During the Track Record Period and up to the Latest Practicable Date, we have not
experienced any significant incidents or accidents in relation to workers’ safety, and there
had been no material violation of any environme ntal laws and regulations applicable to our
operations. However, we cannot assure any of these risks would not occur in the future, the
occurrence of which may harm our business operations and reputation, which could inhibit
our ability to take on other contracts or otherwise grow our business.
Any preferential income tax treatment and the government grants that we enjoy in the regions
where we operate may be altered or terminated
According to the applicable PRC tax regula tions, the statutory corporate income tax
rate in the PRC is 25%. Our Company and certain of our subsidiaries have been qualified as
a High and New Technology Enterprise and have enjoyed a preferential income tax rate of
15% since then. In 2021 and 2022, our effective income tax rate is 14.5% and 11.3%,
respectively. In 2023, we recorded income tax credit of RMB316.4 million. For further
details, see ‘‘Financial Information — Description of Key Components of Our Results of
Operations — Income Tax (Expense)/credit’’ and Note 10 to Part II of the Accountants’
Report in Appendix IA. In addition, upon commencement of operation of our Indonesia
Plant, we may enjoy preferential income tax t reatments and government grants from the
local government.
We cannot assure you that our subsidiaries will be able to enjoy or continue to enjoy
the aforementioned preferential income tax treatment or other existing tax treatment in
relation to transactions within the Group. For instance, under applicable PRC laws and
regulations, the preferential income tax treatment for a ‘‘High and New Technology
Enterprise’’ is subject to renewal every three years and can be revoked by the relevant local
authorities upon a review process on the elig ibility of such accreditation. We cannot assure
you that our Company and our subsidiaries will continue to be accredited as a ‘‘High and
New Technology Enterprise’’ upon expiration of the relevant certificate, or that such
accreditation will not otherwise be revoked by the relevant local authorities. If we fail to
renew any preferential tax treatment qualif ication in time or at all, or if any change or
termination of government grants or preferent ial tax treatment occurs, the decrease in other
income or increase in our tax charge or any other r elated tax liabilities could materially and
adversely affect our results of oper ations and financial condition.
In addition, during the Track Record Period, we received government grants primarily
in the form of tax refunds, operating subsidies and various industry-specific subsidiaries to
reward our efforts for technological innovation. For the years ended December 31, 2021,
2022 and 2023 and the six months ended June 30, 2024, our government grants amounted to
RMB22.7 million, RMB47.1 million, RMB86.5 million and RMB106.1 million,
respectively.
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Our eligibility for government grants is depe ndent on various factors, including the
conditions we have to meet, the relevant governm ent policies and the availability of funding
at different authorities. We cannot guarantee that we will continue to receive similar levels
of government grants, or at all. If we no longer receive any government grants in time or at
all, or if the amount of government grants we receive decreases significantly, our business,
results of operations and financial condition will continue to be adversely affected.
Share-based payments may lead to shareholding dilution for our Shareholders and adversely
affect our financial performance
We adopted share incentive schemes for the benefit of our Directors, senior
management, mid-level management, key te chnicians and employees who contribute to
the development and success of our Group . See Note 36 to Part II of the Accountants’
Report in Appendix IA to this prospectus and ‘‘Appendix IV — Statutory and General
Information — A. Further Information About Our Group — 5. 2023 Share Option
Scheme.’’ In 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, we
incurred share-based paymen t expenses of nil, RMB4.4 million, RMB2.7 million, RMB12.9
million and RMB4.7 million, respectively. T o further incentivize our employees to
contribute to our Group, we may pay additional share-based payment in the future.
Issuance of Shares with respect to such share-based payment may dilute the shareholding
percentage of our existing Shareholders. Such share-based payments may also increase our
expenses and therefore have a material and adverse effect on our financial performance.
We face competition in our business
We compete with a number of domestic and international companies in industries that
we operate in. The LFP cathode material market is highly competitive and concentrated,
and we expect that the competition will be even more intense in the future. In addition, the
automotive chemical industry in China is expect ed to witness significant growth. According
to Frost & Sullivan, the automotive specialty ch emical industry faces si gnificant challenges
due to the constantly evolving consumer demands. These demands are not limited to the
performance and efficiency of vehicles but also encompass environmentally friendly and
sustainable solutions. Our existing competitors may seek to increase their market shares
through various measures, such as continued research and development efforts, increased
production capacity, optimized production process and active marketing campaigns. Our
competitors may also seek to increase their m arket shares through the reduction of price.
We expect to face competition from both existing and new competitors as we expand our
business into new business lines, geographic regions and product categories. Competitive
pressure could also have an adverse impact on the demand for and pricing of our products,
which in turn affects our growth and market share. If we fail to compete effectively, we may
n o tb ea b l et or e t a i no re x p a n do u rm a r k e ts h a r e ,w h i c hw o u l dh a v eam a t e r i a la d v e r s e
effect on our business, results of operations and financial condition.
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Failure to maintain an effective quality control system could have a material adverse effect on
our business, financial condition and results of operations
As the quality of our products is critical to the success of our businesses, we must
maintain an effective quality control system for our production and other operational
activities. Our quality control system has been IATF16949, ISO9001 and ISO45001
certified. However, the effectiveness of our qu ality control system depends significantly on
a number of factors, including the design of t he system and the related training programs,
as well as our ability to ensure that our employees adhere to our quality control policies and
guidelines.
Any failure or deterioration of our quality control system could result in defects in our
products, which in turn may subject us to contractual, product liability and other claims.
Any such claims, regardless of whether they a re ultimately successful, could cause us to
incur significant costs, harm our business reput ation and result in significant disruption to
our operations. Furthermore, if any such claims were ultimately successful, we could be
required to pay substantial monetary damages or penalties, which could have a material
adverse effect on our businesses, financial condition, results of operations and reputation.
We depend on certain third parties for various services and products in connection with our
business
We rely on third-party suppliers for vario us goods and services including utilities,
energy, raw materials, manufacturing services , warehousing services and transportation
services which are in line with industry practice. We endeavor to source goods and services
from third-party providers whom we believe are able to meet our quality, delivery schedule
and other requirements. However, the goods and services provided by any of the third-party
service providers may not be provided in a timely manner or of satisfactory quality. If the
third-party providers do not perform satisfactorily, substantially reduce the amount and
scope of goods and services provided to us, subs tantially increase their prices or terminate
their business relationship with us, we may need to replace the third-party providers or take
other remedial measures which could increase our costs of operations. As we do not have
direct control over the third-party providers, if they become involved in unauthorized
provision of goods or services not complying with our requirements or that of our
customers, our reputation may be affected. Our reputation will also be adversely affected if
the third-party providers do not comply with ap plicable laws and regulations. This, in turn,
may materially and adversely affect our business, reputation, financial condition and results
of operations.
We may not be able to detect and prevent fraud, n egligence or other misconducts committed by
our employees or third parties
Our internal control system and procedures are designed to monitor our operations
and overall compliance. However, we cannot g uarantee that they will always enable us to
detect, prevent and take remedial measure si nr e l a t i o nt of r a u d ,n e g l i g e n c eo ro t h e r
misconduct committed by our employees, suppliers, business partners or other third parties
in a timely and effective manner. Examples of such behavior include crimes such as theft,
vandalism and bribery.
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Although we have limited control over the behavior of any of these parties, we may be
viewed as at least partially responsible for their conduct on contractual or tortious grounds.
We may become, or be joined as, a defendant in litigation or other administrative or
investigative proceedings and be held accountable for injuries or damages sustained by our
customers or third parties. To the extent that we cannot recover related costs from the
employees, suppliers, busine ss partners or third parties involved, we may experience
material adverse effects on our business, fina ncial position and results of operations. We
may also attract negative publicity and incur d amages to our reputation and brand value.
The failure to protect our intellectual property rights could have an adverse impact on our
business and competitiveness
We rely on a combination of trademark, trade secret and other intellectual property
laws as well as confidentiality agreements with our employees, suppliers, customers and
others to protect our intellectual properties. As of June 30, 2024, we had 350 patents
(among which 121 are invention patents), 125 copyrights, 712 trademarks and 15 domain
names in mainland China. See ‘‘Statutory and General Information — B. Further
Information about Our Business — 2. Our Material Intellectual Property Rights’’ in
Appendix IV. We consider these intellectual properties are crucial business assets and key to
customer loyalty and essential to our future growth. We may in the future have difficulty
obtaining patents, copyrights, registered trad emarks and other intellectual property rights,
and the patents, copyrights and registered t rademarks we receive may be insufficient to
provide us with meaningful protection or commercial advantage. Furthermore, we have
been and may continue to be involved in litigations and other proceedings initiated by us
against third parties for their infringement of our intellectual property rights. We cannot
provide assurance that any patent, copyright, registered trademark or other intellectual
property right owned by, or licensed to, us will not be invalidated, circumvented or
otherwise challenged in the countries where we operate, or we will be successful in defending
ourselves in intellectual property infringem ent claims. If we are unable to protect our
proprietary technology and intellectual property, our market position would be
undermined, and our business, financial condition and results of operations may be
materially and adversely affected.
Third parties may assert or claim that we have infringed their intellectual property rights,
which may disrupt and affect our business
Our success depends on our ability to use, d evelop and protect our technology and
know-how without infringing the intellectual property rights of third parties. We cannot
assure you 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 intellectual
property rights held by third parties. We have been and may continue to be challenged by or
be involved in litigations or other proceedin gs initiated by third parties, including
competitors as well as other entities or indivi duals, for infringement of their intellectual
property rights. We may not be fully aware of other parties’ intellectual property rights
involved in our systems, applications and busin ess operations and there may be third-party
trademarks, patents, copyrights, know-how or other intellectual property rights that are
infringed by our operations or other aspects of our business without our awareness. To the
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extent that our employees or other parties use intellectual property owned by others in their
work for us, disputes may arise as to the rights in related know-how and inventions. We
may have to incur considerable time and costs in dealing with any claims or litigation, and if
they are successful, we may be subject to s ubstantial damages, royalty payments,
restrictions from conducting our business and other stringent requirements unfavorable
to our business and operations. We may also be required to indemnify other parties or pay
settlement costs, and to obtain licenses, modify applications or refund fees, each of which
may be expensive and time-consuming. Such processes may create a distraction for our
management which could affect our business operations. Additionally, the interpretation
and application of intellectual property right laws of the PRC and the procedures and
standards for granting intellectual property rights in the PRC are governed by the relevant
laws and regulations in effect from time to time and still evolving, and we cannot assure you
that PRC courts or regulatory authorities would agree with our analysis. If we were found
to have violated the intellectual property r ights of others, we may be subject to liability for
our infringement or may be prohibited from using such intellectual property, and we may
incur licensing fees or be forced to develop alternatives of our own. As a result, our business
and results of operations may be materially and adversely affected.
We have limited business insurance coverage which could expose us to significant costs and
business disruption
We face various operational risks in connection with our businesses, including but not
limited to production interruptions caused by operational errors, electricity outages, the
failure of equipment and other risks; limi tations imposed by environmental or other
regulatory requirements; environmental or industrial accidents; and catastrophic events.
These risks can result in, among other things, damage to and destruction of production
facilities, personal injury or fatalities, mone tary losses and legal liability. The occurrence of
any of these events may result in the interruption of our operations and subject us to
significant losses or liabilities.
Besides statutory social insurances as required under relevant PRC Law including
pension insurance, medical insurance, work-rel ated injury insurance, maternity insurance,
and unemployment insurance, we mainly mainta in property-related insurance to cover our
buildings, facilities, equipment and inventorie s. We believe our existing insurance coverage
is adequate for our existing operations and is in line with industry standards. Despite the
above, we do not maintain insurance policies covering our business interruption or
key-man. As such, we cannot assure that our insurance coverage will be sufficient or
available to cover damages, liabilities or lo sses we may incur in the co urse of our business.
Moreover, there are certain losses for which insurance is not available in the PRC on
commercially practicable terms, such as losses suffered due to business interruptions,
earthquakes, typhoons, flooding, war or civil disorder. If we are held responsible for any
such damages, liabilities or losses due to insuff iciency or unavailability of insurance, there
could be a material adverse effect on our business, financial position and results of
operations.
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Increases in labor costs and the enforcement of stricter labor laws and regulations in the region
we operate may adversely affect our business and our profitability.
We are incorporated and substantially all of our operations are located in the PRC,
and China’s overall economy and the average wage in China have increased in recent years
and are expected to continue to grow. The average wage level of our employees has also
increased in recent years. We expect that our labor costs, including wages and employee
benefits, will continue to increase. Unless we are able to pass on these increased labor costs
to our customers, our profitability and resu lts of operations may be materially and
adversely affected.
We have been subject to stricter regulatory requirements in terms of entering into labor
contracts with our employees and paying various statutory employee benefits, including
pensions, housing funds, medical insurance, work-related injury insurance, unemployment
insurance and maternity insurance to designated government agencies for the benefit of our
employees. Our plan to streamline and rationalize our pool of employees or otherwise
change our current employment or labor practices may be limited by the PRC Labor
Contract Law and its implementation rules, as well as any future changes to labor laws and
regulations. We may need to change or adapt our labor practices from time to time in
response to new labor laws, regulations, rules and policies, but we may not be able to do so
in a timely and efficient manner. Failure to do so may adversely affect our businesses and
results of operations.
Under the PRC Social Insurance Law and the Administrative Measures on Housing
Provident Fund, employees are required to participate in pension insurance, work-related
injury insurance, medical insurance, unemplo yment insurance, maternity insurance, and
housing provident funds, and employers are required, together with their employees or
separately, to pay the contributions to social insurance and housing provident funds for
their employees. Also, the PRC Labor Contract Law and the Interim Provisions on Labor
Dispatch imposed certain restrictions on the use of dispatched labor including but not
limited to the form of employment, numbers of dispatched workers, etc. During the Track
Record Period, we had not been subject to any a dministrative penalties in connection with
PRC labor laws and regulations. However, we cannot assure you that our historical and
current labor-related practices will at all tim es be deemed in full comp liance with relevant
PRC laws and regulations by PRC government authorities mainly due to the evolving
interpretation and implementation of these laws and regulations. In the event of us being
deemed as noncompliant with the relevant laws and regulations, we may be required to
rectify within a prescribed time period and t o pay fines, late payment fees and/or other
penalties if we fail to do so.
We cannot assure you that our employm ent practices will be deemed to be in
compliance with labor-related laws and regul ations in mainland China due to the changes in
labor laws and regulations, related interpret ations and implementations, which may subject
us to labor disputes or government investi gations. If we are deemed to have violated
relevant labor laws and regulations, we may be required to provide additional
compensation to our employees and our business, financial condition and results of
operations could be materially and adversely affected.
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We may be involved in legal or other proceedings arising out of our operations, including
product liability claims, from time to time and may face significant liabilities as a result
We may, from time to time, be involved in disputes with various parties involved in our
business operations, including but not lim ited to our customers, suppliers, employees,
logistics service providers and banks. These disputes may lead to legal or other proceedings,
which may result in damages to our reputation, substantial costs and diversion of our
resources and management’s attention. In addition, we may encounter additional
compliance issues in the course of our operations, which may subject us to administrative
proceedings and unfavorable results, and re sult in liabilities and delays relating to our
production or product launch schedules. We cannot assure you as to the outcome of such
legal proceedings, and any negative outcome may materially and adversely affect our
business, financial condition and results of operations.
We are also exposed to potential product liability claims in the event that there is any
damage caused by defective products. A successful product liability claim against us could
require us to pay for substantial damages. Prod uct liability claims against us, whether or
not successful, are costly and time-consumin g to defend. In the event that our products
prove to be defective, we may be required to redesign or recall such products. We cannot
assure you that a product liab ility claim will not be brought against us in the future. A
product liability claim, with or without merit, could result in significant adverse publicity
against us, and could have a material adverse effect on the marketability of our products
and our reputation, which in turn, could have a material adverse effect on our business,
financial condition and results of operations.
Our success depends upon the retention of our Directors, senior management, as well as our
ability to attract and retain qualified and experi enced employees and resignation of any of the
Directors, members of our senior management or key employees would adversely affect our
business operation and financial performance
Our continued success is highly dependent upon the efforts of our Directors, senior
management and other key employees. If any of them leaves and we are unable to promptly
hire and integrate a qualified replacement , or if we are unable to attract and retain
additional qualified personnel for our future growth, our growth may be limited and/or our
business, financial position and results of o perations may be materially and adversely
affected. For further details on our Directors and senior management, see ‘‘Directors,
Supervisors and Senior Management.’’
We have not obtained any ‘‘key person’’ insurance on our key personnel. Although
each of our senior management, departme nt heads, major technical and marketing
personnel has entered into non-compete agreement with us, we cannot assure that such
non-competition provisions shall be enforceable in the event of dispute arising between our
senior management and other key employees and us, as we may not have provided adequate
compensation to them for their non-competition obligations, which is required under
relevant PRC laws. As such, if any of our senior management and other key employees joins
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a competitor or forms a competing company, we may lose customers, know-how and key
professionals and staff members, without any recourse, in which case our business, financial
position and operating results could be materially and adversely affected.
Negative news or publicity may adversely affect our reputation, business and growth prospects
Any negative news or publicity in relation t o us, or any of our Directors, management,
Controlling Shareholders and joint ventures or b usiness partners or counter-parties, or any
of their respective affiliates (including, whe re applicable, any join t venture or business
partner or counter-party thereof), among others, whether or not they act on our behalf or
otherwise utilize or share our brand name, and even if proven untrue, could adversely affect
our reputation, business and growth prospects.
We cannot assure you that such negative news or publicity would not damage our
reputation or brand image. Given our specialized industry and market, negative news,
publicity and word of mouth could spread quickly and negatively impact our reputation,
brand image or relationship with third parti es, which could have a material adverse effect
on our business, financial condition and results of operations. Even if we are not a party to,
not involved in, and not liable to these litigations, disputes and allegations, we cannot
assure you that any of such negative news or publicity will not affect our reputation, brand
image or relationship with third parties, which could in turn have a material adverse effect
on our business, financial condition and results of operations.
We are subject to evolving laws and regulations regarding personal data and information and
may fail to protect our consumer’s data and information
Primarily in relation to our automotive s pecialty chemical business, we obtain
consumer data through our self-operated online stores, websites and mobile apps, such as
our end consumers’ personal information, payment-related information and transaction
history. Any actual or alleged leakage or unauthorized usage of the consumer data we have
collected or concerns about our practices with regard to the collection, storage, use or
disclosure of personal information or other privacy-related matters, even if unfounded,
could damage our reputation, and as a result, our business, financial condition, results of
operations and prospects may be materially and adversely affected.
Advances in technology, the expertise of hackers, new discoveries in the field of
cryptography or other events or developments could result in compromises or breaches of
the technologies that we use to protect conf idential information. We may not be able to
prevent third parties, such as hackers, from illegally obtaining and misappropriating our
proprietary data and consumer information. In addition, we have limited control or
influence over the security policies or measu res, adopted by e-commerce platforms, online
payment service providers, logistics service providers and other third parties in relation to
consumers’ online purchase activities. Any n egative publicity on our IT system’s or online
sales channels’ safety or privacy protection mechanism and policy could have a material
adverse effect on our public image and reputation.
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Furthermore, the laws and regulations in the PRC governing personal data are
evolving. Any change in such laws and regulations governing personal data could adversely
affect our ability to use such data or discourage consumers from u sing online sales channels,
either of which could have a material adverse ef fect on our business, financial condition,
results of operations and prospects.
Natural disasters, public health and public security hazards may severely disrupt our business
and operations
The outbreak of any severe diseases such as the human swine flu, also known as
Influenza A (H1N1), H5N1 avian flu, severe ac ute respiratory syndrome or the COVID-19,
if uncontrolled, could have an adverse effect on the overall business sentiment and
environment in locations where we operate, which in turn may have an adverse impact on
domestic consumption and on our products. In addition, if employees are affected by a
severe communicable disease, we may be required to adopt measures to prevent the spread
of the disease, which may cause disruption to our operation. The spread of any severe
communicable disease may also affect the ope rations of our suppliers and other service
providers.
Moreover, any future occurrence of natural d isasters, including e arthquakes, floods,
landslides and droughts which may result in deaths of people, significant economic losses
and significant and extensive damage to factories, power lines and other properties, as well
as power failures and shortages, blackouts, transportation and communications disruptions
and other losses in the affected areas may, among other things, materially and adversely
affect or disrupt our operations or those of our customers and suppliers. Furthermore, such
natural disasters, public health and public secu rity hazards may severely restrict the level of
economic activity in affected areas, which may in turn materially and adversely affect our
business, results of ope rations and prospects.
We could be adversely affected as a result of any sales we make to certain countries that are,
or become subject to, sanction administered by the United States, the European Union, the
United Kingdom, the United Nations and other relevant sanctions authorities
The United States and other jurisdictions or organizations, including the European
Union, the United Kingdom, the United Nations and Australia, have, through executive
order, legislation or other governmental means, implemented measures that impose
economic sanctions against such countries or a gainst targeted industry sectors, groups of
c o m p a n i e so rp e r s o n s ,a n d / o ro r g a nizations within such countries.
These sanctions programs are reviewed or amended by sanctions authorities from time
to time, and new requirements or restrictions may come into effect which might increase
scrutiny on our business or result in one or more of our business activities being deemed to
have violated sanctions, or being sanctionable. If we were required to pay penalties as a
result of any sanctions violations, or alter ou r business to prevent violation of sanctions
rules or regulations, it could adversely affect our results of operations.
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In addition, economic sanctions laws impos ed by the United States, European Union,
and other jurisdictions may expose us to potenti al compliance risks. Sanctions laws prohibit
business in or with certain countries or gover nments, and with certain persons or entities
that have been sanctioned by the United States, the European Union or other governments
and international or regional organizations, such as the United Nations Security Council.
Although we mainly operate within the PRC, we from time to time have engaged or may
engage in certain international business that could expose us to international sanction risks.
Although our Group’s activities during t h eT r a c kR e c o r dP e r i o dd on o ti m p l i c a t e
restriction under international sanctions, it is possible that governmental authorities may
in the future impose sanctions on us, particularly in the event that we fail to detect and, as
appropriate, remediate such violations, and there can be no assurance that we can always be
in compliance with all such sanctions laws in the future. We also cannot predict with
certainty the interpretation or implementa tion of any sanctions laws or policies or their
future changes. Any alleged violations of san ctions laws or engagement in sanctionable
activities could adversely affect our reputation, business, results of operations and financial
condition. For details of our internal control measures to identify and minimize our
exposure to sanctions risk, see ‘‘Business — Risk Management and Internal Control’’.
RISKS RELATING TO DOING BUSINESS IN THE COUNTRIES AND REGIONS
WHERE WE OPERATE
You may have limited recourse in effecting services of legal process or enforcing overseas
judgments against us, our Directors, Supervisors and our senior management
Most of our Directors and executive officers reside within the PRC, and most, if not
all, of our assets and substantially all of the assets of those persons are located within the
PRC. It may be difficult, complicated and time- consuming for investors to effect service of
process upon us or those persons inside the PRC or to enforce against us or them in the
PRC any judgments obtained from non-PRC courts.
A judgment of a court of another jurisdiction may only be reciprocally recognized or
enforced if the jurisdiction has a treaty wit h the PRC or if the judgment complies with the
principle of reciprocity and do not violate th e basic principles of the PRC laws, national
sovereignty, security, social interests and public interests, subject to the satisfaction of other
requirements. Judgments rendered by Hong Kong courts may be recognized and enforced in
the mainland China if the requirements set forth by the Arrangement on Mutual
Recognition and Enforcement of Judgments in Civil and Commercial Matters by Courts
of Mainland and of the Hong Kong Special Administrative Region Pursuant to Agreed
Jurisdiction by Parties Concerned ( 《關於內地與香港特別行政區法院相互認可和執行當事人
協議管轄的民商事案件判決的安排》) (the ‘‘Arrangement ’’) are met. Specifically, pursuant to
the Arrangement, a party with a final cour t judgment rendered by a Hong Kong court
requiring payment of money in a civil and commercial case with a choice of court agreement
in writing may apply for recognition and enfo rcement of the judgment in mainland China.
Similarly, a party with a final judgment rend ered by a court in mainland China requiring
payment of money in a civil and commercia l case with a choice of court agreement in
writing may apply for recognition and en forcement of such judgment in Hong Kong. A
choice of court agreement in writing is def ined as an agreement in writing entered into
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between the parties after the effective date of the arrangement in which a Hong Kong or
mainland China court is expressly designated a s the court having sole jurisdiction for the
dispute. On January 18, 2019, the PRC and Hong Kong entered into an agreement
regarding the scope of judgments which may be enforced between mainland China and
Hong Kong (《關於內地與香港特別行政區法院相互認可和執行民商事案件判決的安排》) (the
‘‘New Arrangement ’’). The New Arrangement broadens the scope of judgments that may be
enforced between mainland China and Hong Kong under the Arrangement. Under the New
Arrangement, any party concerned may appl y to relevant PRC court or Hong Kong court
for recognition and enforcement of a final court judgment in civil and commercial cases
subject to the conditions set forth in the New Arrangement. Although the New
Arrangement has come into effect, uncertainties remain as to the outcome and
effectiveness of any action brou ght under the New Arrangement.
The recognition and enforcement of foreign judgments are provided for under the PRC
Civil Procedures Law. Courts in mainland China may recognize and enforce foreign
judgments in accordance with the requirements of the PRC Civil Procedures Law based
either on treaties between mainland China and the country where the judgment is made or
on principles of reciprocity between jurisdictions. In addition, according to the PRC Civil
Procedures Law, the courts in mainland China will not enforce a foreign judgment against
us or our Directors and officers if they decide that the judgment violates the basic principles
of PRC laws or national sovereignty, security or public interest. As a result, there is no
assurance that a judgment rendered by a court outside the PRC would be recognized and
enforced in a court in mainland China.
Payment of dividends or gains from the sale or other disposition of our H Shares is subject to
taxation under PRC law
Under applicable PRC tax laws, regulations and statutory documents, non-resident
individuals and enterprises are subject to taxes with respect to dividends received from us or
gains realized upon the sale or other dispositi on of our H Shares. Non-resident individuals
are generally subject to PRC individual income tax under the Individual Income Tax Law of
the PRC (《中華人民共和國個人所得稅法》) with respect to the aforesaid gains at a rate of
20% unless specifically exempted by the tax authority of the State Council or reduced or
eliminated by an applicable tax treaty. We are required to withhold related tax from
dividend payments.
Pursuant to applicable regulations, domestic non-foreign-invested enterprises issuing
shares in Hong Kong may generally, when distr ibuting dividends, withhold individual
income tax at the rate of 10%. Where, under the circumstance of withholding at source or
designated withholding, non-resident taxpayers determine through self-assessment that they
are eligible for and need to claim treaty ben efits, they shall fill out an Information
Reporting Form for Non-resident Taxpayers Claiming Treaty Benefits, submit it to their
withholding agents. If a non-resident taxpa yer fails to submit an Information Reporting
Form for Non-resident Taxpayers Claiming Trea ty Benefits to the withholding agent or the
information entered is incomplete, the withho lding agent shall withhold taxes in accordance
with the provisions of domestic tax laws.
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Non-PRC resident enterprises that do not have establishments or place of business in
the PRC, or that have establishments or place of business in the PRC but their income is not
related to such establishments or place of b usiness, are subject to the PRC enterprise
income tax at the rate of 10% on dividends re ceived from the PRC companies and gains
realized upon disposition of equity inter ests in the PRC companies pursuant to the
Enterprise Income Tax Law and other applic able PRC tax regulations and statutory
documents. Taxes may be reduced or eliminated under special arrangements or applicable
treaties between the PRC and the jurisdiction where the non-resident enterprise resides.
Pursuant to applicable regulations, we in tend to withhold tax at a rate of 10% from
dividends paid to non-PRC resident enterprise holders of our H Shares, including HKSCC
Nominees. Entitlement to treaty benefits for non-resident taxpayers shall be handled by
means of ‘‘self-judgment of eligibility, declarat ion of entitlement, and retention of relevant
materials for future reference.’’ Non-resident taxpayers and withholding agents need to
cooperate with PRC tax authorities in the foll ow-up administration and investigation of
non-resident taxpayers’ enti tlement to treaty benefits.
Notwithstanding the above, PRC tax authorities determine whether and how
individual income tax on gains derived by holders of our H Shares from their disposition
of our H Shares may be collected in accordance with applicable laws and regulations in the
PRC. Non-PRC resident holders of our H Shares should be aware that they may be
obligated to pay PRC tax on the dividends received from us and gains realized through sales
or transfers by other means of the H Shares.
Policies regarding foreign currency conversion may affect our foreign exchange transactions
and our ability to pay dividends and meet other obligations
During the Track Record Period, we receive substantially all of our revenue in RMB.
Currently, the conversion of RMB into foreign currency has to comply with the relevant
laws and regulations and remittance of foreign currencies are subject to the PRC foreign
exchange regulations. We may have to convert a portion of our revenue into other
currencies to meet our foreign currency obligations, such as payments of dividends declared
in respect of our H Shares, if any, and settlement of foreign investment. Shortage in the
availability of foreign currency may restric t the ability of our Group to remit sufficient
foreign currency out of the PRC, or otherwise satisfy our foreign currency denominated
obligations.
Under existing PRC foreign exchange regulations, payments of current account items,
such as profit distributions and trade and service-related foreign exchange transactions, can
be made in foreign currencies without prior approval from the SAFE, by complying with
certain procedural requirements. However, app roval from or registration with appropriate
governmental authorities is required where RMB is to be converted into foreign currency
and remitted out of the PRC to pay capital expenses under the capital account such as the
repayment of loans denominated in foreign currencies.
The policies regarding foreign exchange transactions under the current account and the
capital account may not necessarily continue in the future. In addition, these foreign
exchange policies may restrict our ability to obt ain sufficient foreign exchange, which could
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have an adverse effect on our foreign exchange transactions and the fulfilment of our other
foreign exchange requirements. If there are changes in the policies regarding the payment of
d i v i d e n d si nf o r e i g nc u r r e n c i e st os h a r e h o l d e r so ro t h e rc h a n g e si nf o r e i g ne x c h a n g ep o l i c i e s
resulting in insufficient foreign exchange, o u rp a y m e n to fd i v i d e n d sin foreign currencies
may be affected.
RISKS RELATING TO THE GLOBAL OFFERING
Our A Shares were listed in China in 2017, and the characteristics of the A Share and H share
market may differ
Our A Shares were listed on the Shanghai Stock Exchange in 2017. Following the
Global Offering, our A Shares will continue to be traded on the Shanghai Stock Exchange
and our H Shares will be traded on the Stock Exchange. Under the current PRC laws and
regulations, without the approval from the relevant regulatory authorities, our H Shares
and A Shares are neither interchangeable nor fu ngible, and there is no trading or settlement
between the H Share and A Share markets. With different trading characteristics, the H
Share and A Share markets have divergent trading volumes, liquidity and investor bases, as
well as different levels of retail and instituti onal investor participant. As a result, the
trading performance of our H Shares and A Sh ares may not be comparable. Nonetheless,
fluctuations in the price of our A Shares may adversely affect the price of our H Shares, and
vice versa. Due to the different characteristics of the H Share and A Share markets, the
historical prices of our A Shares may not be indicative of the performance of our H Shares.
You should therefore not place undue reliance on the trading history of our A Shares when
evaluating the investment decision in our H Shares.
We will be concurrently subject to PRC and Hong Kong listing and regulatory requirements
As we are listed on the Shanghai Stock Exchange and will be listed on the Main Board
of the Stock Exchange, we will be required to comply with the listing rules (where
applicable) and other regulatory regimes of both jurisdictions, unless otherwise agreed by
the relevant regulators. Accordingly, we may incur additional costs and resources in
complying with the requirem ents of both jurisdictions.
You should not place any reliance on any information released by us in connection with the
listing of our A Shares on the Shanghai Stock Exchange
As our A Shares are listed on the Shanghai Stock Exchange, we have been subject to
periodic reporting and other information disclosure requirements in China. As a result,
from time to time, we publicly release our financial and operational information on the
Shanghai Stock Exchange or other media outlets designated by the CSRC. However, the
information announced by us in connection with our A Shares is based on the regulatory
requirements of the securities authorities, in dustry standards and market practices in China,
which are different from those applicable to the Global Offering. The presentation of
financial and operational information fo r the Track Record Period disclosed on the
Shanghai Stock Exchange or other media outlets may not be directly comparable to the
financial and operational information contained in this prospectus. As a result, prospective
investors in our H Shares should be reminded that, in making their investment decisions as
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to whether to purchase our H Shares, they should rely only on the financial, operating and
other information included in this prospectus. By applying to purchase our H Shares in the
Global Offering, you will be deemed to have agreed that you will not rely on any
information other than that contained in this prospectus and any formal announcements
made by us in Hong Kong with respect to the Global Offering.
An active trading market for our H Shares may not develop
Prior to the Global Offering, there was no public market for our H Shares. We cannot
assure you that a public market for our H Shares with adequate liquidity will develop and
be sustained following the completion of Global Offering. In addition, the Offer Price of
our H Shares may not be indicative of the market price of our H Shares following the
completion of the Global Offering.
If an active public market for our H Shares does not develop following the completion
of the Global Offering, the market price and liquidity of our H Shares could be materially
and adversely affected.
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 market price and trading volume of our H Shares may be highly volatile. Several
factors, some of which are beyond our control, such as variations in our revenue, earnings
and cash flow, changes in our pricing policy for products as a result of competition, the
emergence of new technologies, strategic allian ces or acquisitions, the addition or departure
of key personnel, changes in ratings by financial analysts and credit rating agencies,
litigation, the removal of the restrictions o n H share transactions or volatility in market
prices and changes in the demand for our products, could cause large and sudden changes to
the market price and trading volume at which our H Shares will trade. Further, derivative
transactions that may be entered into by investors in our H Shares (including cornerstone
investors, if any, during their lock-up period to the extent that such transactions are not in
violation of the lock-up restrictions) for hed ging purposes, even if these transactions are
settled only in cash, could still result in signif icant price and trading volume volatility of our
H Shares. Besides, the Stock Exchange and other securities markets have, from time to time,
experienced significant price and trading v olume volatility that are not related to the
operating performance of any particular com pany. This volatility may also materially and
adversely affect the market price of our H Shares.
We will release our 2024 third quarter consolidated financial results on the Shanghai Stock
Exchange no later than October 31, 2024, which is shortly after the Listing. If such quarterly
consolidated financial results fail to meet investors’ expectation, the trading price of our H
Shares may be adversely affected.
We will release our 2024 third quarter consolidated financial results on the Shanghai
Stock Exchange which is shortly after the Listing, but in no event later than October 31,
2024, in accordance with the applicable disc losure requirements for A-share listed
companies. Our historical quarterly consolidated financial results may not be indicative
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of any of our future quarterly financial results. If our 2024 third quarter consolidated
financial results fail to meet the investors’ e xpectation, the trading price of our H Shares
may be adversely affected.
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 H Shares
The market price of our H Shares could decline as a result of future sales of a
substantial number of our H Shares or other securities relating to our H Shares in the public
market, or the issuance of new shares or other securities, or the perception that such sales or
issuances may occur. Future sa les, or anticipated sales, of substantial amounts of our
securities, including any future offerings, could also materially and adversely affect our
ability to raise capital at a specific time and on terms favorable to us. In addition, our
Shareholders may experience dilution in their holdings if we issue more securities in the
future. New shares or shares-linked securities issued by us may also confer rights and
privileges that take priority over those conferred by the H Shares.
As the Offer Price of our H Shares is higher than our consolidated net tangible assets book
value per share, purchasers of our H Shares in the Global Offering may experience immediate
dilution upon such purchases
The Offer Price of our H Shares is higher than the net tangible asset book value per
share immediately prior to the Global Offering. As a result, purchasers of our H Shares in
the Global Offering will experience imme diate dilution. Purchasers of H Shares may
experience further dilution if the Underwriters exercise the Over-allotment Option or if we
issue additional H Shares in the future.
We cannot assure you when, if and in what form or size we will pay dividends in the future
We cannot assure you when, if and in what f orm or size we will pay dividends in the
future. Our Board determines the frequency and amount of dividend distributions mainly
based on our results of operations, cash flow and financial position, capital adequacy
ratios, business prospects, regulatory rest rictions on the payment of dividends and other
factors that our Board of Directors deems relevant. In particular, the distribution of our
retained profits could be subject to current articles of association of the Company, the PRC
Company Law and certain covenants under bank borrowing agreements between the
Company and relevant banks that requested no dividend distribution when the Company
recorded net losses. See ‘‘Financial Inform ation — Dividend Policy.’’ We may not adopt the
same dividend policy that we have adopted in the past.
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Certain facts and statistics derived from government contained in this prospectus may not be
reliable
Certain facts and statistics in this prospectus, including, but not limited to, the
information and statistics are derived from various publicly available publications of
governmental agencies or independent third parties, which our Directors believe to be
reliable. We have no reason to believe that such information is false or misleading or that
any fact has been omitted that would render such information false or misleading.
However, we cannot guarantee the qualit y or reliability of the information from
official government sources. Our Directors believe that we have taken reasonable care to
ensure that the facts and statistics presented are accurately extracted and reproduced from
such information. The information from official government sources has not been
independently verified by us, the Joint Sponsors, the Overall Coordinators, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Manager, the Capital Market
Intermediaries or the Underwriters or any o ther party involved in the Global Offering
(except Frost & Sullivan) and no representation is given as to i ts accuracy. We, therefore,
make no representation as to the accuracy or completeness of that information. You should
not place undue reliance on them and you should consider how much weight or importance
such information carry and should not place undue reliance on them.
Our Controlling Shareholders have substantial i nfluence over us and their interests may not be
aligned with the interests of our other Shareholders
The interests of our Controlling Sharehold ers may differ from the interests of our
other Shareholders. Our Contr olling Shareholders could have significant influence in
determining the outcome of any corporate tr ansaction or other matter submitted to our
Shareholders for approval, including mergers, consolidations and the sale of all or
substantially all of our assets, election of Direct ors and other significant corporate actions.
This concentration of ownership, as a result, may discourage, delay or prevent a change in
control of our Company, which could deprive our Shareholders of an opportunity to receive
a premium for their H Shares in a sale of our Company or may reduce the market price of
our H Shares. In addition, to the extent the interests of our Controlling Shareholders
conflict with the interests of other Shareholders, the interests of other Shareholders may be
disadvantaged or harmed.
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 ‘‘an ticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘going
forward’’, ‘‘intend’’, ‘‘plan’’, ‘‘project’’, ‘‘seek’’, ‘‘expect’’, ‘‘may’’, ‘‘ought to’’, ‘‘should’’,
‘‘would’’ or ‘‘will’’ and similar expressions. These statements are, by their nature, subject to
significant risks and uncertainties. Prospectiv e investors are cautioned that reliance on any
forward-looking statement in volves risk and uncertainties and that, even if the Directors
believe the assumptions related to those forwar d-looking statements are reasonable, any or
all of those assumptions could prove to be inaccurate and as a result, the forward-looking
statements based on those assumptions could a lso be incorrect. The risks and uncertainties
in this regard consist of those identified in th e risk factors discussed above. In light of these
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and other risks and uncertainties, the disclosure of forward-looking statements in this
prospectus should not be regarded as representations by our Company that the plans and
objectives will be achieved, and investors should not place undue reliance on such
statements. Our Company does not undertake a ny obligation to update publicly or release
any revisions of any forward-looking statements, whether as a result of new information,
future events, or otherwise. For details of thes e forward-looking statements including the
associated risks, see ‘‘Forward-looking Statements.’’
You should read the entire prospectus carefully and we strongly caution you not to place any
reliance on the information in press articles or other media coverage regarding ourselves and
the Global Offering
We may be subject to press and media coverage prior to the publication of this
prospectus, and subsequent to the date of this prospectus but prior to the completion of the
Global Offering. The press and media coverage may include certain fin ancial information,
industry comparisons, profit forecasts and other information about us that does not appear
in this prospectus.
You should rely solely upon the informatio n contained in this prospectus and any
formal announcements made by us in Hong Kong in making your investment decision
regarding the Global Offering. We do not accept any responsibility for the accuracy or
completeness of any information reported by the press or other media, nor the fairness or
appropriateness of any forecasts, views or o pinions expressed by the press or other media
regarding ourselves or the Global Offering.
We make no representation as to the appropriateness, accuracy, completeness or
reliability of any such information, reports or publication. Accordingly, prospective
investors should not rely on any such information, reports or publications in making their
investment decisions regarding the Global Offering.
In making their decisions as to whether to purchase our H Shares, prospective
investors in the Global Offering should only rely on the financial, operational and other
information included in this prospectus. By applying to purchase our H Shares in the
Global Offering, you will be deemed to have agreed that you will not rely on any
information other than that contained in this prospectus.
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In preparation for the Listing, our Company has sought the following waivers and
exemption from strict compliance with the re levant provisions of the Hong Kong Listing
Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance:
WAIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Hong Kong Listing Rules, a new applicant for listing on
the Hong Kong Stock Exchange must have sufficient manageme nt presence in Hong Kong,
which normally means that at least two of the executive Directors must be ordinarily
resident in Hong Kong. Rule 19A.15 of the Hong Kong 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
t h eH o n gK o n gS t o c kE x c h a n g e .
Since our headquarters and principal business operations and management of our
Group are carried out in mainland China, our e xecutive Directors are based in mainland
China to better manage and attend to our Group’s business operations. Therefore, we do
not and, in the foreseeable future, will not have sufficient management presence in Hong
Kong for the purpose of satisfying the requirement under Rule 8.12 of the Hong Kong
Listing Rules.
Accordingly, pursuant to Rule 19A.15 of the Hong Kong Listing Rules, we have
applied to the Hong Kong Stock Exchange for, and the Hong Kong Stock Exchange has
agreed to grant, a waiver from strict compliance with the requirement under Rules 8.12 and
19A.15 of the Hong Kong Listing Rules. In orde r to maintain effective communication with
the Hong Kong Stock Exchange, we will put in p lace the following measures in order to
ensure that regular communication is maintained between the Hong Kong Stock Exchange
and us:
(a) we have appointed two authorized representatives pursuant to Rule 3.05 of the
Hong Kong Listing Rules. The two authorized representatives are Mr. Zhang Yi
(‘‘Mr. Zhang ’’), our executive Director and Ms. Cheung Lai Ha (‘‘ Ms. Cheung ’’),
our joint company secretary. The authorized representatives will act as the
principal channel of communication between the Hong Kong Stock Exchange and
our Company. The authorized representat ives will be available to meet with the
Hong Kong Stock Exchange in Hong Kong within a reasonable period of time
upon request and will be readily contactable by the Hong Kong Stock Exchange
by telephone and/or email to deal promptly with any enquiries which may be
made by the Hong Kong Stock Exchange. Each of the authorized representatives
is authorized to communicate on behalf of our Company with the Hong Kong
Stock Exchange;
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
RULES AND EXEMPTIONS FROM COM PLIANCE WITH THE COMPANIES
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(b) each of the authorized representati ves has means to contact all Directors
(including the non-executive Director and the independent non-executive
Directors) promptly at all times as and when the Hong Kong Stock Exchange
wishes to contact the Directors on a ny matters. We will implement a policy
whereby:
(i) each Director will provide his/her contact details (including phone number
and email address) to the authorized representatives;
(ii) each Director will provide his/her phone numbers or means of
communication to the authorized repr esentatives when he/she is travelling;
and
(iii) each Director has provided his/h er mobile phone number, office phone
number and email address to the Hong Kong Stock Exchange;
(c) in compliance with Rule 3A.19 of the Hong Kong Listing Rules, we have retained
Guotai Junan Capital Limited to act as our compliance advisor, who will act as an
additional channel of communication between the Hong Kong Stock Exchange
and our Company for the period commencing on the Listing Date and ending on
the date that our Company publishes our financial results for the first full
financial year after the Listing Date pursuant to Rule 13.46 of the Hong Kong
Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, we shall ensure that
the compliance advisor will have access at all times to our authorized
representatives, our Directors and other officers. We shall also ensure that our
authorized representatives, Directors and other officers will provide promptly
such information and assistance as the compliance advisor may need or may
reasonably require in connection with the performance of the compliance
advisor’s duties as set forth in Chapter 3A of the Listing Rules. We shall ensure
that there are adequate and efficient means of communication among our
Company, our authorized representatives, our Directors and other officers and
the compliance advisor, and will keep the c ompliance advisor fully informed of all
communications and dealings between us and the Hong Kong Stock Exchange;
(d) our Company will inform the Hong Kong Stock Exchange promptly in respect of
any change in our Company’s authorized representatives and compliance advisor;
(e) each Director who is not ordinarily re sident in Hong Kong has confirmed that
each of them possesses or can apply for valid travel documents to visit Hong Kong
and can meet with the Hong Kong Stock Exchange within a reasonable period;
and
(f) we will retain a Hong Kong legal advisor to advise us on the application of the
Hong Kong Listing Rules and other app licable Hong Kong laws and regulations
after our Listing.
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
RULES AND EXEMPTIONS FROM COM PLIANCE WITH THE COMPANIES
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WAIVER IN RELATION TO JOINT COMPANY SECRETARIES
Pursuant to Rules 3.28 and 8.17 of the Hong Kong Listing Rules, our company
secretary must be an individual who, by virtue of his or her academic or professional
qualifications or relevant experience, is, in the opinion of the Hong Kong Stock Exchange,
capable of discharging the functions of company secretary. The Hong Kong 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 th e Legal Practitioners Ordinance (Chapter
159 of the laws of Hong Kong); or
(c) a certified public accountant as defined in the Professional Accountants
Ordinance (Chapter 50 of the laws of Hong Kong).
Note 2 to Rule 3.28 of the Hong Kong Listing Rules further provides that in assessing
‘‘relevant experience’’, the Hong Kong Stock Exchange will consider the individual’s:
(a) length of employment with the issuer and other issuers and the roles he/she
played;
(b) familiarity with the Hong Kong Listing Rules and other relevant law and
regulations including the SFO, Companies Ordinance, the Companies (Winding
Up and Miscellaneous Provisions) O rdinance 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 Hong Kong Listing Rules (i.e. not less than
15 hours of relevant professional training in each financial year); and
(d) professional qualifications in other jurisdictions.
We have appointed Mr. Zhang, who is an executive Director, as one of our joint
company secretaries. Although Mr. Zhang does not possess the qualification and sufficient
relevant experience as stipulated in the Notes to Rule 3.28 of the Hong Kong Listing Rules,
we would like to appoint him as our joint company secretary due to his past management
experience within our Group and his thorough understanding of the internal administration
and business operations of our Group. In addition, we have appointed Ms. Cheung, who
fulfils the requisite qualification as required under Note 1 to Rule 3.28 of the Hong Kong
Listing Rules, to act as our other joint company secretary and to assist Mr. Zhang to
acquire all qualifications and experience as the company secretary of our Company required
under Rule 3.28 of the Hong Kong Listing Rules. See ‘‘Directors, Supervisors and Senior
Management’’ for further information regar ding the qualifications and experience of Mr.
Zhang and Ms. Cheung.
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
RULES AND EXEMPTIONS FROM COM PLIANCE WITH THE COMPANIES
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Apart from discharging her functions in her role as one of our joint company
secretaries, Ms. Cheung will assist Mr. Zhang in enabling him to acquire the relevant
company secretary experience as required und er Rule 3.28 of the Hong Kong Listing Rules
and to become familiar with the requirements of the Hong Kong Listing Rules and other
applicable Hong Kong laws. In addition, Mr. Z hang will also attend relevant professional
training during each financial year as required under Rule 3.29 of the Hong Kong Listing
Rules.
We have applied for, and the Hong Kong Stock Exchange has granted, a waiver from
strict compliance of Rules 3.28 and 8.17 of the Hong Kong Listing Rules in respect of the
appointment of Mr. Zhang as one of our joint company secretaries pursuant to Chapter
3.10 of the Guide for New Listing Applicants on the following conditions:
(a) Mr. Zhang must be assisted by Ms. Cheun g, who possesses the qualifications and
experience required under Rule 3.28 of the Hong Kong Listing Rules and is
appointed as a joint company secretary o f our Company throughout the validity
period of the waiver;
(b) the waiver is valid for an initial period of three years commencing from the Listing
Date and will be revoked immediately if Ms. Cheung ceases to provide such
assistance or if there are material breaches of the Hong Kong Listing Rules by our
Company; and
(c) before the end of the three-year period, the qualifications and experience of Mr.
Zhang and the need for on-going assistance of Ms. Cheung will be further
evaluated by our Company. Our Company will then endeavor to demonstrate to
the Hong Kong Stock Exchange’s satisf action that Mr. Zhang, having had the
benefit of the assistance of Ms. Cheung for the immediately preceding three years,
has acquired the relevant experience (within the meaning of Note 2 to Rule 3.28 of
the Listing Rules) such that a further waiver from Rules 3.28 and 8.17 of the
Listing Rules will not be necessary. Our Company understands that the Hong
Kong Stock Exchange may revoke the waiver if Ms. Cheung ceases to provide
assistance to Mr. Zhang during the three-year period.
WAIVER AND EXEMPTION IN RELATION TO THE 2023 SHARE OPTION SCHEME
Rule 17.02(1)(b) of the Hong Kong Listing Rules requires our Company to disclose,
among other things, full details of all outstanding options and awards granted under the
2023 Share Option Scheme upon the Listing. Paragraph 27 of Appendix D1A to the Hong
Kong Listing Rules requires our Company to disclose particulars including the
consideration for which the options were o r will be granted and the price and duration
of the options, and the names and addresses of the grantees under the 2023 Share Option
Scheme.
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
RULES AND EXEMPTIONS FROM COM PLIANCE WITH THE COMPANIES
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Paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance requires our Company to disclose details of the
number, description and amount of any shares in or debentures of our Company which any
person has, or is entitled to be given, an optio n to subscribe for, together with certain
particulars of each option, namely (a) the peri od during which it is exercisable; (b) the price
to be paid for shares or debentures subscribed for under it; (c) the consideration (if any)
given or to be given for it or for the right to it; and (d) the names and addresses of the
persons to whom it was given.
As of the Latest Practicable Date, our Co mpany had granted outstanding options
under the 2023 Share Option Scheme to a total of 162 eligible participants, including four
Directors (three of whom are also senior management members of our Company) and
twelve other connected persons of our Company, and 146 other employees of our Group,
which corresponded to 5,295,000 underlying A Shares in aggregate, representing 0.80% of
the total number of Shares in issue immediately after completion of the Global Offering
(assuming the Over-allotment Option is not exercised and the options granted under the
2023 Share Option Scheme are not exercised) on the terms set out in ‘‘Statutory and General
Information — A. Further Information about Our Group — 5. 2023 Share Option Scheme’’
in Appendix IV.
We have applied to the Stock Exchange and SFC, respectively for (i) a waiver from
strict compliance with the disclosure requirements under Rule 17.02(1)(b) of, and paragraph
27 of Appendix D1A to, the Listing Rules; and (ii) a certificate of exemption under Section
342A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance exempting
our Company from strict compliance with the disclosure requirements under paragraph
10(d) of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, on the ground, that strict compliance with the above requirements
would be unduly burdensome for our Company for the following reasons:
(a) given that 162 grantees are involved under the 2023 Share Option Scheme, strict
compliance with such disclosure requirements in setting out full details of all the
grantees under the 2023 Share Option Scheme in this prospectus would be costly
and unduly burdensome for our Company in light of a significant increase in cost
and timing for information compilation and prospectus preparation.
(b) the grant and exercise in full of the options under the 2023 Share Option Scheme
will not cause any material adverse impact to the financial position of our
Company;
(c) non-compliance with the above disclosure requirements would not prevent our
Company from providing its potential investors with an informed assessment of
the activities, assets, liabilities, financ ial position, management and prospects of
our Company; and
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
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(d) material information relating to the options under the 2023 Share Option Scheme
will be disclosed in this prospectus, including a summary of the major terms under
the 2023 Share Option Scheme, the total number of Shares subject to the 2023
Share Option Scheme, the exercise price per Share, the potential dilution effect on
the shareholding and impact on earnings per Share upon full exercise of the
options granted under the 2023 Share Option Scheme. The Directors consider that
the information that is reasonably necessary for potential investors to make an
informed assessment in their investme nt decision making process has been
included in this prospectus.
In light of the above, our Directors are of the view that the grant of the waiver and
exemption sought under this application will not prejudice the interest of the investing
public.
The Stock Exchange has agreed to grant t o our Company a waiver under the Listing
Rules on condition that:
(a) on an individual basis, full details of the options granted under the 2023 Share
Option Scheme to each of the Directors, senior management and connected
persons of our Company will be disclosed i n ‘‘Statutory and General Information
— A. Further Information about Our Group — 5. 2023 Share Option Scheme’’ in
Appendix IV, including all the particulars required under Rule 17.02(1)(b) of, and
paragraph 27 of Appendix D1A to, the Listing Rules, and paragraph 10 of Part I
of the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance;
(b) in respect of the options granted under the 2023 Share Option Scheme to the
remaining grantees (other than those set out in (a) above), disclosure will be made,
on an aggregate basis, categorized into lots based on the number of Shares
underlying each individual grantee, being: 1 to 10,000 Shares, 10,001 to 100,000
Shares and 100,001 to 160,000 Shares. For each categorized lot of Shares, the
following disclosure will be made on an agg regate basis: (1) the aggregate number
of grantees and number of Shares underlying the options under the 2023 Share
Option Scheme, (2) the consideration paid (if any) for the grant of the options
under the 2023 Share Option Scheme and (3) the exercise period and the exercise
price of the options granted under the 2023 Share Option Scheme, in ‘‘Statutory
and General Information — A. Further Information about Our Group — 5. 2023
Share Option Scheme’’ in Appendix IV to this prospectus;
(c) aggregate number of Shares underlying the options granted under the 2023 Share
Option Scheme and the percentage to our Company’s total issued share capital
represented by such number of Shares as of the Latest Practicable Date will be
disclosed in ‘‘Statutory and General Info rmation — A. Further Information about
Our Group — 5. 2023 Share Option Scheme’’ in Appendix IV to this prospectus;
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
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(d) the potential dilution effect and impact on earnings per Share upon the full
exercise of the options under the 2023 Share Option Scheme will be disclosed in
‘‘Statutory and General Information — A. Further Information about Our Group
— 5. 2023 Share Option Scheme’’ in Appendix IV to this prospectus;
(e) a summary of the major terms of the 2023 Share Option Scheme will be disclosed
in ‘‘Statutory and General Information — A. Further Information about Our
Group — 5. 2023 Share Option Scheme’’ in Appendix IV to this prospectus;
(f) the particulars of the waiver will be disclosed in this prospectus;
(g) a full list of all the grantees (including the persons referred to in (a) above) under
the 2023 Share Option Scheme containing all the particulars as required under
Rule 17.02(1)(b) and paragraph 27 of Appendix D1A of the Listing Rules and
paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance will be made available for public inspection
as set out in ‘‘Documents Delivered to th e Registrar of Companies and Available
on Display’’ in Appendix V to this prospectus; and
(h) the grant of a certificate of exemption under the Companies (Winding Up and
Miscellaneous Provisions) Ordinance from the SFC exempting our Company from
the disclosure requirements provided in paragraph 10(d) of Part I of the Third
Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance.
The SFC has agreed to grant to our Company the certificate of exemption under
section 342A of the Companies (Winding Up a nd Miscellaneous Provisions) Ordinance on
condition that:
(a) full details of the options granted by the Company under the 2023 Share Option
Scheme to each of the Directors, senior management and connected persons of
our Company will be disclosed in ‘‘Sta tutory and General Information — A.
Further Information about Our Group — 5. 2023 Share Option Scheme’’ in
Appendix IV to this prospectus and such details to include all the particulars
required under paragraph 10 of Part I of the Third Schedule to the Companies
(Winding Up and Miscellaneous Provisions) Ordinance;
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
RULES AND EXEMPTIONS FROM COM PLIANCE WITH THE COMPANIES
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(b) in respect of the options granted by the Company under the 2023 Share Option
Scheme to the remaining grantees (other than those set out in (a) above),
disclosure will be made, on an aggregate ba sis, categorized into lots based on the
number of Shares underlying each individual grantee, being: 1 to 10,000 Shares,
10,001 to 100,000 Shares and 100,001 to 160,000 Shares. For each categorized lot
of Shares, the following disclosure will be made on an aggregate basis: (1) the
aggregate number of grantees and number of Shares underlying the options under
the 2023 Share Option Scheme, (2) the consideration paid (if any) for the grant of
the options under the 2023 Share Option Scheme and (3) the exercise period and
the exercise price of the options granted under the 2023 Share Option Scheme, in
‘‘Statutory and General Information — A. Further Information about Our Group
— 5. 2023 Share Option Scheme’’ in Appendix IV to this prospectus;
(c) a full list of all the grantees (includin g the persons referred to in (a) above) who
have been granted the options to subscribe for Shares under the 2023 Share
Option Scheme, containing all the details as required in paragraph 10 of Part I of
the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, will be made available for public inspection as set out in ‘‘Documents
Delivered to the Registrar of Companies and Available on Display’’ in Appendix
V to this prospectus; and
(d) the particulars of the exemption will be disclosed in this prospectus, and this
prospectus will be issued on or before October 22, 2024.
Further details of the 2023 Share Option Scheme are set out in ‘‘Statutory and General
Information — A. Further Information about Our Group — 5. 2023 Share Option Scheme’’
in Appendix IV.
WAIVER AND EXEMPTION IN RELATION TO THE MATERIAL CONTRACT
Rule 11.06 of the Listing Rules requires this listing document to contain all specific
items of information set out in Appendix D1A. Under paragraph 53(2) to Appendix D1A of
the Listing Rules, all material contracts (n ot being entered into in the ordinary course of
business) entered into by any member of th e Group within the two years immediately
preceding the issue of the listing document shall be published on the Stock Exchange’s
website and the Company’s website for a reasonable period of time (being not less than 14
days).
By paragraph 10 to Chapter 6.6 of the Guide for New Listing Applicants, copies of
material contracts certified as true copies by approved certifiers with their recognized
digital signatures, together with other required documents shall be submitted to the Stock
Exchange for application for the authorisati on of the registration of this Prospectus.
Under paragraph 17 of Part I of the Third Schedule to the Companies (Winding Up
and Miscellaneous Provisions) Ordinance, the Company is required to include a statement
that there has been delivered to the Registrar of Companies for registration of a copy of
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
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every material contract, not being a contract entered into in the ordinary course of the
business carried on or intended to be carried o n by the company or a contract entered into
more than 2 years before the date of issue of thi s Prospectus. Section 342C(3)(b)(i) of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance requires a copy of all
material contracts stated in this Prospectus sh all be delivered to the Registrar of Companies
together with this Prospectus and other required documents for registration of this
Prospectus.
The Lopal Times Transfer Agreement entered into by our Company, Yichun Times
and Lopal Times on October 28, 2022 in relation to the transfer of 70% equity interests in
Lopal Times to our Company at the consideration of RMB1 is one of the material contracts
as disclosed in ‘‘Statutory and General Info rmation — B. Further Information about our
Business — 1. Summary of Material Contract s.’’ The Lopal Times Transfer Agreement
contains terms on, among other things, business operation between our Group and Yichun
Times involving provision of processing services by Lopal Times to Yichun Times and/or its
parent company to produce lithium carbonate products (the ‘‘ Provision of Processing
Services by Lopal Times to CATL Group ’’). For details of the Lopal Times Transfer
Agreement, see also ‘‘History and Development — Our Strategic Cooperation —
Acquisition of Lopal Times in 2022.’’
We have applied to (i) the Stock Exchange fo r, and the Stock Exchange has granted, a
waiver from strict compliance with the requirements under Rule 11.06 of, and paragraph
53(2) of Appendix D1A to, the Listing Rules and paragraph 10 to Chapter 6.6 of the Guide
for New Listing Applicants and (ii) the SFC for, and the SFC has granted, a certificate of
exemption under Section 342A of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance exempting our Company from strict compliance with the
requirements under paragraph 17 of Part I of the Third Schedule to the Companies
(Winding Up and Miscellaneous Provisions) Ordinance and section 342C(3)(b)(i) of the
Companies (Winding Up and Miscellaneous P rovisions) Ordinance, so that information
relating to details of pricing calculation mechanism for the Provision of Processing Services
by Lopal Times to CATL Group be redacted f rom the Lopal Times Transfer Agreement
(the ‘‘Sensitive Commercial Information ’ ’ )t ob ep u b l i s h e do nt h ew e b s i t e so ft h eS t o c k
Exchange and our Company and be submitted for registration of this Prospectus for the
following reasons:
(a) the Sensitive Commercial Information would not affect potential investors in
assessing the assets, liabilities, financia l position, profits and losses and prospects
of our Company. The Sensitive Commercial Information is highly technical and it
does not provide potential investors meaningful information in assessing the
financial impact of the transactions contemplated under the Lopal Times Transfer
Agreement on our Group. Specifically, the Sensitive Commercial Information
includes complex formulas in calculating the price for the Processing Services by
Lopal Times to CATL Group. The formulas are complicated, not in simple or
plain language and comprise of industry-specific and technical terminologies and
jargons. Thus, the disclosure of the Sensitive Commercial Information will not
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
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enhance the general investing public’s understanding of the transactions
contemplated under the Lopal Times Transfer Agreement and the disclosure of
the Sensitive Commercial Information is unnecessary. As the material terms of the
Lopal Times Transfer Agreement had al ready been summarized into everyday
language and disclosed in the Prospectus as illustrated in paragraph (c) below,
investing public will have sufficient in formation on the Lopal Times Transfer
Agreement and be able to assess the impact of the Lopal Times Transfer
Agreement essential for an informed d ecision. Therefore, only making the
redacted version of Lopal Times Transfer Agreement available on display and be
submitted for registration purpose is unlikely to mislead the investing public
regarding the facts and circumstances, knowledge of which is essential for the
informed assessment of the Group;
(b) given the competitive nature of the indu stries in which our Group operates, the
Sensitive Commercial Information, being d etails of pricing calculation mechanism
for the Provision of Processing Services by Lopal Times to CATL Group, is in
nature commercially sensitive and is core trade secret for contracting parties that
is exclusive and customized to each party. The disclosure of the Sensitive
Commercial Information may enable our competitors to anticipate our pricing
strategies which may jeopardize our ability to negotiate pricing terms with our
suppliers and customers, and may therefore materially and adversely affect our
financial performance in the future. Fo r instance, if the Sensitive Commercial
Information is publicly disclosed, our competitors may tailor specific pricing
mechanism and offer more competitive pricing term to CATL Group and thereby
affect our ability to negotiate pricin g terms with CATL Group. Also, our
customers may also require us to offer them exact same terms as the Sensitive
Commercial Information and thereby limit our ability to negotiate pricing terms
with these customers. Therefore, the disclosure of the Sensitive Commercial
Information is inappropriate and competitively harmful to us as a whole;
(c) the terms of the Lopal Times Transfer Agreement which are material to investors’
assessment on our Group as well as the reasons and benefits for entering into the
Lopal Times Transfer Agreement have b e e ns u m m a r i z e da n dd i s c l o s e di nt h e
Prospectus, see ‘‘History and Development — Our Strategic Cooperation —
Acquisition of Lopal Times in 2022.’’ B esides, following completion of the
transfer of equity interests in Lopal Times under the Lopal Times Transfer
Agreement, Lopal Times since then became a subsidiary of our Group, its
financial results had been consolidated into the financial statements of our Group
which had been disclosed in this Prospectus. Further, after the Listing, the
Provision of Processing Services by Lopal Times to CATL Group will become
continuing connected transactions of our Company and will be governed by the
CATL Purchase Framework Agreement. See also ‘‘Connected Transactions —
Our Enhanced Business Cooperation with CATL Group.’’ As such, the mere fact
that only the redacted version of the Lopal Times Transfer Agreement will be
available on display and submitted for registration purpose would not result in
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the omission of any material information or mislead the Shareholders or the
investing public with regard to any fact s knowledge of which is essential for an
informed assessment of our Group; and
(d) the Sensitive Commercial Information relates to the detailed pricing calculation
mechanism for the Provision of Processing Services of Lopal Times to CATL
Group which are services provided by our Group to CATL Group in our ordinary
and usual course of business. If such pricing calculation mechanism were included
in separate agreement instead of incorporating such terms in the Lopal Times
Transfer Agreement akin to arrangements customary to transaction of this type,
such separate agreement would be a contr act entered into in the ordinary course
of business of our Group and therefore would not be regarded as a material
contract for the purpose of paragraph 52 to Appendix D1A of the Listing Rules
and paragraph 17 of Part I of the Third Schedule to the Companies (Winding Up
and Miscellaneous Provisions) Ordinance. As such, the disclosure of the Sensitive
Commercial Information would be unnece ssary, and only the redaction version of
the Lopal Times Transfer Agreement will be made available on display and be
submitted for registration purpose does not contradict the intended purpose of
making material contracts available on display and submitting material contracts
for registration.
In light of the above, our Directors are of the view that the grant of the waiver and
exemption sought under this application woul d not prejudice the interest of the investing
public.
The SFC has agreed to grant to our Company the certificate of exemption under
section 342A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
granting a partial exemption from strict compliance with paragraph 17 of Part I of the
Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance in
respect of our obligation to include a statement that a copy of every material contract has
been delivered to the Registrar of Companies for registration and section 342C(3)(b)(i) of
the Companies (Winding Up and Miscellaneou s Provisions) Ordinance in respect of our
obligation that a copy of every material con tract has been delivered to the Registrar of
Companies for registration on the following conditions that:
(a) this Prospectus contains the statement that a copy of every material contracts
referred to in ‘‘Statutory and General Information — B. Further Information
about our Business — 1. Summary of Material Contracts’’ in Appendix IV to this
prospectus (subject, in case of Lopal Times Transfer Agreement, to the omission
of the Sensitive Commercial Information) has been delivered to the Registrar of
Companies for registration;
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(b) a copy of every material contract referred to in ‘‘Statutory and General
Information — B. Further Informati on about our Business — 1. Summary of
Material Contracts’’ in Appendix IV to t his prospectus in the form delivered to
the Registrar of Companies for registration are made available on display in
accordance with ‘‘Documents Delivered to the Registrar of Companies and
Available on Display — B. Documents Available on Display’’ in Appendix V to
this prospectus; and
(c) the particulars of the exemption will be disclosed in this prospectus, and this
prospectus will be issued on or before October 22, 2024.
CONTINUING CONNEC TED TRANSACTIONS
We have entered into certain transactions which will constitute continuing connected
transactions of our Company under the Hong Kong Listing Rules following the completion
of the Global Offering. We have applied to the Hong Kong Stock Exchange for, and the
Hong Kong Stock Exchange has granted, a waiver from strict compliance with (where
applicable) the announcement requirement set out in Chapter 14A of the Hong Kong
Listing Rules for such continuing connected tran sactions. For further details in this respect,
see ‘‘Connected Transactions — Waiver Application.’’
ALLOCATION OF H SHARES TO EXIST ING MINORITY SHAREHOLDERS AND
THEIR CLOSE ASSOCIATES
Rule 10.04 of the Listing Rules requires tha t a person who is an existing shareholder of
the issuer may only subscribe for or purchase any securities for which listing is sought which
are being marketed by or on behalf of the issuer either in his or its own name or through
nominees if the conditions in Rules 10.03(1) and (2) of the Listing Rules are fulfilled. It is
provided in Rule 10.03(1) of the Listing Rule s that no securities may be offered to existing
shareholders on a preferential basis and no p referential treatment may be given to them in
the allocation of the securities; and in Rule 10.03(2) that the minimum prescribed
percentage of public shareholders required by Rule 8.08(1) must be achieved.
Paragraph 5(2) of Appendix F1 to the Listing Rules provides that no allocations will
be permitted to the existing shareholders of the applicant or their close associates, whether
in their own names or through nominees, in the Global Offering unless the conditions set
out in Rules 10.03 and 10.04 of the Listing Rules are fulfilled.
Chapter 4.15 of the Guide for New Listing Applicants provides that the Stock
Exchange will consider giving consent and gr anting waiver from Rule 10.04 of the Listing
Rules to an applicant’s existing shareholders or their close associates to participate in an
initial public offering if any actual or perceived preferential treatment arising from their
ability to influence the applicant during t he allocation process can be addressed.
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
RULES AND EXEMPTIONS FROM COM PLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOU S PROVISIONS) ORDINANCE
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Prior to the Listing, our Company’s share cap ital comprises entirely A Shares listed on
the Shanghai Stock Exchange. We have a large and widely dispersed public A Share
shareholder base.
We have applied to the Stock Exchange for, and the Stock Exchange has agreed to
grant us, a waiver from strict compliance with the requirements under Rule 10.04 and
consent under Paragraph 5(2) of Appendix F1 to the Listing Rules to permit H Shares in the
International Offering to be placed to certain existing minority Shareholders who (i) hold
less than 5% of the voting rights of our Company prior to the completion of the Global
Offering and (ii) are not and will not become (u pon the completion of the Global Offering)
core connected persons of our Company or the close associates of any such core connected
person (together, the ‘‘ Existing Minority Shareholders ’’), subject to the conditions as
follows:
(i) the Joint Sponsors confirm that each Existing Minority Shareholder to whom our
Company may allocate the H Shares in the International Offering holds less than
5% of the voting rights of our Company before Listing;
(ii) the Joint Sponsors confirm that each Existing Minority Shareholder is not a core
connected person of our Company or any close associate of any such core
connected person immediately prior to the Global Offering;
(iii) the Joint Sponsors confirm that none o f the Existing Minority Shareholders have
the right to appoint a Director and/or have any other special rights;
(iv) the Joint Sponsors confirm that allocation to the Existing Minority Shareholders
or their close associates will not affect our ability to satisfy the public float
requirement as prescribed by the Stock Exchange under Rule 8.08 of the Listing
Rules or otherwise approved by the Stock Exchange;
(v) the Joint Sponsors confirm to the Stock Exchange in writing that based on (i)
their discussions with our Company and the Overall Coordinators; and (ii) the
confirmations provided to the Stock Exchange by our Company and the Overall
Coordinators (confirmations (vi) and (vii) mentioned below), and to the best of
their knowledge and belief, they have no reason to believe that any of the Existing
Minority Shareholders or their close associates received any preferential
treatment, or is in a position to exert influence on the Company to obtain
actual or perceived preferential treatment in the allocation as a placee by virtue of
their relationship with our Company, and details of the allocation will be
disclosed in this prospectus and/or the allotment results announcement, as the
case may be;
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
RULES AND EXEMPTIONS FROM COM PLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOU S PROVISIONS) ORDINANCE
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--- page 114 ---
(vi) our Company will confirm to the Stock Exchange in writing that no preferential
treatment has been, nor will be, given to the Existing Minority Shareholders or
their close associates, nor is the Existing Minority Shareholder in a position to
exert influence on the Company to obtain actual or perceived preferential
treatment, by virtue of their relationship with our Company in any allocation in
the placing tranche;
(vii) the Overall Coordinators will confir m to the Stock Exchange that, to the best of
their knowledge and belief, no preferenti al treatment has been, nor will be, given
to the Existing Minority Shareholders or their close associates by virtue of their
r e l a t i o n s h i pw i t ho u rC o m p a n yi na n yallocation in the placing tranche.
WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING
RULES AND EXEMPTIONS FROM COM PLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOU S PROVISIONS) ORDINANCE
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DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors (including any proposed Director who is
named as such in this prospectus) collectivel y and individually accept full responsibility,
includes particulars given in complia nce 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 Hong Kong Listing Rules for the
purpose of giving information 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 matters the omission of which would make any statement
herein or this prospectus misleading.
CSRC FILING
On January 18, 2024, the CSRC has issued a notification on our Company’ completion
of the PRC filing procedures for the listing of our H Shares on the Stock Exchange and the
Global Offering. As advised by our PRC Legal Advisor, our Company has completed all
necessary filings with the CSRC in the PRC in relation to the Global Offering and the
Listing.
THE HONG KONG PUBLIC OFFERING AND THIS PROSPECTUS
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 set out the terms and conditions of the Hong Kong Public
Offering.
The Hong Kong Offer Shares are offered solely on the basis of the information
contained and representations made in this prospectus and on the terms and subject to the
c o n d i t i o n ss e to u th e r e i na n dt h e r e i n .N op e r s o ni sa u t h o r i z e dt og i v ea n yi n f o r m a t i o ni n
connection with the Global Offering or to make any representation not contained in this
prospectus, and any information or representation not contained herein must not be relied
upon as having been authorized by our Company, the Joint Sponsors, the Joint Global
Coordinators, the Overall Coordinators, th e Capital Market Intermediaries, the Joint
Bookrunners, the Joint Lead Managers and any of the Underwriters, any of their respective
directors, agents, employees or advisors or any other party involved in the Global Offering.
The Listing is sponsored by the Joint Sponsors and the Global Offering is managed by
the Overall Coordinators. The Hong Kong P ublic Offering is fully underwritten by the
Hong Kong Underwriters under the terms and conditions of the Hong Kong Underwriting
Agreement and is subject to us and the Sponsor-OCs (for themselves and on behalf of the
Underwriters) agreeing on the Offer Price. The In ternational Offering is expected to be fully
underwritten by the International Underwriters subject to the terms and conditions of the
International Underwriting Agreement, which is expected to be entered into on or around
the Price Determination Date.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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If, for any reason, the Offer Price is not agreed among us and the Sponsor-OCs (for
themselves and on behalf of the Underwrite rs), the Global Offering will not proceed and
will lapse. For full information about the Underwriters and the underwriting arrangements,
see ‘‘Underwriting’’ for further details.
Neither the delivery of this prospectus nor any offering, sale or delivery made in
connection with the H Shares should, under any circumstances, constitute a representation
that there has been no change or development reasonably likely to involve a change in our
affairs since the date of this prospectus or im ply that the information contained in this
prospectus is correct as of any date subsequent to the date of this prospectus.
PROCEDURES FOR APPLICATION FO R THE HONG KONG OFFER SHARES
The procedures for applying for the Hong Kong Offer Shares are set forth in ‘‘How to
Apply for Hong Kong Offer Shares.’’
STRUCTURE OF THE GLOBAL OFFERING
Details of the structure of the Global Offerin g, including its conditions, are set forth in
‘‘Structure of the Global Offering.’’
OVER-ALLOTMENT OPTI ON AND STABILIZATION
Details of the arrangements relating to the Ov er-allotment Option and stabilization are
set forth in ‘‘Structure of the Global Offering.’’
RESTRICTIONS ON OFFERS AND SALES OF SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public
Offering will be required to, or be deemed by his/her/its acquisition of Offer Shares to,
confirm that he/she/it is aware of the restrictions on offers of the Offer Shares described in
this prospectus.
No action has been taken to permit a public offering of the Offer Shares or the general
distribution of this prospectus in any jurisdiction other than in 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 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 jurisd ictions and pursuant to registration with or
authorization by the relevant securities regulatory authorities or an exemption therefrom.
In particular, the Offer Shares have not been offered and sold, and will not be offered and
sold, directly or indirectly, in the PRC.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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UNDERWRITING
The Listing is sponsored by the Joint Sponsors and the Global Offering is managed by
the Overall Coordinators. The Hong Kong P ublic Offering is fully underwritten by the
Hong Kong Underwriters subject to the terms and conditions of the Hong Kong
Underwriting Agreement. The International O ffering is expected to be fully underwritten
by the International Underwriters, subject to the agreement on the Offer Price between the
Sponsor-OCs (for themselves and on behalf of the Underwriters) and us. For further details
on the Underwriters and the underwriting arrangements, see ‘‘Underwriting.’’
APPLICATION FOR LISTING OF THE H SHARES ON THE HONG KONG STOCK
EXCHANGE
We have applied to the Listing Committee of the Hong Kong Stock Exchange for the
listing of, and permission to deal in, the H Shares in issue and to be issued pursuant to the
Global Offering (including the H Shares which may be issued pursuant to the exercise of the
Over-allotment Option).
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of an y application will be invalid if the listing of,
and permission to deal in, the H Shares on the Hong Kong Stock Exchange is refused before
the expiration of three weeks from the date of the closing of the application lists, or such
longer period (not exceeding six weeks) as may, within the said three weeks, be notified to
the Company by or on behalf of the Hong Kong Stock Exchange.
COMMENCEMENT OF DEALINGS IN THE SHARES
Dealings in the H Shares on the Hong Kong Stock Exchange are expected to
commence on Wednesday, October 30, 2024. The H Shares will be traded in board lots of
500 Shares each. The stock code of the Shares will be 2465. Except as otherwise disclosed in
this prospectus and the A Shares that have been listed on the Shanghai Stock Exchange, no
part of our share or debt securities is listed on or deal in on the Hong Kong Stock Exchange
or any other stock exchange and no such listing or permission to list is being or proposed to
be sought in the near future.
H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the
H Shares 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 Listing Date or any other date as determined by HKSCC.
Settlement of transactions between participants of the Hong Kong Stock Exchange is
required to take place in CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and the
HKSCC Operational Procedures in effect from time to time.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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Investors should seek the advice of their stockbroker or other professional advisor for
details of the settlement arr angement as such arrangements may affect their rights and
interests. All necessary arrangements have b een made to enable the H Shares to be admitted
into CCASS.
PROFESSIONAL TAX ADVICE RECOMMENDED
You should consult your professional advisors if you are in any doubt as to the
taxation implications of subscribing for, pur chasing, holding or disposing of, or dealing in,
the H Shares or exercising any rights attaching to the H Shares. We emphasize that none of
our Company, the Joint Sponsors, the Joint Global Coordinators, the Overall
Coordinators, the Capital Market Intermediaries, the Joint Bookrunners, the Joint Lead
Managers, the Underwriters, any of our or their respective directors, officers or
representatives or any other person involve d in the Global Offering accepts responsibility
for any tax effects or liabilities resulting fr om your subscription, purchase, holding or
disposing of, or dealing in, the H Shares or your exercise of any rights attaching to the H
Shares.
REGISTER OF MEMBERS AND STAMP DUTY
All of the H Shares issued pursuant to applications made in the Global Offering will be
registered on our H Share register to be maintained in Hong Kong by our H Share
Registrar, Computershare Hong Kong Investor Services Limited. Our principal register of
members will be maintained by us at our legal address in mainland China.
Dealings in our H Shares registered on our H Share Registrar will be subject to Hong
Kong stamp duty.
DIVIDENDS PAYABLE TO HOLDERS OF H SHARES
Unless determined otherwise by our Company, dividends payable in Hong Kong
dollars in respect of our H Shares will be paid to the Shareholders as recorded on the H
Share register of our Company in Hong Kong and sent by ordinary post, at the
Shareholders’ risk, to the registered address of each Shareholder.
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus contains translations of certain Renminbi
amounts into Hong Kong dollars at a specified rate. Unless we indicate otherwise, the
translations of Renminbi into Hong Kong dolla rs and vice versa have been made at the rate
of RMB1.00 to HK$1.098998. No representati on is made that any amount in Renminbi or
Hong Kong dollars can be or could be, or have been, converted at the above rate or any
other rate or at all.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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ROUNDING
Certain amounts and percentage figures included in this prospectus have been subject
to rounding adjustments. Accordingly, figure s shown as totals in certain tables may not be
an arithmetic aggregation of the figures preceding them.
LANGUAGE
If there is any inconsistency between this prospectus and its Chinese translation, this
prospectus shall prevail, provided that if there is any inconsistency between the Chinese
names of the entities or enterprises established in the PRC mentioned in this prospectus and
their English translations, the Chinese names shall prevail. The English translations of the
Chinese names of such PRC entities or enterprises are provided for identification purposes
only.
OTHER
Unless otherwise specified, all references to any shareholdings in our Company
following the completion of the Global Offering assume that the Over-allotment Option and
the options granted under the 2023 Share Option Scheme are not exercised.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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DIRECTORS
Name Residential Address Nationality
Executive Directors
Mr. Shi Junfeng ( 石俊峰) ...... R o o m1 0 1 ,B u i l d i n g5 0
No. 1 Wending Road
Qixia District, Nanjing
Jiangsu Province
PRC
Chinese
Mr. Lu Zhenya ( 呂振亞)
(former name: Lu Zhenya
(呂貞亞) ) ................
Room 1005, Unit 3, Building 5
No. 2 Jinyao Road
Qixia District, Nanjing
Jiangsu Province
PRC
Chinese
Mr. Qin Jian ( 秦建) ......... R o o m6 0 4 ,U n i t2 ,B u i l d i n g6
Zuoyou Yangguang Community
Qixia District, Nanjing
Jiangsu Province
PRC
Chinese
Mr. Shen Zhiyong ( 沈志勇).... R o o m3 0 2 ,U n i t1 ,B u i l d i n g3
No.18 Yaojia Road
Qixia District, Nanjing
Jiangsu Province
PRC
Chinese
Mr. Zhang Yi ( 張羿) ......... R o o m3 0 4 ,U n i t2 ,B u i l d i n g1
Jinlingjiuyuan Heyuan
No. 56 Dashugen
Xuanwu District, Nanjing
Jiangsu Province
PRC
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 0–


--- page 121 ---
Name Residential Address Nationality
Non-Executive Director
Ms. Zhu Xianglan ( 朱香蘭).... R o o m1 0 1 ,B u i l d i n g5 0
No. 1 Wending Road
Qixia District, Nanjing
Jiangsu Province
PRC
Chinese
Independent Non-Executive
Directors
M r .L iQ i n g w e n(李慶文) . . . . . . 10F, Unit 3, Building No. 8
Landianchang Qingboyuan
Haidian District, Beijing
PRC
Chinese
Mr. Ye Xin ( 葉新) .......... R o o m4 – 1 6 0 2 ,P h a s e1
Yajule Binjiang Guoji
Pukou District, Nanjing
Jiangsu Province
PRC
Chinese
Ms. Geng Chengxuan ( 耿成軒) . . Room 406, Building 3
Sifang New Village Eighth Village
Guanghua Road
Qinhuai District, Nanjing
Jiangsu Province
PRC
Chinese
Mr. Hong Kam Le ( 康錦里) .... F l a tB ,1 7 / F ,B l o c k9
Braemar Hill Mansion
31 Braemar Hill Road
North Point
Hong Kong
Chinese
(Hong Kong)
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 1–


--- page 122 ---
SUPERVISORS
Name Residential Address Nationality
Mr. Xue Jie ( 薛傑) .......... R o o m5 0 4 ,B u i l d i n g3
Lulong Shanzhuang
No.178 Jianning Road
Gulou District, Nanjing
Jiangsu Province
PRC
Chinese
Mr. Zhou Lin ( 周林) ......... R o o m1 1 0 1 ,U n i t1
Building 26, Cuipingchengyuan
No. 33 Mozhou East Road
Jiangning District, Nanjing
Jiangsu Province
PRC
Chinese
Ms. Chang Huihong ( 常慧紅). . . Room 2306, Unit 3, Building 4
Jiang Yuerun Mansion
Qixia District, Nanjing
Jiangsu Province
PRC
Chinese
Further information about our Directors, Supervisors and other senior management
members are set out in ‘‘Directors, Supervisors and Senior Management.’’
PARTIES INVOLVED IN T HE GLOBAL OFFERING
Joint Sponsors Guotai Junan Capital Limited
27/F, Low Block
Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
Halcyon Capital Limited
11/F, 8 Wyndham Street
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 2–


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Joint Global Coordinators and
Overall Coordinators
Guotai Junan Securities (Hong Kong) Limited
27/F, Low Block
Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
Halcyon Securities Limited
11/F, 8 Wyndham Street
Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
Capital Market Intermediaries,
Joint Bookrunners and
Joint Lead Managers
Guotai Junan Securities (Hong Kong) Limited
27/F, Low Block
Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
Halcyon Securities Limited
11/F, 8 Wyndham Street
Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
BOCI Asia Limited
26/F Bank of China Tower
1 Garden Road
Central
Hong Kong
CCB International Capital Limited
12/F CCB Tower
3 Connaught Road Central
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 3–


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ABCI Capital Limited
(Only as a Joint Bookrunner)
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
ABCI Securities Company Limited
(Only as a Joint Lead Manager)
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
CMB International Capital Limited
45th Floor
Champion Tower
3 Garden Road
Central
Hong Kong
TradeGo Markets Limited
Room 3405, West Tower
Shun Tak Centre
168–200 Connaught Road Central
Hong Kong
Livermore Holdings Limited
Unit 1214A, 12/F, Tower II
Cheung Sha Wan Plaza
833 Cheung Sha Wan Road
Kowloon
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 4–


--- page 125 ---
Legal Advisors to Our Company As to Hong Kong law:
Han Kun Law Offices LLP
Rooms 4301–10
43/F, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong
As to PRC Law:
Grandall Law Firm (Shanghai)
27/F, Garden Square
968 West Beijing Road
Shanghai
PRC
As to Indonesia law:
Hanafiah Ponggawa & Partners
W i s m a4 6—K o t aB N I ,3 2 n d&4 1 s tF l o o r s
Jl. Jend. Sudirman Kav. 1
Jakarta 10220
Indonesia
As to Singapore law :
Avant Law LLC
10 Anson Road
#10–02 International Plaza
Singapore 079903
Legal Advisors to the Joint Sponsors and
the Underwriters
As to Hong Kong law:
Fangda Partners
26/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
As to PRC Law:
Jingtian & Gongcheng
45/F, K. Wah Centre
1010 Huaihai Road (M)
Xuhui District
Shanghai
PRC
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 5–


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Reporting Accountants Moore CPA Limited
Certified Public Accountants and Registered
Public Interest Entity Auditor
801–806 Silvercord, Tower 1
30 Canton Road, Tsimshatsui
Kowloon
Hong Kong
Industry Consultant Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
2504 Wheelock Square
1 7 1 7N a n j i n gW e s tR o a d
Shanghai 200040
China
Receiving Banks Industrial and Commercial Bank of
China (Asia) Limited
33/F., ICBC Tower
3 Garden Road
Central
Hong Kong
Bank of China (Hong Kong) Limited
Bank of China Tower
1 Garden Road
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 6–


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Registered Office and
Headquarters in the PRC
No. 6 Hengtong Avenue
Nanjing Economic and Technological
Development Zone
PRC
Head Office and Principal Place of
Business in Hong Kong
46/F, Hopewell Centre
183 Queen’s Road East
Wan Chai
Hong Kong
Company’s Website
www.lopal.com.cn
(Note: the information on this website does not form
part of this prospectus )
Joint Company Secretaries Mr. Zhang Yi ( 張羿)
Room 304, Unit 2, Building 1
Jinlingjiuyuan Heyuan
No. 56 Dashugen
Xuanwu District, Nanjing
Jiangsu Province
PRC
Ms. Cheung Lai Ha ( 張麗霞)( HKACG, ACG )
46/F, Hopewell Centre
183 Queen’s Road East
Wan Chai
Hong Kong
Authorized Representatives Mr. Zhang Yi ( 張羿)
Room 304, Unit 2, Building 1
Jinlingjiuyuan Heyuan
No. 56 Dashugen
Xuanwu District, Nanjing
Jiangsu Province
PRC
Ms. Cheung Lai Ha ( 張麗霞)( HKACG, ACG )
46/F, Hopewell Centre
183 Queen’s Road East
Wan Chai
Hong Kong
Audit Committee Ms. Geng Chengxuan ( 耿成軒)( Chairlady )
Mr. Ye Xin ( 葉新)
Mr. Hong Kam Le ( 康錦里)
CORPORATE INFORMATION
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Remuneration and Evaluation
Committee
M r .L iQ i n g w e n(李慶文)( Chairman )
Ms. Geng Chengxuan ( 耿成軒)
Mr. Lu Zhenya ( 呂振亞)
Nomination Committee Mr. Ye Xin ( 葉新)( Chairman )
Ms. Geng Chengxuan ( 耿成軒)
Mr. Shi Junfeng ( 石俊峰)
Strategy Committee Mr. Shi Junfeng ( 石俊峰)( Chairman )
Mr. Zhang Yi ( 張羿)
M r .L iQ i n g w e n(李慶文)
H Share Registrar Computershare Hong Kong Investor Services Limited
Shops 1712–1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Compliance Advisor Guotai Junan Capital Limited
27/F, Low Block
Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
Principal Banks China Merchants Bank Co., Ltd.,
Nanchang Road Branch
No. 40 Nanchang Road
Nanjing
PRC
Industrial and Commercial Bank of China Limited,
Nanjing Zidong Branch
Building B, Financial and Trading Building
Xingang Industrial Zone
No. 89 Xingang Avenue
Qixia District, Nanjing
PRC
CORPORATE INFORMATION
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The information and statistics set out in this section and other sections of this
prospectus were extracted from different official government publications, available sources
from public market research and other independent sources, and from the independent
industry report prepared by Frost & Su llivan. We believe that the sources of such
information are appropriate sources for such information, and we have taken reasonable
care in extracting and reproducing such information. We have no reason to believe that such
information and statistics are false or misleading or that any fact has been omitted that
would render such information and statistics false or misleading in any material respect. The
information from official government sources has not been independently verified by us, the
Joint Sponsors, the Overall Coordinators, the Capital Market Intermediary, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters,
any of their respective directors, officers, repr esentatives, affiliates, employees, advisers or
agents, or any other persons or parties involved in the Global Offering, and no
representation is given as to the accuracy or completeness of such information and
statistics. Our Directors confirm to the best of their knowledge, and after making reasonable
enquiries, that there have been no material adverse changes in the industry since the date of
the Frost & Sullivan Report which would qualify, contradict or have a material impact on the
information set out in this section.
SOURCE OF INFORMATION
We commissioned Frost & Sullivan to conduct market research on the LFP cathode
material and automotive specialty chemical industries and prepare the Frost & Sullivan
Report. Frost & Sullivan is an independent g lobal consulting firm founded in 1961 in New
York that offers industry research and market strategies. We have contracted to pay
RMB580,000 to Frost & Sullivan for c ompiling the Frost & Sullivan Report.
In preparing the Frost & Sullivan Report, Fro st & Sullivan conducted detailed primary
research which involved discussing the status o f the industry with certain leading industry
participants and conducting interviews w ith relevant parties. Frost & Sullivan also
conducted secondary research which involv ed reviewing company reports, independent
research reports and data based on its own research database. Frost & Sullivan obtained the
figures for the estimated total market size fro m historical data analysis plotted against
macroeconomic data as well as considered the above-mentioned industry key drivers. Its
market engineering forecasting methodology in tegrates several forecasting techniques with
the market engineering measurement-based system and relies on the expertise of the analyst
team in integrating the critical market elemen ts investigated during the research phase of
the project. These elements primarily include expert-opinion forecasting methodology,
integration of market drivers and restraints, integration with the market challenges,
integration of the market engineering measu rement trends and integration of econometric
variables. The Frost & Sullivan Report is comp iled based on the following assumptions: (i)
the social, economic and political environmen t of the globe and mainland China is likely to
remain stable in the forecast period; and (ii) re lated industry key drivers are likely to drive
the market in the forecast period.
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In respect of market position disclosure, the Joint Sponsors (i) conducted the due
diligence interview with Frost & Sullivan to understand the methodology adopted by them
in determining the overall market size of the in dustries in which the Group operates and the
number of market players in the relevant industries and identifying the top market players
and collection of these players’ background info rmation and financial/operating data, and
(ii) discussed with Frost & Sullivan on th e assumptions made and compared with the
assumptions made in other similar projects c arried out by Frost & Sullivan. Based on the
above, the Joint Sponsors did not notice any matter of which will cast doubt on the
reasonableness of such assumptions.
OVERVIEW OF LITHIUM-ION BATTERY INDUSTRY
A lithium-ion battery is rechargeable and undergoes the charging and discharging
process by the movement of lithium ions between the cathode and anode. When compared
to rechargeable alkaline batteries, lithium-i on batteries exhibit higher energy density,
generate less pollution, and better safety performance.
Lithium-ion batteries primarily compri se cathode materials, separators, anode
materials, and electrolytes, among which the cathode material plays a pivotal role in
determining the battery’s energy density and safety. The cost of cathode materials accounts
for approximately 55% of the overall cost of lithium-ion batteries. Lithium-ion batteries
can be categorized based on cathode materials, such as Lithium Iron Phosphate (LFP),
Nickel Cobalt Manganese (NCM), Lithium Manganese Oxide (LMO), and Lithium Cobalt
Oxide (LCO) batteries. Among these types, LFP and NCM batteries are considered the
mainstream options for lithium-ion batteries.
The global lithium-ion battery industry experienced substantial growth in shipment
volume, increasing from 250.1 GWh in 2019 to 1,226.8 GWh in 2023, with a CAGR of
48.8%. Projections indicate that global shipme nt volume of lithium-ion batteries will reach
3,680.5 GWh in 2028, demonstrating a CAGR of 24.2% from 2024 to 2028. The lithium-ion
battery market in mainland China has also witn essed rapid expansion due to factors such as
the rising adoption of renewable energy and robust supply chain practices. From 2019 to
2023, mainland China market experienced significant growth, increasing from 117.5 GWh
to 892.8 GWh, at a CAGR of 66.0%. It is anticipated that the market size of the lithium-ion
battery industry in mainland China will f urther escalate from 1,171.3 GWh in 2024 to
2,804.2 GWh in 2028, demonstrating a CAGR of 24.4%.
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Market Size of Lithium-ion Battery Industry by Shipment Volume
(Global and Mainland China), 2019–2028E
0
4,000
GWh
3,500
3,000
2,500
2,000
1,500
1,000
500
2019
CAGR 2019–2023
Global
Mainland China
CAGR 2024E–2028E
48.8% 24.2%
66.0% 24.4%
2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
250.1
117.5
323.2
142.5
576.0
327.0
959.1
655.8
1,226.8
892.8
1,548.1
1,171.3
1,945.3
1,497.0
2,426.6
1,866.3
3,000.3
2,295.2
3,680.5
2,804.2
Source: Frost & Sullivan Report
OVERVIEW OF LFP CATHOD EM A T E R I A LI N D U S T R Y
LFP cathode material remains the most extensively used cathode material for
lithium-ion batteries, playing a crucial role in their electrochemical performance. When
compared to other cathode materials, particularly NCM, LFP cathode material exhibits
numerous advantages in terms of cycle life, safety features, and temperature tolerance. LFP
cathode material’s exceptional cycle life ens ures long-lasting performance, while its
enhanced safety features effectively mitigat e the risks associated with thermal runaway
and short circuit. Furthermore, LFP cathode m aterial demonstrates higher tolerance for
extreme temperatures, enabling reliable ope ration in a broader range of environments.
Although there are several emerging new tec hnology paths for batteries such as sodium-ion
batteries, those are still in the early devel opment stage and there remains gaps to realize
mass production and commercialization. For exa mple, sodium-ion batteries still have major
functionality limitations such as low energy density and safety concerns under water
exposure. As such lithium-ion batteries will continue to dominate the NEV battery market
in the near future.
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The principal raw materials of LFP cathod e material, lithium carbonate and iron
phosphate, are more cost-effective and readily available as compared to those used in NCM
materials. In 2023, the global price of LFP cat hode material was approximately RMB72.2
thousand per ton, which was less than half that of NCM materials. These characteristics
position LFP cathode material as the preferred choice for new energy vehicles (NEV),
energy storage systems (ESS)
Note , and critical power backup systems. From 2019 to 2023,
the market share of LFP cathode material in the global cathode material industry, based on
shipment volume, significantly grew from 14.0% to 57.6%. With co ntinuous advancements
in LFP cathode material, its application scope is expected to expand further in the future.
Breakdown of Lithium-ion Battery Industry by Cathode Materials by Shipment Volume
(Global), 2019 and 2023
2019
LFP
NCM
Others
14.0%
58.6%
27.4%
2023
LFP
NCM
Others
57.6%35.8%
6.7%
Source: Frost & Sullivan Report
Note:
The Chinese ESS industry is highly competitive and exhibit s significant market concentration, with the top five
manufacturers accounting for around 60% of the entire C hinese ESS industry in 2022, primarily dominated by
top-tier lithium-ion battery companies with substantial m arket share and outstanding capabilities. Most players
in this sector are battery manufacturers who have strat egically diversified from NEV and consumer battery
sectors into the energy storage business, leveraging multiple advantages such as capital, technology, and
resources.
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Value Chain Analysis of LFP Cathode Material Industry
The upstream segment of the LFP cathode material industry includes raw material
suppliers and production equipment manufactu rers. Raw material suppliers play a vital role
in the supply chain by furnishing essential components required for the production of LFP
cathode material, such as lithium carbonate and iron phosphate. On the other hand,
production equipment manufacturers provide the machinery and equipment necessary for
the manufacturing process of LFP cathode material. At present, a growing number of LFP
cathode material manufacturers are broadening their engagement in the upstream segment
of the LFP cathode material industry to m anufacture their own raw materials.
The midstream segment encompasses batte ry cathode material manufacturers who
employ two main manufacturing techniques: solid-state and liquid-state methods. Under
the liquid-state method, elements of the finished products, i.e., the lithium carbonate and
iron phosphate, are more evenly mixed, leading to a higher consistency of the finished
products, but the preparation process is more complicated. In contrast, manufacturers
utilizing the solid-state method have a technol ogical advantage that allows them to scale up
production efficiently to meet the substantial downstream demand due to its relative
simplicity, efficiency, and scalability. The p roduction process utilizing the solid-state
method is more straightforwar d (mainly involving mixing raw materials, ball milling for
homogeneity, calcination to form the LFP str ucture, followed by crushing and sieving to
desired particle sizes), less capital and equi pment-intensive, and can be automated more
easily than the liquid-state method, which requires dissolving raw materials,
co-precipitation of precursors, and intensive washing and filtering to remove impurities.
Additionally, by eliminating liquid losses, th e solid-state method yields higher energy
efficiency and material utilization. As the most crucial segment in the industry value chain,
cathode material manufacturers play a pivotal role. They are responsible for producing
high-quality LFP cathode material, ensuri ng production scalability and efficiency,
maintaining stringent quality control meas ures, driving innovation, and effectively
connecting both ends of the supply chain.
The downstream segment of the LFP cathode ma terial industry involves the utilization
o ft h ep r o d u c e dc a t h o d em a t e r i a l .T h ep r i m a r yapplication of LFP cathode material lies in
the production of LFP batteries. These batteries find wide usage in NEV and ESS
industries. In the NEV market, LFP batteries offer a safe and reliable automotive energy
storage solution, while in the ESS market, they enable efficient storage of renewable energy
to combat climate change.
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Diagram of LFP Cathode Material Industry Value Chain
Upstream
Raw Material Suppliers
Production Equipment
Manufacturers
Iron Phosphate
Solid-state Method
Liquid-state Method
Lithium Carbonate
...
Midstream Downstream
ApplicationsLFP Cathode Material
Maunfacturers
LFP Battery
New Energy Vehicle
(NEV)
Energy Storage System
(ESS)
Source: Frost & Sullivan Report
Market Size of LFP Cathode Material Industry
The sales volume of the global LFP cathode material industry increased remarkably at
a CAGR of 100.4% from 2019 to 2023. This growth was primarily driven by increased
demand from the NEV and ESS sectors, advanc ements in battery technology and thermal
management systems, and the inherent cost advantage of LFP batteries. Moving forward,
due to strong downstream demand and the cost-effectiveness of LFP batteries, the global
LFP cathode material industry is expected to sustain its growth trajectory and reach a
volume of 4,192.0 thousand tons by 2028, representing a CAGR of 18.6% from 2024.
In 2023, market in mainland China accounted for approximately 99% of global LFP
cathode materials in terms of sales volume. T he majority of leading manufacturers of LFP
cathode materials are based in mainland Ch ina, driving the global growth trend in this
sector. Similar to the global market, the sales volume of LFP cathode materials in mainland
China experienced significant growth fro m 2019 to 2023, with a comparable CAGR of
100.6%. In the future, more prominent LFP cathode material corporations in mainland
China are expected to establish production cap acity abroad to expand their overseas market
presence and reduce transportation costs. By 2028, the sales volume of LFP cathode
materials in mainland China is projected to reach 3,884.0 thousand tons, demonstrating a
CAGR of 17.2% from 2024. Nonetheless, it is anticipated that the market share of LFP
cathode materials in mainland China in terms of global LFP cathode material will shift
from 97.1% in 2024 to 92.7% in 2028. This shift presents opportunities for the growth and
emergence of other regions globally.
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Market Size of LFP Cathode Materials by Sales Volume (Global and Mainland China),
2019–2028E
0
4,500
4,000
Thousand Tons
3,500
3,000
2,500
2,000
1,500
1,000
500
2019
CAGR 2019–2023
Global LFP Catthode Material
Mainland China LFP Cathode Material
CAGR 2024E–2028E
100.4% 18.6%
100.6% 17.2%
2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
102.9 101.6 126.5 125.0
410.3 406.0
1,103.0 1,095.0
1,660.0 1,645.0
2,118.0 2,056.0
2,590.0
2,467.0
3,092.0
2,911.0
3,624.0
3,377.0
4,192.0
3,884.0
Source: Frost & Sullivan Report
Market Drivers and Trends of LFP Cathode Material Industry
Overseas expansion drives the international growth of companies across the lithium-ion
battery value chain
In recent times, manufacturers along the lithium-ion battery value chain have been
gradually expanding their focus from mainland China to international markets as part of
their globalization strategy, aiming to attain early-mover advantages during expansion. It is
expected that the market share of LFP cathode materials in sales volume outside of
mainland China will rise from 2.9% in 2024 to 7.3% in 2028. Among the overseas
destinations, Indonesia offers several key advantages, including its comprehensive NEV
industry value chain, investment-friendly polic ies, and favorable geographical location. To
begin with, leading companies within the lithium-ion battery value chain have developed
detailed investment plans in In donesia, resulting in the establishment of a comprehensive
layout of the lithium-ion battery value chain in t he country. Specifically, several leading
global lithium-ion battery manufacturers and NEV manufacturers have announced plans to
establish manufacturing fac ilities in Indonesia, attracte d by rapid market growth, the
localization incentives, and proximity to raw m aterial sources. These major industry players
are expected to invest billions of dollars ov er the next few years to set up integrated
production capacities spanning from upstream mining and raw material manufacturing to
midstream battery material supply and downstream lithium-ion battery manufacturing and
recycling. Their ambitious expa nsion strategies and projected capital investments also attest
to the promising market potential of Indones ia as a hub for the electric vehicle ecosystem
and lithium cathode material value chain. Th e Indonesian government has also successively
promulgated policies to promote industry growth by reducing taxes and increasing the
proportion of local raw materials for NEVs. Fo r example, in the Presidential Regulation
No.55/2019, Indonesia has prioritized the domestic NEV industry and set local content
requirements for NEVs produced in Indonesia to reach 40% by 2023, 60% by 2029, and
80% by 2030. Further, in the Government Regulation No. 74/2021, battery electric vehicle,
a type of NEV, is exempted from sales tax on luxury goods. In law No. 1/2022, title transfer
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and ownership fee and vehicle tax towards NEV s will start exemption in 2025. Besides, the
domestic LFP battery annual production capacity only accounts for less than 5% of the
demand for NEV battery in Indonesia and Indonesia has set out its target to export 200,000
NEVs by 2025 and achieve 2.2 million electric vehicles on the roads by 2030, representing
considerable growth potential, both domestically and overseas, thus providing market
spaces and attracting foreign investment on local LFP industry value chain. Meanwhile,
Indonesia, being a nation that supplies raw materials and serves as a maritime hub
connecting mainland China with other countries of raw material origin, offers various
advantages. These include convenient tran sportation of raw materials, and reduced
shipment costs. Thus, leading companies in mainland China throughout the lithium-ion
batteries value chain have initiated investments in overseas regions, specifically in
Indonesia, to capitalize on these favorable factors. By shifting their production
operations to Indonesia, LFP cathode material companies based in mainland China can
leverage the country as a strategic platform to support their global strategies.
Upstream expansion of LFP cathode materials manufacturers enables stable income
Currently, a prevailing trend in the lithium -ion battery value chain is the expansion of
LFP cathode materials manufacturers towards upstream raw material manufacturing.
Through expansion, LFP cathode material ma nufacturers aim to achieve both stable cost
and supply of raw materials, which is particu larly vital in view of the significant price
fluctuation in recent years. The global price of lithium carbonate has fluctuated greatly
from approximately RMB71.0 thousand per ton in 2019 to RMB272.3 thousand in 2023.
Meanwhile, the price of iron phosphate has increased from approximately RMB12.4
t h o u s a n dp e rt o ni n2 0 1 9t oa p p r o x i m a t e l yR M B 1 4 . 0t h o u s a n dp e rt o ni n2 0 2 3 .
Consequently, LFP cathode material manufacturers which are capable of producing
lithium carbonate and iron phosphate themselves can maintain a relatively consistent cost
range for LFP cathode materials while ensuring a reliable supply of the necessary raw
materials. This strategic move is expected to ultimately enhance their profitability.
Moreover, by reducing their dependence on external suppliers, LFP cathode material
manufacturers gain greater control over the balance between supply and demand. This
control contributes to the overall safety and st ability of corporations within the industry.
Lithium carbonate, in particular, plays a crucial role as it is a key raw material in producing
LFP cathode materials, providing the necessary lithium for the electrochemical properties
that give LFP batteries their high stability, long cycle life, and safety. As of 2023, lithium
carbonate represents over 80% of the raw material costs, making its stable supply vital for
LFP cathode material manufacturers. This upstream expansion encourages dynamic
collaboration across the lithium-ion battery value chain, fostering a more integrated and
resilient industry.
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Development of downstream markets boost demand for LFP cathode materials
Since 2020, the NEV market has experienced significant growth in demand, with
mainland China leading the trend with NEV sal es volume increasing from 1.4 million units
in 2020 to 9.4 million units in 2023. Follo wing the rapid growth trend of NEVs and
lithium-ion batteries in the NEV industry, being the upstream among the NEV value chains,
the production capacity and sales volume of LFP cathode material has grown significantly
to meet downstream demand. In the future, NEVs are expected to account for more market
share, gradually replacing ICE vehicles. Additionally, NEVs and lithium-ion battery
manufacturers are expected to switch their p ursuits from high energy density to safety,
cost-performance, and the life cycle for each b attery, boosting the demand for LFP cathode
material with high cost-effectiveness, reliab ility, safety and resource availability. Another
downstream market for LFP cathode material is the ESS market which has expanded
rapidly to adjust the balance between electricity power supply and demand. Following
supporting policies and subsidies, the global market of ESS battery has grown significantly
from 21.3 GWh in 2019 to 240.5 GWh in 2023, representing a CAGR of 83.3%. LFP
cathode materials have profound advantages on safety, life cycle and cost-effectiveness that
perfectly fit the demand of the ESS market. Therefore, the penetration rate of LFP cathode
material will continue to rise as the favorable material for ESS manufacturers. As mainland
China accounts for more than 80% of the global ESS battery market, the support from
government in mainland China on ‘‘New Energy Storage’’ and demand from downstream
application will boost the demand of LFP cathode materials in both mainland China and
the world.
Policy supports the investment and expansion in LFP cathode materials
In mainland China, LFP cathode material industry is officially included in the
encouraged industries in the ‘‘Industrial Struc ture Adjustment Catalog (2019 Edition)’’. At
t h es a m et i m e ,f r o mt h ep e r s p e c t i v eo fd o w n s t ream industries, ‘‘The 14th Five-Year Plan
New Energy Storage Development Implementation Plan’’ have vigorously promoted the
development of ESS including the electrochemical energy storage, thereby strengthening the
advantage of LFP cathode material. Additiona lly, with the initiatives to achieve ‘‘carbon
peak’’ and ‘‘carbon neutrality’’, governments continue to implement favorable policies to
accelerate the growth of NEVs and energy storage facilities both domestically and globally,
w h i c hi nt u r nd r i v e st h eg r o w i n gd e m a n do nL F Pcathode materials. In the United States,
the federal government will transform its fleet into the largest zero-emission vehicle fleet in
the nation, reaching 100 percent zero-emissi on vehicle acquisitions by 2035. Also in the
U.S., the Environmental Protection Agency increased limits on vehicle exhaust emissions in
April 2023, aiming to ensure that U.S. NEV sales account for 67% of its new passenger car
sales in 2032. As a result of favorable policies to promote the advancement of battery
module technology, LFP has become increasingly popular among the NEV and ESS fields.
Therefore, supporting policies will continue to assure the development and persistent
investment on LFP cathode materials.
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New technology boost potential market demand for LMFP cathode materials
As the latest category of battery cathode material, lithium manganese iron phosphate
(LMFP) cathode material is an upgraded sub -category of LFP cathode material that
includes manganese, mainly deploying in NEV battery and ESS battery. For LMFP, it has a
crystal structure similar to LFP cathode material, and it also possesses the characteristics of
stable chemical properties and excellent sa fety performance. Meanwhile, the manganese
elements doped in LMFP can increase the charg ing voltage of the material, raising it from
the 3.4V of LFP cathode material to 4.1V. This increases the theoretical energy density of
LMFP batteries by 15–20%, further extending the driving range. LMFP’s safety
performance is superior to NCM, while its energy density is higher than LFP cathode
material. In terms of temperature resistance, at –20 degrees Celsius, the capacity retention
rate of LMFP batteries can reach nearly 80%, while that of LFP batteries is 60% ~70%.
From a raw material supply perspective, LMFP exhibits low dependence on rare metals,
such as cobalt, which provides it with a price advantage in comparison to NCM cathode
materials. After the addition of manganese, both the diffusion rate of lithium-ion and the
electronic conductivity of the material decrease, achieving better battery performance.
LFP cathode material manufacturers are well- positioned to transition their production
to LMFP by utilizing their established con nections with existing suppliers of lithium
carbonate and iron phosphate, in addition to their customer base in the NEV and ESS
sectors. Manufacturers using solid-state production methods for LFP cathode materials are
particularly well-positioned for this transit ion, given the similar production processes for
LFP and LMFP. This allows for an efficient switc h in production focus. While there are still
certain technical challenges associated with using LMFP as the sole component in batteries,
such as large specific surface area, moisture absorption in electrode sheets, low compaction
density, and high internal resistance, leading manufacturers of LFP cathode materials are
already in the process of transitioning towards LMFP production. Meanwhile, NEV and
ESS battery companies are beginning to e mbrace the technological transition by
incorporating LMFP cathode materials in th eir products. Despite being in its early
stages, the LMFP industry in China is highly competitive, with major players vying for
dominance. LMFP technology is becomi ng a key focus among leading battery
manufacturers.
In the future, LMFP cathode materials are projected to become a major development
path for manufacturers, with global sales reaching 1,577.7 thousand tons by 2028, and an
expected CAGR of 199.9% between 2023 and 2 028. Similarly, LMFP cathode material sales
in mainland China are expected to reach 1,490.9 thousand tons for the same period, with an
expected CAGR of 196.6% between 2023 and 2028.
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Entry Barriers to LFP Cathode Material Industry
Resource barrier
The production of LFP cathode materials requires many raw materials including
lithium, iron, phosphorus, and carbon, each of which come from different sources. These
raw materials account for approximately 80% to 85% of the total cost of LFP cathode
material production. Therefore, a stable supply of raw materials at reasonable cost is a key
to entering the market. Since only large producers can secure stable and quality supply,
other competitors face unstable supply at higher prices due to their relatively small
purchasing volumes, thus forming the resource barrier for new entrants.
Capital barrier
The production of LFP cathode materia ls requires a large amount of capital
investment, including factory construction, research and development, production, etc.
With capital advantages, leading LFP cathod e material manufacturers are able to utilize
economies of scale to lower production cost, expand their production capacity and sustain
their research and development investments on latest LFP cathode material products. New
entrants with insufficient capital to purchas e those expensive production facilities are hard
to compete with existing LFP cathode material i ndustry participants. Therefore, existing
leaders are able to produce better LFP cathode materials with higher power density, lower
cost, better performance and more reliable qua lity, thus forming the capital barrier for new
entrants.
Client recognition barrier
The quality of cathode materials has a direct impact on the quality of lithium-ion
batteries, which in turn affects the end products, in particular the safety of the end products
which is considered as the top priority concern of the downstream customers. Therefore,
lithium-ion battery manufactures are highly sel ective with respect to suppliers and generally
have stringent entry thresholds and rigorous screening mechanisms for suppliers. Once a
supplier satisfies the requirements of accredited suppliers, customers rarely make any
substantial changes or replacements. For example, leading battery manufacturers need to
inspect the production lines of the new LFP c athode material suppliers before accepting
them as qualified suppliers, an inspection pro cess that often takes months or even a year. In
addition, leading manufacturers along the LFP battery value chain have also begun to
collaborate with their downstream customers in the expansion of overseas lithium-ion
battery production. By establishing overseas pr oduction capabilities, LFP cathode material
manufacturers will be able to satisfy the demands of the overseas market while reducing
potential costs and risks. As a result, these fa ctors form a client recognition barrier in both
mainland China and overseas markets.
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Threats and Challenges of LFP Cathode Material Industry
The global and mainland China LFP cathode material industries encounter various
challenges common to midstream industries a long the lithium-ion battery value chain.
These challenges include managing fluctuating prices of raw materials, periods of
oversupply due to periodic demand adjust ments, and evolving policies that affect
downstream industries. Raw material pric e volatility can compress profit margins for
LFP cathode material manufacturers. Periodic destocking behavior of battery
manufacturers can temporarily reduce demand and lead to overcapacity. This can disrupt
the supply chain and limit pricing power for LFP cathode material producers before
demand catches up. Nevertheless, with the righ t strategies, leading LFP cathode material
manufacturers can weather shor t-term fluctuations while capitalizing on the considerable
growth opportunities in the LFP cathode material industry.
With respect to evolving policies that affect downstream industries, despite long term
supportive policies that underpin the long term development and growth of the LFP
cathode material industry, such as the Industrial Structure Adjustment Catalog (2019
Edition) which officially includes the LFP cathode material industry as an encouraged
industry and ‘‘The 14th Five-Year Plan New Energy Storage Development Implementation
Plan’’ which vigorously promotes the development of ESS, evolving policies that affect
downstream industries could have short-t erm effects and cause growth to temporarily
slowdown. For instance, China’s termination of direct purchase subsidies for NEVs in
December 2022 led to reduced demand for NEV batteries and related components such as
LFP cathode materials, temporarily slow ing growth in the downstream LFP cathode
material industry in the first half of 2023.
Besides policy changes in mainland Chin a, global policy changes and upcoming
measures, including bills such as the U.S. ‘‘Inflation Reduction Act’’, the European Union’s
‘‘Critical Raw Materials Act’’, and investigations by U.S. Department of Commerce and
European Commission into whether Chinese lithium-ion battery manufacturers are
engaging in unfair trade practices, may also reduce the bargaining power of LFP cathode
material manufacturers that are based in mainland China as well as leading NEV and ESS
battery companies. The ‘‘Inflation Reduction Act’’ stated that in order for NEV to apply for
tax credits, the vehicles must not contain any battery components manufactured by foreign
sensitive entity companies (including the mainland China) in 2024, and must not contain
any battery components extracted, processed or recycled by foreign sensitive entity
companies, companies that are owned, controlled, regulated or directed by foreign
governments including China, Russia, Iran and North Korea, in 2025. Meanwhile, the
‘‘Critical Raw Materials Act’’ proposes that at least 40% of the consumption of raw
materials that are important for key strategic technologies such as green development must
be processed in the EU. Therefore, the above-mentioned bill and investigations may
negatively impact the LFP cathode material indu stry in mainland China, resulting in threats
and challenges of LFP cathode material industry.
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Competitive Landscape Analysis of LFP Cathode Material Industry
In 2023, the sales volume of global LFP cathode material reached 1,660.0 thousand
tons. Our Group achieved the position of the fourth-largest global manufacturer of LFP
cathode material by sales volume. In 2023, our sales volume reached 108.1 thousand tons,
accounting for 6.5% of the entire market. The LFP cathode materials market is highly
concentrated, with the top five global manuf acturers accounting fo r around 66.7% of the
whole market in 2023. The global top five LFP cathode material manufacturers are the
same as the top five manufacturers in mainland China, as mainland China market
represents around 99% of the global LFP cathode material market in 2023. As a result, our
Group is also the fourth largest LFP cathode material manufacturer by sales volume in
mainland China.
Top Five Companies of LFP Cathode Material Industry by Sales Volume (Global), 2023
Our Group
Company C
Company B
Company A
Ranking
1
2
3
4
5
30.5%
12.9%
9.9%
6.5%
6.3%
506.8
213.9
164.1
108.1
105.0
Compay Name Sales Volume in 2023 (Thousand Tons) Market Share (%)
Company D
Source: Frost & Sullivan Report
Notes:
Established in 2016, Company A is a listed company on the Shenzhen Stock Exchange. It is the global leading
supplier of lithium-ion battery cat hode materials, focusing on the research and development, production, and
sales of lithium-ion battery cathode materials. Th e company’s main products include LFP cathode materials,
NCM cathode materials and other lithium-ion battery c athode materials. In 2023, Company A’s sales revenue
exceeded RMB41.3 billion.
Established in 2007, Company B is a listed company on the Shenzhen Stock Exchange. It is the global leading
enterprise dedicated to the research and development, pr oduction, and sales of cathode materials for lithium-ion
batteries. The company’s core products are LFP ca thode materials. In 2023, Company B’s sales revenue
exceeded RMB16.9 billion.
Established in 2010, Company C is a listed company on th e Shanghai Stock Exchange. It is one of the earliest
enterprises that engaged in the production and research and development of cathode materials for lithium-ion
batteries, mainly producing LFP cathode materials and precursors for lithium-ion NEV batteries and ESS
batteries. In 2023, Company C’s sale s revenue exceeded RMB12.1 billion.
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Established in 2016, Company D is a global leading inno vator of lithium-ion battery basic materials. The
company is dedicated to the research and developm ent, production, and sales of various advanced cathode
materials, especially LFP cathode materials. In 2023, Company D started its LFP cathode material and iron
phosphate production line in Neijiang, Sichuan.
Average Price Analysis of LFP Cathode Material
Raw materials and products
Lithium carbonate and iron phosphate are the primary raw materials for LFP cathode
materials. To produce one ton of LFP cathode material, between 0.2 and 0.25 tons of
lithium carbonate and between 0.95 and 1.0 tons of iron phosphate are required. Lithium
carbonate constitutes approximately 21% to 25% of the mass of the final LFP cathode
material product.
The price of lithium carbonate heavily relies on imported lithium, mainly sourced from
South America and Australia. The price of lithium carbonate in China has undergone two
major cyclical fluctuations over the past decade driven by supply-demand dynamics in the
lithium-ion battery industry. In 2014, the average price of lithium carbonate reached
R M B 6 7 . 4t h o u s a n dp e rt o na n di n c r e a s e dt oR M B 1 2 4 . 5t h o u s a n dp e rt o ni n2 0 1 8a s
shipment volume of NEV and ESS batteries in creased rapidly from approximately 6 GWh
in 2014 to 70.2 GWh in 2018. Lithium carbonate prices then dropped to an average of
RMB48.0 thousand per ton in 2020 as production capacity of lithium carbonate expanded
to meet demand.
The second cycle emerged as demands from the NEV and ESS sectors accelerated
again. The combined shipment volumes for these batteries increased from 96.2 GWh in 2018
to 610.0 GWh in 2022. The price of lithium carbonate experienced significant growth
between 2020 and 2022, escalating from RMB48.0 thousand per ton to over RMB482.4
thousand per ton. This growth was also attr ibutable to limited and slow-growing
production capacity, which failed to meet th e rising demand. Then the price of lithium
carbonate dropped to RMB272.3 thousand per ton in 2023 mainly due to the balancing
between supply and demand as lithium carbonate supply increased coupled with slowdown
of production in downstream industries. Speci fically, according to the Ministry of Industry
and Information Technology of the PRC ( 中華人民共和國工業和信息化部), lithium
carbonate production soared by approximate ly 21.0% year-on-year, escalating from 343
thousand tons in 2022 to 415 thousand tons in 2023. Meanwhile, the NEV battery industry
resorted to destocking activities in response to falling lithium carbonate prices in hopes of
reducing their exposure to price fluctuations.
The price of iron phosphate is relatively stable compared to lithium carbonate, with the
price increasing from RMB10.4 thousand per ton in 2020 to RMB20.8 thousand per ton in
2022. Similarly, the price of iron phosphate decreased to RMB14.0 thousand per ton in
2023.
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As the supply and demand for lithium carbonate and iron phosphate achieve balances,
both raw materials experienced a decrease in price in 2023. In the near term, the prices of
lithium carbonate and iron phosphate are expected to further decrease due to softening
demand sentiments, coupled with the broader global economic slowdown. These factors
have negatively impacted the downstream lithium-ion battery market, as well as the NEV
and ESS industries. As a result, it is anticipated that the price of lithium carbonate will drop
to RMB95.5 thousand per ton in 2024, while th e price of iron phosphate will decline to
RMB10.2 thousand per ton during the same period. However, with the development of the
Guangzhou Futures Exchange, the introduction of lithium carbonate futures, and
improvements in the market mechanism, it is anticipated that both raw materials will
achieve a balance between supply and demand, resulting in price fluctuations within a
reasonable range. Based on the foregoing, the price of lithium carbonate is expected to
decline slightly to RMB91.5 thousand per ton b y 2028, while the price of iron phosphate is
projected to decrease to RMB9.8 thousand per ton during the same period.
The global LFP cathode material industry has witnessed a surge in sales value since
2018, primarily driven by the growing demand from NEV and ESS sectors and rising raw
material costs. The average prices of the LFP cathode material globally and in mainland
China exhibit a similar trend from 2018 to 2 022. Considering the fluctuations in raw
material costs, the global price of LFP cath ode material decreased from approximately
RMB62.7 thousand per ton in 2018 to the lowest yearly average price of around RMB29.8
thousand per ton in 2020. Subsequently, it has grown to around RMB125.0 thousand per
ton in 2022. As a result of the drop in price of principal raw materials, the average price of
LFP cathode material dropped to RMB72.2 tho usand per ton in 2023. In 2024, the price of
LFP cathode material is expected to continue declining due to reduced raw material costs
and tapered demand in downstream industries. As a result, the price is anticipated to
decrease further to RMB35.5 thousand per ton in 2024. Looking ahead, with the balance of
raw material prices and the increasing demand from downstream industries, the price of
LFP cathode material is projected to stab ilize and reach RMB39.5 thousand per ton by
2028. Given China’s dominance in this industry , the global average selling price is expected
to closely follow these trends.
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Average Price of Lithium Carbonate, 2000–2028E
Thousand RMB/Ton
Average Price of Lithium Carbonate
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
0
50
100
150
200
250
300
350
400
450
500
37.0
12.3 13.2 12.8 14.2 12.0 18.5 26.9 30.9 40.6 47.0 51.3 56.4 61.2 67.4 75.0 86.0 94.2
124.5
71.0
48.0
119.8
482.4
272.3
95.5 93.8 92.6 91.8 91.5
Source: Frost & Sullivan
Note: Due to the lack of comprehensive lithium carbona te pricing data in China prior to 2018, the prices
used in this report for the period before 2018 have been derived based on global pricing estimates.
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Average Price of Iron Phosphate and LFP Cathode Materials, 2018–2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
18.3
12.4
10.4
14.3
20.8
14.0
10.2 10.0 9.9 9.8 9.8
Thousand RMB/Ton
Average Price of Iron Phosphate
0
5
10
15
20
25
30
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
62.7
41.7
29.8
55.0
125.0
72.2
35.5 37.0 38.6 39.1 39.5
Average Price of LFP Cathode Material
0
40
20
60
80
100
120
140
Thousand RMB/Ton
Source: Frost & Sullivan
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OVERVIEW OF AUTOMOTIVE SPECIALTY CHEMICAL INDUSTRY
Automotive specialty chemicals are used in the repair and maintenance of automobiles
and relevant parts to improve vehicle perf ormance, extend component life, reduce
pollution, and save energy. Automotive specialty chemicals mainly include diesel exhaust
fluid (DEF), automotive lubricant, coo lant, and car maintenance products.
. Diesel exhaust fluid: Diesel exhaust fluid converts harmful nitrogen oxides emitted
by diesel engines into harmless water vapor and nitrogen, effectively reducing the
exhaust emissions of diesel engines. Diesel exhaust fluid is a kind of consumable,
with an average consumption of 3–5% of diesel usage.
. Automotive lubricant: Lubricant can be categorized into industrial, automotive,
and other lubricant products. Automoti ve lubricants, such as diesel engine oil,
gasoline engine oil, transmission oil, an d automotive gear oil, are recognized as
automotive specialty chemical produc ts due to their various environmental
advantages, including extend engine lifespan, enhance fuel efficiency, and
conserve energy, ultimately promoting a cleaner and more sustainable
automotive sector.
. Coolant: Coolant plays a critical role in the thermal management system of
vehicles by facilitating efficient heat tra nsfer and precise temperature control. It
enhances heat absorption and transfer, enabling vehicles to operate within the
optimal temperature range, thereby improving performance, comfort, and
ensuring safety.
. Car maintenance products: Car maintenance products encompass a wide range of
products designed to clean, protect, and maintain various aspects of an
automobile’s appearance and functionality. Car maintenance products include
windshield washer fluid, gasoline additiv e, automobile wash wax, air conditioner
cleaner, tire cleaner and dressing, interio r detailing products, engine degreasers,
etc.
Value Chain Analysis of Automotive Specialty Chemical Industry
The upstream segment comprises raw material suppliers and production equipment
manufacturers. Raw material suppliers, such as urea granule manufacturers, base oil
companies, and ethylene glycol producers, play a crucial role by providing the primary
chemicals and materials needed to produce auto motive specialty chemicals. Meanwhile,
production equipment manufacturers supply the machinery and equipment necessary for
the manufacturing process.
The midstream segment involves manufacturers of diesel exhaust fluid, automotive
lubricant, coolant, and car maintenance products. These manufacturers receive the raw
materials from upstream suppliers and pro cess and transform them into automotive
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specialty chemicals. The formulation and composition of these chemicals are key factors in
the industry, as companies strive to develop in novative, high-perform ance, cost-effective,
and compliant solutions to gain a compet itive advantage in the dynamic market.
The downstream segment focuses on the distribution, sales, utilization, and support
services related to automotive specialty chemic als. This includes collaborating closely with
automobile manufacturers, distributors, OEM customers, and retail customers to deliver
high-quality products and services that meet industry requirements and customer
expectations.
Diagram of Automotive Specialty Chemical Industry Value Chain
Upstream Midstream Downstream
Raw Materials Suppliers
Production Equipment Manufacturers
Urea Granule
Base Oil
Ethylene Glycol
Diesel Exhaust Fluid
Automotive Lubricant
Coolant
Car Maintenance Products
Automotive Specialty
Chemicals Manufacturers
Automobile Manufacturers
Distributors
OEM Customers
Retail Customers
Downstream Channels
Source: Frost & Sullivan Report
Market Size of Automotive Specialty Chemical Industry
The global automotive specialty chemical industry, which includes diesel exhaust fluid,
automotive lubricant, coolant, and car main tenance product sectors, has experienced
significant growth due to the expansion of the automotive industry and increasing demand
for sustainable solutions. Gl obal automotive ownership has increased to 1,771.5 million
units in 2023 from 1,557.7 million units in 2019. With increasing demand from downstream
industries, the global market size of diesel exhaust fluid by sales volume has increased from
7.7 million tons in 2019 to 10.8 million tons in 2023, with a CAGR of 8.8%. For global
automotive lubricant industry, the market si ze has increased from 19.6 million tons in 2019
to 22.7 million tons in 2023, representing a CAGR of 3.7%. The global coolant sector has
experienced steady growth, with the market size by sales volume rising from 5.3 million tons
in 2019 to 5.8 million tons in 2023, exhibiti ng a CAGR of 2.3%. Additionally, the global
market size of car maintenance product in dustry has increased from 20.0 million tons in
2019 to 22.3 million tons in 2023, with a CAGR of 2.7%. As the global automotive industry
is projected to further expand, with an estima ted ownership of 1,984.9 million units in 2028,
the global automotive specialty chemical industry is expected to grow accordingly. The
forecasted CAGR for the period between 2024 and 2028 is 5.2% for diesel exhaust fluid,
3.0% for automotive lubricant, 4.1% for coolant, and 3.0% for car maintenance products,
respectively.
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Market Size of Automotive Specialty Chemical Industry by Sales Volume (Global), 2019,
2023 and 2028E
2019
7.7
19.6
5.3
20.0
0.0
5.0
10.0
15.0
20.0
25.0
Million T ons
2023
10.8
22.7
5.8
22.3
0.0
5.0
10.0
15.0
20.0
25.0
Million T ons
2028E
13.9
26.3
7.1
25.8
0.0
5.0
10.0
15.0
20.0
30.0
25.0
Million Tons
CAGR 2019–2023
Automotive Lubricant
CAGR 2024E–2028E
3.7% 3.0%
Diesel Exhaust Fluid 8.8% 5.2%
2.3% 4.1%
2.7% 3.0%
Coolant
Car Maintenance Products
Source: Frost & Sullivan Report
As a result of collaborative efforts by government agencies to reduce harmful pollutant
emissions, specifically nitrogen oxide (NOx) , the sales volume of diesel exhaust fluid in
mainland China has experienced significant growth over the past few years. From 2019 to
2023, the sales volume of diesel exhaust fluid in mainland China increased from 1,977.2
thousand tons to 3,637.2 thousand tons, achieving a CAGR of 16.5%. With the
implementation of additional measures in the future and the enforcement of stricter
emission standards for all vehicles, it is projected that the sales volume of diesel exhaust
fluid in mainland China will reach 5,757.0 thousand tons by 2028, reflecting a CAGR of
9.4% between 2024 and 2028.
Market Size of Diesel Exhaust Fluid Industry by Sales Volume (Mainland China),
2019–2028E
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
0.0
3,000.0
6,000.0
Thousand Tons
5,757.0
1,977.2
2,561.6
3,003.2
3,250.0
3,637.2
4,019.1
4,413.0
4,832.2
5,281.6
5,500.0
5,000.0
4,500.0
4,000.0
3,500.0
2,500.0
CAGR 2019–2023
Diesel Exhaust Fluid
CAGR 2024E–2028E
16.5% 9.4%
2,000.0
Source: Frost & Sullivan Report
As the impact of the pandemic subsides, the sales volume of automotive lubricants in
mainland China has shown a steady increase from 2022 to 2023, rising by 2.0% from
3,803.1 thousand tons to 3,880.0 thousand tons. With the resurgence of transportation and
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logistics, along with growth in the automoti ve industry, it is anticipated that the sales
volume of automotive lubricants will reach 4,252.8 thousand tons by 2028, demonstrating a
CAGR of 1.8%.
Market Size of Automotive Lubricant Industry by Sales Volume (Mainland China),
2019–2028E0.0
3,750.0
3,800.0
3,850.0
4,000.0
4,300.0
Thousand Tons
3,625.2 3,632.4 3,653.6
3,803.1
3,880.0
3,953.7
4,027.7
4,102.2
4,177.2
4,250.0
4,200.0
4,150.0
4,100.0
4,050.0
3,950.0
3,900.0
CAGR 2019–2023
Automotive Lubricant
CAGR 2024E–2028E
1.7% 1.8%
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
3,650.0
4,252.8
3,700.0
Source: Frost & Sullivan Report
Coolant has always played a crucial role in ensuring the functionality and safety of
conventional ICE vehicles. Its primary functi on is to maintain a stable engine temperature,
optimizing performance and providing a comfortable cabin environment for both drivers
and passengers. In addition, with the rise in popularity of NEVs among consumers, the
demand for coolant in these vehicles is substan tially higher than that in ICE vehicles due to
the need to maintain a stable temperature for batteries of NEVs. As a result, the sales
volume of coolant in mainland China has exper ienced growth from 1,422.1 thousand tons in
2019 to 1,710.0 thousand tons in 2023, reflecting a CAGR of 4.7%. As the number of NEVs
being sold in mainland China continues to rise, it is expected that the sales volume of
coolant will reach 2,554.7 thousand tons by 2 028, with a projected CAGR of 8.5% between
2024 and 2028.
Market Size of Coolant Industry by Sales Volume (Mainland China), 2019–2028E
0.0
2,000.0
2,600.0
Thousand Tons
1,422.1 1,443.1
1,492.7
1,611.2
1,710.0
1,843.4
1,995.0
2,165.5
2,351.7
2,554.7
2,500.0
2,400.0
2,300.0
2,200.0
2,100.0
1,900.0
1,800.0
1,700.0
1,600.0
CAGR 2019–2023
Coolant
CAGR 2024E–2028E
4.7% 8.5%
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
1,500.0
Source: Frost & Sullivan Report
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Car maintenance products encompass a wide array of products specifically designed to
clean, protect, and maintain different aspects of an automobile’s appearance and
functionality. These products play a critic al role in the automotive industry. The sales
volume of car maintenance products in mainla nd China has witnessed a rise, increasing
from 4,336.7 thousand tons in 2019 to 5,033.6 thousand tons in 2023, reflecting a CAGR of
3.8%. As the number of automobiles owned in mainland China continues to grow, the
demand for car maintenance products is expect ed to escalate. It is projected that the sales
volume of car maintenance products will reach 6,123.5 thousand tons by 2028, with a
projected CAGR of 4.0% between 2024 and 2028.
Market Size of Car Maintenance Product Industry by Sales Volume (Mainland China),
2019–2028E
0.0
6,200.0
Thousand Tons
4,336.7 4,263.2
4,673.7
4,851.5
5,033.6
5,226.4
5,427.6
5,646.3
5,877.8
6,123.5
CAGR 2019–2023
Car Maintenance Products
CAGR 2024E–2028E
3.8% 4.0%
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
6,000.0
5,800.0
5,600.0
5,400.0
5,200.0
5,000.0
4,800.0
4,600.0
4,400.0
Source: Frost & Sullivan Report
Market Drivers and Trends of Automo tive Specialty Chemical Industry
Expanding automotive industry drives demand for automotive specialty chemicals
The growing automotive industry provide s huge demand for automotive specialty
chemicals. Global automobile ownership in creased from 1,557.7 million units in 2019 to
1,771.5 million units in 2023, and it is expected to reach 1,984.9 million units in 2028, at a
CAGR of 2.2% between 2024 and 2028. Mainland China, as the largest and fastest-growing
automotive market, has seen its automobile ownership increase from 260.0 million units in
2019 to 336.3 million units in 2023, at a CAG R of 6.6%, outpacing the global CAGR of
3.3% during the same period. It is further estimated that automobile ownership in mainland
China will reach 430.5 million units by 2028, at a CAGR of 5.0% between 2024 and 2028.
Due to the growth of the automotive sectors, there is anticipated to be an increase in the
need for automotive specialty chemicals on both a global and domestic scale. This
significant growth in demand has led to the de velopment of automotive specialty chemical
products, including diesel exhaust fluid, automotive lubricant, coolant, and car
maintenance products.
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Stricter regulations drive increased demand for diesel exhaust fluid
In recent years, the Chinese regulatory bodi es have continued to issue environmental
protection related rules and regulations which exert great influence on the automobile
manufacturing industry as well as the downstream and upstream industries thereof. Tighter
regulations will reinforce the entry barrier in terms of regulatory compliance for the
automotive specialty chemical industry and boost demand for sustainable products that are
able to keep abreast with the latest regulato ry adjustments. For example, the demand for
diesel exhaust fluid has significantly increased due to the enforcement of stricter emissions
regulations aimed at reducing NOx emissions. NOx poses risks to health and the
environment, causing respiratory issues, sen sory impairments, and damage to vegetation,
leading to reduced crop yields and hindered gro wth. The implementation of the ‘‘Limits and
measurement methods for emissions from light-duty vehicles (CHINA VI)’’ by Ministry of
Ecology and Environment in 2020 established notably stricter NOx emission limits for light
vehicles, resulting in a 42.9% reduction in NOx emissions from light vehicles in mainland
China between 2018 and 2021. Consequently, d iesel exhaust fluid sales have more than
doubled in the past few years as a direct outcome of these stringent regulatory measures.
Furthermore, the nationwide implementatio n of the ‘‘Limits and measurement methods for
emissions from diesel fueled heavy-duty vehicles (CHINA VI)’’ phase, effective from July 1,
2023, has imposed significantly stricter NOx emission standards for heavy-duty diesel
vehicles compared to the previous ‘‘CHINA V’’ standards. This policy is accompanied by a
ban on producing, importing, and selling v ehicles that do not meet the ‘‘CHINA VI’’
standard. As the anticipation of future policy issuances continues, the demand for diesel
exhaust fluid is expected to persi stently increase in the future.
Growing demand for coolant due to emergence of NEV
The growing demand for coolant in the automotive industry can be attributed to the
emergence of NEVs. In addition to the traditional cabin and powertrain thermal
management systems found in ICE vehicles, NEVs require specialized thermal
management for their batteries. The temperature requirements for NEV batteries are
crucial for their optimal functioning. Extrem e temperatures can have detrimental effects on
battery performance. When temperatures drop below zero degrees Celsius, the
electrochemical reactions within the batte ry slow down, resulting in decreased power,
acceleration, and driving range. Conversely, temperatures above 40 degrees Celsius can lead
to irreversible damage and initiate a destructive chain reaction known as thermal runaway.
Therefore, maintaining the appropriate temperature range is essential for ensuring the
longevity and optimal performance of NEV batteries. The rise of NEVs is expected to drive
the future growth of the coolant industry and contribute to the overall development of
automotive specialty chemical industry.
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Entry Barriers to Automotive Specialty Chemical Industry
Customer recognition barrier
The automotive specialty chemical industry faces a significant customer recognition
barrier. Automobile manufacturers, being major customers in this industry, have stringent
requirements and rigorous product screenin gp r o c e s s e st h a tc a nl a s tf o rm o n t h so re v e n
years. Chemical manufacturing companies must fulfill these requirements to obtain
approval, as defective automotive specialty chemical products not only negatively impact
the quality of automobiles but also harm the reputation of the automobile brand, posing
potential safety risks to its customers. On the other hand, automotive specialty chemical
companies accumulate their automobile manu facturer customers over a long-term customer
development process. Once a partnership is fo rmed, automobile manufacturer customers
exhibit strong loyalty to qualified suppliers and are not easily swayed to make changes. This
stringent evaluation process creates a high barrier for customer recognition in the
automotive specialty chemical industry. New entrants lacking long-established brand
reputation and customer base find it challeng ing to compete with existing companies in the
industry. Building trust and establishing a s trong reputation becomes crucial for these
newcomers, as it influences their ability to g ain recognition and secure partnerships with
automobile manufacturers.
Sales and distribution channel barrier
In the retail market sector, as it directly ta rgets end consumers, the breadth, depth, and
stability of sales and distribution channels are among the most critical factors influencing
industry competitiveness. With the dev elopment and changes in the automotive
aftermarket, consumers have multiple channels to choose automotive specialty chemical
products, including repair stations, supermarkets/retail stores, 4S dealership stores, gas
stations, e-commerce platforms, and aftermar ket servicing centers. This necessitates the
establishment of large-scale, widely covered, a nd influential sales and distribution channels
by companies. The sales and distribution cha nnel barriers in the automotive specialty
chemical industry involve the construction of efficient distributor networks and the ability
to meet seasonal demand fluctuations with elastic supply capabilities. Establishing a
nationwide sales and distribution network takes a considerable amount of time to acquire
local distributor teams’ reco gnition and establish a robust supply chain infrastructure.
Simultaneously, efficient management of sal es and distribution channels is crucial in
effectively responding to sudden increases in consumer demand in specific seasons and
regions. New entrants face intense competition from well-established companies that have
already invested significant time in buildin g a nationwide sales and d istribution channel,
thereby creating substantial sales and distri bution channel barriers for newcomers in the
automotive specialty chemical industry.
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Eligibility barrier
The automotive specialty chemical industry faces a high eligibility barrier, as proper
certification is required for companies to operate within this sector. Several certifications
play a crucial role in ensuring compliance with quality, environmental, automotive
industry, occupational health and safety, and intellectual property management standards.
These certifications include ISO 9001 : 2015 for quality management system certification,
ISO 14001 : 2015 for environmental management system certification, IATF 16949 : 2016 for
automotive industry quality management system certification, ISO 45001 : 2018 for
occupational health and safety management system certification, GB/T23001–2017 for
integration of informatization and industria lization management system certification, and
GB/T 29490–2013 for enterprise intellectua l property management certification.
Furthermore, it is essential for the laboratory to obtain CNAS ISO/IEC 17025
certification, which ensures that the laboratory meets the necessary competence and
quality requirements for test ing and calibration. These elig ibility barriers ensure that
companies in the automotive specialty chemical industry adhere to high-quality standards,
environmental regulations, safety measure s, and intellectual property protection.
Compliance with these certifications and standards not only ensures the legality of
operations but also instills confidence in customers and stakeholders regarding the
reliability and quality of the products and services provided by these companies.
Threats and Challenges of Automotive Specialty Chemical Industry
The automotive specialty chemical indust ry highlights three primary challenges:
increasingly stringent regulatory requirements, fierce market competition, and
fast-changing consumer preferences. Fir stly, increasingly stringent regulatory
requirements pose a significant challenge, requiring adherence to safety standards,
quality control measures, and staying updated with regulations. To overcome this
challenge, manufacturers should establis h robust compliance management systems,
collaborate with regulatory authorities, and prioritize quality control processes.
Secondly, automotive specialty chemical industry faces fierce market competition,
especially for private companies facing barr iers to entry due to the dominance of large
government-owned companies. Private compa nies must differentiate themselves, forge
strong partnerships, and leverage their ag ility and innovation to gain recognition and
market share. Lastly, evolving consumer d emands create technological challenges.
Manufacturers must invest in research and development to stay ahead of technological
advancements, anticipate changes in consum er preferences, and develop cutting-edge
solutions to cater to the fast-changing indu stry landscape. Staying competitive in the
industry necessitates continuous innovation, strategic positioning, and proactive
monitoring of emerging technologies and market trends.
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Competitive Landscape Analysis of Automotive Specialty Chemical Industry
In 2023, the total market size of diesel ex haust fluid industry in mainland China
measured by sales volume was 3,637.2 thousand tons. The top three diesel exhaust fluid
companies in mainland China, in terms of sales volume, collectively held a market share of
51.2%. Among all companies, our Group achieved the third position with a sales volume of
approximately 331.4 thousand tons, amounting to a market share of 9.1% in the diesel
exhaust fluid industry in mainland China in 2023.
Top Three Companies of Diesel Exhaust Fluid Industry by Sales Volume (Mainland China),
2023
Our Group
Company F
Company E
Ranking
1
2
3
29.1%
12.9%
9.1%
1,060.0
470.0
331.4
Company Name Sales Volume in 2023 (Thousand Tons) Market Share (%)
Source: Frost & Sullivan Report
In 2023, the total market size of coolant industry in mainland China measured by sales
volume reached 1,710.0 thousand tons. The t op three coolant companies in mainland
China, in terms of sales volume, collectiv ely held a market share of 26.9%. Among the
participants in the industry, our Group secu red the third position with a sales volume of
99.4 thousand tons, representing a market s hare of 5.8% in the coolant industry for the
same year.
Top Three Companies of Coolant Industry by Sales Volume (Mainland China), 2023
Our Group
Company F
Company E
Ranking
1
2
3
12.3%
8.8%
5.8%
210.0
150.0
99.4
Sales Volume in 2023 (Thousand Tons) Market Share (%)Company Name
Source: Frost & Sullivan Report
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The automotive lubricant market in China is highly competitive and diverse across
state-owned enterprises including Company E and Company F, domestic private enterprises
such as our Group, and multinational brands. The top five manufacturers which consisted
of state-owned enterprises and multinational foreign enterprises accounted for
approximately 30% of the entire Chinese automotive lubricant industry in 2023. The key
success factors in this market include having a strong supply chain, leveraging channel
advantages, and occupying specific market seg ments such as OEM, large-scale customers,
and the mid-to-high-end consumer market. The rapid economic growth and globalization in
the APAC region, particularly in China, have contributed to the market’s expansion and
evolution, with increasing industrial concentration expected to strengthen the position of
leading companies.
The Chinese car maintenance product industry is characterized by a high degree of
competition, with both domestic and international players vying for market share. Major
market players offer a wide range of car maintenance products, including car wash
products, waxes and polishes, and car interior cleaning products. Given the broad range of
car maintenance products for different applications offered by different players, the market
share is fairly fragmented without a clearly dominant leader for the entire segment and
companies generally compete with simil ar products of other market players on a
product-by-product basis. The industry is also characterized by a growing trend towards
e-commerce, with more and more consumers purchasing car maintenance products online.
Notes:
Established in 1998, Company E is a government-owned c onglomerate in mainland China that is publicly listed
in multiple locations, including Shanghai, Hong Kong and New York. It operates as a comprehensive energy
and chemical company. The company’s business activit ies span across petroleum and natural gas exploration,
pipeline transportation, oil refinin g, petrochemical production, sales, and storage of related products. In 2023,
Company E’s revenue exceeded RMB3.2 trillion.
Established in 1999, Company F is a government-owne d holding company in mainland China that is listed in
multiple locations including Shanghai a nd Hong Kong. It is renowned for its significant influence in the global
energy sector, offering comprehensive services in the field of oil and gas field engineering, technology, and
equipment manufacturing. In 2023, Company F’s revenue exceeded RMB3.0 trillion.
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Average Price Analysis of Automotive Specialty Chemical Raw Materials and Products
The primary raw materials for automotive sp ecialty chemicals include urea granules,
base oil, and ethylene glycol. Between 2019 and 2022, automotive specialty chemicals have
experienced significant price variability d ue to the gradual economic recovery, which the
average urea granule prices increased from RMB1,939.3 per ton in 2019 to RMB2,820.2 per
ton in 2022. Automotive lubricants, derived from base oil extracted from crude oil, are
directly affected by changes in crude oil prices, making them a fundamental factor in price
fluctuations. In recent years, the average per b arrel price of crude oil rose from RMB408.5
in 2019 to RMB646.6 in 2022. In contrast, the ethylene glycol industry’s overcapacity led to
a decline in its average price from RMB4,744.4 per ton in 2019 to RMB4,537.9 per ton in
2022. In 2023, China’s urea production entered a phase of intensive production, with its
capacity increasing by 2.2 million tons from the previous year, reaching a total of 73.81
million tons. Consequently, the average pric e of urea granules has dropped to RMB2,460.9
per ton in 2023. Meanwhile, the ongoing hikes in interest rates have affected global oil
demand. In response to rising inflation, economies worldwide, including those in Europe,
Japan, India, and Brazil, have adopted monetary policies featuring interest rate increases
and balance sheet contractions. This has resulted in slowed economic growth and a
corresponding decline in oil demand, leading to a decrease in crude oil prices to RMB567.3
per barrel in 2023. The price of ethylene glycol, which is also derived from crude oil,
decreased to RMB4,116.7 per ton in 2023. This decline was primarily due to a drop in crude
oil prices and overcapacity in the market.
Average Price of Urea Granule Crude Oil, and Ethylene Glycol, 2019–2023
2021 2022 202320202019
4,744.4
5,239.2
4,537.9
0
5,400
4,000
4,200
4,400
4,600
4,800
5,000
5,200
RMB/Ton
Average Price of Ethylene Glycol
in Mainland China
2022 2023202120202019
1,939.3
2,510.5 2,460.9
2,820.2
0
3,000
2,500
2,000
RMB/Ton
Average Price of Urea Granule in Mainland China
2021 2022 202320202019
408.5
646.6
0
400
500
600
650
300
350
450
550
RMB/Barrel
Global Average Crude Oil Price
1,780.5
278.2
443.5
567.3
4,116.7
3,815.8
*N o t e : The crude oil price above is the average price bet ween Brent Crude Oil and West Texas Intermediate
Crude Oil
Source: Frost & Sullivan Report
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The prices of automotive specialty chemical products have exhibited significant
fluctuations due to variations in raw material costs and demand. Specifically, the average
price of diesel exhaust fluid in mainland China rose from RMB1,616.5 per ton in 2019 to
RMB1,740.1 per ton in 2022, before declining to RMB1,736.1 per ton in 2023. Automotive
lubricant prices saw an increase from RMB14,619.1 per ton in 2019 to RMB16,453.8 per
ton in 2022, with a further rise to RMB16,966.6 per ton in 2023. This recent increase was
influenced by the implementation of new co nsumption tax policies, as detailed in the
‘‘Announcement on the Implementation Approach for Consumption Tax Policies for
Certain Refined Oil Products’’, issued on June 30, 2023. Coolant prices also fluctuated,
decreasing from RMB5,007.1 per ton in 2019 to RMB4,493.5 per ton in 2020, then rising
again to RMB5,098.2 per ton in 2022. In 2023, the price declined to RMB4,868.2 per ton.
The easing of geopolitical tensions is expected to stabilize raw material costs further, which
in turn should stabilize the prices of these specialty chemical products.
Average Price of Diesel Exhaust Fluid, Automotive Lubricant, and Coolant, 2019–2023
2021 2022 202320202019
14,619.1
16,966.6
16,453.8
0
17,000
14,500
15,500
16,000
16,500
RMB/Ton
2021 2022 202320202019
5,007.1
5,098.2
0
4,750
4,650
4,800
4,850
4,900
4,950
5,000
5,100
5,050
RMB/Ton
Average Automotive Lubricant Price
in Mainland China
Average Coolant Price in Mainland China
2021 2022 202320202019
1,616.5
1,736.11,740.1
0
1,750
1,700
1,650
RMB/Ton
Average Diesel Exhaust Fluid Price in Mainland China
1,674.0
1,604.4
15,000
14,401.2
14,708.1
4,868.2
4,493.5
4,600
4,550
4.990.7
4,700
Source: Frost & Sullivan Report
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LAWS AND REGULATIONS IN THE PRC
We are subject to a variety of PRC laws, rules and regulations across a number of
aspects of our business. This section sets forth a summary of the most significant laws and
regulations that are applicable to our current bu siness activities within the territory of the
PRC.
Laws and Regulations on Corporation
On December 29, 1993, the Standing Committee of the National People’s Congress
(the ‘‘SCNPC ’’) issued the PRC Company Law ( 《中華人民共和國公司法》)( t h e‘ ‘Company
Law’’). The currently effective version was adopted by the SCNPC on October 26, 2018. All
companies established in the PRC are subject to the Company Law. The Company Law
regulates the establishment, operation, corporate structure, and management of corporate
entities in China and classifies companies i nto limited liability companies and companies
limited by shares.
The latest revised version was adopted by the SCNPC on December 29, 2023, and will
implement on July 1, 2024. The main amendments involve perfecting the company’s capital
system, improving the company’s establishmen t and exit system, optimizing the company’s
organizational structure and strengthening th e responsibilities of controlling shareholders
and management personnel, etc.
General meeting
According to the Company Law, a general meeting of a company limited by shares
shall be constituted by all the shareholders; the general meeting shall be the authority of the
company and shall exercise duties and powers in accordance with the provisions of the
Company Law.
A general meeting shall be convened once every year. An extraordinary general
meeting shall be convened within two months i n case of the certain events specified in the
Company Law.
The Company Law has no specific provisions on the quorum of shareholders to attend
the general meeting.
Under the Company Law, shareholders present at a general meeting have one vote for
each share they hold, save that the company’s shares held by the company are not entitled
t oa n yv o t i n gr i g h t s .
Under the Company Law, resolutions of the general meeting shall be passed by more
than half of the voting rights held by shareholders (including those represented by proxy)
attending the general meeting, with the exception of matters 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, which in each case shall be
passed by at least two-thirds of the voting rights held by the shareholders (including those
represented by proxy) attending the general meeting.
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Shareholders may entrust a representative to attend the general meeting, and the
representative shall submit a power of attorney to the company and exercise the voting
rights within the scope of the authorization.
Transfer of shares
Shares may be transferred in accordance with relevant laws and regulations. Registered
shares shall be transferred by means of endorsement or other means prescribed by laws or
administrative regulations; after the transfer, the company shall record the name and
domicile of the transferee in the register of shareholders of the company. Within 20 days
before the general meeting or within fiv ed a y sb e f o r et h er e c o r dd a t eo fd i v i d e n d
distribution determined by the company, no c hange to the above-mentioned register of
shareholders shall be registered. The transfe r of bearer shares shall take effect when the
shareholder delivers the shares to the transferee.
Restrictions on shareholding and transfer of shares
Generally, the target investors of H shares offering by domestic companies shall be
overseas investors. Where domestic inves tors subscribe H shares issued by domestic
companies, domestic investors shall be compliant with the relevant provisions of
cross-border investment, such as qualified do mestic institutional investors (QDII), or
overseas investment filing (ODI), etc.
Under the Company Law, the shares of the company held by the promoters shall not
be transferred within one year from the date of establishment of the company. The
directors, supervisors and senior management personnel of the company shall report to the
company the shares held by them and their chan ges, and the shares transferred each year
during their term of office shall not exceed 25% of the total shares of the company held by
them respectively. The above-mentioned personnel shall not transfer their shares of the
company within half a year after their resignation. The Articles of Association may make
other restrictive provisions on the transfer of shares held by the directors, supervisors, and
senior management personnel of the company.
Variation of class rights
The Company Law has no specific provision relating to variation of class rights.
However, the Company Law states that the State Council may formulate separate
regulations on companies issuing other types of shares which are not provided in the
Company Law.
Relevant regulations and policies for downstream industries
From the perspective of the actual use of products, the Company’s LFP cathode
material products are mainly used in areas including power batteries and energy storage
batteries. As the PRC government has attached increasing importance to energy saving and
emission reduction, environmental protection and strategic emerging industries, it has
successively launched relevant regulations and p olicies for NEVs, energy storage technology
and power batteries etc.
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In August 2023, the Ministry of Industry and Information Technology of the People’s
Republic of China (the ‘‘ MIIT ’’), the Ministry of Finance of the People’s Republic of China
(the ‘‘MOF’’), the Ministry of Transport of the People’s Republic of China (the ‘‘ MOT’’),
the Ministry of Commerce of the People’s Republic of China (the ‘‘ MOFCOM ’’), the
General Administration of Customs of the People’s Republic of China (the ‘‘ GAC’’), the
National Energy Administration, and the Natio nal Administration of Financial Regulation
jointly issued the Work Plan for Stabiliz ing Growth in the Automotive Industry
(2023–2024) (《汽車行業穩增長工作方案（2023–2024 年）》) ,w h i c hp r o p o s e dt os u p p o r tt h e
expansion of NEVs consumption, effectively implement the existing NEV preferential
policies such as vehicle and vessel use tax and vehicle acquisition tax, properly carry out
work regarding settlement and review of subsidy funds for NEVs, and actively expand the
proportion of personal consumption of NEVs. It also proposed to organize and commence
the pilot work of the pilot zone for comprehensive electrification of public sector vehicles,
accelerate the promotion and application of NEVs in the sections of urban public
transportation, taxi, sanitation, postal express, urban logistics and distribution, conduct
research on and explore the promotion of regional pilot program on zero-emission of
freight trucks, further enhance the level of electrification of public sector vehicles, organize
and commence activities for promoting NEVs in rural areas, encourage enterprises to
develop more advanced and applicable models, and fully explore the consumption potential
of rural areas.
In June 2023, the MOF, the State Taxation Administration and the MIIT jointly issued
the Announcement on Continuing and Optimizi ng the Vehicle Acquisition Tax Reduction
and Exemption Policies for New Energy Vehicles ( 《關於延續和優化新能源汽車車輛購置稅
減免政策的公告》), which proposed to exempt NEVs p urchased during the period from
January 1, 2024 to December 31, 2025 from vehicle acquisition tax, with the amount of tax
exemption for each new energy passenger ve hicle not exceeding RMB30,000, and reduce
vehicle acquisition tax by half on NEVs purch ased during the period from January 1, 2026
to December 31, 2027, with the amount of tax reduction for each new energy passenger
vehicle not exceeding RMB15,000.
In January 2023, the MIIT, the MOT, th e National Development and Reform
Commission of the People’s Republic of China (the ‘‘ NDRC ’’), the MOF, the Ministry of
Ecology and Environment of the People’s Republic of China (the ‘‘ MOEE ’’), the Ministry
of Housing and Urban-Rural Development of the People’s Republic of China (the
‘‘MOHURD ’’), the National Energy Administration, and the State Post Bureau of the
People’s Republic of China jointly issued th e Notice on Organizing Pilot Work Regarding
Pilot Zone of Comprehensive Electrification of Public Sector Vehicles ( 《關於組織開展公共
領
域車輛全面電動化先行區試點工作的通知》), which proposed to substantially enhance the
level of electrification of vehicles and significantly increase the proportion of NEVs in new
and renewed vehicles in pilot areas, and strive to achieve a proportion of 80% in the sectors
of urban public transportation, taxi, sanitation, postal express, and urban logistics and
distribution.
In September 2022, the MOF, the State Taxation Administration and the MIIT jointly
issued the Announcement on Continuing the Policies Regarding the Exemption of New
Energy Vehicles from Vehicle Acquisition Tax ( 《關於延續新能源汽車免徵車輛購置稅政策
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的公告》), which proposed to exempt NEVs which are included in the Catalogue of Models
of New Energy Vehicles Exempte d from Vehicle Purchase Tax ( 《免徵車輛購置稅的新能源汽
車車型目錄》) and purchased during the period from January 1, 2023 to December 31, 2023
from vehicle acquisition tax.
In June 2022, the Ministry of Science and Technology of the People’s Republic of
China (the ‘‘MOST ’’), the NDRC, the MIIT, the MOEE, the MOHURD, the MOT, the
Chinese Academy of Sciences, the Chinese Academy of Engineering and the National
Energy Administration jointly issued the Implementation Plan for Supporting Carbon Peak
and Carbon Neutrality with Science and Technology (2022–2030) ( 《科技支撐碳達峰碳中和
實施方案（2022–2030 年）》), which listed energy storage te chnology as one of the supporting
technologies for green and low-carbon energ y transformation, and proposed to launch
research and development of efficient energy s torage technologies, including compressed air
energy storage, flywheel storage, liquid- and solid-state lithium-ion battery energy storage,
sodium-ion battery storage and fluid-flow battery storage.
In January 2022, the NDRC and the National Energy Administration jointly issued the
14th Five-Year Plan New Energy Storage Development Implementation Plan ( 《「十四五」新
型儲能發展實施方案》), which proposed by 2025, new energy storage shall transform from
the initial stage of commercialization to the large-scale development and fulfill the
development goal with conditions for large-scale commercial application, and included the
improvement of upstream and downstream indus trial chain, cultivation and extension of
the new energy storage upstream and downstream industries, and active promotion of the
development of the whole industrial chain of new energy storage relying on backbone
enterprises with independent intellectual property rights and core competitiveness as
important elements of steady promotion of the new energy storage industrialization
process.
In January 2022, the State Council of the People’s Republic of China (the ‘‘ State
Council ’’) issued the Comprehensive Work Plan for Energy Conservation and Emission
Reduction for the 14th Five-Year Plan Period ( 《「十四五」節能減排綜合工作
方案》), which
proposed that the proportion of NEVs used for urban public transportation, taxi, logistics,
and sanitation and street sweeping, among oth ers, shall be increased. It also proposed by
2025, the sales volume of NEVs will reach about 20% of the total sales volume of new
vehicles.
In December 2021, the MOF, the MIIT, the MOST, and the NDRC jointly issued the
Notice on Fiscal Subsidy Policies of 2022 for the Promotion and Application of New
Energy Vehicles ( 《關於2022 年新能源汽車推廣應用財政補貼政策的通知》), which proposed
that in 2022, the subsidies for NEVs shall be reduced by 30% from the 2021 level; the
subsidies for eligible vehicles in urban public tr ansportation, road passe nger transportation,
taxi (including online ride-hailing), sanitati on, urban logistics and distribution, postal
express, civil aviation airports as well as the official business of the Party and government
bodies shall be reduced by 20% from the 2021 level.
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In July 2021, the NDRC and the National Ene rgy Administration jointly issued the
Guidance on Accelerating the Development of New Energy Storage ( 《關於加快推動新型儲
能發展的指導意見》), which proposed that by 2025, the tra nsformation from the initial stage
of commercialization to large-scale development of new energy storage shall be achieved,
and the installed capacity shall reach more t han 30 million kilowatts; and by 2030, the full
market-oriented development of new energy sto rage shall be realized. T he installed capacity
shall basically meet the corresponding ne eds of new power systems. New energy storage
shall become one of the key supportive measures for carbon peak and carbon neutrality in
the energy field.
In December 2020, the MOF, the MIIT, the MOST and the NDRC jointly issued the
Notice of Further Improving the Fiscal Subsi dy Policies for the Promotion and Application
of New Energy Vehicles ( 《關於進一步完善新能源汽車推廣應用財政補貼政策的通知》),
which proposed that in 2021, the subsidies for NEVs shall be reduced by 20% from the
2020 level. In order to promote the utilizatio n of electric vehicles in areas such as public
transportation, the subsidies for eligible vehicles in urban public transportation, road
passenger transportation, taxi (including onlin e ride-hailing), sanitation, urban logistics
and distribution, postal express, civil aviatio n airports as well as the official business of
Party and government bodies shall be reduced by 10% from the 2020 level. To speed up the
promotion of the transformation and upgrading of the public transport industry, local
governments may continue to provide subsidies for the purchase of new-energy buses.
In October 2020, the State Council issued the New Energy Vehicle Industry
Development Plan (2021–2035) ( 《新能源汽車產業發展規劃（2021–2035 年）》), which
proposed to carry out research on key core technologies such as anode and cathode
materials, electrolyte, separator and membrane electrode, strengthen the research on
technologies in weak areas to be developed of power battery and fuel cell system with high
strength, light weight, high s afety, low cost and long life, and accelerate the research and
development and industrialization o f solid-state power battery technology.
In September 2020, the NDRC, the MOST, the MIIT and the MOF jointly issued the
Guiding Opinions on Expanding Investment in Strategic Emerging Industries and
Cultivating and Strengthening New Growth Points and Growth Poles ( 《
關於擴大戰略性
新興產業投資培育壯大新增長點增長極的指導意見》), which proposed that breakthroughs
shall be made in addressing the challenges faci ng new energy electricity technologies, such
as complementation of wind-solar-hydro power , advanced fuel cells, highly efficient energy
storage, and ocean power generation, and infrastructure networks, such as smart grids,
micro-grids, distributed energy, new energ y storage, hydrogen production and fuelling
facilities, and fuel cell systems, etc., shall b e established. It also proposed to carry out a
comprehensive demonstration of electrific ation of public sector vehicles, increase the
proportion of electrification of vehicles in sectors such as urban public transportation, taxi,
sanitation, and urban logistics and distribution, accelerate the construction of
charging/battery swap stations for NEV s, and improve the coverage rate of fast
charging/battery swap stations in expressw ay service areas and public parking spaces.
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Laws and Regulations on Product Quality
According to the Product Quality Law of the PRC ( 《中華人民共和國產品質量法》) (the
‘‘Product Quality Law ’’) promulgated on February 22, 1993 and amended on July 8, 2000,
August 27, 2009 and December 29, 2018 by th e SCNPC, producers and sellers shall
establish a sound internal product quality control system, strictly adhere to a job
responsibility system in relat ion to quality standards and qua lity liabilities, and implement
corresponding examination and inspection measures. The forgery or imitation of quality
marks such as certification marks is prohibited; falsifying the place of origin of product,
and falsifying or imitating the name or address of another factory is prohibited;
adulteration of, or mixing of improper elements with products under manufacturing or
on sale, passing off the sham as the genuine or passing off the inferior as the superior is
prohibited. Any manufacturer or seller who violates the Product Quality Law may be
subject to (i) administrative penalties, including suspension of production or sale, ordered
correction of illegal activities, confiscation o f products subject to ille gal production or sale,
imposition of fines, confiscat ion of illegal gains and, in severe cases, revocation of business
license; and (ii) criminal liabilities if t he illegal activity constitutes a crime.
Laws and Regulations on Production Safety
According to the Production Safety Law of the PRC ( 《中華人民共和國安全生產法》)
latest amended by the SCNPC on June 10, 2021 and came into effect on September 1, 2021,
an enterprise shall (i) provide production saf ety conditions as stipulated in the Production
Safety Law of the PRC and other relevant laws, administrative regulations, national and
industry standards, (ii) establish a comprehe nsive production safety accountability system
and production safety rules, and (iii) deve lop production safety standards to ensure
production safety. Any entity that fails to provide required production safety conditions is
prohibited from engaging in production activities.
The person-in-charge of an enterprise shall be fully responsible for the safety of
production of the enterprise. An enterprise h aving more than 100 employees shall establish
a production safety management institution or be equipped with dedicated production
safety management personnel. Personnel who is responsible for managing production safety
shall inspect the safety of production regularly based on the characteristics of production of
the enterprise and shall deal with any safety issue identified during the inspection in a timely
manner. Any unsolved issue shall be reported to the person-in-charge in a timely manner
and the person-in-charge shall solve such issue immediately. The inspection and measures
taken shall be duly recorded. Enterprises and institutions shall provide their employees with
training on production safety and shall truthfully inform their employees of any potential
r i s k si nr e l a t i o nt ot h ew o r k p l a c ea n dd u t i e s ,preventive measures and emergency measures.
In addition, an enterprise shall provide its employees with personal protective equipment
that meet the national or industry standards and supervise and train them to use such
equipment.
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According to the Measures for the Supervision and Administration of ‘‘Three
Simultaneities’’ for the Safety Fa cilities of Construction Projects ( 《建設項目安全設施「三
同時」監督管理辦法》) promulgated by the former State Administration of Work Safety
(currently known as the Ministry of Emergency Management) on December 14, 2010 and
amended on April 2, 2015, the safety facilities in a newly built, reconstructed or expanded
construction project must be designed, constructed and put into use simultaneously with the
main body of the project. The enterprises sha ll demonstrate and pre-assess the safety
conditions of its construction projects, prepare a dedicated safety design report, submit to
the relevant work safety administrative dep artment for examination or filing, complete
acceptance of safety facilities and prepare repor ts for inspection according to requirements.
If an enterprise violates the relevant requirements, it may be ordered to make corrections
within a specified time limit, discontinue the c onstruction process or suspend its production
and business operation for recti fication, and imposed a fine.
Laws and Regulations on Fire Prevention
According to the Fire Protection Law of the People’s Republic of China ( 《中華人民共
和國消防法》) promulgated by the SCNPC on April 29, 1998 and last amended on April 29,
2021, the fire prevention design and constructi on of a construction project must conform to
the national fire prevention technical standards for project construction. For construction
projects that require fire prevention design in accordance with the national fire prevention
technical standards for project construction, the fire prevention design review and
acceptance system for construction projects shall be implemented. Upon completion of a
construction project that is required to apply for fire control acceptance inspection by the
competent department of housing and urban -rural development under the State Council,
the construction entity shall apply to the comp etent department of housing and urban-rural
development for fire control acceptance inspection. For construction projects other than
those specified in the preceding paragraph, the construction entity shall report to the
competent department of housing and urban-rural development for filing after the
acceptance, and the competent department o f housing and urban-rural development shall
conduct spot checks. Construction projects which are subject to fire control acceptance
inspection according to law shall not be put into use without fire control acceptance
inspection or failing to pass fire control accept ance inspection. Other c onstruction projects
which fail to pass the legal spot checks shall cease to be used.
Laws and Regulations on Environmental Protection
According to the Environmental Protection Law of the People’s Republic of China
(《中華人民共和國環境保護法》)( h e r e i n a f t e rr e f e r r e dt oa st h e‘ ‘Environmental Protection
Law’’) promulgated by the SCNPC on December 26, 1989 and last amended on April 24,
2014, any entity that discharges or will discharge pollutants in the course of operation or
other activities must implement effective environmental protection measures to control and
properly handle hazardous substances generated in the course of such activities, such as
waste gas, waste water, waste residues, dust, malodorous gases, radioactive substances,
noise, vibration and electromagnetic radiation. The State implements a pollutant discharge
permit management system in accordance wi th the law. According to the Environmental
Protection Law and the Regulations on the Administration of Pollutant Discharge
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Licensing, which was promulgated by the State Council on January 24, 2021 and came into
effect on March 1, 2021, enterprises, business units and other producers and operators that
are subject to pollutant discharge licensi ng management shall discharge pollutants
according to the requirements of the pollutant discharge permits, and shall not discharge
pollutants without obtaining the pollutant discharge permits. The competent environmental
protection authorities impose various administrative penalties on individuals or enterprises
in violation of the Environmental Protection Law.
Pursuant to the Regulations on the Administration of Environmental Protection of
Construction Projects ( 《建設項目環境保護管理條例》) promulgated by the State Council on
November 29, 1998 and amended on July 16, 2017 and the Interim Measures for
Environmental Protection Acceptance Exa mination Upon Completion of Construction
Projects (《建設項目竣工環境保護驗收暫行辦法》) promulgated by the former Ministry of
Environmental Protection on November 20, 20 17, the PRC implements a system to appraise
the environmental impact of construction projects. The construction entity shall submit an
environmental impact report or an environmental impact statement for approval prior to
the commencement of the construction project, or an environmental impact registration
form as required by the environmental protect ion administrative department of the State
Council for record. In addition, after the completion of a construction project for which an
environmental impact report or an environme ntal impact statement has been prepared, the
construction entity shall, in accordance with the standards and procedures prescribed by the
competent administrative department of envir onmental protection under the State Council,
conduct acceptance ch ecks on the supporting environm ental protection facilities and
prepare an acceptance report. For construction projects that are constructed in phases or
put into production or use in pha ses, the corresponding environmental protection facilities
shall be inspected and accepted in phases. The construction project can only be put into
production or use after the completed supporti ng environmental protection facilities have
passed the acceptance inspection. Facilities sh all not be put into production or use without
conducting or passing the acceptance examination.
Prevention and control of pollution
Pursuant to the Regulations on the Administr ation of Pollutant Discharge Licensing
(《排污許可管理條例》), which was promulgated by the State Council on January 24, 2021
a n dt o o ke f f e c to nM a r c h1 ,2 0 2 1 ,t h ee n t e r p r i s es, public institutions and other producers
and operators (hereinafter referred to as the ‘‘ pollutant discharge entities ’ ’ )i n c l u d e di nt h e
classified management catalog of pollutant discharge permits for stationary sources of
pollution shall apply for and obtain a pollutant discharge permit within the prescribed time
limit; and those not included in the catalog are not required to do so for the time being.
Pursuant to the Classified Management Cata log of Pollutant Discharge Permits for
Stationary Sources of Pollution (2019 Edition) ( 《固定污染源排污許可分
類管理名錄（2019 年
版）》), which was promulgated by the Ministry of Ecology and Environment on December
20, 2019 and became effective on the same day, a pollutant discharge entity subject to
registration management is no t required to apply for a pollutant discharge permit. It shall
fill in the pollutant discharge registration f orm on the management information platform of
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state pollutant discharge permits, and register its basic information, pollutant discharge
route, pollutant discharge standards implemented, pollution prevention and control
measures adopted, an d other information.
Laws and Regulations on Import and Export of Goods
Pursuant to the Foreign Trade Law of the PRC ( 《中華人民共和國對外貿易法》)
promulgated by the SCNPC on May 12, 1994 and last amended on December 30, 2022 and
the Notice by the Department of Enterprise Management and Audit-Based Control of
Matters Concerning the Recordation of the Consignees and Consignors of Imported and
Exported Goods (《企業管理和稽查司關於進出口貨物收發貨人備案有關事宜的通知》)i s s u e d
by the General Administration of Customs of the PRC on January 3, 2023, a consignee or
consignor of imported or expo rted goods who applies for filing shall be qualified as a
market entity and is not required to be filed as a foreign trade business operator.
According to the Customs Law of the PRC ( 《中華人民共和國海關法》)p r o m u l g a t e db y
the SCNPC on January 22, 1987 and last amended on April 29, 2021, unless otherwise
stipulated, the declaration of imported or exported goods may be made by the consignees or
the consignors, or the entrusted customs brokers. To undergo customs declaration
formalities, the consignee or consignor of imported or exported goods and the customs
brokers shall file with the Customs in accordance with the law.
According to the Provisions on the Recordation of Customs Declaration Entities of the
PRC ( 《中華人民共和國海關報關單位備案管理規定》) promulgated by the General
Administration of Customs on November 19, 2021 and executed on January 1, 2022, the
consignee or consignor of imported or exported goods or a customs brokers, as filed with
the customs may undergo customs declaration within the customs territory of the PRC.
Where a consignee or consignor of imported or exported goods or a customs brokers applies
for filing, it shall obtain the qualification of market entities.
Laws and Regulations on Land, Planning and Project Construction
Land
According to the Land Administration Law of the PRC ( 《中
華人民共和國土地管理
法》) promulgated by the SCNPC on June 25, 1986 and latest amended on August 26, 2019,
and the Regulations for the Implementatio n of the Land Administration Law of the PRC
(《中華人民共和國土地管理法實施條例》) promulgated by the State Council on December
27, 1998 and latest revised on July 2, 2021, the land in the PRC is either State-owned or
collectively-owned. Except for land which is legally owned by the State or has been
expropriated as State-owned according to law, all of the land is collectively-owned. The
State-owned land use rights may be used by third parties through grant, allocation, lease,
capital contribution and other forms. Third parties who have obtained the State-owned
land use rights may legally use, profit from and dispose of the State-owned land use rights
within the statutory term of use and scope of planned uses.
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Planning
According to the Urban and Rural Planning Law of the PRC ( 《中華人民共和國城鄉規
劃法》) promulgated by the SCNPC on October 28, 2007 and latest amended on April 23,
2019, if the construction of buildings, struc tures, roads, pipelines and other projects is
carried out in the planned area of a city or a town, the construction entity or individual
shall apply to the competent authority of urban and rural planning of the people’s
government of the city or county or the people’s government of the town as determined by
the people’s government of the province, autonomous region or municipality directly under
the Central Government for a construction project planning permit.
Project construction
According to the Construction Law of the PRC ( 《中華人民共和國建築法》)
promulgated by the SCNPC on November 1, 1997 and latest amended on April 23, 2019,
prior to the commencement of construction work, the construction entity shall apply to the
competent construction administrative authority of the people’s government at or above the
county level where the project is located for a construction permit in accordance with the
relevant provisions of the State, except for small-scale projects under the quota as
determined by the construction administrative authority under the State Council. A
construction project shall be delivered fo r use only after it has passed the acceptance
examination. A construction project shall not be delivered for use without conducting or
passing the acceptance examination.
Laws and Regulations on Property Leasing
According to the PRC Civil Code ( 《中華人民共和國民法典》), an owner of immovable
or movable property is entitled to possession, use, earnings, and disposal of such property
in accordance with the law. Subject to the cons ent of the lessor, the lessee may sublease the
leased premises to a third party. Where a lessee subleases the premises, the lease contract
between the lessee and the lessor remains valid . The lessor is entitled to terminate the lease
if the lessee subleases the premises without the consent of the lessor. In addition, if the
ownership of the leased premises changes duri ng the lessee’s possession in accordance with
the terms of the lease contract, the validity of the lease contract shall not be affected.
Moreover, pursuant to the PRC Civil Code, if t he mortgaged property has been leased and
transferred for occupation prior to the establishment of the mortgage right, the original
tenancy shall not be affected by such mortgage right.
On December 1, 2010, the Ministry of Hou sing and Urban-Rural Development
promulgated the Administrative Measures on Leasing of Commodity Housing ( 《商品房屋
租賃管理辦法》), which became effective on February 1 , 2011. According to such measures,
the lessor and the lessee are required to comple te property leasing registration and filing
formalities within 30 days from execution of th e property lease contract with the competent
construction or real estate authorities of the municipality or county where the leased
property is located. If a company fails to do as aforesaid, it may be ordered to rectify within
a stipulated period, and if such company fails to rectify, a fine ranging from RMB1,000 to
RMB10,000 may be imposed.
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Laws and Regulations on Foreign Investment Access
The Foreign Investment Law of the PRC ( 《中華人民共和國外商投資法》), which was
promulgated by the National People’s Congress (‘‘ NPC’’) on March 15, 2019 and
implemented on January 1, 2020, establishe s the management system for pre-access
national treatment and negative list for foreign investment in the PRC. ‘‘Pre-access national
treatment’’ means that foreign investors and their investments shall be treated no less
favorably than domestic investors and their investments at the stage of investment access;
‘‘negative list’’ refers to the special administrative measures for access of foreign investment
in specific fields as prescribed by the PRC. The PRC gives national treatment to foreign
investment outside the negative list. In addition, the Regulation for Implementing the
Foreign Investment Law of the PRC ( 《中華人民共和國外商投資法實施條例》) (the
‘‘Implementation Regulations ’’), which came into effect on January 1, 2020, further
stipulates that the PRC shall, according to the needs of national economic and social
development, formulate a catalogue of encouraged foreign-invested industries, and specify
the specific industries, fields and regions in which foreign investors are encouraged and
guided to invest.
T h eN D R Ca n dt h eM O F C O Mj o i n t l yi s s u e dthe Special Administrative Measures
(Negative List) for Foreign Investment Access (2021 version) ( 《外商投資准入特別管理措施
（負面清單）（2021 年版）》) (the ‘‘2021 Negative List ’’) on December 27, 2021, to replace the
previous encouraging catalog and negative list thereunder. Pursuant to the Foreign
Investment Law, the Implementation Regulations and the 2021 Negative List, foreign
investors shall not make investments in prohibit ed industries as specified in the negative list,
while foreign investments must satisfy certain conditions stipulated in the negative list for
investment in restricted industries. Industrie s not listed in the negative list are generally
deemed ‘‘permitted’’ for foreign investments.
Regulations on Overseas Investment
Pursuant to the Measures for the Admini stration of Overseas Investment ( 《境外投資管
理辦法》) which was issued by the MOFCOM on March 16, 2009 and amended on
September 6, 2014, the MOFCOM and the commerce departments at provincial levels shall
conduct filing or confirmation managemen t depending on different circumstances of
overseas investments of enterprises. Overseas investments involving any sensitive country or
region, or any sensitive industry shall be subject to confirmation management. Overseas
investments under other circumstances shall be subject to filing management.
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Pursuant to the Measures for the Administration of Overseas Investment of
Enterprises (《企業境外投資管理辦法》) which was issued by the NDRC on December 26,
2017 and became effective on March 1, 2018, an enterprise in the territory of the PRC (the
‘‘Investor ’’) carrying out overseas investments shall undergo formalities including the
examination or filing for an overseas investment project (the ‘‘ project(s) ’’), report the
relevant information, and cooperate in supervisory inspection. Sensitive projects conducted
by Investors directly or through overseas enterprises controlled by them shall be subject to
confirmation management. Non-sensitive projects conducted by Investors directly, namely,
non-sensitive projects involving Investors’ direct contribution of assets, equity or provision
of financing or guarantees, shall be subject to filing management. The aforementioned
sensitive projects include projects involvin gas e n s i t i v ec o u n t r yo rr e g i o no ras e n s i t i v e
industry. The Catalogue of Sensitive Sectors for Outbound Investment (2018 Edition) ( 《境
外投資敏感行業目錄（2018 年版）》) promulgated by the NDRC became effective on March 1,
2018, which listed out the sensitive industries in detail.
Laws and Regulations on Overseas Offering and Listing
On February 17, 2023, with the approval of the State Council, the CSRC promulgated
the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic
Companies (《境內企業境外發行證券和上市管理試行辦法》) (the ‘‘Trial Measures ’’) and five
relevant guidelines, which came into force on March 31, 2023. According to the Trial
Measures, (i) PRC domestic companies that seek to offer or list securities overseas, both
directly and indirectly, should fulfill the f iling procedure and submit relevant information
to the CSRC; if a domestic company fails to co mplete the filing procedure or conceals any
material fact or falsifies any major conten t in its filing documents, it may be subject to
administrative penalties, such as order to rect ify, warnings and fines, and its controlling
shareholders, de facto controllers, the perso n directly in charge and other directly liable
persons may also be subject to administrative penalties, such as warnings and fines; (ii)
direct overseas offering and listing by domestic companies refers to the overseas offering
and listing of the companies limited by shares registered and established in the PRC; and
(iii) any companies limited by shares register ed and established in the PRC are required to
file with the CSRC within three business day s after its application document of overseas
listing is submitted. Failure to complete th e filing under the Trial Measures may subject a
PRC domestic company to a rectification order issued by the CSRC, warnings, and a fine of
RMB1 million to RMB10 million. As advised by our PRC Legal Advisor, our offering and
Listing is a direct overseas offering and listing by domestic company under the Trial
Measures and we have submitted the filing app lication to the CSRC within three business
days after our submission of the application of listing to the Stock Exchange. Our Group
will comply with the filing requirements und er the Trial Measures. As advised by our PRC
Legal Advisor, we do not fall under any of the prohibited circumstances that would
disallow an overseas listing as stipulated in the Trial Measures. The CSRC published a
notice on our completion of the filing procedur es for our offering and Listing on January
18, 2024.
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Besides, domestic companies seeking to overseas offering and listing shall strictly
comply with the laws, administrative regu lations and relevant provisions of the PRC
government on foreign investment, State-owned asset management, industry regulation,
overseas investment, cybersecurity, data secu rity, etc., shall not disrupt domestic market
order, and shall not harm national interests, public interests and the legitimate rights and
interests of domestic investors. A domestic company that conducts overseas offering and
listing shall (i) formulate its articles of association, improve its internal control system and
standardize its corporate governance, fina ncial affairs and accounting activities in
accordance with the PRC Company Law, t he PRC Accounting Law and other PRC laws,
administrative regulations and applicable provisions; (ii) abide by the legal system of the
PRC on confidentiality and take necessary measures to fulfil it s confidentiality
responsibility, shall not divulge any state secret or the work secrets of state organs, and
shall also comply with laws, administrative regulations and the relevant provisions of the
PRC if it is involved in the overseas provision of personal information and important data.
In addition, the Trial Measures also list out the circumstances where overseas offering and
listing is explicitly prohibited, including: (i) su ch securities offering and listing is explicitly
prohibited by specific PRC laws and regulations; (ii) that constitutes a threat to or
endangers national security; (iii) the P RC domestic company, or its controlling
shareholder(s) and de facto controller(s) , have committed relevant crimes such as
corruption, bribery, misappropriation of property or undermining the order of the
socialist market economy during the last three years; (iv) the domestic company is
currently under investigations for alleged criminal offenses or major violations of laws and
regulations, and no conclusion has yet been made thereof; or (v) there are material
ownership disputes over the equity held by the controlling shareholder(s) or by other
shareholder(s) that are controlled by the c ontrolling shareholder(s) and/or de facto
controller(s).
On February 24, 2023, the CSRC and other relevant government authorities
promulgated the Provisions on Strengthening the Confidentiality and Archives
Administration of Overseas Securities Issuance and Listing by Domestic Companies (‘‘ 關
於加強境內企業境外發行證券和上市相關保密和檔案管理工作的規定’’) (the ‘‘Provision on
Confidentiality ’ ’ ) ,w h i c hc a m ei n t of o r c eo nM a r c h3 1 ,2 0 2 3 .A c c o r d i n gt ot h eP r o v i s i o n
on Confidentiality, where any PRC domestic company provides or publicly discloses to the
relevant securities companies, securities service i nstitutions, overseas re gulatory authorities
and other entities and individuals, or provi des or publicly discloses through its overseas
listing subjects, documents and materials involv ing state secrets and working secrets of state
organs, it shall report the same to the competent department with examination and
approval authority for approval in accord ance with the law, and submit the same to the
secrecy administration department of the s ame level for filing. Domestic companies
providing accounting archives or copies thereof to entities and individuals including
securities companies, securities service institu tions and overseas regulatory authorities shall
perform the corresponding procedures pursuant to the relevant provisions of the State. The
working papers formed within the territory of the PRC by securities companies and
securities service institutions that provide c orresponding services for domestic companies
seeking overseas offering and listing shall be kept within the territory of the PRC, and those
that need to leave the PRC shall go through th e examination and approval formalities in
accordance with the relevant provisions of the State.
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Regulations on Internet Information Security and Privacy Protection
Regulations on Internet information security
On July 1, 2015, the SCNPC promulgated the National Security Law of the PRC ( 《中
華人民共和國國家安全法》), which became effective on the same day, pursuant to which the
state shall safeguard the sovereignty, securi ty and cybersecurity development interests of
the state, and that the state shall establish a na tional security review and supervision system
to review, among other things, foreign investments, key technologies, internet and
information technology products and services, and other important activities that are
likely to impact the national security of the PRC.
On November 7, 2016, the SCNPC promulgated the Cybersecurity Law of the PRC
(《中華人民共和國網絡安全法》) (the ‘‘Cybersecurity Law ’’), which became effective on June
1, 2017 and is applied to the construction, operation, maintenance and use of networks as
well as the supervision and administration o f cybersecurity in the PRC. According to the
Cybersecurity Law, network operators shall comply with laws and regulations and fulfill
the obligations to safeguard the security of the network when conducting business and
providing services. Those who provide services through networks shall take technical
measures and other necessary measures in accordance with the mandatory requirements of
laws, regulations and national standards to safeguard the safe and stable operation of the
networks, respond to network security incidents effectively, prevent illegal and criminal
activities, and maintain the integrity, confi dentiality and availability of network data, and
network operators shall not collect the personal information irrelevant to the services
provided, or collect or use the personal information in violation of the provisions of laws or
agreements between both parties.
On June 10, 2021, the SCNPC promulgated the Data Security Law of PRC ( 《中華人民
共和國數據安全法》) (the ‘‘Data Security Law ’’), which became effective on September 1,
2021. The Data Security Law mainly sets forth specific provisions regarding the
establishment of basic systems for data security management, including hierarchical data
classification management system, risk asse ssment system, monitoring and early warning
system, and emergency response system. In ad dition, the Data Security Law clarifies the
data security protection obligations of organizations and individuals carrying out data
activities and implements data sec urity protection responsibilities.
On November 14, 2021, the Cyberspace Administration of China ( 中華人民共和國國家
互聯網信息辦公室) (the ‘‘CAC’’) issued the Regulations on the Administration of Cyber
Data Security (Draft for Comments) ( 網絡數據安全管理條例（徵求
意見稿）) (the ‘‘ Draft
Regulations on Data Security ’’), which stipulates that, am ong others, data processors
seeking for listing in Hong Kong that affects o r may affect national security must report to
the CAC for a cybersecurity review. However, the Draft Regulations on Data Security
provides no further explanation or interpretation of ‘‘affects or may affect national
security’’. As of the Latest Practicable Date, the Draft Regulations o n Data Security has not
become effective, and is therefore subject to further changes and interpretations. As advised
by our PRC Legal Advisor, in the event that the Draft Regulations on Data Security
becomes effective in its current form, we will have to fulfill corresponding obligations,
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including ‘‘conducting data security assessment once a year on our own or by entrusting a
data security search institution, and submitting the previous year’s data security assessment
report to the municipal network information department divided into districts before
January 31 of each year’’ and ‘‘formulating data security training plans and organizing data
security education and training for all employees every year’’, etc. Nevertheless, the
Regulations on the Administration of Cyber Data Security (Draft for Comments) will not
have a material adverse impact on the Group’s business operations and the Listing
(assuming the Draft Regulations on Data S ecurity is implemented in its current form).
On December 28, 2021, the CAC and other twelve PRC regulatory authorities jointly
revised and promulgated the Measures for Cybersecurity Review ( 《網絡安全審查辦法》) (the
‘‘Cybersecurity Review Measures ’’), which became effective on February 15, 2022. The
Cybersecurity Review Measures provides that, among others, (i) critical information
infrastructure operators that purchase network products and services or network platform
operators that engage in data processing activities that affect or may affect national security
shall be subject to the cybersecurity revi ew by the Cybersecurity Review Office, the
department which is responsible for the implementation of cybersecurity review under the
CAC; (ii) network platform operators with personal information data of more than one
million users that seek for listing in a foreign country are obliged to apply for a
cybersecurity review by the Cybersecurity Re view Office; and (iii) the relevant regulatory
authorities may initiate cybersecurity review if such regulatory authorities determine that
the enterprise’s network products or services, or data processing activities affect or may
affect national security.
Regulations on Privacy protection
Pursuant to the PRC Civil Code ( 《中華人民共和國民法典》), personal information of a
natural person shall be protected by the law. Any organization or individual that needs to
obtain personal information of the others shall obtain such information legally and ensure
the safety of such information, and shall not illegally collect, use, process or transmit
personal information of the others, or illega lly purchase or sell, provide, or make public
personal information of the others.
Further, the Ninth Amendment to the Criminal Law of the PRC ( 《中華人民共和國刑
法修正案（九）》), which was issued by the SCNPC on August 29, 2015 and became effective
on November 1, 2015, stipulates that any netw ork service provider that fails to fulfill the
obligations related to information network security management as required by applicable
laws and administrative regulations and refus es to take corrective mea sures, will be subject
to criminal liability for causing (i) any large-s cale dissemination of ille gal information; (ii)
any severe effect due to the leakage of users’ in formation; (iii) any serious loss of evidence
of criminal activities; or (iv) other severe si tuations, and any individual or entity that (a)
illegally sells or provides personal information to the others or (b) steals or illegally obtains
any personal information w ill be subject to criminal liability in severe situations.
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On August 20, 2021, the SCNPC promulgated the Personal Information Protection
Law of PRC ( 《中華人民共和國個人信息保護法》) (the ‘‘ Personal Information Protection
Law’’), which became effective on November 1, 2021. Pursuant to the Personal Information
Protection Law, the processing of personal information includes the collection, storage, use,
processing, transmission, provision, disclosure, deletion, etc. of personal information, and
before processing personal information, persona l information processors shall truthfully,
accurately and completely inform individuals of the following matters in a conspicuous
manner and in clear and easy-to-understand language: (i) the name and contact information
of the personal information processor; (ii) purpose of processing personal information,
processing method, type of personal information processed, and retention period; (iii)
methods and procedures for individuals to exercise their rights under the Personal
Information Protection Law; and (iv) other matters that shall be notified as required by
laws and administrative regulations. Based on the processing purposes and processing
methods of personal information, types of personal information, impacts on personal rights
and interests, and possible security risk, etc., personal information processors shall also
take the following measures to ensure that personal information processing activities
comply with laws and administrative regulat ions and to prevent unauthorized access and
personal information leakage, tampering, and loss: (i) formulating internal management
systems and operating procedures; (ii) implementing classified management of personal
information; (iii) adopting corresponding secu rity technical measures such as encryption
and de-identification; (iv) reasonably determining the operating authority for personal
information processing, and regularly conduct safety education and training for
practitioners; (v) formulating and organizing the implementation of emergency plans for
personal information security incidents; and (vi) other measures stipulated by laws and
administrative regulations.
Where personal information is processed in violation of the provisions of the Personal
Information Protection Law, or the processing of personal information fails to fulfill the
personal information protection obligations thereunder, the department performing
personal information protection duties shall or der corrections, give warnings, confiscate
illegal gains, and order to suspend or terminat e the provision of services by the applications
that illegally process personal information; if the personal information processor refuses to
make corrections, a fine of not more than RM B1 million shall be imposed; the directly
responsible person in charge and other directly responsible personnel shall be fined for not
less than RMB10,000 but not more than RMB1 00,000. For any aforesaid illegal act with
serious circumstances, the department perform ing personal information protection duties at
or above the provincial level shall order the personal information processor to make
corrections, confiscate the illegal gains, im pose a fine of less than RMB50 million or less
than 5% of the previous year’s turnover, order the suspension of relevant business or
suspend business for rectification and notify the relevant competent authority to revoke the
relevant permits or business license; impose a fine of not less than RMB100,000 but not
more than RMB1 million on the directly responsible person in charge and other directly
responsible personnel, and may decide to prohibit them from serving as a director,
supervisor, senior management and person in charge of personal information protection of
related companies within a certain period of time.
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Laws and Regulations on Labor, Social Insurance and Housing Provident Fund
According to the Labor Law of the PRC ( 《中華人民共和國勞動法》) promulgated by
the SCNPC on July 5, 1994 and last amended o n December 29, 2018, the Labor Contract
L a wo ft h eP R C(《中華人民共和國勞動合同法》) amended by the SCNPC on June 29, 2007
and took effect on January 1, 2008 and amended on December 28, 2012 and took effect on
July 1, 2013, and the Implementing Regulations of the Labor Contracts Law of the PRC
(《中華人民共和國勞動合同法實施條例》) promulgated by the State Council and took effect
on September 18, 2008, employers must strictly abide by state standards and provide
relevant trainings to its employees, prote ct their labor rights and perform its labor
obligations. Labor relationships between em ployers and employees must be executed in
written form. Labor contracts shall be categorized into labor contracts with fixed term,
labor contracts without fixed term and labor contracts to be expired upon completion of
certain tasks. The remuneration payable by employers to its employees shall not be less than
local minimum wage. Employers must establis h a system for labor safety and sanitation,
and strictly comply with national standards and provide relevant education to its
employees. Violations of the above labor and social protection laws may result in the
imposition of fines and other administrative and criminal liability in the case of serious
violations.
According to the Social Insurance Law of the PRC ( 《中華人民共和國社會保險法》)
promulgated by the SCNPC on October 28, 2010 and last amended on December 29, 2018
and the Provisional Regulations on Collectio n and Payment of Social Insurance Premiums
(《社會保險費徵繳暫行條例》) amended by the State Council and effective on March 24,
2019, a domestic enterprise shall pay premium for pension insurance, unemployment
insurance, maternity insurance, work injury insurance and basic medical insurance for its
employees at an appropriate percentage based on the amounts stipulated by the laws. If the
relevant payment is not paid in full and on time to the relevant local administrative agency,
t h ee m p l o y e rm a yb eo r d e r e dt om a k eu pt h eg a po rp a yaf i n e .M e a n w h i l e ,t h eR e g u l a t i o n s
on Work Injury Insurance ( 《工傷保險條
例》), the Regulations on Unemployment Insurance
(《失業保險條例》), the Trial Measures on Employee Maternity Insurance of Enterprises ( 《企
業職工生育保險試行辦法》) and other laws and regulations contain specific clauses on
different types of social insurance. Employer s governed by such laws and regulations shall
pay corresponding insurance premiums for their employees.
According to the Regulations on the Administration of Housing Provident Fund ( 《住
房公積金管理條例》) promulgated by the State Council on April 3, 1999 and last amended
on March 24, 2019, employers shall make deposit registration for housing provident fund at
the housing provident fund management center and set up housing provident fund accounts
for its employees. Employers should pay the housing provident fund in full and on time.
Employers failing to make payment of housin g provident fund within the time limit or in
full will be ordered by the housing provident fund management center to make the payment
or make up the shortfall within the prescribed t ime limit; otherwise, the housing provident
fund management center may apply for compulsory enforcement with the people’s court.
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Laws and Regulations on Intellectual Property
Trademark
According to the Trademark Law of the PRC ( 《中華人民共和國商標法》)p r o m u l g a t e d
by the SCNPC on August 23, 1982 and last amended on April 23, 2019, the Trademark
Office of the administrative department for industry and commerce under the State Council
shall be responsible for the registration and administration of trademarks in the PRC. The
administrative department for industry and commerce under the State Council shall
establish a Trademark Revie w and Adjudication Board to be responsible for handling
trademark disputes. The registration of a tr ademark shall be valid for ten years from the
date of approval. If there is a continued need for the use of trademark, a renewal shall be
made in accordance with the requirements within twelve months before the expiry of the
trademark registration. If the renewal is no t made within the stipulated period, the valid
period may be extended for six months. Each renewal of registration of trademark shall be
valid for ten years from the date of the expiry o f the previous trademark registration. If no
renewal application has been filed before the expiry date, the registered trademark shall be
deregistered. The administrative department for industry and commerce lawfully investigate
any infringement of the exclusive right under a registered trademark. Any alleged criminal
offense, shall be timely referred to a judicial authority and decided according to law.
Patent
According to the Patent Law of the PRC ( 《中華人民共和國專利法》)p r o m u l g a t e db y
the SCNPC on March 12, 1984 and last amended on October 17, 2020, inventions refer to
new technical solutions for a product, method or its improvement. Utility models refer to
new technical solutions for the shape, structure or the combination of both shape and
structure of a product, which is applicable for p ractical use. Designs refer to new designs of
the shape, pattern or the combination of shape and pattern, or the combination of the color,
shape and pattern of the whole or part of a product with esthetic feeling and industrial
application value. The validity period of paten t for inventions, utility models and designs is
20 years, 10 years and 15 years, respectively, all starting from the date of application.
Copyright
According to the Copyright Law of the PRC ( 《中華人民共和國著作權法》)
promulgated by the SCNPC on September 7, 1990 and last amended on November 11,
2020, citizens, legal persons or other organizations in the PRC shall, whether published or
not, enjoy copyright in their works, which include, among others, works of literature, art,
natural science, social science, engineerin g technology and computer software created in
writing or oral or other forms. A copyright hol der shall enjoy a number of rights, including
the right of publication, the right of authorship and the right of reproduction.
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Domain names
According to the Administrative Measures for Internet Domain Names ( 《互聯網域名
管理辦法》) promulgated by the MIIT on August 24, 2017 and effective on November 1,
2017, domain name root servers and domain name root server operation institutions,
domain name registration man agement institutions and domain name registration service
institutions established in the PRC shall obtain permission from the MIIT or the
communications administration bureau of the province, autonomous region or
municipality directly under the Central Government. The applications for the
establishment of domain name root servers and domain name root server operation
institutions and domain name registration m anagement institutions shall be submitted to
the MIIT. The applications for the establis hment of domain name registration service
institutions shall be submitted to the communications administration bureau of the
province, autonomous region or municipality directly under the Central Government. The
permissions of domain name root server operation institutions, domain name registration
management institutions and dom ain name registration service in stitutions are valid for five
years.
Laws and Regulations on Foreign Exchange
According to the Foreign Exchange Adm inistration Regulations of the PRC ( 《中華人
民共和國外匯管理條例》) (the ‘‘Foreign Exchange Administration Regulations ’’), which was
promulgated by the State Council on January 29, 1996 and came into effect since April 1,
1996, the Foreign Exchange Administration Regu lations classify all international payments
and transfers into current items and capital it ems. Most of the current items are not subject
to the approval of foreign exchange administration agencies, while capital items are subject
to such approval. The Foreign Exchange Administration Regulations were subsequently
amended on January 14, 1997 and August 1, 2008, and came into effect on August 5, 2008.
The latest amendment to the Foreign Exchange Administration Regulations clearly states
that the PRC will not impose any restriction on international current payments and
transfers.
On December 26, 2014, the SAFE issued the Notice of the SAFE on Issues Concerning
the Foreign Exchange Administration of Overseas Listing ( 《國家外匯管理局關於境外上市
外匯管理有關問題的通知》), pursuant to which a domestic company shall, within 15
business days from the closing date of its ove rseas listing issuance, register the overseas
listing with the SAFE’s local branch at the place of its incorporation; and the proceeds from
an overseas listing of a domestic company may be remitted to a dedicated domestic account
or deposited in a dedicated overseas account, but the use of the proceeds shall be consistent
with the content of the prospectus and other public disclosure documents.
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According to the Notice of the State Administration of Foreign Exchange on Policies
for Reforming and Regulating the Control over Foreign Exchange Settlement under the
Capital Account ( 《國家外匯管理局關於改革和規範資本項目結匯管理政策的通知》)i s s u e d
by the SAFE on June 9, 2016, domestic institutions may settle their foreign exchange
receipts under the capital account (including repatriated funds raised through overseas
listing) entitled to discretionary settlemen t according to relevant policies with banks as
actually needed for business operation. The tent ative percentage of discretionary settlement
of foreign exchange receipts under the capital account of domestic institutions is 100%,
subject to the adjustment of the SAFE in due time based on international revenue and
expenditure situations.
Laws and Regulations on Taxation
Enterprise income tax
According to the Enterprise Income Tax Law of the PRC ( 《中華人民共和國企業所得稅
法》), which was promulgated by the SCNPC and was latest amended on December 29, 2018,
and the Regulations on the Implementation of the Enterprise Income Tax Law of the PRC
(《中華人民共和國企業所得稅法實施條例》), which was promulgated by the State Council
and was latest amended in April 23, 2019 (collectively referred to as the ‘‘ EIT Law ’’), a
uniform 25% enterprise income tax rate is imposed to both foreign invested enterprises and
domestic enterprises, except where tax incentives are granted to special industries and
projects. The enterprise income tax rate is reduced to 20% for qualifying small low-profit
enterprises. The high-tech enterprises that n eed full support from the PRC government will
enjoy a reduced tax rate of 15% for enterprise income tax.
Value-added tax
Pursuant to the Provisional Regulations of the PRC on Value-added Tax ( 《中華人民共
和國增值稅暫行條例》), which was promulgated by the State Council and was latest
amended on November 19, 2017, and the Impl ementation Rules for the Provisional
Regulations of the PRC on Value-added Tax ( 《中華人民共和國增值稅暫行條例實施細則》),
which was promulgated by the Ministry of Finance and was latest amended on October 28,
2011 and effective from November 1, 2011, en tities and individuals engaging in selling
goods, providing processing, repairing or replacement services or importing goods within
the territory of the PRC are taxpayers of the value-added tax.
According to the Notice of the Ministry of Finance and the State Taxation
Administration on Adjusting Value-added Tax Rates ( 《財政部、國家稅務總局關於調整增
值稅稅率的通知》) effective in May 1, 2018, the value-added tax rates of 17% and 11% on
sales and imported goods shall be adjusted to 16% and 10%, respectively.
According to the Announcement of the Ministry of Finance, the State Taxation
Administration and the General Administr ation of Customs on Relevant Policies for
Deepening the Value-Added Tax Reform ( 《財政部、稅務總局、海關總署關於深化增值稅改
革有關政策的公告》) promulgated on March 20, 2019 and effective from April 1, 2019, the
value-added tax rates of 16% and 10% on sales and imported goods shall be adjusted to
13% and 9%, respectively.
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Dividends distribution
The principal laws, rules and regulatio ns governing dividend distributions by
foreign-invested enterprises in the PRC are the Company Law and the Foreign
Investment Law and its Implementing Regulations. Under these requirements,
foreign-invested enterprises may pay divid ends only out of their accumulated profit, if
any, as determined in accordance with PRC a ccounting standards and regulations. A PRC
company is required to allocate at least 10% of its respective accumula ted after-tax profits
each year, if any, to fund statutory capital res erve fund until the aggregate amount of that
reserve fund have reached 50% of the registere d capital of the enterprise. A PRC company
is not permitted to distribute any profits until any losses from prior fiscal years have been
offset. Profits retained from the prior fi scal year may be distributed together with
distributable profits from the current fiscal year.
Pursuant to the Individual Income Tax Law of the PRC ( 《中華人民共和國個人所得稅
法》), which was most recently amended on Aug ust 31, 2018, and the Implementation
Provisions of the Individual Income Tax Law of the PRC ( 《中華人民共和國個人所得稅法實
施條例》) ,w h i c hw a sm o s tr e c e n t l ya m e n d e do nD e c ember 18, 2018, dividends distributed by
PRC enterprises are subject to individual income tax levied at a flat rate of 20%. For a
foreign individual who is not a resident of the PRC, the receipt of dividends from an
enterprise in the PRC is normally subject to individual income tax of 20% unless
specifically exempted by the tax authority of the State Council or reduced by relevant tax
treaties.
Pursuant to the EIT Law and the Regulations on the Implementation of the Enterprise
Income Tax Law of the PRC, since January 1, 2008, an enterprise income tax rate of 10%
will normally be applicable to dividends dec lared to a non-PRC resident investor which
does not have an establishment or place of business in the PRC, or which has such
establishment or place of business but the relevant income is not effectively connected with
the establishment or place of business, to the extent such dividends are derived from sources
within the PRC, unless any such non-PRC residen t investor’s jurisdiction of incorporation
has a tax treaty with the PRC that provides for a preferential withholding arrangement.
Non-resident investors residing in jurisdi ctions which have entered into treaties or
adjustments for the avoidance of double taxation with the PRC might be entitled to a
reduction of the PRC enterprise income tax imposed on the dividends received from PRC
companies. The PRC currently has entered into avoidance of double taxation treaties or
arrangements with Hong Kong, Macau, and a number of countries and regions including
Australia, Canada, France, Germany, Japan, M alaysia, the Netherlands, Singapore, the
United Kingdom and the United States. No n-PRC resident enterprises entitled to
preferential tax rates in accordance with th e relevant taxation treaties or arrangements
are required to apply to the PRC tax authorities for a refund of the enterprise income tax in
excess of the agreed tax rate, and the refund application is subject to approval by the PRC
tax authorities.
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LAWS AND REGULATIONS IN INDONESIA
Overview
Our Group commenced its business activity in Indonesia on February 22, 2023 by
setting up its indirectly owned subsidiary, PT LBM Energi Baru Indonesia as a foreign
invested company in Indonesia.
The business scope of PT LBM Energi Baru I ndonesia, which mainly involves the
manufacture of LFP cathode material products for lithium-ion batteries, falling into the
scope of manufacturing operations of battery for electric motor vehicle under the Indonesia
law, will be subject to the relevant laws and reg ulations in Indonesia. These include, but are
not limited to, laws and regulations relating to foreign investment and incorporation, labor,
environment, protection of trade secrets, intellectual property rights, importation and
exportation of goods, competition law and tax law in Indonesia.
Business and Foreign Investment in Indonesia
In general, businesses and foreign investments in Indonesia are governed by several
regulations, mainly Law No. 40 of 2007 on Limi ted Liability Companies as lastly amended
by Law No. 6 of 2023 on the Determination of Government Regulation in Lieu of Law No.
2o f2 0 2 2o nJ o bC r e a t i o na saL a w( t h e‘ ‘J o bC r e a t i o nL a w’’) (the ‘‘Company Law ’’), Law
No. 25 of 2007 on Investment as lastly amended by the Job Creation Law (the ‘‘ Investment
Law’’), and Presidential Regulation of the Republic of Indonesia No. 10 of 2021 on
Investment Business Field as lastly amended b y Presidential Regulation of the Republic of
Indonesia No. 49/2021 (the ‘‘ Positive Investment List ’’).
The Investment Law mandates foreign investment to be in the form of a limited
liability company under the Company Law an d domiciled within the territory of the
Republic of Indonesia unless stipulated otherwise by the law.
If a foreign individual or foreign entity intends to have share participation in a
domestic-owned limited liability company, t he domestic company would need to change its
status to a foreign invested company (‘‘ PMA’’) and will be regarded as foreign capital.
Generally, the subscribed capital and paid-up capital of a PMA, such as PT LBM Energi
Baru Indonesia, must be at least IDR10 b illion. As such, a PMA will be considered as a
large-scale enterprise.
Article 2 of the Positive Investment List provides that all business fields are open to
investment, except for: (i) business activities that are declared closed for investment; or (ii)
activities that can only be carried out by the central government.
Under the Positive Investment List, the scope of business of PT LBM Energi Baru
Indonesia, i.e. battery industry f or electric motor vehicle, does not fall under the criteria of:
(a) business closed for investment and (b) business that can only be carried out by the
central government, and therefore is 100% open for foreign investment.
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Environmental Protection in Indonesia
Environmental protection in Indonesia is governed by various laws, regulations, and
decrees, including Law No. 32 of 2009 on Environmental Protection and Management and
its amendments set out under the Job Creation Law (the ‘‘ Environmental Law ’’) and
Government Regulation No. 22 of 2021 on Implementation of Environmental Protection
and Management (‘‘ GR No. 22/2021 ’’).
The Environmental Law stipulates that any bus iness activity that significantly impacts
the environment must obtain an environmenta l feasibility decree issued by the central or
regional government based on the Environmental Impact Analysis (‘‘ AMDAL ’’). The
environmental feasibility dec ree is a pre-requisite for is suing a business license — the
environmental approval.
If the business actor is loca ted in an industrial estate that already has an AMDAL, the
business actor must secure a Detailed Environmental Management Plan (‘‘ RKL’’) and
Detailed Environmental Monitoring Plan (‘‘ RPL’’) (together, ‘‘RKL-RPL Rinci ’’) as its
environmental approval. For the case of PT LBM Energi Baru Indonesia, since it is located
in Kendal Industrial Park, PT LBM Energi Baru Indonesia is only required to have
RKL-RPL Rinci as its environmental approval before commencing its
operation/production.
GR No. 22/2021 regulates the management of hazardous waste, from identification
and minimization to storage, t ransportation, utilization, processing, disposal, risk
mitigation, emergency response, and penalties for violations.
Specifically, if any hazardous waste is produced, PT LBM Energi Baru Indonesia must
obtain environmental approval and a license in hazardous waste processing. To obtain such
environmental approval, PT LBM Energi Baru In donesia must first obtain hazardous waste
management technical approval per the requirements of GR No. 22/2021. As PT LBM
Energi Baru Indonesia has yet to enter the operation/production stage as of the Latest
Practicable Date, environmental approval and a license in hazardous waste processing are
not required.
Pursuant to Article 82A of the Environmental Law, business actors that operate
without environmental approval are subject to administrative sanctions in the forms of
written warnings, enforcement by the government, administrative fines, suspension of
business licenses and/or revocation of business licenses.
Labor Protection and Social Security and Occupational Safety in Indonesia
A c c o r d i n gt oL a wN o .1 3o f2 0 0 3o nM a n p o w er, as lastly amended by the Job Creation
Law (the ‘‘Manpower Law ’’), employment shall be based on employment contracts, which
can be fixed-term or permanent. Permanent contracts have no specific duration, while
fixed-term contracts can be initiated and re newed for a maximum of five years. According
to Article 90 of the Manpower Law, employers are prohibited from paying wages in an
amount lower than the prevailing minimum wage.
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If PT LBM Energi Baru Indonesia intends to hire foreign workers, PT LBM Energi
Baru Indonesia must fulfill the requirements for hiring foreign workers. These requirements
include obtaining approval of foreign workers’ utilization plan from the Ministry of
Manpower and from Indonesian companion(s)/employee(s), paying to the expertise and
skills development fund, and obtaining the re quired stay permit. Indonesian law prohibits
any company from utilizing foreign workers in positions that handle a personnel or human
resources department.
Law No. 24 of 2011 on Social Security Agency, as lastly amended by the Job Creation
Law (‘‘BPJS ’’) covers all health insurance program s and insurance programs on accident,
pension plan, pension guarantee, life insurance, and job loss insurance. Pursuant to Law
24/2011, a company as an employer is required to register itself and its employees as
participants in BPJS. Apart fr om employers, everyone including workers and contribution
assistance recipients who meet the requiremen ts as participants in the BPJS, must register
themselves and their family members as a part icipant in BPJS under the BPJS program that
is followed. The company as the employer is obliged to pay its contributions to BPJS and
collect the payment of contribution to BPJS borne by their employees, and then deposit the
payment to BPJS.
Trade Secret Protection in Indonesia
Trade secret protection is regulated under Law No. 30 of 2000 on Trade Secrets (‘‘ Law
30/2000 ’’) which defines trade secrets as information in the field of technology and/or
business that is not known by the public and has economic value as it is useful in business
activities, and the confidentiality o f which is maintained by its owner.
Based on Article 13 of Law 30/2000, an infringement of trade secrets takes place when
a person deliberately discloses the trade secrets or breaks the agreement or the obligations,
either written or not, to maintain the confidentiality of the relevant trade secrets and a
person shall be deemed to have infringed trade secrets of another party if he obtains or
possesses the trade secrets in a manner that is contrary to the prevailing laws and
regulations. In general, PT LBM Energi Baru Indonesia must obtain the relevant trade
secrets owner’s consent to use and/or disclose any information pertaining to the trade
secret.
Intellectual Property Right Protection in Indonesia
Under Indonesian laws and regulations, all types of intellectual property are
supervised by the Directorate General of Intellectual Property (‘‘ DGIP ’’), including (a)
mark, (b) patent, (c) industrial design, (d) copyright, (e) geographical indication, (f) trade
secret, and (g) layout design of integrated circuit. Each type of these intellectual property is
governed by a different set of laws and regulations in Indonesia. The intellectual properties
may be transferred, and the owner of the intellectual properties may also grant a license to a
third party based on a license agreement in a ccordance with the prevailing regulations in
Indonesia.
As of the Latest Practicable Date, PT LBM Energi Baru Indonesia does not own any
intellectual property rights in Indonesia.
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The penalties for an infringement or violation of intellectual property are set out in
different laws and regulations depending on the type of intellectual property. In general, the
infringement of intellectual property may in clude: (a) the use of intellectual property
without the approval of the owner; and/or (b) the use of a third party’s intellectual property
which has been registered under the DGIP. Such infringements may result in criminal
sanctions, imprisonment, and/or fines.
Import and Export Licensing
Import and export licensing in Indonesia are mainly governed under Government
Regulation No. 5 of 2021 on Implementation of Risk-Based Licensing (‘‘ GR 5/2021 ’’),
Minister of Trade (‘‘ MOT’’) Regulation No. 36 of 2023 on Import Policies and
Arrangements as amended by MOT Regulation No. 8 of 2024 (‘‘ MOT Regulation
36/2023 ’’), MOT Regulation No. 18 of 2021 on Goods Prohibited from Being Exported
and Goods Prohibited from Being Imported as amended by MOT Regulation No. 22 of
2023 on Goods Prohibited from Being Exported (which is lastly amended by MOT
Regulation No. 20 of 2024) (‘‘ MOT Regulation 18/2021 ’’).
GR 5/2021 requires PT LBM Energi Baru Indonesia to own a Business Identification
Number (‘‘NIB’’), which, amongst others, also applies as an import identification number as
referred to in laws and regulations on import identification number and customs access
rights as referred to in the prevailing regulat ions in the customs sector. The NIB, which has
an import identification number, can only be use d either for a general import identification
number (for import activities of traded goods), or a producer import identification number
(for import activities of goods that are self-u sed as capital goods, raw materials, auxiliary
materials, and/or materials to support the production process).
It is to be noted that MOT Regulation 36/2 023 further regulates that for the import
activities of certain goods, importers are obligated to secure additional business licensing in
the import sector from MOT before the goods enter the Indonesian customs territory.
However, principal raw materials that PT LBM Energi Baru Indonesia will use to produce
LFP cathode materials, i.e., iron phosphate precursor and lithium carbonate salt, do not
fall under any category of certain goods that require additional business licensing in MOT
Regulation 36/2023, and therefore can be imported with an NIB.
In this regard, PT LBM Energi Baru Indonesia has obtained its NIB and has registered
its scope of business as battery industry for electric motor vehicles, and LFP cathode
materials do not fall under any category of the banned goods for import and export under
MOT Regulation 18/2021.
Competition Law in Indonesia
The Competition Law is governed under Law No. 5 of 1999 on Prohibition of
Monopolistic Practices and Unfair Competition, as amended by the Job Creation Law
(‘‘Law 5/1999 ’’).
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Law 5/1999 generally prohibits various agreements and business behaviors that may
cause monopolistic practices and unfair business competition. Specifically, Law 5/1999
prohibits certain agreements such as price fixing, market division, boycotts, cartels, and
vertical agreements that limit competition. It al so prohibits monopolistic business activities
and the abuse of dominant market positions through mergers or acquisitions, interlocking
directorates, or major equity stakes. Certain exemptions also exist under Law 5/1999 for
agreements relating to intellect ual property, technical standards, research cooperation,
international treaties, export-orien ted activities and small businesses.
Failure to comply with Law 5/1999 may lead to administrative and criminal sanctions,
including fines or imprisonment, depending on the nature and extent of the non-compliance
with Law 5/1999.
Taxation Registration in Indonesia
All companies incorporated or running their business activities in Indonesia are subject
to Indonesian taxation, including foreign invested companies, foreign companies carrying
out business activities through a permanent establishment in Indonesia, and corporate
organizations incorporated overseas receiving or accruing income from Indonesia. In
addition to the main taxpayer identification number using the company’s address, separate
taxpayer identification numbers may also be obtained for the other business activities of a
company, including a branch office.
Generally, a company of taxable goods or services must collect VAT (as defined below)
from the buyer. Before obtaining the confirmation as a Taxable Entrepreneur, a taxpayer
must fulfill the requirements and pass the survey conducted by the tax office. The taxpayer
will obtain the taxable entity confirmati on number after being confirmed as a Taxable
Entrepreneur. Based on prevailing regulations, any entrepreneur is obliged to be confirmed
as a Taxable Entrepreneur if, up to one month in the financial year, the gross calculation
amount and/or gross rev enue exceeds IDR4.8 billion.
Types of Tax in Indonesia
Value-added tax (‘‘VAT’’)
The delivery of goods and services in Indonesia is generally subject to VAT. However,
certain goods and services are exempt from VAT under Law No. 42 of 2009 on Value Added
Tax, as lastly amended by the Job Creation Law (the ‘‘ VAT Law ’’), mainly including food
and beverages served in hotels, restaurants, eat eries, food stalls, and similar establishments
or government services. The current VAT rate is 11% starting from April 1, 2022. The VAT
rate will increase to 12% beginning on January 1, 2025. Export of taxable goods and/or
services for consumption outside of Indonesian customs territory are typically not subject
to VAT.
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VAT liabilities are typically settled by usi ng an input-output mechanism, whereby the
vendor charges and the buyer pays VAT on the sale of taxable goods or services. VAT is
classified from the vendor’s perspective as output tax and from the buyer’s perspective as
input tax. To the extent that the goods or services are necessary for running the buyer’s
business, the input tax can be credited agains t the buyer’s output tax. If output tax exceeds
input tax in a particular month, the differen ce must be settled by the applicable VAT return
filing deadline. If input tax exceeds output t ax, the overpaid VAT can be carried forward to
future months or refunded at year-end.
Corporate income tax
Corporate income tax applies to corporat e taxpayers, including limited liability
companies, limited partnership s, firms, joint ventures, foundations, or other entities
established or domiciled in Indonesia. A tax treatment equivalent to corporate taxpayers
also applies to permanent establishments.
Resident corporate taxpayers and permanent establishments are subject to a tax rate of
22%. Public companies with at least 40% of paid-up shares traded on the Indonesia Stock
Exchange and meeting specific requirements are eligible for a 3% tax reduction.
Further, small and medium enterprises (‘‘ SMEs ’’) with annual revenue of not exceeding
IDR50 billion may be entitled to a 50% tax reduction according to Article 31E of the Law
No. 7 of 1983 on Income Tax as lastly amended by Job Creation Law (the ‘‘ Income Tax
Law’’), that is proportionally imposed on the taxable income of a fraction of the gross
turnover of up to IDR4.8 billion.
Withholding tax
Indonesia imposes withholding tax on certain types of income, such as salaries,
interests, dividends, etc., which are subject to withholding, where the payer is required to
calculate, withhold, and remit the withhold ing tax to the tax authorities periodically.
Withholding tax may be final tax or non-final tax. In the case of the latter, non-final
w i t h h o l d i n gt a xm a yb eu s e da sat a xc r e d i tagainst tax payable. Main withholding tax
articles in Indonesia include:
— Article 21 on employment, services, or ac tivities income for resident individual
taxpayers;
— Article 22 on imports, state-owned enterprise purchases and luxury goods;
— Article 23 on dividends, interest, royalties, bonuses, rents or compensation with
respect to technical services, management services, consultation services and other
services;
— Article 4(2) on income from properties, interests, sale of shares, etc.; and
— Article 26 on income paid or payable to non-resident taxpayers with a tax rate of
20%, subject to tax treaties.
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Tax policies in Kendal Industrial Park
Since PT LBM Energi Baru Indonesia is located in Kendal Industrial Park, a special
economic zone under Government Regulation No. 40 of 2021 on Implementation of Special
Economic Zone, it is entitled to certain tax incentives subject to the terms and conditions
under Government Regulation No. 40 of 2021 and Minister of Finance Regulation No.
237/PMK.010/2020 of 2020 concerning Tax, Customs, and Excise Treatment in KEK as
amended by Minister of Finance Regulation No. 33/PMK.010/2021 of 2021, including but
not limited to reduction on corporate income tax, accelerated depreciation of tangible fixed
assets, accelerated amortization of intangible assets and reduction in income tax on
dividends.
Foreign Exchange
The general provisions on foreign exchange in Indonesia are mainly regulated by Law
No. 7 of 2011 on Currency as amended by Law No. 4 of 2023 on the Development and
Strengthening of the Financial Sector, Regulation of Bank Indonesia (‘‘ BI’’) No.
17/3/PBI/2015 on Mandatory Use of Rupiah in the Territory of the Republic of
Indonesia (the ‘‘Mandatory Use of IDR Regulation ’’).
BI is constitutionally mandated to func tion as the central bank responsible for
maintaining the stability of the IDR, including determining the reference exchange rate.
However, in the case of international agreements, the Indonesian party and foreign party
are at liberty to choose the foreign exchange rate presented by BI or other institutions.
IDR shall be used in any transaction conducted within Indonesian territory. This
obligation may be exempted for the following conditions according to the Mandatory Use
of IDR Regulation: (a) certain transactions fo r the implementation of the state budget; (b)
revenue and/or grants from or to overseas; (c) international commercial transactions; (d)
bank deposits in the form of foreign currencies; or (e) international finance transactions.
The exemption to use IDR above also applies to investors that transfer and repatriate
in foreign currencies for, among others, capital, profits, interest, and dividends according to
Article 8 paragraph (3) of the Investment Law.
Failure to comply with the Mandatory Use of IDR Regulation to use IDR for the
transaction that requires the use of IDR is subj ect to sanctions as follows: (a) imprisonment
for up to one year and a fine of IDR200 million; and (b) written warnings, fines, and
prohibition from participation in payment transactions.
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OVERVIEW
We are principally engaged in the production and sale of LFP cathode materials and
automotive specialty chemicals. The history of our Group can be traced back to 2003, when
our Company was established by Mr. Shi, Mr. Shi Baoshan (Mr. Shi’s elder brother) and
Mr. Qin Jian. To this day, Mr. Shi remains as o ne of our Controlling Shareholders, and he
is the chairman of our Board and an executive Director.
In the early years, our business was main ly focused on the automotive specialty
chemicals segment, which included the production of lubricants and engine coolants.
Through strategic growth over the years, we successfully expanded and strengthened our
product portfolio to also include diesel exhaust fluids and car maintenance products. We
expanded into the daily chemical products se gment with the establishment of Jiangsu Green
Melon in July 2020. Since 2020, we started to sell LFP cathode materials. Having
considered the technical advantages and market lead of Tianjin Beiterui Nano and Jiangsu
Beiterui Nano and in line with our long-term deve lopment strategies formulated in response
to developments in the automotive industry, on June 11, 2021, our Company acquired
100% equity interest in Tianjin Beiterui Nano and 100% equity interest in Jiangsu Beiterui
Nano through our subsidiary, Changzhou Liyuan, from BTR Group, which further
expanded our LFP cathode materials business. We expanded into the hydrogen energy
segment in 2022 through the organic development of Jiangsu Boyuan. Under Mr. Shi’s
leadership together with our other senior ma nagement members, we achieved strong growth
from 2021 to 2022 whereby our revenue incr eased by 247.1% from RMB4,053.5 million for
the year ended December 31, 2021 to RMB14, 071.6 million for the year ended December 31,
2022 although we recorded gross loss in 2023 p rimarily driven by unpr ecedented volatility
in lithium carbonate market prices. Despite the challenges we faced, we witnessed signs of
improvement in the first half of 2024, we reco rded gross profit of RMB344.0 million in the
first half of 2024 as compared to gross loss of RMB241.4 million for the same period in
2023.
Since April 10, 2017, our A Shares have been listed on the Shanghai Stock Exchange
(stock code: 603906).
HISTORY AND DEVELOPMENT
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OUR BUSINESS MILESTONES
The following is a summary of our Group’s key business development milestones:
Year Milestone
2 0 0 3 ............. O u rC o m p a n yw a se s t a b l i s h e di nM a r c h2 0 0 3u n d e rt h el a w so f
the PRC.
2 0 0 4 ............. W ew e r ea w a r d e dW e l l - k n o w nT r a d e m a r ko fN a n j i n g( 南京市著
名商標) by the Nanjing Administration of Industry and
Commerce ( 南京市工商行政管理局).
2 0 0 6 ............. O u rt e s t i n gc e n t e ri nN a n j i n gw a sa w a r d e dC N A Sc e r t i f i c a t i o n
by the China National Accreditation Service for Conformity
Assessment ( 中國合格評定國家認可委員會).
2 0 1 3 ............. W e e x p a n d e d i n t o t h e d i e s e l e x h a u s t f l u i d s e g m e n t w i t h t h e
acquisition of Jiangsu Kelas.
2 0 1 5 ............. W ew e r ea w a r d e dW e l l - k n o w nT r a d e m a r ko fC h i n a( 中國馳名商
標)b yt h eT r a d e m a r kO f f i c eo ft he State Administration for
Industry and Commerce ( 國家工商行政管理總局商標局).
We were awarded 2014 Nanjing Mayor Quality Award ( 南京市市
長質量獎) by the Nanjing People’s Government.
2 0 1 6 ............. W ew e r ea w a r d e dJ i a n g s uQ u a l i t yA w a r d( 江蘇省質量獎)b yt h e
Jiangsu People’s Government.
2 0 1 7 ............. O u r A S h a r e s w e r e l i s t e d o n t h e S h a n g h a i S t o c k E x c h a n g e i n
April 2017.
2 0 1 8 ............. W e a c q u i r e d 7 0 % e q u i t y i n t e r e s t i n J i a n g s u R u ilifeng, thus
indirectly acquired control of Zhangjiagang TEEC, a subsidiary
of Jiangsu Ruilifeng. Throug h Zhangjiagang TEEC, we have
further enhanced our strengths in the production and sales of
coolants and car maintenance products.
2 0 2 0 ............. W ee x p a n d e di n t ot h ed a i l yc h e m i c a lp r o d u c t ss e g m e n tw i t ht h e
establishment of Jiangsu Green Melon in July 2020.
We started to sell LFP cathode materials.
HISTORY AND DEVELOPMENT
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Year Milestone
2 0 2 1 ............. W e e s t a b l i s h e d C h a n g z h o u L i y u a n i n M a y 2 0 2 1 t o g e t h e r w i t h
other investors to further develop our LFP cathode materials
business. We, through Changzhou Liyuan, acquired Tianjin
Beiterui Nano and Jiangsu Beiterui Nano from BTR Group in
June 2021, and since then, we commenced production of LFP
cathode materials.
In October 2021, Ningbo Meishan Baoshuigang District
Wending Investment Co., Ltd. ( 寧波梅山保稅港區問鼎投資有限
公司), a wholly-owned subsidia ry of CATL, and Fujian Times
Mindong New Energy Industry Equity Investment Partnership
(Limited Partnership) ( 福建時代閩東新能源產業股權投資合夥企
業（有限合夥）), became investors of Changzhou Liyuan. CATL is
a company listed on the Shenzhen Stock Exchange (stock code:
300750).
2 0 2 2 ............. W ea c q u i r e d7 0 %e q u i t yi n t e r e s ti nL o p a lT i m e sa n da g r e e dt o
cooperate with Yichun Times in th e construction of a production
plant for lithium carbonate to be owned and operated by Lopal
Times.
We expanded into the hydrogen energy segment through the
organic development of Jiangsu Boyuan.
2 0 2 3 ............. W ec o m m e n c e dp r e p a r a t i o nf o ro u rI n d o n e s i aP l a n ti nF e b r u a r y
2023 by setting up PT LBM Energi Baru Indonesia through our
subsidiary Changzhou Liyuan.
ESTABLISHMENT AND MAJOR SHAREHOLDING CHANGES OF OUR COMPANY
Establishment and Major Shareholding Changes of Our Company Prior to January 2014
Our Company, then known as Jiangsu Lopal Petrochemicals Co., Ltd. ( 江蘇龍蟠石化
有限公司), was established in the PRC on March 11, 2003 as a limited liability company
with an initial registered capital of RMB5 million. At the time of establishment, our
Company was owned as to 80%, 10% and 10% by Mr. Shi, Mr. Shi Baoshan and Mr. Qin
Jian (together, the ‘‘ Founders ’’), respectively. For details of the background of Mr. Shi and
Mr. Qin Jian, see ‘‘Directors, Supervisors and Senior Management.’’ Mr. Shi Baoshan is
Mr. Shi’s elder brother and a technical consult ant of Jiangsu Kelas. The initial registered
capital of our Company was funded by the Founders in proportion to their respective
holdings in our Company. Mr. Shi funded his portion of the registered capital using his
personal resources. Mr. Shi Baoshan’s portion of the registered capital was paid up by
Nanjing Lopal Lubricants Co., Ltd. ( 南京龍蟠潤滑油有限責任公司) (which changed its
name to Nanjing Fulima Lubricants Co., Ltd. ( 南京富利
瑪潤滑油有限責任公司)) (‘‘Nanjing
Lopal Lubricants ’’), as it then owed Mr. Shi Baoshan certain debts. Mr. Qin Jian’s portion
of the registered capital was funded by Nanjing Lopal Lubricants, as it then owed Mr. Qin
HISTORY AND DEVELOPMENT
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Jian certain debts, and with funds borrowed from Mr. Shi. As of the Latest Practicable
Date, Mr. Qin Jian had fully settled his debt to Mr. Shi relating to payment of the registered
capital. Nanjing Lopal Lubricants was d eregistered in October 2013. Prior to its
deregistration, Nanjing Lopal Lubricants was owned as to 80%, 10% and 10% by Ms.
Qin Juan, Mr. Xue Lingjian and Mr. Qin Jian. Ms. Qin Juan is Mr. Qin Jian’s younger
sister. Mr. Xue Lingjian is Ms. Qin Juan’s husband.
On April 14, 2009, Mr. Shi Baoshan transf erred all his 10% equity interest in our
Company to Ms. Shi Shuhong at the consideration of RMB500,000, and Mr. Qin Jian
transferred all his 10% equity interest in our Company to Ms. Zhu at the consideration of
RMB500,000. The consideratio ns of the said transfers were de termined with reference to the
then registered capital of our Company. Upon the completion of the transfers, our
Company was owned as to 80%, 10% and 10% by Mr. Shi, Ms. Zhu and Ms. Shi Shuhong,
respectively. Ms. Shi Shuhong is Mr. Shi’s elder sister and Ms. Zhu is Mr. Shi’s wife. For
details of the background of Ms. Zhu, see ‘‘Directors, Supervisors and Senior
Management.’’
Between April 2009 and November 2013, our Company underwent several rounds of
increases in registered capital and equity transfer. As of November 29, 2013, our
Company’s registered capital was RMB63,888,849, which was owned as to approximately
67.62%, 7.51%, 8.35% and 16.52% by Mr. Shi, Ms. Zhu, Nanjing Bailey and Jiantou Jiachi
(Shanghai) Investment Co., Ltd. ( 建投嘉馳（上海）投資有限公司)( ‘ ‘Jiantou Jiachi ’’),
respectively. For details of the backgrou nd of Nanjing Bailey, see ‘‘— Corporate
Structure — Corporate Structure as of the Latest Practicable Date’’ below. For details of
the background of Jiantou Jiachi, see ‘‘— Conversion into a Joint Stock Company in
January 2014’’ below.
Conversion into a Joint Stock Company in January 2014
On January 23, 2014, our Company was converted into a joint stock company with a
registered capital of RMB156 million and was r enamed as Jiangsu Lopal Tech. Co., Ltd. ( 江
蘇龍蟠科技股份有限公司). RMB156,000,000 of the audited net assets of our Company as of
November 30, 2013 was converted into 156,000,000 Shares with a nominal value of
RMB1.00 each.
The shareholding structure of our Company immediately after the completion of the
conversion into a joint stock company was as follows:
Shareholder
Number of
Shares held
Approximate
percentage of
shareholding
(%)
Mr. Shi (1) ........................... 1 0 5 , 4 8 7 , 2 0 0 6 7 . 6 2
Ms. Zhu (1) .......................... 1 1 , 7 1 5 , 6 0 0 7 . 5 1
Nanjing Bailey (1) ..................... 1 3 , 0 2 6 , 0 0 0 8 . 3 5
Jiantou Jiachi (2) ...................... 2 5 , 7 7 1 , 2 0 0 1 6 . 5 2
Total .............................. 156,000,000 100.00
HISTORY AND DEVELOPMENT
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Notes:
(1) Mr. Shi and Ms. Zhu are spouses. For details of the background of Mr. Shi and Ms. Zhu, see ‘‘Directors,
Supervisors and Senior Management.’’
As of the Latest Practicable Date, Lopal Internationa l was the general partner of Nanjing Bailey, and the
partnership interest of Nanjing Ba iley was held as to approximately 5 6.99% by Ms. Zhu, approximately
1.16% by Lopal International, while the remainder w as held by 33 subsisting or former employees of our
Group whose percentage of partnership interest ra nged from approximately 1.08% to 2.02% each. As of
the Latest Practicable Date, Lopal Internationa l was owned as to 90% and 10% by Mr. Shi and Ms. Zhu,
respectively.
(2) Jiantou Jiachi, an Independent Third Party, is a limi ted liability company established in the PRC and as of
the Latest Practicable Date, it was wholly -owned by Jiantou Investment Co., Ltd. ( 建投投資有限責任公
司), which was in turn wholly-owned by China Jianyin Investment Co., Ltd. ( 中國建銀投資有限責任公司),
which was in turn wholly-owned by Central Huijin Investment Co., Ltd. ( 中央匯金投資有限責任公司),
which was in turn wholly-owned by China Investment Corporation ( 中國投資有限責任公司), a
state-owned enterprise of the PRC. Jiantou Jiachi was a financial investor of our Company.
A Share Offering and Listing on the Shanghai Stock Exchange in April 2017
As approved by the CSRC, our Company completed the initial public offering and
listing of our A Shares on the Shanghai Stock Exchange (stock code: 603906) on April 10,
2017. Immediately following this offering, our share capital was increased to 208,000,000 A
Shares with a nominal value of RMB1.00 each, and the shareholding structure of our
Company was as follows:
Shareholder (1)
Number of
A Shares held
Approximate
percentage of
shareholding
(%)
M r .S h i............................ 1 0 5 , 4 8 7 , 2 0 0 5 0 . 7 2
M s .Z h u ........................... 1 1 , 7 1 5 , 6 0 0 5 . 6 3
N a n j i n gB a i l e y....................... 1 3 , 0 2 6 , 0 0 0 6 . 2 6
J i a n t o uJ i a c h i ........................ 2 0 , 5 7 1 , 2 0 0 9 . 8 9
National Council for Social Security Fund
(全國社會保障基金理事會)
(2) ............ 5 , 2 0 0 , 0 0 0 2 . 5 0
O t h e rS h a r e h o l d e r s .................... 5 2 , 0 0 0 , 0 0 0 2 5 . 0 0
Total .............................. 2 0 8 , 0 0 0 , 0 0 0 1 0 0 . 0 0
Notes :
(1) See notes in ‘‘— Establishment and Major Shareholding Changes of Our Company — Conversion into a
Joint Stock Company in January 2014’’ above.
(2) As advised by our PRC Legal Advisor, as Jiantou Jia chi was a PRC state-owned enterprise, according to
then subsisting relevant PRC Law, it was requi red to transfer such number of A Shares that was
equivalent to 10% of the total number of A Shares off ered at the initial public offering to National
Council for Social Security Fund ( 全國社會保障基金理事會).
HISTORY AND DEVELOPMENT
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As of the Latest Practicable Date, our Company was listed on the Shanghai Stock
Exchange, and our Directors confirmed that, save as the Verbal Warning disclosed in
‘‘Business — Legal Proceedings and Compliance — Non-compliance — Verbal warning by
the Shanghai Stock Exchange’’, we had no instances of non-compliance with the rules of the
Shanghai Stock Exchange in any material respects since our listing on the Shanghai Stock
Exchange and, to the best knowledge of our Directors after having made all reasonable
enquiries, there was no matter that should be brought to the attention of potential investors
of our Company in relation to our compliance record on the Shanghai Stock Exchange.
Based on the filings on the website of the Sha nghai Stock Exchange and the information
available in the public domain, our PRC Legal Advisor is of the view that since our listing
on the Shanghai Stock Exchange, we had no instances of material non-compliance with the
rules of the Shanghai Stock Exchange, and there is no matter that should be brought to the
attention of potential investors of our Co mpany. Based on the independent due diligence
conducted by the Joint Sponsors and our PRC Legal Advisor’s view above, nothing has
come to the Joint Sponsors’ attention that would cause them to disagree with our Directors’
confirmation with regard to the compliance records of our Company on the Shanghai Stock
Exchange.
Share Capital Changes in 2018
In January 2018, our Company granted 3,720,000 restricted A Shares to 60 employees
of our Group pursuant to its 2017 restricted share scheme (the ‘‘ 2017 Restricted Share
Scheme ’’). Pursuant to the terms of the 2017 Restricted Share Scheme, the 2017 Restricted
Share Scheme has expired and no further restricted A Shares will be granted under the
scheme. Since April 2, 2021, the restriction on disposal of all the restricted A Shares granted
under the 2017 Restricted Share Scheme has been released.
At the Board meeting held in April 2018 and the annual general meeting of our
Company held in May 2018, we resolved to issue 42,344,000 A Shares as bonus shares to
our then Shareholders with reference to a total of 211,720,000 issued A Shares immediately
before the bonus issue. Upon completion of the bonus issue in June 2018, our share capital
was increased to 254,064,000 A Shares with a nominal value of RMB1.00 each.
HISTORY AND DEVELOPMENT
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Share Capital Changes in 2019
At the Board meeting held in April 2019 and the annual general meeting of our
Company held in May 2019, we resolved to issue 50,779,200 A Shares as bonus shares to
our then Shareholders with reference to a total of 253,896,000 issued A Shares immediately
before the bonus issue. During 2019, we repurchased and cancelled a total of 2,230,080
restricted A Shares granted under the 2017 Restricted Share Scheme. As of December 31,
2019, our share capital was 302,613,120 A Sh ares with a nominal value of RMB1.00 each.
Share Capital Changes in 2020
During 2020, we repurchased and cancelled a total of 185,760 restricted A Shares
granted under the 2017 Restricted Share Scheme.
On April 23, 2020, we issued 4,000,000 units of convertible bonds with a par value of
RMB100 each and an aggregate principal amou nt of RMB400 million, which were listed on
the Shanghai Stock Exchange on May 19, 2020. The convertible bonds were for a term of six
years commencing from April 23, 2020 at an annual interest rate of 0.50% for the first year,
0.80% for the second year, 1.80% for the third year, 3.00% for the fourth year, 3.50% for
the fifth year and 4.00% for the sixth year. The initial conversion price was RMB9.61 per A
Share, which was later revised to RMB9.48 p er A Share with effect from June 4, 2020. As of
December 10, 2020, the relevant bondholder con verted the relevant convertible bonds into
41,940,886 A Shares, and we redeemed all of the outstanding convertible bonds.
As of December 31, 2020, our share capital was 344,368,246 A Shares with a nominal
value of RMB1.00 each.
Share Capital Changes in 2021
At the Board meeting held in March 2021 and the annual general meeting of our
Company held in April 2021, we resolved to issue 137,740,386 A Shares as bonus shares to
our then Shareholders with reference to a total of 344,350,966 issued A Shares immediately
before the bonus issue. During 2021, we repurchased and cancelled a total of 17,280
restricted A Shares granted under the 2017 Restricted Share Scheme. As of December 31,
2021, our share capital was 482,091,352 A Sh ares with a nominal value of RMB1.00 each.
HISTORY AND DEVELOPMENT
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Share Capital Changes in 2022
In May 2022, we underwent a non-public offering of 82,987,551 A Shares at an offer
price of RMB26.51 per A Share. We raised RMB2,199,999,977.01 in gross proceeds from
the non-public offering, and the net proceeds (after deduction of the underwriting
commissions and other offering relate d expenses of RMB24,468,856.18) was
RMB2,175,531,120.83. As of the Latest Practicable Date, we had utilized RMB1,575.6
million of such net proceeds. The following tabl e sets forth the statu s of the use of proceeds
from the said non-public offering:
Intended use of proceeds
Percentage of
intended use
of net
proceeds
Intended
use of net
proceeds from
the non-public
offering
Utilized net
proceeds as of
the Latest
Practicable
Date
Unutilized net
proceeds as of
the Latest
Practicable
Date
Original
proposed
timeframe of
unused
balance and
current
expected
timeframe of
unused
balance
(%)
(in RMB
millions)
(in RMB
millions)
(in RMB
millions)
To expand the scale and
production of our NEV
power and energy
storage cathode
m a t e r i a l.......... 5 9 . 3 1 , 290.0 672.9 617.1
by the second
quarter of
2025
600,000 tons diesel
exhaust fluid
production expansion
project
(1)(2) ........ 1 1 . 7 255.6 256.2 — —
40,000 tons per annum
lithium carbonate
production facility
construction project
(2) 6.0 129.9 142.0 — —
Working capital and
other general corporate
p u r p o s e s .......... 2 3 . 0 500.0 504.5 — —
Total .............. 100.0 2,175.5 1,575.6 617.1 —
HISTORY AND DEVELOPMENT
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Notes:
1. On June 13, 2022, our Board has resolved to change the entity to implement the expansion projects
for administrative convenience and the entitie s involved prior and after the change are both
wholly-owned subsidiaries of our Group.
2. On February 20, 2024, as the 600,000 tons diesel exhaust fluid production expansion project had
been completed, the shareholders of our Company had resolved to apply the remaining proceeds
from the non-public offering of approximately R MB129.9 million to 40,000 tons per annum lithium
carbonate production facili ty construction project.
3. To the extent that the net proceeds from the non-publ ic offering are not immediately required for
the above purposes and without affecting the use of such net proceeds as intended, our Company
may utilize idle unutilized net proceeds from the offerings of (i) not exceeding RMB600 million from
the non-public offering to supplement our working cap ital temporarily for a period not exceeding 12
months from April 25, 2024, and by the end of such 12-month period, such utilized cash shall be
deposited to the designated account of our Company in full; and (ii) not exceeding RMB760 million
(comprising RMB720 million from the non-public o ffering and RMB40 million from the issue of the
convertible bonds of the Company in 2020) and not exceeding RMB2,800 million of our own idle
cash to invest in wealth management products for the period from the annual general meeting of the
Company for the year 2023 until the annual general meeting of the Company for the year 2024. The
interest generated from such investment in wealth management products will be applied to
supplement our working capital. As of the Latest Practicable Date, (i) t he amount of net proceeds
from the non-public offering used to supplement our working capital temporarily and remained
outstanding is RMB500 million; and (ii) the aggr egate amount of net proceeds from the non-public
offering used to invest in wealth management pr oducts and remain outstanding is RMB130 million.
As of December 31, 2022, our share capital was 565,078,903 A Shares with a nominal
value of RMB1.00 each, and the shareholding of our Company was as follows:
Shareholder Note
Number of
A Shares held
Approximate
percentage of
shareholding
(%)
M r .S h i............................ 2 1 2 , 6 6 2 , 1 9 5 3 7 . 6 3
M s .Z h u ........................... 2 3 , 6 1 8 , 6 4 9 4 . 1 8
N a n j i n gB a i l e y....................... 3 , 0 2 5 , 2 0 8 0 . 5 4
J i a n t o uJ i a c h i ........................ 4 , 4 4 9 , 4 8 7 0 . 7 9
O t h e rS h a r e h o l d e r s .................... 3 2 1 , 3 2 3 , 3 6 4 5 6 . 8 6
Total .............................. 5 6 5 , 0 7 8 , 9 0 3 1 0 0 . 0 0
Note: See notes in ‘‘— Establishment and Major Sharehol ding Changes of Our Company — Conversion into a
joint stock company in January 2014’’ above.
HISTORY AND DEVELOPMENT
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On August 30, 2022, we announced our Board’s proposal to issue convertible bonds
with an aggregate principal amount of no more than RMB2.1 billion (‘‘ Proposed 2022 CB
Issuance ’’). The Proposed 2022 CB Issuance was s ubject to, among others, the approval by
the relevant governmental authorities in the PRC. In October 2022, our Company
submitted the relevant application and do c u m e n t si nr e l a t i o nt ot h eP r o p o s e d2 0 2 2C B
Issuance to CSRC for consideration. Follo wing the change in applicable laws and
regulations in the PRC in February 2023, th e Proposed 2022 CB Issuance was subject to
review by the Shanghai Stock Exchange and ful fillment of relevant procedures relating to
issuance registration with the CSRC. On Marc h 1, 2023, we received notice of acceptance
from the Shanghai Stock Exchange confirming that the documents provided were complete,
in compliance with requisite formality and eligible for review. In November 2022 and
March 2023, we have received written comments as well as subsequent follow up comments
from the CSRC and the Shanghai Stock Exchange in respect of the Proposed 2022 CB
Issuance, respectively, and have responded to their comments in December 2022, May 2023
(with updates and revisions submitted in June 2023), respectively. On June 30, 2023, after
considering, among other factors, our Company’s strategic development and capital
operation plans and the reasons set out in ‘‘— Reasons for the Termination of the Proposed
2022 CB Issuance and the Listing on the Stock Exchange’’ below, our Board and our
Supervisory Committee resolved to terminate the Proposed 2022 CB Issuance voluntarily.
As of the Latest Practicable Date and to the best of our Directors’ knowledge, our
Company did not receive any further enquiries from the relevant regulatory authorities and
there were no outstanding enquiries from relev ant regulatory authorities with respect to the
Proposed 2022 CB Issuance. During the prepa ration of the Proposed 2022 CB Issuance, we
did not encounter disagreements with relevant professional parties, CSRC nor Shanghai
Stock Exchange.
To the best of their knowledge, our Directors confirm that they are not aware of (i) any
other matters relating to the Proposed 202 2 CB Issuance which should be reasonably
highlighted in this prospectus for investors to form an informed assessment of our
Company; and (ii) any other matters that need to be brought to the attention of the Stock
Exchange and investors in relation to the Proposed 2022 CB Issuance. Having considered
that the proceeds from the Proposed 2022 CB Issuance were primarily intended to use for
building new production lines of different phases in Hubei, major phase of which has been
completed in view of our prevailing production needs, our Directors are of the view that the
termination of the Proposed 2022 CB Issuance did not have any material adverse impact on
our Company’s prevailing producti on and operational activities.
HISTORY AND DEVELOPMENT
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Reasons for the Termination of the Proposed 2022 CB Issuance and the Listing on the Stock
Exchange
Our Directors believe that the terminati on of the Proposed 2022 CB Issuance and the
Listing will be in the interest of our Group’s business development strategies, and would be
beneficial to us and our Shareholders as a whole for the following reasons:
(i) our Group considered equity financing namely the Listing is a more attractive
option than debt financing namely the Proposed 2022 CB Issuance under
prevailing conditions to fund our future b usiness operations and expansion plans
as the Listing will provide us the necessary and immediately available funds
offshore to finance our overseas expansion. On the other hand, if we proceed with
the Proposed 2022 CB Issuance, which is a debt financing exercise to support our
operations and expansion plans, our financial performance and liquidity may be
negatively affected due to principal and interest payments in debt financing
interest payments. Thus, our Directors consider the Proposed 2022 CB Issuance is
not an ideal option in the long run; and
(ii) the trading performance of our A Shares has been decreasingly active in the
second half of 2022 and first half of 2023, during which the trading volume and
closing price were volatile. On the othe r hand, as the Stock Exchange is a leading
player of the international financial markets, it does not only offer us direct access
to international capital markets to enh ance our fund raising capabilities and
shareholder base but also offer us a better platform to promote our international
presence that favours the development of our international business and overseas
business plans. Thus, our Directors believe that the Listing on the Stock Exchange
will enhance the value of our Shares, boost investors’ confidence and enhance
shareholders’ return in the long run.
2023 SHARE OPTION SCHEME
The 2023 Share Option Scheme was adopted by our Shareholders at the extraordinary
general meeting held on September 22, 2023. The purposes of the 2023 Share Option
Scheme are, among others, to incentivize the management personnel and employees, attract
and retain management talents and key perso nnel, prevent loss of talents, and enhance
cohesiveness and competitiveness of our Company. As of the Latest Practicable Date, 162
eligible participants have been granted outstanding options under the 2023 Share Option
Scheme in respect of an aggregate of 5,295,000 A Shares, representing approximately 0.80%
of the total issued Shares immediately after the completion of the Global Offering
(assuming the Over-allotment Option is not exercised and the options granted under the
2023 Share Option Scheme are not exercised). For details of the 2023 Share Option Scheme,
see ‘‘Statutory and General Information — A. Further Information about Our Group — 5.
2023 Share Option Scheme’’ in Appendix IV.
HISTORY AND DEVELOPMENT
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OUR PRINCIPAL SUBSIDIARIES
As of the Latest Practicable Date, we held twe lve principal subsidiaries. The following
table sets forth the detailed information of these principal subsidiaries which made a
material contribution to our total assets, revenue and/or profit before tax during the Track
Record Period
(1) :
Name of subsidiary
Date of
incorporation/
establishment
Place of
incorporation/
establishment
Equity
interest
attributable
to our
Group (2)
Authorized share
capital/registered
capital Principal activities
Jiangsu Kelas . . . August 20, 2009 PRC 100% RMB435,531,144 Production and sales
of diesel exhaust
fluids; and sales of
coolants and car
maintenance
products
Lopal Lubrication March 27, 2013 PRC 100% RMB265,000,000 Production and sales
of lubricants
Zhangjiagang
T E E C ......
May 20, 1996 PRC 39.91% USD30,000,000 Production and sales
of coolants and car
maintenance
products
Changzhou
L i y u a n ......
May 12, 2021 PRC 64.03% RMB778,614,662 Sales of LFP cathode
materials
Sichuan Liyuan . October 21,
2020
PRC 64.03% RMB500,000,000 Production and sales
of LFP cathode
materials
Jiangsu Beiterui
N a n o .......
January 28,
2021
PRC 64.03% RMB300,000,000 Production and sales
of LFP cathode
materials
Shandong Liyuan September 10,
2021
PRC 64.03% RMB160,000,000 (3) Production and sales
of LFP cathode
materials and
production of iron
phosphate
Hubei Liyuan . . . December 2,
2021
PRC 64.03% RMB410,000,000 Production and sales
of LFP cathode
materials
Tianjin Beiterui
N a n o .......
December 28,
2015
PRC 64.03% RMB100,000,000 Production and sales
of LFP cathode
materials
Lopal Times. . . . March 2, 2022 PRC 70% RMB1,000,000,000 Production of lithium
carbonate
Lopal New
M a t e r i a l .....
January 4, 2023 PRC 100% RMB145,000,000 Research and
development,
production and
sales of
environmentally
friendly chemicals
for vehicles
Shandong Kelas . December 30,
2020
PRC 100% RMB100,000,000 Production and sales
of urea for vehicles
HISTORY AND DEVELOPMENT
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Notes:
(1) A subsidiary of our Company is considered a principal subsidiary if it contributed 10% or more to the
total assets or revenue of our Group in any year during the three years ended December 31, 2023 or to the
profit before tax of our Group in any year during t he two years ended December 31, 2022, or 5% or more
to the total assets or revenue or gross profit our Group during the six months ended June 30, 2024,
considering that we recorded gross loss and loss before tax for the year ended December 31, 2023 and
recorded loss before tax for the six months ended June 30, 2024.
(2) Such equity interest may be held indirectly by our Company through its subsidiaries as of the Latest
Practicable Date. For details, see ‘‘— Corporate S tructure — Corporate Structure as of the Latest
Practicable Date’’ below.
(3) On September 27, 2024, the sole shareholder of Shandong Liyuan has resolved to increase the registered
capital of Shandong Liyuan from RMB160,000,000 to RMB410,000,000. As of the Latest Practicable
Date, the said capital increase has not been completed.
OUR STRATEGIC COOPERATION
Acquisition of Jiangsu Ruilifeng in 2018
Jiangsu Ruilifeng was established in t he PRC as a limited liability company on
September 17, 2009. On June 27, 2018, our Company and 15 then equity holders of Jiangsu
Ruilifeng (the ‘‘ Ruilifeng Transferors ’’) entered into an equity transfer agreement (the
‘‘Ruilifeng Transfer Agreement ’’), whereby the Ruilifeng Transferors agreed to transfer in
aggregate 70% of the equity interest in Jiangs u Ruilifeng to our Comp any at the aggregate
consideration of RMB302,910,000 (the ‘‘ Ruilifeng Consideration ’’), which was fully settled
on May 14, 2021. The consideration was determined with reference to a valuation report
issued by an independent valuer. Upon completion of the said equity transfers on July 27,
2018 and up to the Latest Practicable Date, Jiangsu Ruilifeng was owned as to 70%, 20%,
9% and 1% by our Company, Zhangjiagang Zhaorui Corporate Management Partnership
(Limited Partnership) ( 張家港兆瑞企業管理合夥企業（有限合夥）)( ‘ ‘ Zhangjiagang
Zhaorui ’’), Wang Zhaoyin ( 王兆銀) and Qian Xuefen ( 錢雪芬), respectively. For details of
Zhangjiagang Zhaorui, Wang Zhaoyin ( 王兆銀) and Qian Xuefen ( 錢雪芬), see ‘‘—
Corporate Structure — Corporate Structure as of the Latest Practicable Date.’’ At the time
of our acquisition of 70% equity interest in Ji angsu Ruilifeng, Jiangsu Ruilifeng already
held 57.01% equity interest in Zhangjiagang TEEC. As such, through the acquisition of
Jiangsu Ruilifeng, we acquired a contro lling interest in Zhangjiagang TEEC.
HISTORY AND DEVELOPMENT
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The following sets out a summary of some of t he major terms of the Ruilifeng Transfer
Agreement:
Governance of Jiangsu
Ruilifeng:
The board of directors of Jiangsu Ruilifeng shall comprise
five directors, out of which our Company has the right to
nominate three candidates and the other equity holders of
Jiangsu Ruilifeng have the right to nominate two
candidates. The chairman of Jiangsu Ruilifeng shall be
nominated by our Company.
Unless otherwise provided in the articles of Jiangsu
Ruilifeng as of the date of the Ruilifeng Transfer
Agreement, the Ruilifeng Transferors shall ensure that
certain agreed matters relating to Zhangjiagang TEEC and
required to be voted on by the directors of Zhangjiagang
TEEC nominated by Jiangsu Ruilifeng at the board
meetings of Zhangjiagang TEEC shall first be approved by
a majority of board of directors of Jiangsu Ruilifeng.
Profit guarantee: The profit guarantee period shall be the years 2018, 2019
and 2020 (the ‘‘ Ruilifeng PG Period ’’).
The Ruilifeng Transferors guarantee that during the
Ruilifeng PG Period, the annual audited net profit of
Zhangjiagang TEEC for each of the years shall not be less
than 103% of the annual audited net profit of the previous
year (the ‘‘ Guaranteed Profit ’’). The annual audited net
profit in this clause means the lower of (i) the net profit, and
(ii) the net profit after deducting non-recurring profit or loss
items, as shown in the audit report issued by a professional
auditor.
If the annual audited net profit of Zhangjiagang TEEC in
any of the years during the Ruilifeng PG Period is lower
than the annual audited net profit in 2017, the Ruilifeng
Transferors shall be jointly and severally liable to
compensate our Company an amount calculated according
to the following formula by cash:
Total compensation for the relevant year = Absolute value
of (Guaranteed Profit for the year – 2017 annual audited net
profit)/Sum of the Guarantee d Profit for each of the years
during the Ruilifeng PG Period 6 Ruilifeng Consideration
HISTORY AND DEVELOPMENT
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--- page 200 ---
Compensation for the relevant year payable by each
Ruilifeng Transferor = Total compensation for the
relevant year as calculated above 6 Amount of equity
interest transferred by the re levant Ruilifeng Transferor to
our Company/Total amount of equity interest transferred
by all of the Ruilifeng Transferors to our Company
If the annual audited net profit of Zhangjiagang TEEC in
any of the years during the Ruilifeng PG Period is greater
than the annual audited net profit in 2017 but lower than
the Guaranteed Profit for the year, the Ruilifeng
Transferors shall be jointly and severally liable to
compensate our Company an amount calculated according
to the following formula by cash:
Total compensation for the relevant year = Absolute value
of (Guaranteed Profit for the year – Annual audited net
profit for the previous year)
Compensation for the relevant year payable by each
Ruilifeng Transferor = Total compensation for the
relevant year as calculated above 6 Amount of equity
interest transferred by the re levant Ruilifeng Transferor to
our Company/Total amount of equity interest transferred
by all of the Ruilifeng Transferors to our Company
However, the total compensation payable by the Ruilifeng
Transferors shall not exceed 50% of the Ruilifeng
Consideration.
The Guaranteed Profit under the Ruilifeng T ransfer Agreement had been met for each
of the years during the Ruilifeng PG Period, and no compensation was payable in respect
thereof.
Establishment of Changzhou Liyuan in 2021 and Subsequent Capital Increases
Changzhou Liyuan was established in the PRC as a limited liability company on May
12, 2021 to further develop our LFP catho de materials business. At the time of its
establishment, Changzhou Liyuan was owned as to approximately 73.33%, 11.11%,
10.00% and 5.56% by our Company, Changzhou Y oubeili Venture Capital Center (Limited
Partnership) ( 常州優貝利創業投資中心（有限合夥）)( ‘ ‘Changzhou Youbeili ’’), BTR Group
and Nanjing Jinbeili Venture Capita l Center (Limited Partnership) ( 南京金貝利創業投資中
心（有限合夥）)( ‘ ‘Nanjing Jinbeili ’’), respectively. For details on Changzhou Youbeili, BTR
Group and Nanjing Jinbeili, see ‘‘— Corporate Structure — Corporate Structure as of the
Latest Practicable Date.’’
HISTORY AND DEVELOPMENT
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On July 19, 2021, Changzhou Liyuan, our Company, BTR Group, Changzhou
Youbeili, Nanjing Jinbeili, Changzhou Jin tan Hongyuan Venture Capital Partnership
(Limited Partnership) ( 常州金壇泓遠創業投資合夥企業（有限合夥）)( ‘ ‘Jintan Hongyuan ’’)
and Nanjing Chaoli Venture Capita l Center (Limited Partnership) ( 南京超利創業投資中心
（有限合夥）)( ‘ ‘Nanjing Chaoli ’’) entered into a capital increase agreement, pursuant to
which the registered capital of Changzhou Liyuan was increased from RMB315,000,000 to
RMB357,000,000 by RMB42,000,000, of which RMB35,000,000 was subscribed by Jintan
Hongyuan and RMB7,000,000 was subscribed by Nanjing Chaoli. Upon completion of the
said capital increase on July 20, 2021, Changzhou Liyuan was owned as to approximately
64.71%, 9.80%, 9.80%, 8.82%, 4.90% and 1 .96% by our Company, Changzhou Youbeili,
Jintan Hongyuan, BTR Group, Nanjing Jinbe ili and Nanjing Chaoli, respectively. For
details on Jintan Hongyuan and Nanjing Chaol i, see ‘‘— Corporate Structure — Corporate
Structure as of the Latest Practicable Date.’’
On October 18, 2021, Ningbo Meishan Baoshuigang District Wending Investment Co.,
Ltd. ( 寧波梅山保稅港區問鼎投資有限公司)( ‘ ‘Wending Investment ’’), Fujian Times Mindong
New Energy Industry Equity Investmen t Partnership (Limited Partnership) ( 福建時代閩東
新能源產業股權投資合夥企業（有限合夥
）)( ‘ ‘Times Mindong ’’, and together with Wending
Investment are referred to as the ‘‘ Liyuan New Investors ’’), our Company, BTR Group,
Changzhou Youbeili, Nanjing Jinbeili, Jint an Hongyuan, Nanjing Chaoli and Changzhou
Liyuan entered into a capital increase agreement (the ‘‘ Liyuan Second Capital Increase
Agreement ’’), pursuant to which the registered capital of Changzhou Liyuan was increased
from RMB357,000,000 to RMB481,113,281 by RMB124,113,281, of which RMB46,019,531
was subscribed by Wending Investment at the consideration of RMB165,000,000,
RMB50,203,125 was subscribed by Times Mindong at the consideration of
RMB180,000,000 and RMB27,890,625 was subscribed by our Company at the
consideration of RMB100,000,000. Upon completion of the said capital increase on
December 16, 2021 (the ‘‘ Liyuan Completion Date ’’), Changzhou Liyuan was owned as to
approximately 53.81%, 10.43%, 9.57%, 7.27%, 7.27%, 6.55%, 3.64% and 1.45% by our
Company, Times Mindong, Wending Investme nt, Changzhou Youbeili, Jintan Hongyuan,
BTR Group, Nanjing Jinbeili and Nanjing Chaol i, respectively. For details on Wending
Investment and Times Mindong, see ‘‘— Corporate Structure — Corporate Structure as of
the Latest Practicable Date.’’
The following sets out a summary of some of the major terms of the Liyuan Second
Capital Increase Agreement:
Composition of the
board of directors:
The board of directors of Changzhou Liyuan shall comprise
five directors, out of which Wending Investment shall have
the right to nominate one candidate, BTR Group shall have
the right to nominate one candidate and our Company shall
have the right to nominate three candidates.
Composition of the
supervisory
committee:
The supervisory committee of Changzhou Liyuan shall
comprise three supervisors, out of which Wending
Investment shall have the right to nominate one candidate.
HISTORY AND DEVELOPMENT
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Business cooperation: CATL shall enjoy priority in the supply of 75% of the LFP
cathode materials produced by Changzhou Liyuan
(including Tianjin Beiterui Nano, Jiangsu Beiterui Nano
and Sichuan Liyuan), and if Changzhou Liyuan establishes
any new subsidiaries in the future, CATL shall have the
r i g h tt on e g o t i a t ew i t hC h a n g z h o uL i y u a no nt h e
proportion of the product supply to be secured for CATL
by such new subsidiaries.
For a period of five years from the date of the Liyuan
Second Capital Increase Agreement, CATL will distribute
30% of the LFP cathode materials produced by Changzhou
Liyuan (including Tianjin Beiterui Nano, Jiangsu Beiterui
Nano and Sichuan Liyuan).
Liquidation preference: In the event of statutory liquidation such as liquidation,
dissolution or termination of business, or any deemed
liquidation as provided for in the Liyuan Second Capital
Increase Agreement, of Changzhou Liyuan, out of the
remaining balance of proceeds from the disposal of assets of
Changzhou Liyuan after payment of liquidation fees, wages,
social security fees and statutory compensations,
outstanding tax liabilities and outstanding debts in
accordance with the applicable laws (the ‘‘ Distributable
Liquidation Proceeds ’’), the Liyuan New Investors shall have
liquidation preference to obtain the higher of the following:
(1) the total investment amount of the Liyuan New
Investors (which means the initial cost of investment
corresponding to the equity interest in Changzhou
Liyuan held by the Liyuan New Investors at the time)
plus interest at an annual rate of 10% counting from
the date of actual payment of the investment moneys by
the Liyuan New Investors;
(2) the amount of Distributable Liquidation Proceeds that
is proportionate to the equity holding percentage of the
Liyuan New Investors in Changzhou Liyuan at the
time.
HISTORY AND DEVELOPMENT
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--- page 203 ---
Repurchase right: In the event of any of the following, the Liyuan New
Investors shall have the right to demand our Company or its
designated party to repurchase the equity interest in
Changzhou Liyuan held by the Liyuan New Investors:
(1) our Company fails to make an announcement on the
spin-off and qualified listi ng (as defined in the Liyuan
Second Capital Increase Agreement) of Changzhou
Liyuan within four years after the Liyuan Completion
Date, or Changzhou Liyuan fails to complete a
qualified listing within five years after the Liyuan
Completion Date, and the Liyuan New Investors and
our Company are unable to reach a consensus on the
progress of the qualified listing (failure to complete a
qualified listing within five years after the Liyuan
Completion Date as a result of the related party
transactions between Changzhou Liyuan and the
Liyuan New Investors excepted);
(2) the product quality or supply of Changzhou Liyuan
(including the subsidiaries of Changzhou Liyuan) fails
to meet the standards as required under the Liyuan
Second Capital Increase Agreement, and such failure
cannot be remedied within a specified period as
reasonably requested;
(3) any key employee of Changzhou Liyuan as provided
for in the Liyuan Second Capital Increase Agreement
resigns or no longer provides services to Changzhou
Liyuan, materially impacting the production and
operation of Changzhou Liyuan;
(4) our Company or Changzhou Liyuan materially
breaches the Liyuan Second Capital Increase
Agreement.
HISTORY AND DEVELOPMENT
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--- page 204 ---
If the Liyuan New Investors exercise the repurchase right,
the repurchase price shall be the higher of the following: (1)
the equity holding of the Liyuan New Investors in
Changzhou Liyuan at the time multiplied by the valuation
of Changzhou Liyuan at the time, which is to be determined
in accordance with the fair value assessed by a qualified
third party valuer mutually agreed by our Company and the
Liyuan New Investors, and such fair value assessment shall
take into account the reasonable valuation of other
comparable listed companies (including our Company) at
t h et i m e( t h e‘ ‘Fair Value Assessment Method ’’); or (2) the
amount of capital injected corresponding to the equity
interest held by the Liyuan New Investors at the time plus
an investment gain at an annual rate of 10% (calculated
from the date of actual payment of the capital) (the ‘‘ IRR
Method ’’ and the resultant repurchase price, the ‘‘ Liyuan
New Investors Repurchase Price ’’). The Liyuan New
Investors shall have the right to demand our Company or
its designated party to repurchase the equity interest by cash
(provided that such repurchase shall not cause any material
impact on the cash flow of our Company), or by issuing new
shares of our Company to the Liyuan New Investors.
Other shareholders’
rights:
The Liyuan Second Capital Increase Agreement contains
other terms such as transfer restrictions, right of first
refusal, anti-dilution and tag-along right.
Termination: The Liyuan Second Capital Increase Agreement may be
terminated in the event of, among others, any of the
following: (i) the parties mu tually agree to terminate the
Liyuan Second Capital Increase Agreement in writing; or
(ii) if any force majeure event (as defined in the Liyuan
Second Capital Increase Agreement) occurs which has
rendered the performance of the Liyuan Second Capital
Increase Agreement impossible, any party may give written
notice to the other parties to terminate the Liyuan Second
Capital Increase Agreement.
On June 13, 2022, Changzhou Liyuan, BTR Group, Changzhou Youbeili, Nanjing
Jinbeili, Nanjing Chaoli, Jintan Hongyuan, Wending Investment, Times Mindong and our
Company entered into a capital increase agreement, pursuant to which the registered capital
of Changzhou Liyuan was increased from RMB481,113,281 to RMB720,741,131 by
RMB239,627,850, which was subscribed b y our Company at the consideration of
RMB1,290,000,000. Upon completion of the said capital increase on June 29, 2022,
Changzhou Liyuan was owned as to approximately 69.17%, 6.97%, 6.39%, 4.86%, 4.86%,
HISTORY AND DEVELOPMENT
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--- page 205 ---
4.37%, 2.43% and 0.97% by our Company, Times Mindong, Wending Investment,
Changzhou Youbeili, Jintan Hongyuan, BTR Group, Nanjing Jinbeili and Nanjing Chaoli,
respectively.
On December 31, 2023, Jianxin Financial Asset Investment Co., Ltd. ( 建信金融資產投
資有限公司)( ‘ ‘Jianxin Investment ’’), Wending Investment, Times Mindong, our Company,
BTR Group, Changzhou Youbeili, Nanjing Jin beili, Jintan Hongyuan, Nanjing Chaoli and
Changzhou Liyuan entered into a capital increase agreement (the ‘‘ Liyuan Fourth Capital
Increase Agreement ’’), pursuant to which the share capital of Changzhou Liyuan was
increased from RMB720,741,131 to RMB735,071,009 by RMB14,329,878, which was
subscribed by Jianxin Investment at the consideration of RMB100,000,000 (the ‘‘ Capital
Increase by Jianxin Investment ’’). Upon completion of the said capital increase on February
5, 2024 (the ‘‘ Liyuan Fourth Capital Increase Completion Date ’’), Changzhou Liyuan was
owned as to approximately 67.82%, 6.83%, 6.26%, 4.76%, 4.76%, 4.29%, 2.38%, 0.95%
and 1.95% by our Company, Times Mindong, Wending Investment, Changzhou Youbeili,
Jintan Hongyuan, BTR Group, Nanjing Jinbe ili, Nanjing Chaoli and Jianxin Investment,
respectively.
The following sets out a summary of some of the major terms of the Liyuan Fourth
Capital Increase Agreement:
Composition of the
board of directors:
The board of directors of Changzhou Liyuan shall comprise
five directors, out of which Wending Investment shall have
the right to nominate one candidate, BTR Group shall have
the right to nominate one candidate and our Company shall
have the right to nominate three candidates.
Composition of the
supervisory
committee:
The supervisory committee of Changzhou Liyuan shall
comprise three supervisors, out of which Wending
Investment shall have the right to nominate one candidate.
Liquidation preference: In the event of statutory liquidation such as liquidation,
dissolution or termination of business, or any deemed
liquidation as provided for in the Liyuan Fourth Capital
Increase Agreement, of Changzhou Liyuan, out of the
Distributable Liquidation Proceeds, the Liyuan New
Investors and Jianxin Investment (collectively, the ‘‘ Liyuan
2023 Investors ’’) shall have liquidation preference to obtain
the higher of the following:
(1) (a) in relation to the Liyuan New Investors, the Liyuan
New Investors Repurchase Price, or (b) in relation to
Jianxin Investment, the Jianxin Repurchase Price (as
defined below), in each ca se with reference to their
respective equity interest holding in Changzhen Liyuan
at the material time;
HISTORY AND DEVELOPMENT
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(2) the amount of Distributable Liquidation Proceeds that
is proportionate to the equity holding percentage of the
Liyuan 2023 Investors in Changzhou Liyuan at the
time.
Repurchase right: In the event of any of the following, the Liyuan New
Investors shall have the right to demand our Company or its
designated party to repurchase the equity interest in
Changzhou Liyuan held by the Liyuan New Investors:
(1) our Company fails to make an announcement on the
spin-off and qualified listi ng (as defined in the Liyuan
Fourth Capital Increase Agreement) of Changzhou
Liyuan within four years after the Liyuan Completion
Date, or Changzhou Liyuan fails to complete a
qualified listing within five years after the Liyuan
Completion Date, and the Liyuan New Investors and
Changzhou Liyuan are unable to reach a consensus on
the progress of the qualified listing (failure to complete
a qualified listing within five years after the Liyuan
Completion Date as a result of the related party
transactions between Changzhou Liyuan and the
Liyuan New Investors excepted);
(2) the product quality or supply of Changzhou Liyuan
(including the subsidiaries of Changzhou Liyuan) fails
to meet the standards as required under the Liyuan
Second Capital Increase Agreement, and such failure
cannot be remedied within a specified period as
reasonably requested;
(3) any key employee of Changzhou Liyuan as provided
for in the Liyuan Fourth Capital Increase Agreement
resigns or no longer provides services to Changzhou
Liyuan, materially impacting the production and
operation of Changzhou Liyuan;
(4) our Company or Changzhou Liyuan materially
breaches the Liyuan Fourth Capital Increase
Agreement.
HISTORY AND DEVELOPMENT
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--- page 207 ---
In the event of any of the following, Jianxin Investment
shall have the right to demand our Company or its
designated party to repurchase the equity interest in
Changzhou Liyuan held by it:
(1) our Company fails to make an announcement on the
qualified listing (as defined in the Liyuan Fourth
Capital Increase Agreement) of Changzhou Liyuan
within four years after the Liyuan Fourth Capital
Increase Completion Date, o r Changzhou Liyuan fails
to complete a qualified listing within five years after the
Liyuan Fourth Capital Increase Completion Date, and
the Liyuan 2023 Investors and Changzhou Liyuan are
unable to reach a consensus on the progress of the
qualified listing;
(2) the Liyuan New Investors demand our Company or its
designated party to repurchase part or all of the equity
interest in Changzhou Liyuan held by the Liyuan New
Investors pursuant to the Liyuan Fourth Capital
Increase Agreement or any other agreement entered
into by the Liyuan New Investors, Changzhou Liyuan
and our Company;
(3) our Company or Changzhou Liyuan materially
breaches the Liyuan Fourth Capital Increase
Agreement.
If the repurchase right set out above is exercised,
(1) the repurchase price in respect of the equity interests
held by Liyuan New Investors shall be the higher of the
following: (1) the Fair Value Assessment Method; or
(2) the IRR Method. The Liyuan New Investors shall
have the right to demand our Company or its
designated party to repurchase the equity interest by
cash (provided that such repurchase shall not cause any
material impact on the cash flow of our Company), or
by issuing new shares of our Company to the Liyuan
New Investors.
HISTORY AND DEVELOPMENT
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--- page 208 ---
(2) the repurchase price in respect of the equity interests
held by Jianxin Investment shall be the higher of the
following: (1) the equity holding of Jianxin Investment
at the time multiplied by the valuation of Changzhou
L i y u a na tt h et i m e ,w h i c hi st ob ed e t e r m i n e di n
accordance with the fair value assessed by a qualified
third party valuer mutually agreed by our Company
and Jianxin Investment, and such fair value assessment
shall take into account the reasonable valuation of
other comparable listed companies (including our
Company) at the time (the ‘‘ Liyuan 2023 Fair Value
Assessment Method ’’), or (2) the amount of capital
injected corresponding to the equity interest held by the
Jianxin Investment at the time plus an investment gain
at an annual rate of 8% (calculated from the date of
actual payment of the capital) (the ‘‘ Liyuan 2023 IRR
Method ’ ’ ) ,a n dt h e nt ob ed e d u c t e db ya l ld i v i d e n d s
received by Jianxin Investment (the resultant
repurchase price, the ‘‘ Jianxin Repurchase Price ’’).
Jianxin Investment shall have the right to demand
our Company or its designated party to repurchase the
equity interest by cash (provided that such repurchase
shall not cause any material impact on the cash flow of
our Company), or by issuing new Shares of our
Company to Jianxin Investment.
Termination of certain
terms under Liyuan
Second Capital
Increase Agreement:
Upon the effective date of the Liyuan Fourth Capital
Increase Agreement, being January 29, 2024, certain terms
in the Liyuan Second Capital Increase Agreement have been
terminated and replaced by that in the Liyuan Fourth
Capital Increase Agreement, including, amongst others, the
composition of the board of directors and supervisory
committee of Changzhou Liyuan, liquidation preference
and repurchase right as set out in the summary of major
terms of the Liyuan Second Capital Increase Agreement
above.
HISTORY AND DEVELOPMENT
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--- page 209 ---
Other shareholders’
rights:
The Liyuan Fourth Capital In crease Agreement contains
other terms such as transfer restrictions, right of first
refusal, anti-dilution and tag-along right.
Termination: The Liyuan Fourth Capital Increase Agreement may be
terminated in the event of, among others, any of the
following: (i) the parties mu tually agree to terminate the
Liyuan Fourth Capital Increas e Agreement in writing; or (ii)
if any force majeure event (as d efined in the Liyuan Fourth
Capital Increase Agreement) occurs which has rendered the
performance of the Liyuan Fourth Capital Increase
Agreement impossible, any party may give written notice
to the other parties to terminate the Liyuan Fourth Capital
Increase Agreement.
On May 13, 2024, Kunlun Gongrong Green (B eijing) New Industry Investment Fund
Partnership (Limited Partnership) ( 昆侖工融綠色（北京）新興產業投資基金合夥企業（有限合
夥）)( ‘ ‘Kunlun Gongrong ’’, together with Jianxin Investment, the ‘‘ Series A Liyuan
Investors ’’), Jianxin Investment, Wending Inv estment, Times Mindong, our Company,
BTR Group, Changzhou Youbeili, Nanjing Jin beili, Jintan Hongyuan, Nanjing Chaoli and
Changzhou Liyuan entered into a capital increase agreement (the ‘‘ Liyuan Fifth Capital
Increase Agreement ’’), pursuant to which (i) Kunlun Gongrong agreed to subscribe share
capital of RMB42,858,091 in Changzhou Liyuan by way of capital increase at a
consideration of RMB285,426,805.77 and (ii) the Capital Increase by Jianxin Investment
contemplated under the Liyuan Fourth Capi tal Increase Agreement was modified to the
effect that Jianxin Investment will subscribe share capital of RMB15,015,440 (instead of
RMB14,329,878) at the same consideration of RMB100,000,000. Following which, the
share capital of Changzhou Liyuan was increased from RMB735,071,009 to
RMB778,614,662 by RMB43,543,653. Upon completion of the said capital increase on
May 29, 2024, Changzhou Liyuan was owned as to approximately 64.03%, 6.45%, 5.91%,
4.49%, 4.49%, 4.05%, 2.25%, 0.90%, 5.50% and 1.93% by our Company, Times Mindong,
Wending Investment, Changzhou Youbeili, Jintan Hongyuan, BTR Group, Nanjing
Jinbeili, Nanjing Chaoli, Kunlun Gongrong and Jianxin Investment, respectively.
The following sets out a summary of some of the major terms of the Liyuan Fifth
Capital Increase Agreement:
Composition of the
board of directors:
The board of directors of Changzhou Liyuan shall comprise
seven directors, out of which Wending Investment shall
have the right to nominate one candidate, BTR Group shall
have the right to nominate one candidate, Kunlun
Gongrong shall have the right to nominate one candidate
and our Company shall have the right to nominate four
candidates, provided that Kunlun Gongrong shall cease to
have such director nomination right when it holds less than
3% equity interests in Changzhou Liyuan.
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Composition of the
supervisory
committee:
The supervisory committee of Changzhou Liyuan shall
comprise three supervisors, out of which Wending
Investment shall have the right to nominate one candidate.
Liquidation preference: In the event of statutory liquidation such as liquidation,
dissolution or termination of business, or any Deemed
Liquidation (as defined below), of Changzhou Liyuan
(collectively, the ‘‘ Liquidating Events ’’), out of the
Distributable Liquidation Proceeds, the Liyuan New
Investors and Series A Liyuan Investors (collectively, the
‘‘Liyuan 2024 Investors ’’) shall have liquidation preference
to obtain the higher of the following (the ‘‘ Investors
Preferential Liquidation Amount ’’):
(1) (a) in relation to the Liyuan New Investors, the Liyuan
New Investors Repurchase Price (i.e. a sum equal to the
higher of the Fair Value Assessment Method and the
IRR Method), or (b) in relation to Series A Liyuan
Investors, the Series A Liyuan Investors Repurchase
Price (as defined below), in each case with reference to
their respective equity interest holding in Changzhou
Liyuan at the material time; and
(2) the amount of Distributable Liquidation Proceeds that
is proportionate to the equity holding percentage of the
Liyuan 2024 Investors in Changzhou Liyuan at the
time.
If the Distributable Liquidation Proceeds are insufficient to
pay all Investors Preferential Liquidation Amount, the
Distributable Liquidation Proceeds will be distributed to
the Liyuan 2024 Investors according to their relative
proportion of preferential liquidation amount that such
Liyuan 2024 Investor is entitled to. Further, if the actual
amount to be received by the respective Liyuan 2024
Investors are less than the applicable Investors Preferential
Liquidation Amount, our Company shall pay such shortfall
to such Liyuan 2024 Investor(s).
HISTORY AND DEVELOPMENT
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For the purpose of the Liyuan Fifth Capital Increase
Agreement, ‘‘Deemed Liquidation ’’ shall mean any of the
following:
(1) (i) Changzhou Liyuan sus pends or discontinues its
business operations, or Changzhou Liyuan is required
by governmental authority to suspend or discontinue
its business; or Changzhou Liyuan is unable to conduct
its normal business activities and is unable to resume
normal business operations within 90 consecutive days
or is unable to achieve its business goals as (a) business
registration certificate o f Changzhou Liyuan necessary
for its business operations or other permit,
authorisation, license or registration material to its
operating activities has not been obtained, not renewed
upon expiry or becomes invalid or (b) assets that is
material to the business operations of Changzhou
Liyuan having been confiscated or expropriated by
any governmental authority ; (ii) business registration
certificate of Changzhou Liyuan necessary for its
business operations or other permit, authorisation,
license or registration material to its operating
activities having been revoked;
(2) the business and management of Changzhou Liyuan
encounter serious difficulties and Changzhou Liyuan is
not able to continue its operations (including but not
limited to the whereabouts of actual controller of
Changzhou Liyuan being unknown for 90 consecutive
days, the board of directors of Changzhou Liyuan is
not able to pass any resolution and is not able to
resolve such issue by way of shareholders’ meetings);
(3) Changzhou Liyuan suffers severe loss and is unable to
continue its business operations;
(4) Changzhou Liyuan, as a result of force majeure events,
suffers material loss and is unable to continue its
business operations;
(5) Change of control or change of actual controller of
Changzhou Liyuan;
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(6) Occurrence of: (a) consolidation, reorganization,
merger, acquisition or other similar transaction
leading to a change of control of Changzhou Liyuan
whereby the shareholding of all pre-existing
shareholders does not exceed 50% in Changzhou
Liyuan after such event, or (b) event in which all or
substantially all of the assets of Changzhou Liyuan are
sold, leased, assigned or the operation of which is
entrusted to third parties, or otherwise disposed to any
third parties including all or substantially all of the
intellectual property rights being licensed to third
parties exclusively.
Repurchase right: In the event of any of the following, the Liyuan New
Investors shall have the right to demand our Company or its
designated party to repurchase the equity interest in
Changzhou Liyuan held by the Liyuan New Investors:
(1) our Company fails to make an announcement on the
spin-off and qualified listi ng (as defined in the Liyuan
Fifth Capital Increase Agreement) of Changzhou
Liyuan within four years after the Liyuan Completion
Date, or Changzhou Liyuan fails to complete a
qualified listing within five years after the Liyuan
Completion Date, and the Liyuan New Investors and
Changzhou Liyuan are unable to reach a consensus on
the progress of the qualified listing (failure to complete
a qualified listing within five years after the Liyuan
Completion Date as a result of the related party
transactions between Changzhou Liyuan and the
Liyuan New Investors excepted);
(2) the product quality or supply of Changzhou Liyuan
(including the subsidiaries of Changzhou Liyuan) fails
to meet the standards as required under the Liyuan
Second Capital Increase Agreement, and such failure
cannot be remedied within a specified period as
reasonably requested;
(3) any key employee of Changzhou Liyuan as provided
for in the Liyuan Fifth Capi tal Increase Agreement
resigns or no longer provides services to Changzhou
Liyuan, materially impacting the production and
operation of Changzhou Liyuan;
(4) our Company or Changzhou Liyuan materially
breaches the Liyuan Fifth Capital Increase Agreement.
HISTORY AND DEVELOPMENT
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--- page 213 ---
In the event of any of the following, each of the Series A
Liyuan Investors shall have the right to demand our
Company or its designated party to repurchase the equity
interest in Changzhou Liyuan held by it:
(1) our Company fails to make an announcement on the
qualified listing (as defined in the Liyuan Fifth Capital
Increase Agreement) of Changzhou Liyuan within four
years after the Liyuan Fourth Capital Increase
Completion Date, or Changzhou Liyuan fails to
complete a qualified listing within five years after the
Liyuan Fourth Capital Increase Completion Date, and
the Series A Liyuan Investors and Changzhou Liyuan
are unable to reach a consensus on the progress of the
qualified listing;
(2) if our Company decides to repurchase the equity
interests in Changzhou Liyuan held by Liyuan New
Investors, our Company shall be obliged to give prior
notice to Series A Liyuan Investors and Series A
Liyuan Investors shall have the right to require our
Company to, and our Company shall, purchase equity
interests in Changzhou Liyuan held by such Series A
Liyuan Investor on same price and terms offered to
Liyuan New Investors, failing which, Series A Liyuan
Investors shall have the right to require our Company
or its designated party to repurchase equity interest in
C h a n g z h o uL i y u a nh e l db ys u c hS e r i e sAL i y u a n
Investor at the price of applicable Series A Liyuan
Investors Repurchase Price (as defined below) in cash;
(3) any Liyuan New Investors demands our Company or
its designated party to repurchase part or all of the
equity interest in Changzhou Liyuan held by the
Liyuan New Investors pursuant to the Liyuan Fifth
Capital Increase Agreement or any other agreement
entered into by the Liyuan New Investors, Changzhou
Liyuan and our Company;
(4) key employee resigns or ceases to be provide services to
C h a n g z h o uL i y u a na n dr e s u l t si nm a t e r i a la d v e r s e
impact on the production and operations of
Changzhou Liyuan;
(5) our Company or Changzhou Liyuan materially
breaches the Liyuan Fifth Capital Increase Agreement.
HISTORY AND DEVELOPMENT
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If the repurchase right(s) set out above is exercised,
(1) the repurchase price in respect of the equity interests in
C h a n g z h o uL i y u a nh e l db yL i y u a nN e wI n v e s t o r ss h a l l
be equal to the Liyuan New Investors Repurchase Price
(i.e. a sum equal to the higher of the following: (1) the
Fair Value Assessment Method; or (2) the IRR
Method). The Liyuan New Investors shall have the
right to demand our Company or its designated party
to repurchase the equity interest by cash (provided that
such repurchase shall not cause any material impact on
the cash flow of our Company), or by issuing new
shares of our Company to the Liyuan New Investors.
(2) the repurchase price in respect of the equity interests in
C h a n g z h o uL i y u a nh e l db yt h eS e r i e sAL i y u a n
Investors shall be the higher of the following: (1) the
equity holding of such Series A Liyuan Investor at the
time multiplied by the valuation of Changzhou Liyuan
at the time, which is to be determined in accordance
with the fair value assessed by a qualified third party
valuer mutually agreed by our Company and such
Series A Liyuan Investor, and such fair value
assessment shall take into account the reasonable
valuation of other comparable listed companies
(including our Company) at the time (the ‘‘ Series A
Liyuan Fair Value Assessment Method ’’), or (2) the
amount of capital injected corresponding to the equity
interest held by such Series A Liyuan Investor at the
time plus an investment gain at an annual rate of 8%
(calculated from the date of actual payment of the
capital) (the ‘‘Series A Liyuan IRR Method ’’), and then
to be deducted by all dividends received by such Series
A Liyuan Investor (the resultant repurchase price, the
‘‘Series A Liyuan Investors Repurchase Price ’’). Series A
Liyuan Investors shall have the right to demand our
Company or its designated party to repurchase the
equity interest by cash, or by issuing new Shares of our
Company to it.
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Termination of certain
terms under Liyuan
Second Capital
Increase Agreement
a n dL i y u a nF o r t h
Capital Increase
Agreement:
U p o nt h ee f f e c t i v ed a t eo ft h eL iyuan Fifth Capital Increase
Agreement, being May 24, 2024, certain terms in the Liyuan
Second Capital Increase Agreement and the Liyuan Fourth
Capital Increase Agreement have been terminated and
replaced by that in the Liyuan Fifth Capital Increase
Agreement, including, amongst others, the composition of
the board of directors and supervisory committee of
Changzhou Liyuan, liquidation preference and repurchase
r i g h ta ss e to u ti nt h es u m m a r yo fm a j o rt e r m so ft h eL i y u a n
Second Capital Increase Agreement and the Liyuan Fourth
Capital Increase Agreement above.
Other shareholders’
rights:
The Liyuan Fifth Capital Increase Agreement contains
other terms such as transfer restrictions, right of first
refusal, anti-dilution and tag-along right.
Termination: The Liyuan Fifth Capital Increase Agreement may be
terminated in the event of, among others, any of the
following: (i) the parties mu tually agree to terminate the
Liyuan Fifth Capital Increase Agreement in writing; or (ii) if
any force majeure event (as d efined in the Liyuan Fifth
Capital Increase Agreement) occurs which has rendered the
performance of the Liyuan Fifth Capital Increase
Agreement impossible, any party may give written notice
to the other parties to terminate the Liyuan Fifth Capital
Increase Agreement.
Thus, according to the terms of the Liyuan Fifth Capital Increase Agreement, we are
required to conduct a spin-off and qualified lis ting (as defined in the Liyuan Fifth Capital
Increase Agreement) of Changzhou Liyuan. While we do not have any specific plans with
respect to the timing or details of any potential spin-off listing on the Hong Kong Stock
Exchange as of the Latest Practicable Date, w e will consider whether such a spin-off is in
the interest of our Company and our Shareholders based on the development of our
business of our Group and Changzhou Liyuan, market conditions and the then applicable
laws and regulations including but not lim ited to the requirements under the Hong Kong
L i s t i n gR u l e s .I nr e l a t i o nt oa n ys u c hs p i n - o f fand qualified listing, we will comply with the
applicable requirements under the Hong Kong Listing Rules, including but not limited to
those set out in Practice Note 15 of the Hong Kong Listing Rules. Specifically, paragraph
3(b) of Practice Note 15 of the Hong Kong Listing Rules provides that the Listing
Committee would not normally consider a spin- off application within three years from the
date of listing of the parent company, given the original listing of the company will have
been approved on the basis of the company’s portfolio of businesses at the time of listing,
and that the expectation of investors at that time would have been that the company would
continue to develop those businesses. If such spin-off and qualified listing of Changzhou
Liyuan within three years from Listing is desirable and be in the interest of our Company
and our Shareholders, we will apply for a waiver from strict compliance with the
HISTORY AND DEVELOPMENT
–2 0 5–


--- page 216 ---
requirements in paragraph 3(b) of Practice Note 15 of the Hong Kong Listing Rules as and
when appropriate if necessary and will only proceed with such spin-off in the event that we
have obtained the aforesa id waiver (if applicable).
If such spin-off and qualified listing of Changzhou Liyuan fail to take place within the
agreed time frame, we may be demanded by the Liyuan 2024 Investors to repurchase their
equity interest in Changzhou Liyuan at a repurchase price to be determined based on (i) in
respect of the equity interests held by Liyua n New Investors, the higher of the Fair Value
Assessment Method or the IRR Method, (ii) in respect of equity interests held by Series A
Liyuan Investors, the higher of the Series A Liyuan Fair Value Assessment Method or the
Series A Liyuan IRR Method and then to be deducted by all dividends received by such
Series A Investor. Upon occurrence of Liquidating Events, the amount payable by our
Group to the Liyuan New Investors and the Series A Liyuan Investors shall be the Liyuan
New Investors Repurchase Price and the Series A Liyuan Investors Repurchase Price,
respectively. Accordingly, in either case of repurchase or occurrence of Liquidating Events,
(i) the amount payable to Liyuan New Inves tors shall be no less than RMB558 million,
which is calculated by the IRR Method and assuming that the payment will be made on the
fifth anniversary after the Liyuan Completi o nD a t ea n dn od i v i d e n dh a db e e np a i dt ot h e
Liyuan New Investors and (ii) the amount payable to Series A Liyuan Investors shall be no
less than RMB556 million, which is calculated by the Series A Liyuan IRR Method and
assuming that the payment will be made on the fifth anniversary after the Liyuan Fourth
Capital Increase Completion Date and no dividend had been paid to Series A Liyuan
Investors. In the event that the amounts payab le will be determined using the Fair Value
Assessment Method and the Series A Liyuan Fair Value Assessment Method, the financial
impact will be subject to the valuation of Changzhou Liyuan at the material time and we
will comply with the applicable requirements under the Hong Kong Listing Rules, including
but not limited to those under Chapters 14 and 14A of the Hong Kong Listing Rules.
The capital contribution recorded during the Track Record Period was initially
recognized at fair value and we have recogn ized approximately RMB345 million, RMB345
million, RMB451.3 million and RMB853 million in our other borrowings as of December
31, 2021, 2022 and 2023 and June 30, 2024, respectively. The fair value of the capital
contribution at completion date is measured based on the present value contractually
determined stream of future cash flows with reference to the valuation carried out by
independent professional valuer using the Binomial model. For details on accounting
treatment during the Track Record Period, see Note 28 of the Accountants’ Report as set
out in Part I of Appendix IA. In addition, pursuant to the Liyuan Fifth Capital Increase
Agreement, such repurchase price may be settled in cash or by issuing new shares of our
Company. If the repurchase price will be settled by way of issuing new shares of our
Company, the shareholding of our Shareholder s immediately following such issuance will
be diluted. As the financial impact of such repurchase right has been reflected in accordance
with applicable accounting standards in the Accountants’ Report as set out in Appendix IA,
our Directors do not expect that there will be any material and adverse impact on our
Group’s operations and financial position if we are required to complete the said
repurchase. Furthermore, considering that the net assets of Changzhou Liyuan and the
Company amounted to approximately RM B2,224.0 million and RMB3,910.1 million,
respectively as of June 30, 2024, in the absence of unforeseen circumstances, the Directors is
HISTORY AND DEVELOPMENT
–2 0 6–


--- page 217 ---
of the view, and the Joint Sponsors concur, that Changzhou Liyuan and the Company have
sufficient resources to meet its payment obligations to the Liyuan New Investors and Series
A Liyuan Investors upon occurrence of Liquidating Events.
Acquisition of Lopal Times in 2022
Lopal Times was established in the PRC as a limited liability company on March 2,
2022. On October 28, 2022, our Company, Yichun Times and Lopal Times entered into an
equity transfer agreement (the ‘‘ Lopal Times Transfer Agreement ’’), whereby Yichun Times
agreed to transfer 70% of the equity interest in Lopal Times to our Company at the
consideration of RMB1 (the ‘‘ Lopal Times Consideration ’’). According to the terms of the
Lopal Times Transfer Agreemen t, the registered capital corresponding to the 70% equity
interest in Lopal Times which our Company agreed to acquire had not been paid up, and
thus the Lopal Times Consideration was determined to be a nominal value of RMB1. Upon
c o m p l e t i o no ft h es a i de q u i t yt r a n s f e ro nN o v e m b e r2 8 ,2 0 2 2a n du pt ot h eL a t e s t
Practicable Date, Lopal Times was owned as to 70% by our Company and 30% by Yichun
Times. Our main reasons for investing in Lopal Times are, among others, (i) to leverage on
the expertise of Yichun Times and its parent company CATL in the research, production
and sales of NEV battery and charging systems in order to develop Lopal Times’ principal
business, i.e. production of lithium carbonat e; and (ii) to secure the supply of and reduce
the impact of fluctuation in the price of lithium carbonate, which is one of the principal raw
materials of LFP cathode materials which we produce.
The following sets out a summary of some of the major terms of the Lopal Times
Transfer Agreement:
Corporate governance: Lopal Times shall h ave one executive director nominated by
our Company and one supervisor nominated by Yichun
Times. It shall also have one general manager nominated by
our Company and approved by its shareholders in general
meeting.
Shareholders’ rights: The Lopal Times Transfer Agreement contains terms on
shareholders’ rights, including restriction on transfer,
pre-emption right, information right and repurchase right.
HISTORY AND DEVELOPMENT
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Business cooperation: The business cooperation of our Company and Yichun
Times shall take place in two phases. In phase 1, the target is
to complete the construction and development of a
production facility to achieve an annual production of
30.0 thousand tons of lithium carbonate, and in phase 2, the
target is to complete the further construction and
development of the production facility to achieve an
annual production of 40.0 thousand tons of lithium
carbonate.
The phase 1 cooperation, which shall take place from the
completion of the construction of phase 1 of the relevant
production facility to four years after the said phase 1 of the
production facility achieving mass production, shall mainly
involve Lopal Times providing processing services to
Yichun Times and/or its parent company, by using certain
raw materials to be supplied by Yichun Times and/or its
parent company to produce lithium carbonate products.
The phase 2 cooperation, which shall take place from the
completion of the construction of phase 2 of the relevant
production facility to four years after the said phase 2 of the
production facility achieving mass production, shall mainly
involve the following areas of cooperation:
(1) Lopal Times will provide p rocessing services to Yichun
Times and/or its parent company, by using certain raw
materials to be supplied by Yichun Times and/or its
parent company to produce lithium carbonate
products;
(2) 75% of the lithium carbonate products processed by
Lopal Times for Yichun Times, its parent and/or
affiliates (subject to the pr oduction capacity of Lopal
Times), will be supplied to Changzhou Liyuan, and
Changzhou Liyuan will also enjoy priority (compared
to other third parties under the same terms and
conditions) in the supply of the remaining portion of
the lithium carbonate products.
In respect of LFP to be produced by Changzhou Liyuan and
sold to Yichun Times, its parent and/or affiliates, Yichun
Times, its parent and/or affiliates will procure Lopal Times
to supply the lithium carbonate (which is a raw material of
LFP) required by Changzhou Liyuan, subject to the
production capacity of Lopal Times.
HISTORY AND DEVELOPMENT
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--- page 219 ---
Distribution of profits: In respect of the profits after tax of Lopal Times for each
financial period, Lopal Times shall first repay any project
financing facilities and sharehol ders loans (if any) according
to the repayment schedule and set aside capital reserves in
accordance with applicable laws and regulations, and any
remainder may be distributed at our Company’s discretion
taking into account the development of and future plans for
L o p a lT i m e s .I fo u rC o m p a n ydecides to distribute profits
to the shareholders of Lopal Times, each shareholder’s
entitlements shall be proportionate to the respective paid-up
capital contribution.
Termination: The Lopal Times Transfer Agreement shall be terminated
under any of the following circumstances: (i) the parties to
the agreement mutually agreed to terminate; (ii)
performance of the Lopal Times Transfer Agreement is
materially hindered as a result of force majeure events (as
defined in the Lopal Times Transfer Agreement).
MAJOR ACQUISITIONS AND DISPOSALS
Acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano
Tianjin Beiterui Nano and Jiangsu Beiter ui Nano, which are engaged in the field of
LFP cathode materials, were subsidiaries of BTR Group prior to their acquisitions by our
Group. For details on the development of our LFP cathode materials business and the
rationale behind the acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano, see
‘‘Business — Our Businesses — LFP Cathode Materials.’’
On April 23, 2021, our Company entered into an agreement with, among others, BTR
Group, whereby our Company agreed to acquir e 100% equity interest in Tianjin Beiterui
Nano and 100% equity interest in Jiangsu Beiterui Nano through our subsidiary,
Changzhou Liyuan, from BTR Group. The consideration for the 100% equity interest in
Tianjin Beiterui Nano was RMB328,640,000 and the consideration for the 100% equity
interest in Jiangsu Beiterui Nano was RMB515,791,000, both of which were determined
with reference to a valuation report issued by an independent valuer. On May 27, 2021, the
State Administration for Market Supervisio n issued the ‘‘Decision on Not Implementing
Further Anti-Monopoly Examination for Concentration of Business Operators’’
(Anti-Monopoly Examination Decision [2021] No. 276) ( 《經營者集中反壟斷審查不實施進
一步審查決定書》（反壟斷審查決定[2021]276 號）) stating that it would not implement further
examination on our Company’s acquisition of a portion of the business of BTR Group.
Each of the acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano was completed
on June 11, 2021 and the relevant consideration was fully settled on June 10, 2021. As
advised by our PRC Legal Advisor, the acquisitions have been properly and legally
completed and settled and all necessary approvals from the relevant authorities have been
obtained.
HISTORY AND DEVELOPMENT
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As one or more of the applicable ratios exceed 25% but less than 100%, the
acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano are considered as a major
transaction, and the relevant pre-acquisit i o nf i n a n c i a li n f o r m a t i o ni sr e q u i r e dt ob e
disclosed pursuant to Rule 4.05A of the Hong Kong Listing Rules. For details of certain
pre-acquisition financial information of Tianjin Beiterui Nano from January 1, 2020 to May
31, 2021 and Jiangsu Beiterui Nano from Janua ry 28, 2021 (date of incorporation) to May
31, 2021, see ‘‘Financial Information — Fina ncial Information of Tianjin Beiterui Nano
and Jiangsu Beiterui Nano.’’
We have consolidated the results of operations of Tianjin Beiterui Nano and Jiangsu
Beiterui Nano since June 1, 2023. For details, see ‘‘Financial Information — Basis of
Presentation — Acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano.’’
Acquisition of Shandong Meiduo
On March 6, 2024 and March 7, 2024, our Company entered into share transfer
agreement (‘‘Shandong Meiduo Original Agreement ’’) and a supplemental agreement (the
‘‘Shandong Meiduo Supplemental Agreement ’’) with and among Lopal International and
Shandong Meiduo, whereby our Company conditionally agreed to acquire 100% equity
interest in Shandong Meiduo from Lopal International at an aggregate consideration of
RMB100,539,200 (‘‘Shandong Meiduo Acquisition ’’). Upon the completion of the Shandong
Meiduo Acquisition, we propose to inject capital of RMB50 million into the registered
share capital of Shandong Meiduo. Following which, the registered share capital of
Shandong Meiduo will be further incre ased from RMB100 million to RMB150 million.
The necessary filing and registration with the local authorities in respect of the
Shandong Meiduo Acquisition shall be comple ted 15 working days after utilization rate of
the lithium battery recycling project of Shandong Meiduo having achieved 70% for seven
consecutive working days (the ‘‘ Production Condition ’’) and the completion of the Shandong
Meiduo Acquisition shall take place on the date on which the necessary filing and
registration with the relevant local authorities having been completed, which will take place
after the Production Condition is fulfilled. As of the Latest Practicable Date, construction
and operation of the lithium battery recycling project of Shandong Meiduo is on-going in
the process of completing the acceptance examination and the Shandong Meiduo
Acquisition has not been completed, subject to the satisfaction of the Production
Condition. Completion of the Shandong Meiduo Acquisition is currently expected to
take place in the fourth quarter of 2024.
The consideration for the 100% equity interest in Shandong Meiduo was
RMB100,539,200, which was determined with r eference to (i) the appraised value of such
equity interest of RMB50,539,200 based on the valuation report issued by an independent
valuer. The valuation method adopted is the asset-based method and the reference date of
the valuation report is October 31, 2023; an d (ii) the increase in paid-up capital of
Shandong Meiduo of RMB50,000,000 by Lopal International in January 2024. The
consideration shall be paid within two weeks a fter the necessary filings and registration in
HISTORY AND DEVELOPMENT
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respect of the Shandong Meiduo Acquisition having been completed, and will be satisfied
by our Company’s self-owned funds and we do not expect to use any proceeds from the
Global Offering to fund the Shandong Meiduo Acquisition.
Shandong Meiduo is a company principally engaged in the business of NEV battery
recycling and cascade using and energy storage technology service, the products of which
are extensively used in LFP and cathode materials for ternary batteries. Owing to the
continuous advancement and growth of production technology of Shandong Meiduo in
power battery recycling, coupled with the expansion of our Group’s cathode materials
business, our Company believes that the Shan dong Meiduo Acquisition is in line with our
strategic expansion upstream along the production value chain to control production costs
and stabilize the supply of principal raw materia ls. Our Directors believe that the Shandong
Meiduo Acquisition would enable us to furthe r strengthen our presence in the LFP cathode
material industry and is fair and reasonable and in the interests of the Shareholders as a
whole.
As of the date of the Shandong Meiduo Original Agreement, the Shandong Meiduo
Supplemental Agreement and as of the Latest Practicable Date, Shandong Meiduo was a
wholly owned subsidiary of Lopal International. Lopal International is one of our
Controlling Shareholders and is owned a s to 90% and 10% by Mr. Shi and Ms. Zhu,
respectively, each of which is our Directo r and one of our Controlling Shareholders.
Shandong Meiduo will become a subsidiary of the Company upon completion of the
Shandong Meiduo Acquisition.
This prospectus includes the audited historical financial information of Shandong
Meiduo for the period from September 20, 2022 (the date of establishment) to December 31,
2022, for the year ended December 31, 2023 and for the six months ended June 30, 2024 (see
‘‘The Shandong Meiduo Historical Financial Information’’ in the Accountants’ Report of
Shandong Meiduo set out in Part I of Appendix ID to this prospectus). As none of the
percentage ratios exceed 5%, the Shandong Meiduo Acquisition did not constitute an
acquisition of a major subsidiary of our Company for the purpose of Rule 4.28 of the
Listing Rules.
During the Track Record Period and up t o the Latest Practicable Date, save as
disclosed above, we did not conduct any other major acquisition or disposal that is required
to be disclosed pursuant to Rules 4.04(2), 4.04(4), 4.05A and 4.28 of the Hong Kong Listing
Rules.
DEVELOPMENT AFTER THE TRACK RECORD PERIOD
In line with our strategy to expand our production capacity overseas, we are in talks
with investors and business partners in identifying and exploring suitable potential
investments and business cooperations in Indonesia.
HISTORY AND DEVELOPMENT
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For our production expansion plan in Indonesia, discussions and negotiations on
i n t r o d u c i n gL G E Sa sa ni n v e s t o rt oP TL B M ,our subsidiary in Indonesia, further to the
memorandum of understanding we entered into with LGES in September 2023 regarding
the non-binding joint cooperation of producing LFP cathode materials in Indonesia (the
‘‘Potential LG Investment ’’) are still on-going as of the Latest Practicable Date.
In addition, in October 2024, our Company, Changzhou Liyuan and LBM New Energy
entered into a non-legally binding term sheet (the ‘‘ Term Sheet ’’) with Indonesia Investment
Authority and BRV Lotus International Limited (collectively, the ‘‘ SG Investors ’’) in
relation to the potential investment by the SG Investors in LBM New Energy in the
aggregate sum of up to US$200 million by w ay of subscription of shares in LBM New
Energy (collectively, the ‘‘ Potential SG Investment ’’). Pursuant to the Term Sheet, the SG
Investors may be entitled to special rights s uch as preferential dividend rights, share
redemption rights in case of specified events c ustomary to transactions of this type, right of
first refusal, tag-along rights, liquidation preferences and other customary rights. LBM
New Energy is a wholly-owned subsidiary of Changzhou Liyuan and is the holding
c o m p a n yo fP TL B M .I ft h eP o t e n t i a lS GI n v e stment materialises in the circumstances as
contemplated, upon its completion, it is expected that Changzhou Liyuan will continue to
hold over 50% shares in LBM New Energy and that the proceeds from the Potential SG
Investment will be applied as general wo rking capital of LBM New Energy and its
subsidiaries including but without limitat ion, for the development of phase II of the
Indonesia Plant and such other purposes as may be agreed by us and the SG Investors.
Further, we will continue to apply the proceeds from the Global Offering allocated for the
phase II of the Indonesia Plant in the manner disclosed in the Prospectus. For details of the
proceeds on the phase II of the Indonesia Plant, see ‘‘Future Plans and Use of Proceeds —
Use of Proceeds.’’
Each of the Potential LG Investment and the Potential SG Investment is subject to,
among others, our further negotiation with LGES and/or the SG Investors (as the case may
be) and the entering into of the definitive agreements. There is no assurance that the
Potential LG Investment and/or the Potentia l SG Investment will materialise or eventually
be consummated. See also ‘‘Risk Factors — Our business and operations require significant
capital resources on an ongoing basis and are subject to uncertainties.’’ In the event the
Potential LG Investment and/or the Potential SG Investment materialise(s), each of them
may constitute a notifiable transaction of t he Company and the Company will comply with
the reporting, announcement, circular and/or Shareholders’ approval requirements under
Chapter 14 of the Listing Rules as and when appropriate. We undertake that in the event
that the Potential LG Investment and/or the Pot ential SG Investment materialise(s), both
LBM New Energy and PT LBM will remain as subsidiaries of our Group upon completion
of the Potential LG Investment and/or the Potential SG Investment.
REASONS FOR THE LISTING
Our Company seeks to be listed on the Hong Kong Stock Exchange in order to provide
further capital for, among other things, the construction phase II of the Indonesia Plant and
the development of new LMFP production lines at our Xiangyang Plant in Hubei Province.
See ‘‘Business — Strategies’’ and ‘‘Future Plans and Use of Proceeds’’ for more details.
HISTORY AND DEVELOPMENT
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CORPORATE STRUCTURE
Corporate Structure as of the Latest Practicable Date
The following chart illustrates the corporate and shareholding structure of our
Company as of the Latest Practicable Date:
Lopal International (2)
Mr. Shi(1) Ms. Zhu(1) Nanjing Bailey (3) Mr. Lu Zhenya(4) Mr. Qin Jian(5) Mr. Shen Zhiyong(6) Mr. Zhang Yi(7) Ms. Xu Suxia(8) Other A Shareholders (15)
Our Company
Zhangjiagang TEEC (11)
Sichuan Liyuan Jiangsu Beiterui
Nano
Jiangsu Ruilifeng (10) Changzhou Liyuan (12) Other subsidiaries (13)
1.16%
37.63%
Lopal Times (9)
70%
Lopal New Material
100%
Other subsidiaries (13)Shandong Kelas
Jiangsu Kelas
100%
100%
Lopal Lubrication
100% 70% 64.03%
57.01%
100% 100%
Tianjin Beiterui
Nano
Other
subsidiaries (13)
100%
4.18% 0.34% 0.04% 0.04% 0.04% 0.03% 0.01% 57.69%
Shandong
Liyuan
100%
Hubei Liyuan
100%
Notes:
(1) Mr. Shi and Ms. Zhu are spouses. For details of the background of Mr. Shi and Ms. Zhu, see ‘‘Directors,
Supervisors and Senior Management.’’
(2) As of the Latest Practicable Date, Lopal Inter national was owned as to 90% and 10% by Mr. Shi and Ms.
Zhu, respectively.
(3) As of the Latest Practicable Date, Lopal Internati onal was the general partner of Nanjing Bailey, and the
partnership interest of Nanjing Ba iley was held as to approximately 5 6.99% by Ms. Zhu, approximately
1.16% by Lopal International, while the remainder w as held by 33 subsisting or former employees of our
Group whose percentage of partnership interest r anged from approximately 1.08% to 2.02% each.
(4) Mr. Lu Zhenya is an executive Director. For detail s of the background of Mr. Lu Zhenya, see ‘‘Directors,
Supervisors and Senior Management.’’
(5) Mr. Qin Jian is an executive Director. For detail s of the background of Mr. Qin Jian, see ‘‘Directors,
Supervisors and Senior Management.’’
(6) Mr. Shen Zhiyong is an executive Director. For details of the background of Mr. Shen Zhiyong, see
‘‘Directors, Supervisors and Senior Management.’’
(7) Mr. Zhang Yi is an executive Director. For detail s of the background of Mr. Zhang Yi, see ‘‘Directors,
Supervisors and Senior Management.’’
(8) Ms. Xu Suxia ( 徐素蝦) is the wife of Mr. Qin Jian, an executive Director. As of the Latest Practicable
Date, she was an employee of our Group.
(9) As of the Latest Practicable Date, Lopal T imes was owned as to 70% by our Company and 30% by
Yichun Times. Yichun Times was a d irect wholly owned subsidiary of CATL as of the Latest Practicable
Date.
HISTORY AND DEVELOPMENT
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(10) All the subsidiaries of our Company named in the cha rt are considered as our prin cipal subsidiaries, with
the exception of Jiangsu Ruilifeng. As of the Late st Practicable Date, Jiangsu Ruilifeng held 57.01%
equity interest in Zhangjiagang TEEC, which is consid ered as one of our principal subsidiaries. As of the
Latest Practicable Date, the remaining 30% equity interest in Jiangsu Ruilifeng was held as to 20%, 9%
and 1% by Zhangjiagang Zhaorui, Wang Zhaoyin ( 王兆銀) and Qian Xuefen ( 錢雪芬), and Wang Zhaoyin
(王兆銀) and Qian Xuefen ( 錢雪芬) were also directors of Jiangsu Ruilifeng. As of the Latest Practicable
Date, Jiangsu Ruilifeng was an ins ignificant subsidiary of our Comp any under Rule 14A.09(1) of the
Hong Kong Listing Rules, and as such, Z hangjiagang Zhaorui, Wang Zhaoyin ( 王兆銀) and Qian Xuefen
(錢雪芬) are not our connected persons. As of the Latest Practicable Date, Zhangjiagang Zhaorui was
owned (i) as to 15.5% by Wang Zhaoyin ( 王兆銀), (ii) as to 12.5% by Qian Xuefen ( 錢雪芬)w h oa l s o
served as the general partner, (iii) as to 12.0% by Shi Hanliang ( 施漢良); (iv) as to 4.5% by Zhang Jinlong
(張金龍); (v) as to 4.5% by Zhang Bingsheng ( 張丙生); (vi) as to 4.5% by Cao Yunlong ( 曹雲龍); (vii) as to
4.5% by Li Haishan ( 李海山); (viii) as to 4.5% by Jiao Zhongqiu ( 焦中秋); (ix) as to 4.5% by Wang
Zhaocai ( 王兆才); (x) as to 3.5% by Tao Dianbin ( 陶佃彬); (xi) as to 3.0% by Xu Yan ( 徐艷); (xii) as to
3.0% by Gao Chongyi ( 高崇怡); (xiii) as to 3.0% by Yu Shenghui ( 俞勝慧); (xiv) as to 3.0% by Zhang
Chengxin ( 張成新); (xv) as to 2.5% by Shan Meng ( 單猛); (xvi) as to 2.5% by Zhao Rudong ( 趙汝東);
(xvii) as to 1.5% by Zhang Dajin ( 張大金) ;( x v i i i )a st o1 . 5 %b yW uB e i(武北); (xix) as to 1.0% by Tong
Xiufeng ( 童秀鳳); (xx) as to 1.0% by Gong Haigang ( 龔海港); (xxi) as to 1.0% by Shi Lei ( 時磊); (xxii) as
to 1.0% by Zhou Jie ( 周潔); (xxiii) as to 1.0% by Zhu Ligang ( 朱麗剛); (xxiv) as to 1.0% by Zhang
Chunxiao ( 張春曉); (xxv) as to 1.0% by Cai Yingchun ( 蔡迎春); (xxvi) as to 0.8% by Zou Mi ( 鄒密);
(xxvii) as to 0.8% by Huang Zhangbo ( 黃章波); (xxviii) as to 0.6% by Jiang Weiwei ( 江衛衛); and (xxix) as
to 0.3% by Wang Shaohua ( 王少華). The partners of Zhangjiagang Zhaorui are all subsisting or former
employees of Zhangjiagang TEEC.
(11) As of the Latest Practicable Date, the remain ing 42.99% equity interest in Zhangjiagang TEEC was
owned as to approximately 25.00%, 6.97%, 6.18% and 4.84% by Ethylene Chemical Co., Ltd. ( 乙烯化學
株式會社), Beijing Beihuada Investment Co., Ltd. ( 北京北化大投資有限公司), Beijing Taikelaier
Technology Co., Ltd. ( 北京泰克來爾科技有限公司) and Tokokosen Corporation ( 東工KOSEN 株式會
社), respectively, all of which were Independent Th ird Parties (save for them being shareholders of
Zhangjiagang TEEC).
(12) As of the Latest Practicable Date, the remainin g 35.97% equity interest in Changzhou Liyuan was owned
as to approximately 6.45%, 5.91%, 4.49%, 4.49%, 4.05%, 2.25%, 0.9%, 5.5% and 1.93% by Times
Mindong, Wending Investment, Cha ngzhou Youbeili, Jintan Hongyuan, BTR Group, Nanjing Jinbeili,
Nanjing Chaoli, Kunlun Gongrong and Jianxin Investment, respectively.
As of the Latest Practicable Date, Times Mi ndong, BTR Group, Jianxin Investment and Kunlun
Gongrong were Independent Third Parties (save f or them being shareholders of Changzhou Liyuan).
Jianxin Investment was a wholly-owned subsidiary of China Construction Bank Corporation, whose A
shares and H shares are listed on the Shanghai Stock Exchange (Stock code: 601939) and the Hong Kong
Stock Exchange (stock code : 939), respectively. We nding Investment was a wholly-owned subsidiary of
CATL, our connected person. Kunlun Gongrong was a li m i t e dp a r t n e r s h i pe s t a b l i s h e di nt h eP R C .T h e
general partners of Kunlun Gongrong we re ICBC Capital Management Co., Ltd. ( 工銀資本管理有限公司)
and CNPC Kunlun (Beijing) Private Equity Fund Management Co., Ltd. ( 中油昆侖（北京）私募基金管理有
限公司), each holding 0.0667% equity interests in Kunlun Gongrong. The limited partners of Kunlun
Gongrong were ICBC Financial Asset Investment Co., Ltd. ( 工銀金融資產投資有限公司)a n dC N P C
Kunlun Capital Co., Ltd. ( 中國石油集團昆侖資本有限公司), holding 70% and 29.8667% equity interests
in Kunlun Gongrong, res pectively. ICBC Capital Management Co., Ltd. ( 工銀資本管理有限公司)w a s
wholly owned by ICBC Financial Asset Investment Co., Ltd. ( 工銀
金融資產投資有限公司), a
wholly-owned subsidiary of Industrial and Comm ercial Bank of China Limited whose A shares and H
shares are listed on the Shanghai Stock Exchange (Stock code: 601398) and Hong Kong Stock Exchange
(Stock code: 1398), respectively. CNPC Kunlun (Bei jing) Private Equity Fund Management Co., Ltd. ( 中
油昆侖（北京）私募基金管理有限公司) was wholly owned by CNPC Kunlun Capital Co., Ltd. ( 中國石油集
團昆侖資本有限公司). CNPC Kunlun Capital Co., Ltd. ( 中國石油集團昆侖資本有限公司) was owned as to
(i) 51% by China National Petroleum Corporation ( 中國石油天然氣集團有限公司), which was wholly
HISTORY AND DEVELOPMENT
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owned by State-owned Assets Supervision and Admini stration Commission of th e State Council, (ii) 29%
by PetroChina Company Limited whose A shares and H shares are listed on the Shanghai Stock Exchange
(Stock code: 601857) and Hong Kong Stock Exchange (Stock code: 857), respectively and (iii) 20% by
CNPC Capital Company Limited ( 中國石油集團資本股份有限公司) whose shares are listed on the
Shenzhen Stock Exchange (Stock code: 000617).
As of the Latest Practicable Date , Changzhou Youbeili was managed b y its general partner, Mr. Shi, and
was owned as to 99.9% and 0.1% by Mr. Shi and Liu Xiuming ( 劉修明), an employee of our Group,
respectively.
As of the Latest Practicable Date, Jintan Hongyuan was managed by its general partner Liu Xiuming ( 劉
修明), and was owned as to approximately 47.0%, 34.2% , 14.4%, 1.2%, 0.6%, 0.6%, 0.4%, 0.4%, 0.4%,
0.4% and 0.4% by Mr. Liu Xiuming ( 劉修明), Huang Youyuan ( 黃友元), Liu Youyong ( 劉又勇), Wang
Zhangjian ( 王張健), Zhang Man ( 張曼), Zhu Zhenwen ( 朱振文), Kang Luhan ( 康錄涵), Mao Yuanyue ( 毛
元躍), Lei Peiyi ( 雷培義), Hou Xiaofeng ( 侯曉峰) and Qu Xingwei ( 瞿興煒), respectively. All of the
partners of Jintan Hongyuan were subsisting or former directors or employees of our Group.
As of the Latest Practicable Date, Nanjing Jinbeili w as managed by its general partner Mr. Shen Zhiyong,
an executive Director, and was owned as to 99% and 1% by Mr. Shen Zhiyong and Mr. Zhang Yi, an
executive Director, respectively.
As of the Latest Practicable Date, Nanjing Chaoli was managed by its general partner Xue Jie ( 薛傑), and
was owned as to 80% and 20% by Xue Jie ( 薛傑) and Xie Yichao ( 解一超), respectively. Xue Jie ( 薛傑)i sa
Supervisor. Xie Yichao ( 解一超) was an employee of our Group as of the Latest Practicable Date.
(13) As of the Latest Practicable Date, there were 16 other subsidiaries of our Company, which are not
considered as our principal subsidia ries. For further details of the subsidiaries of our Company, see Note 1
to Part II of the Accountants’ Report as set out in Appendix IA.
(14) In the above notes, where any Directors or senio r management members of our Company are mentioned,
only their positions held at the Company level are disclosed.
(15) None of such A Shareholders held more than 5% interests in our Company as of the Latest Practicable
Date.
Corporate Structure Immediately Following the Global Offering
The following chart illustrates the corporate and shareholding structure of our
Company immediately after completio n of the Global Offering, assuming the
Over-allotment Option is not exercised and the options granted under 2023 Share Option
Scheme are not exercised:
Lopal International (2)
Mr. Shi(1) Ms. Zhu(1) Nanjing Bailey (3) Mr. Lu Zhenya(4) Mr. Qin Jian(5) Mr. Shen Zhiyong(6) Mr. Zhang Yi(7) Ms. Xu Suxia(8) Other A Shareholders
Our Company
Zhangjiagang TEEC (11)
Sichuan Liyuan Jiangsu Beiterui
Nano
Jiangsu Ruilifeng (10) Changzhou Liyuan (12) Other subsidiaries (13)
1.16%
31.98%
Lopal New Material
100%
Other subsidiaries (13)
Jiangsu Kelas
100%
Shandong Kelas
100%
Lopal Lubrication
100% 70% 64.03%
57.01%
100% 100%
Shandong
Liyuan Hubei Liyuan Tianjin Beiterui
Nano
Other
subsidiaries (13)
100% 100% 100%
3.55% 0.29% 0.04% 0.03% 0.03% 0.03% 0.00% 49.01%
H Shareholders
15.04%
70%
Lopal Times (9)
Notes (1) to (13): See notes (1) to (14) under ‘‘— Corporate Struc ture — Corporate Structure as of the Latest
Practicable Date.’’
HISTORY AND DEVELOPMENT
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PUBLIC FLOAT
So far as our Directors are aware, immediately following the completion of the Global
Offering (assuming the Over-allotment Optio n is not exercised and the options granted
under the 2023 Share Option Scheme are not exercised), the 2,082,400 A Shares held by our
Company as treasury shares and the Shares held by our core connected persons will not be
counted towards the public float for the purpose of Rule 8.08 of the Listing Rules. For the
purpose of this section, the following percentages to the total issued share capital of our
Company exclude the 2,082,400 A Shares held by our Company as treasury shares. Details
of these core connected persons are set out below:
. Mr. Shi (Ms. Zhu’s husband), being the chairman of our Board, an executive
Director and a Controlling Sharehold er, is a core connected person of our
Company, holding approximately 31.98% of the total issued share capital of our
Company;
. Ms. Zhu (Mr. Shi’s wife), being a non-e xecutive Director and a Controlling
Shareholder, is a core connected person o f our Company, holding approximately
3.55% of the total issued share capital of our Company;
. Nanjing Bailey, being a Controlling Share holder, and the general partner of which
(i.e. Lopal International) was owned as to 90% by Mr. Shi and 10% by Ms. Zhu
as of the Latest Practicable Date, is a close associate of Mr. Shi and Ms. Zhu, and
is thus a core connected person of our Company, holding approximately 0.29% of
the total issued share capital of our Company;
. Mr. Lu Zhenya, being an executive Director, is a core connected person of our
Company, holding approximately 0.04% of the total issued share capital of our
Company;
. Mr. Qin Jian, being an executive Director, is a core connected person of our
Company, holding approximately 0.03% of the total issued share capital of our
Company;
. Mr. Shen Zhiyong, being an executive Dir ector, is a core connected person of our
Company, holding approximately 0.03% of the total issued share capital of our
Company;
. Mr. Zhang Yi, being an executive Director, is a core connected person of our
Company, holding approximately 0.03% of the total issued share capital of our
Company;
. Ms. Xu Suxia, being Mr. Qin Jian’s wife, is a close associate of Mr. Qin Jian and is
thus a core connected person of our Company, holding approximately 0.00% of
the total issued share capital of our Company.
HISTORY AND DEVELOPMENT
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Save as provided above, upon the completion of the Global Offering (assuming the
Over-allotment Option is not exercised and the options granted under the 2023 Share
Option Scheme are not exercised), the Shares held by our other Shareholders (including our
H Shareholders and A Shareholders) will be counted towards the public float. It is expected
that upon the Listing, our Company will be able to meet the public float requirements under
Rule 8.08(1) of the Hong Kong Listing Rules.
HISTORY AND DEVELOPMENT
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OVERVIEW
We are a major LFP cathode material manu facturer in the world and a renowned
automotive specialty chemical manufacturer in mainland China. We primarily operate in
the following two segments:
. LFP cathode materials. We primarily engage in the production and sale of LFP
cathode materials. LFP cathode material s are currently the most extensively used
cathode materials for producing lithium-ion batteries used in a wide variety of end
markets, including NEV and energy storage industries.
. Automotive specialty chemicals. We primarily engage in the production and sale of
a diverse portfolio of automotive specialty chemical products covering diesel
exhaust fluids, automobile and industrial lubricants, coolants and car
maintenance products, which are widely used in the automobile manufacturing
market, automotive aftermarket, and engineering equipment market.
We enjoy major market positions in the LFP cathode material industry and multiple
sub-segments of the automotive specialty chemical industry. According to Frost & Sullivan,
in terms of sales volume in 2023, we are China’s and the world’s fourth largest LFP cathode
material manufacturer, with a global market share of 6.5%, while the three largest
manufacturers held market shares of 30.5%, 12.9% and 10.5%, respectively; the third
largest diesel exhaust fluid manufacturer in mainland China, with a market share of 9.1%,
while the two largest manufacturers held mark et shares of 29.1% and 12 .9%, respectively;
and the third largest coolant manufacturer i n mainland China, with a market share of 5.8%,
while the two largest manufacturers held mark et shares of 12.3% and 8.8%, respectively.
The history of our Group can be traced back to 2003 when our Company was
established, initially offering lubricants and e ngine coolants. Through strategic growth over
the years, we successfully expanded and streng thened our product portfolio to also include
other automotive specialty chemicals such as diesel exhaust fluids and car maintenance
products. This has enabled us to form a diverse portfolio of automotive specialty chemical
products for our customers. Our Company comple ted the initial public offering and listing
of our A Shares on the Shanghai Stock Exchange in April 2017. Leveraging our long-term
development strategies tailored to developments within the automotive industry, we
engaged third party contract manufacturers to produce small amounts of LFP cathode
materials in 2020 and the first half of 2021 to st art building knowledge and relationships in
the emerging NEV supply chain. Then in June 2021, we expanded our presence in the LFP
cathode material industry through the acquisitions of Tianjin Beiterui Nano and Jiangsu
Beiterui Nano, which are engaged in businesses in the field of LFP cathode material. See
‘‘History and Development — Our Business Milestones.’’
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Leveraging our research and development and manufactur ing capabilities, the diverse
product offerings of our LFP cathode material business and automotive specialty chemical
business allow us to meet the diverse requirements and exacting specifications of our
downstream customers. We strive to provide d iverse LFP cathode materials, which improve
the power density, performance stability under low-temperature circumstances or charging
efficiency of lithium-ion batteries. Customers of our LFP cathode material business include
major lithium-ion battery manufacturer s such as CATL, REPT BATTERO, Sunwoda and
EVE. Additionally, our automotive specialty chemical business enjoys the strong brand
equity of our Lopal (龍蟠),K e l a s(可蘭素)a n d Teec (迪克) brands and our established sales
and distribution network which have contributed to the competitive positions of our
products. Our automotive specialty chemical products have been recognized by leading
automobile manufacturers and engineering equipment manufacturers and obtained licenses
or approvals from the American Petroleum Institute (API), the International Lubricant
Standardization and Approval Committee (ILSAC) and various globally leading
automobile manufacturers.
We achieved strong growth from 2021 to 2022. Our revenue increased by 247.1% from
RMB4,053.5 million for the year ended Decemb er 31, 2021 to RMB14,071.6 million for the
year ended December 31, 2022. In addition, our net profit increased by 137.6% from
RMB433.4 million for the year ended Decemb er 31, 2021 to RMB1,029.9 million for the
year ended December 31, 2022. This was primarily attributable to the strong growth of our
LFP cathode material business since we acquired it in June 2021, in terms of both average
selling prices and sales volume, driven by the rapid development and growth in demand of
downstream NEV and energy storage industries and the significant increase in the price of
principal raw materials, such as lithium carbonate, which was attributable to tightness in
upstream supply.
However, we recorded a net loss of RMB1,5 14.2 million for the year ended December
31, 2023 as compared to a net profit of RMB1, 029.9 million for the year ended December
31, 2022. This was primarily driven by the unpr ecedented volatility in lithium carbonate
market prices. Specifically, we recorded a gr oss loss of RMB57.5 million for the year ended
December 31, 2023 compared to a gross prof it of RMB2,433.3 million for the year ended
December 31, 2022 as lithium carbonate market prices undergoing an unprecedented sharp
d e c l i n ei n2 0 2 3a f t e ra ne x t e n d e dh i g hp r i c eenvironment created a temporary mismatch
between cost of sales of LFP cathode materials and its revenue contribution for the year
ended December 31, 2023. We recorded a 44.8% ye ar-to-year decrease in revenue from sales
of LFP cathode materials in 2023, mainly attributable to a significant decrease in average
selling price of LFP cathode materials wh ich closely follows the prevailing lithium
carbonate market price which experienced sharp decreases during the year. Due to the
overall decline of lithium carbonate market prices through 2023, our cost of sales for LFP
cathode materials stayed elevat ed relative to the selling prices which had to be lowered to
reflect the sharp decline in lithium carbonate prices during the year. In addition, we
recognized provision for impairment loss of inventories of RMB554.5 million in the 2023 as
a result of the decrease in recoverable amounts of inventories attributable to the declining
raw material prices.
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The market challenges we faced in 2023 continued into the first half of 2024, although
we saw some signs of improvement. For the six months ended June 30, 2024, we recorded a
total revenue of RMB3,568.6 million, repres enting a decrease from RMB3,814.2 million in
the same period of 2023. Revenue generated fr om sales of LFP cathode material decreased
from RMB2,851.5 million in the first half of 2023 to RMB2,475.6 million in the first half of
2024. This decrease was mainly attributable t o two factors affecting average selling price of
our LFP cathode materials, including (i) the co ntinued decline in lithium carbonate market
prices, and (ii) an increase in sales of LFP ca thode materials with procurement of lithium
carbonate and raw materials from customers w hich result in lower revenue recognized and
lower average selling price. Desp ite these challenges, we saw an improvement in our gross
profit, recording RMB344.0 million in the fi rst half of 2024 compared to a gross loss of
RMB241.4 million in the first half of 2023. Our net loss also decreased from RMB811.5
million in the first half of 2023 to RMB260 .2 million in the first half of 2024. These
improvements were primarily due to the increased sales of LFP cathode materials with
procurement of lithium carbonate and raw materials from customers, partially reducing the
Group’s exposure to raw material price fluctuations.
The table below sets forth the breakdown of our revenue by product and service types,
each expressed in an absolute amount and as a percentage of total revenue, for the periods
indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
LFP Cathode materials . . 1,876,842 46.3 12,241,873 87.0 6,753,628 77.4 2,851,523 74.8 2,475,580 69.4
Without procurement
of lithium
carbonate and raw
materials from
customers . . . . . . 1,876,842 46.3 12,084,887 85.9 6,186,681 70.9 2,673,665 70.1 1,696,977 47.6
With procurement of
lithium carbonate
and raw materials
from customers
(1) . — — 156,986 1.1 566,947 6.5 177,858 4.7 778,603 21.8
Automotive specialty
chemicals ......... 2 , 1 1 8 , 7 2 5 5 2 . 3 1 , 7 6 2 , 8 1 4 1 2 . 5 1 , 9 0 3 , 2 1 2 2 1 . 8 9 3 8 , 0 5 7 2 4 . 6 9 7 0 , 1 4 7 2 7 . 2
Diesel exhaust fluid . . 790,630 19.5 688,861 4.9 625,738 7.1 323,102 8.5 306,607 8.6
Automobile and
industrial
l u b r i c a n t ....... 8 4 4 , 4 0 2 2 0 . 8 6 2 3 , 5 5 3 4 . 4 7 0 6 , 6 1 6 8 . 1 3 6 2 , 9 4 8 9 . 5 3 6 7 , 6 2 3 1 0 . 3
C o o l a n t ......... 4 0 3 , 7 0 8 1 0 . 0 3 8 2 , 6 6 1 2 . 7 4 8 4 , 7 0 1 5 . 6 2 0 3 , 2 4 6 5 . 3 2 4 8 , 9 4 8 7 . 0
Car maintenance
p r o d u c t s....... 6 1 , 9 5 5 1 . 5 5 8 , 3 3 0 0 . 4 7 0 , 2 4 0 0 . 8 3 5 , 9 7 8 0 . 9 3 6 , 9 8 8 1 . 0
Other products
(2) . . . . 18,030 0.5 9,409 0.1 15,917 0.2 12,783 0.4 9,981 0.3
Processing income from
lithium carbonate . . . . —— —— —— —— 4 2 , 6 8 5 1 . 2
Others (3) ........... 5 7 , 9 3 8 (4) 1.4 66,956 0.5 72,639 0.8 24,624 0.6 80,200 2.2
Total ............. 4,053,505 100.0 14,071,643 100.0 8,729,479 100.0 3,814,204 100.0 3,568,612 100.0
Notes:
(1) Revenue from sales of LFP cathode materials with p rocurement of lithium carbonate and raw materials
from customers is recognized on a net basis, excl uding cost of lithium carbonate and raw materials
procured from customers.
(2) Mainly comprising revenue from sales of filling equipment and packaging containers for automotive
specialty chemical products.
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(3) Mainly comprising revenue from sales of daily chemical products and unfinished products as well as
revenue from our emerging hydrogen energy business.
(4) Including revenue from selling of small amount s of LFP cathode materials produced by third party
contract manufacturers we engaged. During the Tr ack Record Period and prior to the acquisitions of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano, revenue generated from selling of such LFP cathode
materials amounted to RM B4.2 million in 2021.
Driven by flourishing demand, technological advancement and support from both
governmental and industrial policies, th e end markets of our LFP cathode material
business, including NEV and energy storage industries, have grown and are expected to
continue expanding at a rapid pace. In particu lar, according to Frost & Sullivan, driven by
the PRC government’s dual objectives of ‘‘carbon emission peak’’ ( 碳達峰) and ‘‘carbon
neutrality’’ (碳中和), the NEV industry experienced fast growth, resulting in significant
growth in demand for NEV batteries. The shipment volume of NEV batteries in mainland
China is expected to reach 1,860.5 GWh in 2028 from 816.6 GWh in 2024, representing a
CAGR of 22.9%. Moreover, due to continuous te chnological progress, decrease in energy
storage costs and increase in installation of energy storage equipment, the shipment volume
of the ESS battery industry in mainland China is expected to reach 863.3 GWh in 2028 from
300.4 GWh in 2024, representing a CAGR of 30.2%. Such downstream market development
is expected to stimulate huge demand for the LFP cathode material as the most widely
adopted cathode material for lithium-ion batter ies. According to Frost & Sullivan, the sales
volume of LFP cathode material in mainland China grew rapidly at a CAGR of 100.6%
from 101.6 thousand tons in 2019 to 1,645.0 thousand tons in 2023 and is expected to
further grow at a CAGR of 17.2% from 2,056.0 thousand tons in 2024 to 3,884.0 thousand
tons in 2028.
Moreover, the sales volume of automotive specialty chemical products closely relates
to levels of automobile ownership. Accordin g to Frost & Sullivan, automobile ownership in
mainland China is expected to reach 430.5 million units in 2028 from 354.3 million units in
2024, representing a CAGR of 5.0%. Given the steady increase in automobile ownership,
the sales volumes of diesel exhaust fluids, automotive lubricants, coolants and car
maintenance products in mainland China are expected to increase at CAGRs of 9.4%,
1.8%, 8.5% and 4.0% from 2024 to 2028, respectively, indicating sufficient growth
potential for our automotive specialty chemical business, according to Frost & Sullivan.
Leveraging our market position, diverse pro duct portfolio, manufac turing capabilities,
research and development capabilities, pr oduct quality and qualit y customer base, we
believe we are well positioned to seize market opportunities and benefit from the expected
growth in the end markets of our products.
STRENGTHS
We are a major LFP cathode material manufacturer in the world and a renowned automotive
specialty chemical manufacturer in mainland China benefiting from growing industries
We ranked fourth in China and the world in terms of sales volume of LFP cathode
materials in 2023, with a global market share of 6.5%, while the three largest manufacturers
in the industry held market shares of 30.5%, 12.9% and 10.5%, respectively, according to
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Frost & Sullivan. With five pr oduction facilities in mainlan d China in operation as of the
Latest Practicable Date enabling mass production, stable supply ability and diverse product
offerings, we are able to satisfy our customers’ demands for product quality, quantity,
diversity and timely delivery. Our total production output of LFP cathode materials
increased by 356.9% from approximately 25 .3 thousand tons in 2021 to approximately
115.5 thousand tons in 2023. Our mass produ ction capability could better position us in
cooperating with prominent customers with demand of large quantity of high-quality LFP
cathode materials.
As of the Latest Practicable Date, we opera ted five LFP cathode material production
facilities in (i) Jintan, Jiangsu Province, ( ii) Baodi, Tianjin Municipality, (iii) Pengxi,
Sichuan Province, (iv) Heze, Shandong Province and (v) Xiangyang, Hubei Province. For
the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
our actual production of these five production facilities amounted to 25,281.3 tons, 89,039.9
tons, 115,509.8 tons and 78,914.0 tons, respectively.
We currently offer four series of diversified LFP cathode material products with
different characteristics. The third generat ion of our S series LFP cathode material product,
which is characterized by high compaction, high capacity and high power density for motive
batteries without compromising the stability o f the batteries. Adopting our nano spherical
densification technology to change the molecular shape of lithium iron phosphate ions, our
T series Lithium Iron No.1 ( 鐵鋰壹號) product, which has obtained eleven patents, can
improve the charging efficiency and capacitance under low-temperature circumstances of
lithium-ion batteries. The sales volume of Lithium Iron No.1 amounted to 618.1 tons,
1,205.6 tons, 2,322.4 tons, 1,103.7 tons and 2 ,261.9 tons for the years ended December 31,
2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, respectively. Our Z
series LFP cathode material product represents cost-effective options made using recycled
raw materials. At last, we are actively developing our M series LMFP cathode material and
have provided sample products to customers for testing purposes as of the Latest
Practicable Date. LMFP cathode material is c urrently considered a promising cathode
material option as it combines the high safet y feature of lithium iron phosphate with the
higher energy density and power density of lithium manganese phosphate. Recently, our
research and development team has successfully achieved a better balance of the
compaction and capacitance of our M series products adopting our spherical technology.
This progress would improve the power density of our M series products and homogenize
different raw materials further enhancing m anufacturability of our M series products.
The lithium-ion battery industry is under rapid development. According to Frost &
Sullivan, the shipment volume of NEV battery industry in mainland China is expected to
reach 1,860.5 GWh in 2028 from 816.6 GWh in 2024, representing a CAGR of 22.9%, and
the shipment volume of ESS battery industry in mainland China is expected to reach 863.3
GWh in 2028 from 300.4 GWh in 2024, representing a CAGR of 30.2%. As a result, sales
volume of LFP cathode materials in mainland China is expected to grow at a CAGR of
17.2% from 2,056.0 thousand tons in 2024 to 3, 884.0 thousand tons in 2028. Leveraging our
market position, diverse pro duct offerings, manufacturin g capabilities, research and
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development capabilities, product quality an d quality customer base, we believe we are well
positioned to seize market opportunities and benefit from the expected growth in the LFP
cathode material industry.
In addition, we are actively expanding our production capacity overseas. With the
expected commencement of opera tion of the phase I of our Indonesia Plant with a designed
production capacity of 30.0 thousand tons of LFP cathode materials around the third
quarter of 2024, we are expected to become the first mainland Chinese LFP cathode
material manufacturer to deploy and scale production capacity overseas. In April 2024, the
phase I of our Indonesia Plant has commenced testing and configuration of equipment.
We are also a renowned automotive specialty chemical manufacturer in mainland
China with strong brand recognition and exte nsive sales and distribution networks. As of
the Latest Practicable Date, we operated sev en production facilities for our automotive
specialty chemical business in the PRC. We primarily sell our automotive specialty chemical
products under our Lopal (龍蟠),K e l a s(可蘭素)a n d Teec (迪克) brands. Our Lopal series
automobile lubricants have won the China LubTop Awards ( 中國潤滑油行業年度總評榜)
(previously known as China Lubricants Industry Awards) for nine consecutive years since
2013 and obtained licenses or approvals from t he American Petroleum Institute (API), the
International Lubricant Sta ndardization and Approval Committee (ILSAC) and various
globally leading automobile manufacturers. Ac cording to Frost & Sullivan, in terms of sales
volume in 2023 in mainland China, we are the third largest diesel exhaust fluid
manufacturer, with a market share of 9.1%, while the two largest manufacturers held
market shares of 29.1% and 12.9%, respectively; and the third largest coolant manufacturer
in mainland China, with a market share of 5.8% , while the two largest manufacturers held
market shares of 12.3% and 8.8%, respectively. With around 20 years of experience in the
automotive specialty chemical industry, we have established cooperati ve relationships with
customers and suppliers and gained deep understandings and visions of market trends to
better serve the requirements and specifications of our customers and adapt to the industry
development.
We have a strong customer base for our LFP cathode material business and an extensive sales
and distribution network for our automotive specialty chemical business
Leveraging our diverse portfolio of our LFP cathode material products, solid research
and development capabilities and product quality, we have established cooperative
relationships with leading lithium-ion battery manufacturers, such as CATL, REPT
BATTERO, Sunwoda and EVE. According to Frost & Sullivan, customers in the
lithium-ion battery industry are highly selec tive with respect to quality of raw materials
and generally have stringent entry thresh olds and rigorous screening mechanism for
suppliers. Therefore, once a supplier satisfies the requirements of accredited suppliers,
customers rarely make any substantial changes or replacements. We believe our cooperative
customer relationships stem primarily fr om our mass production capability and stable
supply of competitive products. We believe such relationships enhance our brand
recognition and reputation in the LFP cathod e material industry and will facilitate the
future growth of our customer base.
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According to Frost & Sullivan, the ma rket in mainland China accounted for
approximately 99% of the global sales volume of LFP cathode materials. As such, during
the Track Record Period, substantially all our revenue was derived from our businesses in
mainland China. With a view to further expand our customer base, we continue to pursue
business opportunities and are currently in the verification and/or sample test stages of
globally leading NEV battery manufacturers headquartered overseas. Additionally, we
expect our planned new production plant in Indonesia will aid our overseas business
development efforts.
We have established an extensive sales and distribution network for our automotive
specialty chemical business comprised mainl yo fd i r e c ts a l e st a r g e ting corporate clients,
distributors and online channels targeting retail customers which together enhance the
visibility of our brands and products and en ables us to effectively reach out to target
customers. Our automotive specialty chem ical products are widely recognized by our
customers including leading automobile manufacturers and engineering equipment
manufacturers. In particular, our Kelas (可蘭素) diesel exhaust fluids have been used by
a large number of major commercial vehicles m anufacturers in main land China. As of June
30, 2024, our nationwide distribution netwo rk comprised of 919 distributors covering 22
provinces, four municipalities and five autonomous regions in the PRC. With the rise of
online channels, we have also quickly established self-operated online stores on major
e-commerce platforms such as Tmall, JD.c om and Pinduoduo which we believe helps us
form direct relationship with individu al consumers. As of June 30, 2024, we had 15
self-operated online stores.
Our strong research and development capabilitie s contribute to our competitive and diverse
product portfolio
The competitiveness of our products stem from our strong research and development
capabilities. With our dedication in resea rch and development, we have been able to
continuously improve product performance and quality and develop products that satisfy
the requirements and specifications of our customers.
We offer four series of diversified LFP cathode material products with different
characteristics. The third generation of our S series LFP cathode material product, which is
characterized by high compaction, high capacity and high power density for motive
batteries without compromising the stability o f the batteries. Adopting our nano spherical
densification technology to change the molecular shape of lithium iron phosphate ions, our
T series Lithium Iron No.1 ( 鐵鋰壹號), which has obtained eleven patents, can improve the
charging efficiency and capacitance under lo w-temperature circumstances of lithium-ion
batteries. Our Z series of LFP cathode materia l product represents cost-effective options
made using recycled raw materials. At last, we are actively developing our M series LMFP
cathode material and have provided sample products to customers for testing purposes as of
the Latest Practicable Date. LMFP cathode material is currently considered a promising
cathode material option as it combines the high safety feature of lithium iron phosphate
with the higher energy density and power density of lithium manganese phosphate.
Recently, our research and devel opment team has successfully achieved a better balance of
the compaction and capacitance of our M series products adopting our spherical
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technology. This progress would improve the power density of our M series products and
homogenize different raw materials further e nhancing manufactura bility of our M series
products. As of June 30, 2024, we hold 110 patents, including 47 invention patents, in
relation to our LFP cathode material products, in mainland China. With the growing
demand in relevant end markets such as NEV and energy storage industries, we believe,
continuous investment in research and development and innovation is critical to attracting
new customers and maintaining close relationships with existing customers.
Since the inception of our automotive specialty chemical business in 2003, we have
accumulated a group of research and development personnel with extensive product
development experience in the industry, rendering us strong research and development
advantages that enable us to develop diversified and competitive automotive specialty
chemical products. For example, our Lopal se ries automobile lubricant, which adopted our
proprietary Hyper Zing technology ( 超級鋅技術) and ActivZing technology ( 活力鋅技術),
has high reactivity and low volatility and ca n effectively decompos e carbon deposition and
oil sludge while forming a compact anti-wea r layer on automobile engine, winning the
China LubTop Awards ( 中國潤滑油行業年度總評榜) (previously known as China
Lubricants Industry Awards) for nine consecutive years since 2013 and obtained licenses
or approvals from the American Petroleum Institute (API), the International Lubricant
Standardization and the Approval Commit tee (ILSAC) and various globally leading
automobile manufacturers. Moreover, our Shengchang Pro series ( 省暢PRO系列)d i e s e l
exhaust fluids, which adopted our nano-catalysis technology greatly increases the surface
tension of urea molecules and thereby improves the rate of reduction of nitrogen oxides in
diesel exhaust emissions. As of June 30, 2024, we hold 203 patents in mainland China,
including 69 invention patents, in relation to our automotive specialty chemical products.
We attach great importance to and make significant investment in research and
development. For the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, our total research and development expenses amounted to
approximately RMB208.0 million, RMB615 .5 million, RMB485.7 million and RMB203.6
million, respectively. Our research and devel opment teams led by Dr. Shi Yingfei and Ms.
Sun Liyuan who have extensive research and development experience in chemical
engineering, materials engineering and other sc ientific fields essential to the research and
development of our businesses, comprise 399 members as of June 30, 2024, among which
24.6% of the team members hold master or doctorate degrees. We currently have three
strategically located research and devel opment centers for LFP cathode materials in
Shenzhen, Nanjing and Changzhou. We have also established a testing center for
automotive specialty chemicals in Nanjing which has obtained CNAS certification
awarded by the China National Accreditation Service for Conformity Assessment ( 中國合
格評定國家認可委員會) in 2006 and had been accredited as Jiangsu Provincial Certified
Enterprise Technology Center ( 江蘇省認定企業技術中心), Nanjing Certified Enterprise
Technology Center ( 南京市認定企業技術中心
), Jiangsu Engineering Research Center for
Lubricant Material ( 江蘇省潤滑材料工程技術研究中心), Nanjing Engineering Research
Center for Lubricant Material ( 南京市潤滑材料工程技術研究中心), Jiangsu Provincial
Postdoctoral Innovation Practice Base ( 江蘇省博士後創新實踐基地), and Jiangsu
Provincial Key Enterprise R&D Institution ( 江蘇省重點企業研發機構).
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We believe our continuous investment in research and development not only
consolidates our competitive advantage in th e industry but also helps us establish a solid
foundation for future development.
We have an experienced and visionary management team
We have an experienced and visionary management team with extensive operational
experiences and an in-depth understanding of our industries and the upstream and
downstream segments along the respective industry value chains.
Mr. Shi, our Chairman, has over 30 years of experience in automotive-related
industries. As a testament to Mr. Shi’s expertise in the diesel exhaust fluid market, he was
invited by China Society of Automotive Engineers ( 中國汽車工程學會) to participate in the
drafting of The Requirement and Test Method of Urea Solution for Motor Vehicle ( 《車用尿
素溶液技術規範》). He has also participated in the research and development of several of
our patented technologies in our automotive specialty chemical business. He received a
certificate of the National High Level Talent Support Scheme ( 國家高層次人才特殊支持計
劃) issued by the Organization Department of the Central Committee of the CPC ( 中共中央
組織部) and the Ministry of Human Resources and Social Security ( 人力資源和社會保障部)
and a certificate of the Nanjing Technological Top Experts Scheme ( 南京科技頂尖專家集聚
計劃) issued by the Nanjing Talent Work Leading Group ( 南京市人才工作領導小組)f o rt h e
period of February 2018 to February 2021. Moreover, our management, comprising of our
executive Directors, have an average of over 20 years of experience in managing our
Company. For further details, see ‘‘Directors, Supervisors and Senior Management.’’ The
daily operation of our LFP cathode material business is also led by a team of industry
veterans who were the first inventors of a number of patented inventions with extensive and
hands-on experience in building a successful LFP cathode material business. Over the years,
our management team has established and ma intained good relationships with our
customers and suppliers, which helps us follow market trends and technical
advancements early on and seize latest development opportunities in the industries.
STRATEGIES
Further increase our LFP cathode material production capacity to seize growing downstream
demand, expand our customer base and achieve economies of scale to solidify our position in
the LFP cathode material industry
We plan to further increase our production capacity by building new production lines
and facilities to capitalize the growing dem and for LFP cathode material products and
solidify our position in the LFP cathode mat erial industry. In 2021, our LFP cathode
material production facilities surpassed ful l capacity with an overall utilization rate of
106.9%, while in 2022, the facilities operated near full capacity again and achieved an
overall utilization rate of 97.3%. Accordi ng to Frost & Sullivan, the lithium-ion battery
market in mainland China is still expected to grow from 1,171.3 GWh in 2024 to 2,804.2
GWh in 2028 at a CAGR of 24.4%. Similarly, the ESS battery shipment volume in
mainland China is expected to grow from 300.4 GWh in 2024 to 863.3 GWh in 2028 at a
CAGR of approximately 30.2%, according to the same source. Despite challenges across
the lithium-ion battery value chain driven by decreasing lithium carbonate prices, sales
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volume of our LFP cathode material products i ncreased from 95,120 tons for the year ended
December 31, 2022 to 108,120 tons for the yea r ended December 31, 2023. This trend
continued into the first half of 2024 with sales volume of our LFP cathode material
increasing from 37,427 tons in the first half of 2023 to 74,503 tons in the first half of 2024,
representing a 99.1% increase. We believe su ch resilience primarily stems from (i) our
position in the global LFP cathode material industry underpinned by our mass production
capacity and strong research and developmen t capabilities in core technologies; (ii) our
quality customer base of leading lithium-ion battery manufacturers; and (iii) the industry’s
high barriers for client recognition, as customers rarely make any substantial changes or
replacements once the requirements of accredited suppliers are satisfied.
In order to better serve our customers and meet their demands for production capacity
and high quality products, increase market competitiveness, lower unit production cost by
achieving economies of scale under the backdrop of carbon peak and carbon neutrality, we
have formulated prudent LFP cathode material production expansion plans as follows:
LMFP production lines at Xiangyang Plant
We considered LFP cathode materials to be the optimal long-term technology pathway
in the industry considering LFP cathode materials’ cost-efficiency and superior thermal
stability. Accordingly, we have determined to further capitalize on these advantages by
dedicating production lines to manufacturing LMFP cathode materials, which is an
emerging upgraded sub-category of LFP cathode materials made by adding manganese to
the LFP composition. It is currently considere d a promising cathode material as it combines
the high safety feature of lithium iron phosphate with the higher energy density and power
density of lithium manganese phosphate. Acco rding to Frost & Sullivan, it is expected that
LMFP will eventually become another major development path for battery material
manufacturers. For details of the potential market demand for LMFP, see ‘‘Industry
Overview — Overview of LFP Cathode Material Industry — Market Drivers and Trends of
LFP Cathode Material Industry — New technology boost potential market demand for
LMFP cathode materials.’’ We believe th at developing and producing LMFP cathode
m a t e r i a l sw o u l df u r t h e rd i v e r s i f yo u rp r o d u ct offerings, distinguish us from other LFP
cathode material manufacturers, and position us competitively as the lithium-ion battery
value chain evolves. As such, we intend to app ly approximately 40.0% or HK$208.0 million
of the net proceeds from the Global Offering to finance the construction of LMFP
production lines at our Xiangyang Plant. For further details, see ‘‘Future Plans and Use of
Proceeds — Use of Proceeds.’’
Indonesia Plant
Following the globalization trend of the LFP cathode material industry, many leading
companies along the lithium-ion battery value chain are expanding or have plans to expand
their production to global markets to secure ea rly-mover advantages. According to Frost &
Sullivan, the global LFP cathode material indu stry is expected to grow at a higher rate than
that in mainland China. It is expected that the market share of LFP cathode materials in
terms of sales volume outside of mainland China will rise from 2.9% in 2024 to 7.3% in
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2028. Among the overseas destinations, Indonesia offers several key advantages, including
its comprehensive NEV industry value chain, investment-friendly po licies and favorable
geographical location.
In particular, leading companies within the lithium-ion battery value chain have
developed detailed investment plans in Indo nesia, resulting in the establishment of a
comprehensive layout of the lithium-ion battery market value chain in the country. Further,
Indonesia’s targets to export 200,000 NEVs by 2 025 and achieve 2.2 million electric vehicles
on the roads by 2030 as well as other policy incentives, including reduced taxation for
vehicles with more components produced locally, contribute to a positive policy
environment for development of its industries along the lithium-ion value chain. As a
raw material origin, a maritime hub connecting mainland China with other countries of raw
material origin and with its close geographi c proximity with China, Indonesia also offers
other advantages including convenient transportation and reduced shipment costs. For
further details, see ‘‘Industry Overview — Ov erview of LFP Cathode Material Industry —
Market Drivers and Trends of LFP Cathode Material Industry — Overseas expansion
drives the international growth of companies across lithium-ion battery value chain.’’ We
believe our planned new production facility in I ndonesia renders us a f irst-mover advantage
in the latest market trend of the LFP cathode material industry. As of the Latest Practicable
Date, the phase I of our Indonesia Plant had completed construction and is expected to
commence operation around the fourth quarte r of 2024 with a designed production capacity
of 30.0 thousand tons of LFP cathode materials per year. In April 2024, the phase I of our
Indonesia Plant has commenced testing and configuration of equipment. We also intend to
apply approximately 40.0% or HK$208.0 m illion of the net proceeds from the Global
Offering to finance the construction of phase II of the Indonesia Plant with a designed
production capacity of 90.0 thousand tons of LFP cathode materials per year. For further
details, see ‘‘Future Plans and Use of Proceeds.’’
With the commencement of operation of the phase I of our Indonesia Plant, we aim to
become the first mainland Chinese LFP cathod e material manufacturer to deploy and scale
production capacity overseas, which we be lieve will allow us to seamlessly respond to
requirements and specifications of our overseas customers, seize market shares of
international market and solidify our market position in the global LFP cathode material
industry.
Further expand upstream along the LFP cathode material production value chain
According to Frost & Sullivan, dynamic and i n-depth cooperations between upstream
and downstream participants along the industry value chain mark one of the lithium-ion
battery market’s latest development trends. We believe expanding upstream along the
production value chain is crucial to control p roduction costs and stabilize the supply of
principal raw materials. We are in the progre ss of expanding our pro duction capabilities
upstream and have been producing iron phosphate, a principal raw material for LFP
cathode materials, in-house in order to better maintain close control over key parameters
during our production processes, make improvements based on quality-related feedback,
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develop diversified products tailored to cus tomers’ requirements and specifications and
better manage costs of raw materials. For the six months ended June 30, 2024, we produced
approximately 15,738 tons of iron phosphate in-house for our internal use.
Additionally, our lithium carbonate produc tion facility in Yichun, Jiangxi Province,
with a designed production capacity of 40.0 thousand tons per year has commenced trial
operation since March 2024. We believe furt her expanding upstream will allow us to (i)
consolidate our market positio n in our primary business, i.e., controlling production costs
and stabilizing the supply of principal raw mate rials; (ii) extend our strict quality control
measures to the production of raw materials, including lithium carbonate and iron
phosphate to ensure better performance of our LFP cathode materials; and (iii) solidify our
relationships with major cust omers through our pro duction capabilities in the LFP cathode
material industry value chain. For further details, see ‘‘Our Businesses — Lithium
Carbonate Processing Services.’’
Strengthen our research and development capabilities and attract high-caliber talents
We believe strong research and development capacity is critical for our continued
success in our industries. To this end, we plan to strengthen our research and development
capabilities and upgrade our research and de velopment centers which will allow us to
develop new products that supplement our product portfolio, optimize product quality and
increase production and operational efficiency. In particular, we intend to advance our
research and development efforts in the following areas:
. Research and development of LMFP cathode materials, as well as enhancing
development and production of our M series LMFP cathode material products.
LMFP is an emerging upgraded sub-category of LFP cathode materials made by
adding manganese to the LFP composition. It is currently considered a promising
cathode material as it combines the high s afety feature of lithium iron phosphate
with the higher energy density and power density of lithium manganese
phosphate. According to Frost & Sullivan, it is expected that the LMFP
cathode materials will eventually become another major development path for
the battery material manuf acturers. For details of the potential market demand
for LMFP, see ‘‘Industry Overview — Overview of LFP Cathode Material
Industry — Market Drivers and Trends of LFP Cathode Material Industry —
New technology boost potential market demand for LMFP cathode materials.’’
. Enhance our recycled LFP cathode materials, including improving our
proprietary impurity removal technology and advancing our Z series recycled
LFP cathode material products.
Additionally, we aim to continuously exp and and cultivate our talent reserve and
leverage our deep insights into the downstream supply chain and our cooperative
relationships with customers to enhance our core competitiveness. We believe that loyal,
stable and experienced employees are key to our long-term success. In order to maintain our
independent innovation capability, we plan to c ontinuously recruit, re tain, cultivate and
motivate high-caliber research and development professionals through various initiatives
including providing valuable training programs and incentive schemes.
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Furthermore,we have been developing our h ydrogen energy business across the value
c h a i ns i n c e2 0 2 2 .I nu p s t r e a mh y d r o g e np r oduction, our first electrolytic tank with a
production capacity of 1,000 cubic meters per hour came online in September 2023. In
midstream hydrogen storage, we successfully developed one of the first domestic nine- and
twelve-liter Type IV hydrogen storage vessels for unmanned aerial vehicles. In downstream
hydrogen application, we successfully developed our hydrogen fuel cell catalyst products
that help improve hydrogen fuel cell efficie ncy in late 2022. Recently we have started the
trial production of our hydrogen fuel cell catalyst products. In 2022 and 2023 and the six
months ended June 30, 2024, revenue generated from our hydrogen energy business
amounted to approximately RMB0.1 million, RMB1.6 million and RMB1.3 million,
respectively.
Further reinforce our brand and channel strategies to solidify our market position in the
automotive specialty chemicals industry
We believe our Lopal and Kelas brands have gained wide recognition in mainland
China as a result of our successful marketing promotion and brand building. We intend to
further reinforce our multi-brand strategy and enhance our brand awareness with our
multi-faceted marketing strategy includi ng increasing advertising placement on TV
commercials, radio stations, high-speed railway trains and stations, and highways
billboards, holding product launch conference and using social media. We plan to
actively participate in industry exhibitions to expand our customer base, establish business
contacts and strengthen regional sales. We will also attend academic conferences to enhance
our brand awareness and influence.
Strengthening our sales and distribution networks is crucial to our success and future
growth. As of June 30, 2024, we have established a nationwide sales and distribution
network for our automotive specialty chemical products comprised of 919 distributors
covering 22 provinces, four municipalities a nd five autonomous regions in the PRC. Going
forward, we aim to reinforce cooperation with our distributors to extend the geographic
coverage and depth of our sales and distribut ion networks by providing targeted sales
support and guidance including hosting product road shows and products promotion
events. In the future, in addition to extendi ng the depth of our network in cities where we
operate, we also plan to establish presence and gradually penetrate other prefecture-level
cities in mainland China and relatively lowe r tier cities with strong market potential by
cooperating with distributors with solid track records, strong distribution networks and
sufficient sales personnel.
In recent years, China has been rising as a major vehicle exporter with both domestic
automakers and international brands increasing their shipment to overseas destinations.
Serving the automotive market with our automotive specialty chemical products for 20
years, we intend to leverage our expertise and strengthen relationships with automakers to
capitalize on the trend of their global expansion.
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CHALLENGES TO OUR INDUSTRIES AND OUR BUSINESSES
The LFP Cathode Material Industry
The global lithium-ion battery industry, including the LFP cathode material industry,
experienced substantial growth in shipment volume, increasing from 250.1 GWh in 2019 to
1,226.8 GWh in 2023, with a CAGR of 48.8%, driven by surging demand and supportive
policies in the NEV and energy storage industr ies. According to Frost & Sullivan, in terms
of shipment volume, the mainland China lithium-ion battery market increased from 117.5
GWh in 2019 to 892.8 GWh in 2023, representing a CAGR of 66.0%, and is expected to
reach 2,804.2 GWh in 2028, demonstrating a CAGR of 24.4% from 2024 to 2028.
Additionally, the mainland China LFP cathode material market, which accounted for
approximately 99% of global LFP cathode mat erials in terms of sales volume in 2023,
significantly increased from 101.6 thousand tons in 2019 to 1,645.0 thousand tons in 2023,
representing a CAGR of 100.6%, and is expected to further grow at a CAGR of 17.2%
from 2,056.0 thousand tons in 2024 to 3,884.0 thousand tons in 2028.
This significant downstream demand growth led to upstream supply tightness for
principal raw materials such as lithium carbonate. Upstream supply chain disruptions
caused by the COVID-19 pandemic also constrained lithium resource supply from overseas
origins. As a result, lithium carbonate price s spiked. According to Frost & Sullivan, the
average price of lithium carbonate increased sharply from RMB119.8 thousand per ton in
2021 to RMB482.4 thousand per ton in 2022. Generally, LFP cathode material prices
closely follow the prevailing lithium carbonate prices listed on the SMM. Consequently,
average LFP cathode material prices increased significantly from RMB55.0 thousand per
ton in 2021 to RMB125.0 thousand per ton in 2022.
However, since late 2022, the global an d mainland China LFP cathode material
industries have faced challenges common to midstream industries along the lithium-ion
battery value chain. These include evolving p olicies affecting downstream industries,
periodic oversupply due to demand adjustments, and managing fluctuating prices of raw
materials.
Since late 2022, as new lithium carbonate production capacity gradually released,
supply increased to meet downstream demand. Specifically, numerous companies across
mainland China announced their plans to es tablish or expand their lithium carbonate
production in late 2022 which have materialized in early 2023. According to the Ministry of
Industry and Information Technology of the PRC ( 中華人民共和國工業和信息化部),
lithium carbonate production soared by appro ximately 36.7% year-on-year, escalating
from 150,000 tons in the first half of 2022 to 205,000 tons in the same period in 2023.
However, softening of near-term demand sentiments along with the broader global
economic slowdown in 2023 have impacted the downstream lithium-ion battery and NEV
industries. On the one hand, in December 2022, China discontinued direct purchase
subsidies for NEVs. According to Frost & Sullivan, this has temporarily affected
lithium-ion battery and component demand in early 2023. On the other hand, while
long-term demand is expected to remain health y, concerns over potential further lithium
carbonate price declines led downstream pl ayers including lithium-ion battery and NEV
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manufacturers to temporarily resort to invent ory destocking measures. Such temporary
downstream demand slowdown, coupled with rising lithium carbonate supply, caused
lithium carbonate prices to plunge to RMB272.3 thousand per ton in 2023. Additionally,
the combination of these reasons had led to a significant decrease in average LFP cathode
material prices from RMB125.0 thousand per ton in 2022 to RMB72.2 thousand per ton in
2023 and further to RMB37.4 thousand per ton in the first half of 2024.
Automotive specialty chemical industry
In contrast to the significant fluctuatio ns in the LFP cathode material industry, the
automotive specialty chemical industry whi ch is relatively more mature, has experienced
relatively stable growth in recent years i n line with the expansion of the downstream
automotive industry and increasing d emand for sustainable solutions.
Specifically, mainland China, as the largest and fastest-growing automotive market,
has seen its automobile owners hip increase from 260.0 million units in 2019 to 336.3 million
units in 2023, at a CAGR of 6.6%, outpacing the global CAGR of 3.3% during the same
period. It is further estimated that automobile ownership in mainland China will reach
430.5 million units by 2028, at a CAGR of 5.0 % between 2024 and 2028. As a result,
according to Frost & Sullivan, the sales vol umes of diesel exhaust fluids, automotive
lubricants, coolants and car maintenance p roducts in mainland China are expected to
increase at CAGRs of 9.4%, 1.8%, 8.5% and 4.0% from 2024 to 2028.
O u rB u s i n e s sP e r f o r m a n c e
We achieved strong growth from 2021 to 2022. Our revenue increased by 247.1% from
RMB4,053.5 million for the year ended Decemb er 31, 2021 to RMB14,071.6 million for the
year ended December 31, 2022. In addition, our net profit increased by 137.6% from
RMB433.4 million for the year ended Decemb er 31, 2021 to RMB1,029.9 million for the
year ended December 31, 2022. This growth was primarily attributable to the strong growth
of our LFP cathode material business, in te rms of both sales volume and average selling
prices, driven by the rapid development and growth in demand of downstream NEV and
energy storage industries and the significant increase in the price of lithium carbonate. Our
growth in the years ended December 31, 2022 was also supported by our automotive
specialty chemical business record ing RMB1,762.8 million in revenue.
Despite our business growth in previous ye ars, we recorded a net loss of RMB1,514.2
million for the year ended December 31, 2023 a s compared to a net profit of RMB1,029.9
million for the year ended December 31, 2 022. This was primarily driven by the
unprecedented volatility in lithium carbonat e market prices. Specifically, we recorded a
gross loss of RMB57.5 million for the year ended December 31, 2023 compared to a gross
profit of RMB2,433.3 million for the year end ed December 31, 2022 as lithium carbonate
market prices undergoing an unprecedented sharp decline in 2023 after an extended high
price environment created a temporary mismatch between cost of sales of LFP cathode
materials and its revenue contribution for the year ended December 31, 2023. We recorded a
44.8% year-to-year decrease in revenue from sales of LFP cathode materials in 2023, mainly
attributable to a significant decrease in average selling price of LFP cathode materials
which closely follows the prevailing lithium carbonate market price which experienced
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sharp decreases during the year. Due to the overall decline of lithium carbonate market
prices through 2023, our cost of sales for LFP cathode materials stayed elevated relative to
the selling prices which had to be lowered to reflect the sharp decline in lithium carbonate
prices during the year. In addition, we recognized provision for impairment loss of
inventories of RMB554.5 million in the 2023 as a result of the decrease in recoverable
amounts of inventories attributable to the declining raw material prices.
Nevertheless, compared to the significant dr op in average selling prices, sales volume
of our LFP cathode material products inc reased from 95,120 tons for the year ended
December 31, 2022 to 108,120 tons for the year ended December 31, 2023. Additionally, our
traditional automotive specialty chemical business recorded increasing revenue for the year
ended December 31, 2023 compared to the yea r ended December 31, 2022. Specifically,
revenue from sales of automotive specialty chemical products increased from RMB1,762.8
million for the year ended December 31, 2022 to RMB1,903.2 million for the year ended
December 31, 2023.
The market challenges we faced in 2023 continued into the first half of 2024, although
we saw some signs of improvement. For the six months ended June 30, 2024, we recorded a
total revenue of RMB3,568.6 million, repres enting a decrease from RMB3,814.2 million in
the same period of 2023. Revenue generated fr om sales of LFP cathode material decreased
from RMB2,851.5 million in the first half of 2023 to RMB2,475.6 million in the first half of
2024. This decrease was mainly attributable to tw o factors affecting the average selling price
of LFP cathode materials (i) the continued decline in lithium carbonate market prices, and
(ii) an increase in sales of LFP cathode mater ials with procurement of lithium carbonate
and raw materials from customers. In these cases, costs of such customer-supplied raw
materials were deducted upon revenue recognition, resulting in lower revenue generated
from these transactions and therefore a lower a verage selling price for the segment. Despite
these challenges, we saw an improvement in our gross profit, recording RMB344.0 million
in the first half of 2024 compared to a gross loss of RMB241.4 million in the first half of
2023. Our net loss also decreased from RMB811.5 million in the first half of 2023 to
RMB260.2 million in the first half of 2024. The pro vision for impairment loss of inventories
also showed improvement, decreasing from RMB222.3 million in the first half of 2023 to
RMB69.5 million in the first half of 2024. Thes e improvements were primarily due to the
increased sales of LFP cathode materials with procurement of lithium carbonate and raw
materials from customers, partially reducing the Group’s exposure to raw material price
fluctuations.
Despite the decrease in revenue from o ur LFP cathode material segment, we
experienced positive trends in terms of sales volume. Sales volume of our LFP cathode
material increased from 37,427 tons in the first half of 2023 to 74,503 tons in the first half of
2024, representing a 99.1% increase. This growth in volume demonstrates the continued
strong demand for our LFP cathode materials, even in a challenging price environment.
Additionally, revenue from our automotive specialty chemical business increased from
RMB938.1 million in the first half of 2023 to RMB970.1 million in the first half of 2024.
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Measures in Response to Industry Challenges
In response to the current challenges in the industry, we plan to adopt the following
measures to weather short-term fluctuations w hile capitalizing on the considerable growth
opportunities in the LFP cathode material industry:
Improving resilience to fluctuations in raw material prices
As our business and production scale expands, we will require more raw materials,
which we believe will provide stronger bargaining power with suppliers. In response to
fluctuations in raw material prices, especially the recent decrease in prices of principal raw
materials, we have implemented the following measures:
. Improve procurement practices and organization .W ep l a nt os t r e n g t h e nd i s c u s s i o n s
and negotiations with suppliers and pursue long-term strategic cooperation with
major suppliers with the aim to stabiliz e procurement costs. In particular, we
intend to increase direct procurement from upstream raw material producers
instead of procuring raw materials through trading companies. For the six months
ended June 30, 2024, procurement volume from upstream raw material producers,
together with lithium carbonate produced in-house, accounted for approximately
60% of our total lithium carbonate supply compared to approximately 45% in the
first half of 2023. The table below sets forth unit cost per ton of lithium carbonate
by different channels during the Track Record Period.
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB/ton
Procurement through
trading companies . . . 115,087 404,452 269,465 342,879 89,816
Procurement from
upstream manufactures 133,268 407,330 207,047 257,505 89,777
In-house production. . . . — — — — 84,638
The unit cost of lithium carbonate procured directly from upstream
manufacturers was higher than that procured through trading companies in
2021 and 2022 primarily due to the material’s scarcity during the period, as
evidenced by the significant rise in lit hium carbonate price during the period,
which required prioritizing supply security. In 2023, as lithium carbonate supply
increased and prices significantly decreased, cost of procurement from upstream
manufacturers became lower than that from trading companies, aligning with our
expected cost efficiencies of direct procurement. By the first half of 2024, the costs
from both procurement channels have significantly decreased and averaged at a
relatively equal level, which we believe ge nerally aligns with the lithium carbonate
pricing trend in the same period. During the same period, we also commenced
in-house production of lithium carbonate which demonstrated the lowest unit
cost, further validating our strategy of vertical integration. We believe the
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significant fluctuations in lithium carbonate prices throughout the Track Record
Period underscore the importance of our diversified procurement strategy which
we believe will allow us to better adapt to market volatility.
Additionally, we plan to enhance our inventory management systems, including
controlling inventory turnover days and mai ntaining appropriate inventory levels.
Specifically, to contend with shifting market conditions, we have tightened
coordination between sales, production planning, and purchasing teams through
integrated demand forecasting procedur es. While previously our raw material
procurement plans were determined in monthly cycles, under our enhanced risk
management approach, raw material procurement plans are replanned on a
weekly basis one to two times per week to calibrate with real-time demand. Any
changes in our inventory levels or shifts in customer purchase orders are expected
to flow through to adjust both our production schedules and procurement plans,
which allows procurement teams to more closely collaborate with suppliers to
calibrate purchasing quantities. By direct ly linking sales trends to manufacturing
schedules and raw material orders on shorter planning cycles, we can more
dynamically align key parts of our operations chain to current lithium market
realities.
. Leverage lithium carbonate futures to hedge against price fluctuations of lithium
carbonate. Established in April 2021, the Guangzhou Futures Exchange
introduced lithium carbonate futures in July 2023 offering market participants
the option to leverage lithium carbonate futures contracts to hedge against price
fluctuations. We will leverage lithium carbonate futures transactions to hedge
against the risk exposure of our Group against lithium carbonate fluctuations. We
have implemented internal control and hedging policies to manage and oversee
our lithium carbonate futures hedging activities. For details, see ‘‘— Our
Businesses — LFP Cathode Materials — Lithium carbonate hedging.’’
. Further expand upstream along the LFP cathode material value chain. We believe
integrating the industry supply chain is c rucial to controlling p roduction costs and
stabilizing the supply of principal raw mate rials. During the Track Record Period,
we have been producing iron phosphate in-house and are in the process of
expanding our production capacity of iron phosphate. Our production facility for
lithium carbonate in Yichun, Jiangxi Province has commenced trial operation
since March 2024.
By producing such principal raw materials in-house, we believe we will be able to
better mitigate raw material price fluctuations and control the high percentage of
costs of raw materials in total cost of sales of LFP cathode materials. For further
details, see ‘‘— Strategies — Further expand upstream along the LFP cathode
material production value chain’’ and ‘‘— Our Businesses — LFP Cathode
Materials — Raw materials and suppliers — Raw materials.’’
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Improving production efficiency
We have significantly increased our production capacity and output in the past few
years. Our overall designed production capacity increased from 23,645.8 tons in 2021 to
200,670.2 tons in 2023, with our Heze Plant and Xiangyang Plant commencing operation in
2023. As we expand our production capacit y, we typically experience long supplier
verification procedures of customers and production ramp-up periods before reaching
optimal utilization rates. During ramp-up pe riods, we would record higher fixed cost per
unit and labor cost per unit. As a result, such ramp-up periods have compressed our
margins during the Track Record Period. As our newly commissioned production lines
graduate their ramp-up periods, coupled with our introduction of enhanced production
technologies and automated equipment, we ex pect our production efficiency to increase to
an optimal level. Additionally, we also expect to enjoy improved production efficiency as
our workforce gains familiarity with oper ating and managing ou r production lines.
Furthermore, we plan to further expand our production capacity in the near future,
mainly though the addition of our Indonesia Plant and LMFP production lines in Hubei.
With the expanded production capacity, we be lieve we will be able to designate production
lines for different customers, which will allow u s to reduce the time needed to coordinate the
production of various product specifications and adjust schedules in response to shifting
market demand, thereby improving our production efficiency.
Increasing sales revenue and expanding customer base
The rapid development of downstream industries presents significant growth
opportunities. With rising new energy penetration, strong government support and sound
supply chain practices, the lithium-ion battery market in mainland China has expanded
rapidly and accounted for 72.8% in the global battery industry in 2023 and it is expected to
increase from 1,171.3 GWh in 2024 to 2,804.2 GWh in 2028, representing a CAGR of
24.4%, according to Frost & Sullivan. Addit ionally, the ESS battery shipment volume in
mainland China is expected to increase from 300.4 GWh in 2024 to 863.3 GWh in 2028 at a
CAGR of approximately 30.2%, according to the same source.
. Enhance loyalty of existing customers. T h eL F Pc a t h o d em a t e r i a li n d u s t r yi s
characterized by a high level of customer concentration. As we have built a quality
customer base comprised of leading lithium-ion battery manufacturers we need to
capitalize on our cooperative customer relationship to secure further business
opportunities.
To further enhance loyalty and strengthen ties with existing customers, we plan to
continue leveraging our expanded production capacity to meet their demands as
well as maintain continuous and in-dep th involvement in their research and
development processes to develop product tailored to their requirements. To
better understand customer demands, we intend to strengthen internal sales
meetings and external communicati ons with downstream battery and NEV
manufacturers. We believe enhanced insi ghts into market developments will also
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benefit our procurement practices. Additionally, we will take advantage of our
strategically located production facilit ies to reduce delivery time and costs,
thereby achieving swift and efficient responses to customer demands.
. Expand customer base. We plan to further expand our customer base primarily by
leveraging our reputation in the industry to attract new customers. For example:
○ In October 2022, we entered into a strategic cooperation agreement with an
emerging Zhejiang-based lithium-ion battery manufacturer whose parent is
listed on the Shanghai Stock Exchange STAR Market regarding the supply of
120.0 thousand tons of LFP cathode materials during the contract term.
○ In February 2023, we entered into a stra tegic cooperation agreement directly
with a leading PRC automaker which purports to establish in-depth
cooperation on the supply and development of lithium-ion battery
materials between our Company and the automaker including actively
promoting its battery suppliers to procure our products from us under the
circumstances set forth in the agreement.
○ In June 2023, we entered into a LFP cathode material sales agreement with a
company related to a leading PRC automaker. This company specializes in
the research and development of LFP batteries, primarily for the
automaker’s premium NEV brand.
. Execute our overseas expansion plan. According to Frost & Sullivan, the global
LFP cathode material industry is expected to grow at a higher rate than that in
mainland China. To further expand our customer base, we continue pursuing
opportunities for cooperation with several globally leading NEV battery
manufacturers headquart ered overseas, and some of our production facilities
have already passed supplier verification procedures of these customers. We also
plan to leverage our Indonesia Plant to c apture growth in overseas demands. In
particular, in September 2023, we entered into a memorandum of understanding
with LGES regarding the joint cooperation of producing LFP cathode material in
Indonesia. In addition, in February 2024, we entered into a long-term supply
agreement with LGES, where LGES and i ts affiliates committed to procure
160,000 tons of our LFP cathode materials from 2024 to 2028. For further details
of our Indonesia Plant, see ‘‘— Our Businesses — LFP Cathode Materials —
Production expansion plans.’’
. Enhance research and development of new products and production techniques. In
response to growing downstream requirement s for battery safety, r eliability, driving
range/life cycle, and performance, we have attached great importance to and plan
to keep making significant investment in r esearch and development. We believe that
our past research and development efforts w ill bring us new growth opportunities.
For example, officially launched in A p r i l2 0 2 2 ,o u rL i t h i u mI r o nN o . 1(鐵鋰壹號),
T series products, which can improve the charging efficiency and capacitance under
low-temperature circumstances of lithi um-ion batteries, has been gradually
accepted by our customers. For another example, we are actively developing our
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M series LMFP cathode material product, which is currently considered a
promising cathode material in the industry as it combines the high safety feature
of lithium iron phosphate with the higher energy density and power density of
lithium manganese phosphate. Moreover, we also leverage the joint efforts of our
research and development, production and quality control teams to refine
production processes and techniques. For example, we are tackling the
bottleneck production process of sintering LFP cathode materials to improve
overall production capacity, by increasing the load capacity of our stoves.
. Continue development of our automotive specialty chemical business. Going
forward, we also intend to leverage the stable income and profit growth of our
automotive specialty chemical business to support the overall development of our
Group as a whole.
Based on the foregoing, despite current ch allenges faced by the industry and our net
loss position in 2023 and the first half of 2024, our Directors believe that the LFP cathode
material industry and our overall business are promising. Taking into consideration of
financial resources availa ble to us, including RMB1,902.2 million of cash and cash
equivalents on hand as of August 31, 2024, inte rnally generated funds, RMB1,063.4 million
of unutilized banking facilities as of August 3 1, 2024 and the estimated proceeds from the
Global Offering, our Directors are of the view that we have sufficient working capital to
meet our present needs and at least for the next 12 months from the date of this prospectus.
OUR BUSINESSES
Overview
During the Track Record Period, we principally engaged in the production and sales of
LFP cathode materials and automotive specialty chemicals. We primarily operate in two
major segments: (i) LFP cathode materials and (ii) automotive specialty chemicals
segments.
We are a major provider of LFP cathode mate rials in the world and mainland China
which is currently the most extensively used cathode material for the production of
lithium-ion batteries used in a wide variety of end markets including NEV and energy
storage industries. According to Frost & Su llivan, we ranked fourth in China and the world
in terms of sales volume of LFP cathode material in 2023, accounting for 6.5% of the global
market share, while the three largest manufac turers in the industry held market shares of
30.5%, 12.9% and 10.5%, respectively.
We provide diverse automotive specia lty chemicals to customers under our Lopal (龍
蟠),K e l a s (可蘭素)a n d Teec (迪克) brands. Our automotive specialty chemicals primarily
include diesel exhaust fluids, automobile and industrial lubricants, coolants and car
maintenance products. According to Frost & Sullivan, in terms of sales volume in mainland
China in 2023, we were the third largest diese l exhaust fluid manufacturer, with a market
share of 9.1%, while the two largest manufactu rers held market shares of 29.1% and 12.9%,
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respectively; and the third largest coolant manufacturer in mainland China, with a market
share of 5.8%, while the two larg est manufacturers held market shares of 12.3% and 8.8%,
respectively.
The table below sets forth the breakdown of our revenue by product and service types,
each expressed in an absolute amount and as a percentage of total revenue, for the periods
indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’000 % RMB’ 000 % RMB’000 % RMB’000 %
(unaudited)
LFP Cathode material ...... 1 , 8 7 6 , 8 4 2 4 6 . 3 1 2 , 2 4 1 , 8 7 3 8 7 . 0 6 , 7 5 3 , 6 2 8 7 7 . 4 2 , 8 5 1 , 5 2 3 7 4 . 8 2 , 4 7 5 , 5 8 0 6 9 . 4
Without procurement of
lithium carbonate and
raw materials from
c u s t o m e r s.......... 1 , 8 7 6 , 8 4 2 4 6 . 3 1 2 , 0 8 4 , 8 8 7 8 5 . 9 6 , 1 8 6 , 6 8 1 7 0 . 9 2 , 6 7 3 , 6 6 5 7 0 . 1 1 , 6 9 6 , 9 7 7 4 7 . 6
With procurement of
lithium carbonate and
raw materials from
customers (1) ......... — — 1 5 6 , 9 8 6 1 . 1 5 6 6 , 9 4 7 6 . 5 1 7 7 , 8 5 8 4 . 7 7 7 8 , 6 0 3 2 1 . 8
Automotive specialty chemicals . 2,118,725 52.3 1,762,814 12.5 1,903,212 21.8 938,057 24.6 970,147 27.2
D i e s e le x h a u s tf l u i d ...... 7 9 0 , 6 3 0 1 9 . 5 6 8 8 , 8 6 1 4 . 9 6 2 5 , 7 3 8 7 . 1 3 2 3 , 1 0 2 8 . 5 3 0 6 , 6 0 7 8 . 6
Automobile and industrial
l u b r i c a n t ........... 8 4 4 , 4 0 2 2 0 . 8 6 2 3 , 5 5 3 4 . 4 7 0 6 , 6 1 6 8 . 1 3 6 2 , 9 4 8 9 . 5 3 6 7 , 6 2 3 1 0 . 3
C o o l a n t ............. 4 0 3 , 7 0 8 1 0 . 0 3 8 2 , 6 6 1 2 . 7 4 8 4 , 7 0 1 5 . 6 2 0 3 , 2 4 6 5 . 3 2 4 8 , 9 4 8 7 . 0
Car maintenance products . . 61,955 1.5 58,330 0.4 70,240 0.8 35,978 0.9 36,988 1.0
Other products (2) ........ 1 8 , 0 3 0 0 . 5 9 , 4 0 9 0 . 1 1 5 , 9 1 7 0 . 2 1 2 , 7 8 3 0 . 4 9 , 9 8 1 0 . 3
Processing income from lithium
carbonate ............ — — — — — — — — 4 2 , 6 8 5 1 . 2
Others (3) ............... 5 7 , 9 3 8 (4) 1.4 66,956 0.5 72,639 0.8 24,624 0.6 80,200 2.2
Total ................. 4,053,505 100.0 14,071,643 100.0 8,729,479 100.0 3,814,204 100.0 3,568,612 100.0
Notes:
(1) Revenue from sales of LFP cathode materials with p rocurement of lithium carbonate and raw materials
from customers is recognized on a net basis, excl uding cost of lithium carbonate and raw materials
procured from customers.
(2) Mainly comprising revenue from sales of f illing equipment and packaging containers.
(3) Mainly comprising revenue from sales of daily chemical products and unfinished products as well as
revenue from our emerging hydrogen energy business.
(4) Including revenue from selling of small amount s of LFP cathode materials produced by third party
contract manufacturers we engaged. During the Tr ack Record Period and prior to the acquisitions of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano, revenue generated from selling of such LFP cathode
materials amounted to RM B4.2 million in 2021.
LFP Cathode Materials
LFP cathode materials are currently the mos t extensively used cathode materials for
the production of lithium-ion batteries used in a wide variety of end markets including NEV
and energy storage industries. Guided by our long-term development strategies tailored to
developments within the automotive industry, we engaged third party contract
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manufacturers to produce small amounts of LFP cathode materials in 2020 and the first
half of 2021. This allowed us to start building knowledge and relationships in the emerging
NEV supply chain. Then in June 2021, we expanded our presence in the LFP cathode
material industry through the acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui
Nano, which are engaged in businesses in the field of LFP cathode materials. This move was
driven by two key considerations. First, the au tomotive industry’s shift from ICE vehicles
to NEVs. As a longtime supplier of automotive specialty chemicals, we felt the need to
evolve with the market by entering the NEV supply chain focusing on the most extensively
used lithium-ion battery cathode material. Second, we considered LFP cathode materials to
be the optimal long-term technology pathwa y compared to cobalt-based cathodes, given
LFP’s innate advantages in cost, safety and s tability. We were also confident that China’s
supportive policies for NEV were to signi ficantly increase demand for LFP cathode
materials. Our decision to acquire Tianjin Be iterui Nano and Jiangsu Beiterui Nano was
made after careful evaluation of their technic al capabilities and market dominance. Before
we acquired Tianjin Beiterui Nano and Jiangsu Beiterui Nano from it, the BTR Group had
over a decade of experience researching and dev eloping LFP cathode materials, cultivating
robust technology and knowledge, demonstrating stable industry leadership position. For
further information of the acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano,
see ‘‘History and Development — Major Acquisitions and Disposals — Acquisitions of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano.’’
LFP cathode material products are currently the most extensively used cathode
material according to Frost & Sullivan. We have diversified LFP cathode material products
with different characteristics, including S series products with high compaction and high
capacity, T series products engineered for improved charging efficiency and capacitance at
low-temperatures, Z series products produced from recycled raw materials and M series
LMFP cathode material products. Our LFP cathode material products are mainly supplied
to our strong customer base including leading lithium-ion battery manufactures in
mainland China.
Since the acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano, our sales
volume of LFP cathode materials increased si gnificantly by 254.4% from approximately
30,505 tons in 2021 to 108,120 tons in 2023. This trend continued into the first half of 2024
with sales volume of our LFP cathode material increasing from 37,427 tons in the first half
of 2023 to 74,503 tons in the first half of 2024 , representing a 99.1% increase. For the years
ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024,
average selling price of our LFP cathode ma terials was RMB61,526 per ton, RMB128,699
per ton, RMB62,464 per ton, RMB76,189 per ton and RMB33,228 per ton, respectively.
The fluctuations of sales volume and avera ge selling price of our LFP cathode materials
were primarily driven by shifts in supply and demand dynamics in the upstream lithium
carbonate industry and downstream lithium-ion battery industry leading unprecedented
fluctuation in lithium carbonate market pri ces. For further details, see ‘‘Financial
Information — Significant Factors Affect ing Our Results of Operations — Cost of Raw
Materials’’ and ‘‘Financial Information — Period to Period Comparison of Results of
Operations.’’
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The table below sets forth a summary of our LFP cathode material products:
Product Type
Product Picture
(crystal structure) Product Features
S series LFP cathode
m a t e r i a l ..........
Features high power density for
motive power batteries without
compromising the stability of
batteries, produced with high
compaction and long life cycle. The
S series represents our primary LFP
cathode material products.
Ts e r i e sL F Pc a t h o d e
m a t e r i a l( a l s ok n o w na s
Lithium Iron No.1 ( 鐵
鋰壹號) ) ..........
Features improved charging
efficiency and capacitance at
low-temperatures for lithium-ion
batteries with our proprietary nano
spherical densification technology.
Officially launched in April 2022,
our T series Lithium Iron No.1 ( 鐵
鋰壹號) is being gradually welcomed
by our customers.
Zs e r i e sL F Pc a t h o d e
m a t e r i a l ..........
Features cost-effective LFP cathode
material produced with recycled raw
materials. As commercialization of
lithium-ion battery recycling is still
in a relatively infant stage, sales
volume of our Z series LFP cathode
material products were negligible
compared to our overall sales
volume during the Track Record
Period.
M series LMFP cathode
m a t e r i a l ..........
An emerging upgraded sub-category
of LFP cathode material made by
adding manganese to lithium iron
phosphate. It is currently
considered a promising cathode
material as it combines the high
safety feature of lithium iron
phosphate with the higher energy
density and power density of
lithium manganese phosphate. We
are actively developing our LMFP
cathode material product and have
provided sample products to our
customers’ for testing purposes.
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The table below sets forth a breakdown of our sales volume and average selling price
for our LFP cathode material products by product types:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
ton RMB/ton ton RMB/ton ton RMB/ton ton RMB/ton ton RMB/ton
Ss e r i e sL F PC a t h o d e
M a t e r i a l........ 2 9 , 9 2 7 . 1 6 1 , 3 1 2 . 6 9 3 , 9 1 0 . 6 1 2 8 , 4 6 8 . 3 1 0 5 , 7 9 5 . 9 6 1 , 6 2 3 . 3 3 6 , 3 2 2 . 5 7 4 , 9 3 1 . 1 7 2 , 2 4 0 . 9 3 2 , 8 7 3 . 9
T series LFP Cathode
M a t e r i a l........ 5 7 7 . 9 7 2 , 5 6 1 . 1 1 , 2 0 6 . 1 1 4 6 , 7 0 8 . 7 2 , 3 2 2 . 4 1 0 0 , 7 6 5 . 2 1 , 1 0 3 . 8 1 1 7 , 5 6 2 . 7 2 , 2 6 1 . 9 4 4 , 5 2 6 . 2
Z series LFP Cathode
M a t e r i a l........ — — 3 . 3 1 1 8 , 2 4 4 . 7 1 . 1 8 8 , 3 3 1 . 9 0 . 6 1 0 4 , 0 3 2 . 3 — —
M series LMFP Cathode
M a t e r i a l........ ———— 0 . 2 1 2 3 , 9 2 4 . 9 0 . 1 1 1 0 , 2 1 0 . 5 0 . 2 1 3 4 , 4 0 9 . 6
Overall ........... 3 0 , 5 0 5 . 0 6 1 , 5 2 6 9 5 , 1 2 0 . 0 1 2 8 , 6 9 9 1 0 8 , 1 1 9 . 6 6 2 , 4 6 4 3 7 , 4 2 7 . 0 7 6 , 1 8 9 7 4 , 5 0 3 . 0 3 3 , 2 2 8
Production processes
We produce LFP cathode materials using the solid-state method, which primarily
involves first preparing for the predissociation of iron phosphate, lithium carbonate and
other raw materials by mixing and grinding them in precise proportions and then heating
them to moderately high temperatures, fo llowed by high-temperature sintering and
forming, and finally grinding and screening. The solid-state method renders technological
advantage to manufacturers enabling them to efficiently scale up production. It takes
around two days to complete the production process of a batch of eight tons of LFP
cathode materials. The following chart illust rates the general production process of our
LFP cathode material products:
Mixing Grinding Filtering and
sieving
Packaging Drying Grinding and
screening
Spray drying
Grinding and
screening
Sintering
Production planning
Our smart operation center is responsible for preparing our production plans. We
devise our monthly production plans based on actual and indicative orders received from
customers and forecasts on the demand from downstream customers and will adjust
production plans according to our inventory level and further orders received from
customers.
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Existing production facilities
We produce substantially all of our LFP cathode material products by ourselves, which
we believe allows us to quickly respond to fluctuations in market demands, requests and
specification of customers and evolving technologies in the industry and maximizes our
control over product quality. As of the Latest Practicable Date, we operated five LFP
cathode material production f acilities in the PRC. The table below sets forth the location,
primary products produced and GFA of our production facilities as of the Latest
Practicable Date:
Facility Name Location Primary products produced GFA (sq.m.)
J i n t a nP l a n t............... J i a n g s uP r o v i n c e ,P R C L F Pc a t hode materials 53,141.2
B a o d iP l a n t............... T i a n j i nM u n i c i p a l i t y ,P R C L F Pc a t hode materials 20,944.8
P e n g x iP l a n t ............... S i c h u a nP r o v i n c e ,P R C L F Pc a t hode materials 85,265.0
H e z eP l a n t ................ S h a ndong Province, PRC LFP cathode materials 132,065.0
X i a n g y a n gP l a n t ............ H u b e iP r o v i n c e ,P R C L F Pc a t hode materials 347,618.5
Production capacity and utilization
The table below sets forth a summary of our production capacity in terms of designed
production capacity and utilization rates fo r our production facilities for the periods
indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2024
Designed
Capacity (1)(4)
Actual
Production (2)(4)
Utilization
Rate (3)(4)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
(ton) % (ton) % (ton) % (ton) %
J i n t a nP l a n t ............. 1 7 , 8 1 2 . 5 1 9 , 3 1 7 . 6 108.4 45,000.0 50,705.2 112.7 45,000.0 25, 436.6 56.5 22,500.0 10,093.2 44.9
B a o d iP l a n t ............. 5 , 8 3 3 . 3 5 , 9 6 3 . 7 102.2 10,000.0 11,469.3 114.7 10,000.0 8,367.9 83.7 5,000.0 2,608.5 52.2
Pengxi Plant (5) ............ — — — 3 6 , 499.0 26,865.4 73.6 87,500.0 59,302.9 67.8 43,750.0 39,627.1 90.6
Heze Plant (6) ............. —————— 2 7 , 518.0 11,216.8 40.8 18,470.7 12,143.7 65.7
Xiangyang Plant (6) ......... —————— 3 0 , 652.2 11,185.6 36.5 20,912.7 14,441.5 69.1
Overall ................ 23,645.8 25,281.3 106.9 91,499.0 89,039.9 97.3 200,670.2 115,509.8 57.6 110,633.4 78,914.0 (7) 71.3
Notes:
(1) The designed production capacity of the period repre sents the effective production capacity accumulated
by months, which is calculated based on the optim al hourly production rate of machines and equipment
operating 24 hours a day for approximately 334 working days a year, adjusted pro rata according to the
actual days of operation for respective production lines in a period.
(2) The actual production during the period is the total volume of the products manufactured during that
period.
(3) The utilization rate equals to the actual producti on volume divided by the de signed production capacity
during the same period.
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(4) Represents data since June 2021 after the acquisition of Tianjin Beiterui Nano and Jiangsu Beiterui Nano.
(5) In 2022, Pengxi Plant was in a ramp-up period and had limited actual production.
(6) Heze Plant and Xiangyang Plant were at pilot pr oduction stage during 2023 and the first half of 2024.
(7) Excluding approximately 94.3 tons produce d by the Indonesia Plant during trial production.
In order to meet the rapidly growing downstream demand for LFP cathode materials,
we continuously expanded our production capacity and output since the acquisitions of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano. This included expanding production
capacity at our Jintan Plant in the second half of 2021, as well as expanding and training
our workforce to catch up with the increase in our production capacity. In 2021 and 2022,
our LFP cathode material production at Jintan Plant and Baodi Plant recorded total
utilization rates exceeding 100% primarily be cause we adopted production efficiency
enhancement measures such as increasing r aw material feeding volume and adjusting
downtime for inspection and maintenance to cope with the strong demand for our products.
However, utilization rates of our LFP cat hode material production facilities were
generally lower in the year ended December 3 1, 2023. This was primarily due to (i) a
significant increase in our total designed production capacity from 91,499.0 tons in 2022 to
200,670.2 tons in 2023, mainly attributable to the capacity expansion at our Pengxi Plant;
and (ii) underutilization of certain of our new production lines owing to ongoing supplier
verification procedures of some customers which are specific to production plants and
ramp-up period for increased capacity. Since t he quality of cathode materials is critical to
the quality of lithium-ion batteries, which in turn affects the safety of end products, our
customers require us passing their rigorous product screening procedures for each new
production line installed. According to Frost & Sullivan, such verification procedures can
l a s tf o rm o n t h so re v e nay e a r .
In the first half of 2024, our overall LFP cat hode material produc tion utilization rate
improved to 71.3% from 57.6% for the year ended December 31, 2023. This improvement
was mainly driven by significant increases i n utilization at our newer facilities, with the
Pengxi Plant increasing to 90.6%, Heze Plant to 65.7%, and Xiangyang Plant to 69.1%.
These increases generally reflect optimal ramp-up of operations and progress in supplier
verification procedures, and our strategic decision to adjust utilization rates at our Baodi
Plant and Jintan Plant from the high levels (over 100%) seen in 2021 and 2022 aiming to
achieve more balanced, sustainable, and efficient operations across all our existing
production facilities.
We are confident in the gradual recovery of utilization rates of our LFP cathode
material production plants primarily on the following basis:
. Innate characteristics of LFP cathode materials. LFP cathode material has gained
popularity in the lithium-ion battery industry due to inherent cost advantage and
thermal stability. Compared to other alt ernatives such as NCM cathode material,
LFP cathode material does not contain more expensive metals such as cobalt and
nickel, rendering it an attractive opti on for battery manufacturers and NEV
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manufactures aiming to reduce costs. At th e same time, superior thermal stability
of LFP cathode materials increases their safety, which is a critical consideration in
downstream application. According to F rost & Sullivan, from 2019 to 2023, the
market share of LFP cathode material in the global cathode material industry,
based on shipment volume, significantly grew from 14.0% to 57.6%. With
continuous advancements in LFP cathode material, its application scope is
expected to expand further in the future. We considered LFP cathode materials to
be the optimal long-term technology pathway in the industry considering these
advantages.
. Considerable downstream demand. With rising new energy penetration, strong
government support and sound supply chain practices, the lithium-ion battery
market in mainland China has expanded rapidly and accounted for 72.8% in the
global battery industry in 2023 and it is expected to increase from 1,171.3 GWh in
2024 to 2,804.2 GWh in 2028, representing a CAGR of 24.4%. Such strong
growth is largely attributable to increasing penetration of NEVs in mainland
China. Demand for LFP cathode materials is also expected from the energy
storage industry. With factors such as continuous technological progress, further
decrease in energy storage costs and broadened application scenarios, the ESS
battery shipment volume in mainland Ch ina is expected to increase from 300.4
GWh in 2024 to 863.3 GWh in 2028 at a CAGR of approximately 30.2%,
according to Frost & Sullivan.
In addition, despite the volatility across the lithium-ion battery value chain in 2023
driven by the unprecedented decline in lithium carbonate prices, sales volume of our LFP
cathode material products increased from 95,120 tons for the year ended December 31, 2022
to 108,120 tons for the same period in 2023. This trend continued into the first half of 2024
with sales volume of our LFP cathode material increasing from 37,427 tons in the first half
of 2023 to 74,503 tons in the first half of 2024, representing a 99.1% increase. Moreover,
our production volume of 115,509.8 tons in 2023 exceeded total designed capacity of
91,499.0 tons in 2022. In the first half of 2024, we also achieved an actual production of
78,914.0 tons, representing 68.3% of our full-year 2023 production in only six months, with
our overall utilization rate improving to 71.3% . We believe such resilience primarily stems
from (i) our position in the global LFP cathode material industry underpinned by our mass
production capacity and strong research and d evelopment capabilitie s in core technologies;
and (ii) our customer base of leading lithium -ion battery manufacturers; and (iii) the
industry’s high barriers for client recognition, as customers rarely make any substantial
changes or replacements once the requirements of accredited suppliers are satisfied.
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Subcontracting
To supplement our in-house production capacity when our customers’ demand
temporarily exceeded our production capacity , we outsourced production of a portion of
LFP cathode material products to third-party manufacturers in 2021 and 2022. We have
strict quality control measures with these third-party manufacturers to maintain our
product standards, including requiring them to satisfy our technical specifications and
comply with all applicable indus trial and national quality standards as well as the RoHS
standard published by the European Union. We also deployed our quality control personnel
and technicians to the production facilities of third-party manufacturers. All required raw
materials were provided by us to ensure production consistency. For the years ended
December 31, 2021 and 2022, the production of a pproximately 5,839.7 tons and 13,052.5
tons of LFP cathode materials were subco ntracted, respectively, representing
approximately 19.1% and 13.7% of our total sales volume of LFP cathode material
products for the respective years. We have ceased such subcontracting arrangements since
December 2022 and received final batches of subcontracted products of approximately
3,030.9 tons in 2023. As of the Latest Practicable Date, we do not have any ongoing
subcontracting arrangement in relatio n to our LFP cathode material products.
Critical machinery and equipment
We procure equipment and machinery which we believe is essential to promoting
production stability, product quality and cost competit iveness for our LFP cathode
material business. We endeavor to stream line our production process and increase
automation, digitalization, reliability a nd cost efficiency. For example, our stove
automation system moderates and monitors the sintering temperature and thereby
standardizes the quality of products produced.
We procure and own the majority of the critical production equipment and machinery
used in the production process of our LFP cathode material business, while some were
leased under sales and leaseback or financial lease arrangements. We source our critical
production machinery and equipment from domestic and international industrial players.
For our LFP cathode material business, we calculate depreciation on our critical
production machinery and equipment under our property, plant and equipment using the
straight-line method over their estimated use ful lives, ranging from five to ten years. As of
the Latest Practicable Date, the remaining ser vice life of such critical production machinery
and equipment of our LFP cathode material business was approximately 8.0 years on
average.
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The table below sets forth certain details of the critical machinery and equipment used
in the production of our LFP cathode materials as of June 30, 2024 :
Critical machinery and
equipment
Number of
units Function
S a n dm i l l ........ 9 3 T og r i n di r o np h o s p h a t e ,l i t h i u mc a r b o n a t ea n d
other materials to nanoscale
S p r a yd r y e r ...... 1 5 T os p r a yd r yt h es e m i - f i n i s h e dp r o d u c t sa f t e r
grinding by sand mills
S t o v e ........... 7 9 T os i n t e rt h es p r a yd r i e ds e m i - f i n i s h e dp r o d u c t sa n d
form LFP cathode material finished products
Airflow grinding
m a c h i n e .......
26 To grind LFP cathode material finished products
Nitrogen making
m a c h i n e .......
4 To produce nitrogen condition which is primarily
used to prevent active materials in stoves to react
with oxygen and other gases present in the
atmosphere
Maintenance
We carry out inspections and maintenanc e at our production facilities and for our
machinery and equipment on a periodic basis. Our inspections involve cleaning and
greasing machines and equipment. We have developed and periodically updated internal
repair and maintenance protocols at our production facilities according to the
characteristics and requirements of the par ticular equipment and machinery to ensure our
production lines perform at optimal levels. D u r i n gt h eT r a c kR e c o r dP e r i o da n du pt ot h e
Latest Practicable Date, we did not experience any material or prolonged suspension of
operations due to failures of our machinery or equipment at our LFP cathode material
production facilities.
Production expansion plans
Despite our current available production capacity, we endeavor to expand our
production capacity to cope with the expected increase in demand for LFP cathode
materials. According to Frost & Sullivan, t he market size of the LFP cathode materials
industry in mainland China by sales volume is expected to grow from 2,056.0 thousand tons
in 2024 to 3,884.0 thousand tons in 2028, representing a CAGR of 17.2%.
We believe our Xiangyang Plant brings us strategic advantages due to its location in
Hubei Province. Hubei Province is part of the central region industrial cluster among
China’s six major automotive industry clu sters, with many major lithium-ion battery
manufacturers establishing production fac ilities in the province. Hubei is also one of the
main phosphate mineral bases in China with abundant phosphate mineral resources.
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We expect the production capacity of phase I of Xiangyang Plant to reach 50.0
thousand tons of LFP cathode materials per year. Additionally, we intend to apply
approximately 40.0% or HK$208.0 million of the net proceeds from the Global Offering to
finance the construction of LMFP production lines at our Xiangyang Plant. LMFP, such as
our M series product, is an emerging upgraded s ub-category of LFP cathode materials made
by adding manganese to the LFP composition. It is currently considered a promising
cathode material as it combines the high safety feature of lithium iron phosphate with the
higher energy density and power density of lithium manganese phosphate. Multiple globally
leading lithium-ion battery manufacturers, including some of our customers, have
announced plans to commercialize LMFP batteries in 2023. For further details, see ‘‘—
Strategies — Further increase our LFP cathode material production capacity to seize
growing downstream demand, expand our customer base and achieve economies of scale to
solidify our position in the LFP cathode mater ial industry’’ and ‘‘Future Plans and Use of
Proceeds — Use of Proceeds.’’
As we aim to further grow our business in the fast-developing LFP cathode material
industry, we decided to expand the geograp hical coverage of our production network by
establishing an overseas production plant in Indonesia following the globalization trend of
the industry. According to Frost & Sullivan, t he market share of LFP cathode materials in
terms of sales volume outside of mainland China is expected to rise from 2.9% in 2024 to
7.3% in 2028. Indonesia has been identified as a favorable overseas destination due to its
comprehensive NEV industry value chain, i nvestment-friendly policies and favorable
geographical location. In parti cular, leading companies within the lithium-ion battery value
chain have developed detailed investment plans in Indonesia, resulting in the establishment
of a comprehensive layout of the lithium-ion battery market value chain in the country.
Further, Indonesia’s targets to export 200,000 NEVs by 2025 and achieve 2.2 million
electric vehicles on the roads by 2030 as well as other policy incentives, including reduced
taxation for vehicles with more components p roduced locally, contribute to a positive
policy environment for development of its industries along the lithium-ion value chain. As a
raw material origin and with its close geogra phic proximity with China, Indonesia also
offers other advantages including convenient transportation and reduced shipment costs.
For further details, see ‘‘Industry Overview — Overview of LFP Cathode Material Industry
— Market Drivers and Trends of LFP Cathode Material Industry.’’
We commenced preparation for the Indonesia Plant in February 2023 by setting up PT
LBM Energi Baru Indonesia through our subsidiary Changzhou Liyuan. For the
background of Changzhou Liyuan, see ‘‘History and Development — Our Strategic
Cooperation — Establishment of Changzhou Liyuan in 2021.’’ The phase I of the Indonesia
Plant is expected to commence operation a round the fourth quarter of 2024. Upon
completion of construction, the designed capacity of the phase I of the Indonesia Plant is
expected to be approximately 30.0 thousand tons of LFP cathode materials per year. As of
the Latest Practicable Date, the phase I of the I ndonesia Plant had completed construction.
We also intend to apply approximately 40.0% or HK$208.0 million of the net proceeds
from the Global Offering to finance the construction of the phase II of Indonesia Plant. For
details, see ‘‘Future Plans and Use of Proceeds — Use of Proceeds.’’
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In September 2023, we entered into a memorandum of understanding with LGES
regarding the joint cooperation of producing LFP cathode materials in Indonesia. In
addition, in February 2024, we entered int o a long-term supply agreement with LGES,
where LGES and its affiliates committed to procure 160,000 tons of our LFP cathode
materials from 2024 to 2028. Headquartered in South Korea, LGES is one of the world’s
largest lithium-ion battery manufacturers. We believe this cooperative relationship with
LGES would generate positive impact on our business operations, overseas expansion,
financial results, reputation and brand image. By establishing joint operations in Indonesia,
we aim to leverage synergies in raw material s ourcing, technological expertise and market
access to capitalize on rapid growth oppo rtunities overseas. As major global NEV
manufacturers increasingly adopt LFP batteries, LGES is actively expanding production
capacity to meet demands. According to Fro st & Sullivan, the sales volume of the global
LFP cathode material industry is expected to grow at a CAGR of 18.6% from 2024 to 2028
which is higher than the 17.2% in mainland China, the market share of LFP cathode
materials in terms of sales volume outside of mainland China is expected to rise from 2.9%
in 2024 to 7.3% in 2028. By partnering with LGES, we expect to be better positioned to
secure overseas purchase orders and capture market shares of global LFP cathode material
industry. In addition, by combining LGES’s e xperience, we aim to build an efficient and
industry-leading production base in Indonesia to better serve our customers and tap into
new markets. We also believe that partnering with an industry leader such as LGES would
also facilitate valuable technology exchange.
We determine our production expansion plans carefully, considering, among other
things, (i) estimated market demand for LFP cat hode materials; (ii) prices for LFP cathode
materials; (iii) current and future utilization of e xisting production facilities; (iv) estimated
costs of expansion; and (v) availability of c apital resources. Mo st importantly, our
production expansion plans are based on communication with major customers about their
expected demand for our products. As such, we also took the locations of downstream
customers into account when determining the locations of our new production facilities to
secure the demands of our products and lower relevant transportation costs. Alongside the
expansion of our production capacity, we also invest significantly in technological
innovation and research and development, which helps ensure our added production
capacity to satisfy evolving customer requirements and solidifies our position in the global
LFP cathode material industry. There is no guarantee that any of our expansion projects
will proceed as planned. Our Directors may determine in the future that postponing a
project is in the best interest of the Compa ny after taking into account the prevailing
market conditions, our financial resources and other relevant factors. We may also invest in
additional expansion projects as we continue to grow our business.
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Quality control
Our commitment to high quality and reliab ility helps strengthen the recognition and
trust among our customers. In order to monitor production quality and to ensure that our
products meet all the stringent benchmarks and specifications of our customers and
ourselves, we take a holistic approach to qualit y control, establishing a quality management
system that complies with relevant national and international standards, covering product
development, procurement, production, finished products and logistics. We obtained
ISO9001 : 2015 certification for our quality management system. Moreover, we have
obtained IATF16949 : 2016 certifi cation relating to vehicle quality management. Our testing
center for LFP cathode materials is capable of testing the principal and impurity elements,
particle size and compaction of raw materials, semi-finished products and finished products
of LFP cathode materials.
As of June 30, 2024, we have a quality control team comprising of 276 members for our
LFP cathode materials business. The quality control team is responsible for setting targets
of quality control, establishing the quality control systems and inspection guidelines for our
production, conducting regular inspections and providing trainings on quality and
inspection techniques. To ensure the effectiveness of our quality control system, the
quality control team regularly conducts per formance reviews and data analysis on our
production facilities and equipment.
As a result of our stringent quality control measures, during the Track Record Period
and up to the Latest Practicable Date, in respect of our LFP cathode materials business,
there was no incident of failure in our quality c ontrol systems which had a material impact
on us.
Quality control on product development
Our quality control begins at the initial stage of product development with our
research and development team working closely with our customers to test and evaluate the
effectiveness, capacity and quality of new sa mple products in accordance with relevant
quality standards and customer specifications.
Quality control on procurement
We only procure raw materials from qualified suppliers who have passed the product
quality and reliability assessments and meet the requirements of us and our customers. We
keep evaluating our suppliers regularly with a range of factors including ability to meet our
requirements for raw material quality, producti on capacity, delivery timelines, financial
position, and credit term. We may conduct onsite inspections from time to time on our
suppliers’ facilities. We conduct sample te sts on raw materials upon delivery, and our
quality control system has been designed to identify and address defective or sub-quality
raw materials as early in the production process as possible.
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Quality control on production
We strictly follow our customers’ quality specifications and relevant industry
standards in our production process. Our quality control team conducts daily quality
checks of semi-finished products at key control points during our production process in
accordance with our internal quality control system to ensure quality standards and
compliance requirements of us and our customers are met at each stage of our production
process. Some of our customers may also in spect our production facilities onsite.
Quality control on finished product and logistics
Prior to delivery, our quality control team is responsible for conducting sample checks
for every batch of finished products. We also conduct packaging inspection of finished
products to ensure our packaging is sufficient to safeguard the quality of our finished
products during transportation. We regularly inspect our warehouse and have safety
measures in place to minimize risks of fire ha zards, water damage and other similar risks to
our finished products.
Research and development
In order to cope with developments in the lithium-ion battery industry and other
battery materials industries, it is critical that we maintain our ability to develop new
technologies to meet customers’ evolving demands and specifications and to establish and
strengthen our market position. Our Directors consider our strong research and
development capabilities to be one of our competitive strengths. See ‘‘— Strengths —
Our strong research and devel opment capabilities contribute t o our competitive and diverse
product portfolio’’ for details.
As of June 30, 2024, our research and development team of our LFP cathode material
business comprised of 270 members, dedicated to product and technology development.
Our core research and development team comprises a group of experts with advanced
degrees and extensive research and development experience in chemical engineering,
materials engineering and other scientific fields essential to the research and development of
LFP cathode materials. Most of our research and development team members of our LFP
cathode material business hold bachelor’s degree or above.
Our research and development centers are strategically located to allow our research
and development teams to stay at the forefront of cutting-edge industry developments while
promoting collaboration between research teams and manufacturing personnel. For
instance, our center is strategically located in Shenzhen, a high-tech hub in southern
China, which we believe would allow us to fo llow emerging technologies and latest trends
such as those related to LMFP and sodium mater ials. Meanwhile, centers in the vicinity or
within our production facilities foster sea mless knowledge sharing and collaboration
between research teams and manufacturing personnel. For instance, the Changzhou center
directly addresses customer-related research topics, whilst our Nanjing center focuses on,
among others, low cost LFP cathode materials, such as our Z series products. With the
strategic locations of our research and development centers, we aim to optimize expertise
sharing while tailoring resear ch to manufacturing strengths of our production facilities.
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Leveraging the dedication and expertise of our research and development team and the
assistance of sophisticated analyzing and testing equipment and systems at our research and
development centers, we are seeking breakthroughs in the industry together with our
customers and have developed a series of new production techniques to optimize our
products. Our third generation of high compaction LFP cathode material products enhance
the power density of power batteries while maintaining the stability and safety of the
batteries. Moreover, batteries developed with our proprietary Lithium Iron No. 1 ( 鐵鋰壹
號) product can maintain a higher discharge capacity under low temperatures. This product
also features rapid charging capabilities. As of June 30, 2024, we have obtained eleven
national patents in relation to this product.
We follow a client and market-oriented research and development approach.
Leveraging our insights into the application of latest technologies and new materials, we
communicate regularly with our customers during our research and development processes
to understand and incorporate their demands and expectations to products, and work
closely with our customers to develop suit able solutions during our customization
processes. In particular, we have cooperated with a subsidiary of a leading global
provider of information and communications technology infrastructure and smart devices
to develop a type of low cost LFP cathode material using recycled materials. During our
cooperation with this company on recycled L FP cathode material, it primarily provided
valuable technical input on various production process steps of the research subject and
pilot testing preparation relating to the research subject. We believe such in depth
cooperation with customers provide us opportunities to capture their demand. Depending
on the specific arrangements, payment of fees and allocation of intellectual properties may
vary. For example, in one case where a customer engaged us to carry out a specific research
and development project, the agreement speci fied the amount of compensation to be paid
by the customer in installments based on speci fic project milestones. It was agreed that both
parties jointly hold intellectual propert y rights in the results of such project.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2024, research and development expenses for LFP cathode material products, which
primarily include staff costs for research an d development personnel, expenditures on raw
materials, equipment and product testing, amounted to approximately RMB114.6 million,
RMB517.1 million, RMB377.0 million and RM B150.1 million, respectively, representing
6.1%, 4.2%, 5.6% and 6.1% of our total revenue of LFP cathode material products for the
same periods.
Customers and sales
Customers of our LFP cathode materials include major lithium-ion battery
manufacturers such as CATL, REPT BATTERO, Sunwoda and EVE. We sell our LFP
cathode material products directly to custom ers after passing their stringent supplier
verification procedures, incl uding on-site visits of our produc tion facilities and sample tests
of our products. With positive prospects to their respective business sectors, our customers
are expected to have growing demands for upstream lithium-ion battery raw materials,
including our LFP cathode material products, wh ich in turn represents considerable market
potential for us to achieve sustainable growth. We generally participate in industry
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exhibitions and forums for marketing and advertising of our LFP cathode material
products and would hold press conference for product launch to promote our new products
through mainstream industry media and platforms, including Gaogong Lithium Battery ( 高
工鋰電).
We generally enter into customer framewo rk agreements with our major customers
setting forth general terms governing the terms of the purchase order. The key terms of our
typical framework agreements are as follows:
. Term of service. Our framework agreements typically have terms of one to five
years.
. Price. We generally do not have a fixed price for our LFP cathode material
products. For further details of pricing of our LFP cathode material products see
‘‘— Our Businesses — LFP Cathode Materials — Customers and sales — Pricing
policy.’’
. Purchase order. Customers shall notify us of the type, specification, unit price,
quantity and time of delivery of the products they require in the form of purchase
orders.
. Quantity. Whilst our framework agreements typically do not have minimum
purchase commitments, and actual purchase volumes are determined based on
specific purchase orders, during the Tra ck Record Period we agreed to a minimum
amount of products to be procured by the customer or to be delivered by us
during the term of the agreement, in some framework agreements with certain
customers.
. Rights and obligations. We are responsible for providing products in compliance
with applicable national and industrial standards and in accordance with the
requirements and specifications of the customer prescribed in the agreement or
purchase orders. The customer is genera lly entitled to conduct inspection on the
delivered products.
. Payment. Upon acceptance of the products or receipt of invoice, customers make
payment to us in accordance with the purchase order. We typically grant
customers of our LFP cathode material products a credit period of 30 to 60 days.
. Quality control. The standards and specification s of products will be specified in
the agreement and/or separate purchase o rders. We may provide warranty for up
to one year. For further details of quality control of our LFP cathode material
products see ‘‘— Our Businesses — LFP Cathode Materials — Quality control’’
above.
. Termination. Termination clauses varies from agreements to agreements. Some
entitle (i) termination in mutual agreement in writing; (ii) termination in the event
of three month notice in advance; and/or (iii) unilateral termination of the
non-defaulting party.
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Customer service
We are dedicated to maintaining our cust omer relationships by providing timely
customer support and services along with our high-quality products to our customers. Our
after-sale engineers and representatives will visit our customers from time to time for their
feedbacks to our products and assist our customers to use our products correctly and
compatibly with their products and other raw materials used by them. We also provide
replacement or return services in case of defective products within the warranty period
which is typically one year. Upon receipt of complaint regarding product quality, we
generally will get in touch with our customers in 24 hours and send our team on-site to
investigate complicated issues. For the yea rs ended December 31, 2021, 2022, 2023 and the
six months ended June 30, 2024, the costs inc urred in relation to product returns or
replacements amounted to approximately RMB14,700, RMB189,700, RMB100,200 and
RMB31,200, respectively, and the corres ponding volume of LFP cathode materials
amounted to approximately 69.9 tons, 342.2 tons, 156.6 tons and 8.9 tons, respectively,
which were immaterial as compared to the cost of sales and sales volume of our LFP
cathode material business. During the Tra ck Record Period, there were no material
complaint, product returns or product liability claims from our customers, which reflects
the quality of our products.
Pricing policy
Generally, in line with the fluctuations in raw material costs, the average price of LFP
cathode material decreased from approxim ately RMB41.7 thousand per ton in 2019 to the
lowest average price of around RMB29.8 thousand per ton in 2020. Subsequently, the
average price of LFP cathode materials surged to around RMB125.0 thousand per ton in
2022 driven by rapidly growing downstream demand. The average price of LFP cathode
materials dropped to around RMB72.2 thousand per ton in 2023 and RMB37.4 thousand
per ton in the first half of 2024 primarily a ttributable to drop in raw material prices,
especially lithium carbonate.
We price our products based on a number of factors, including raw materials and
production costs, prevailing market conditi ons, size of purchase orders, and product
specifications requested by customers. Global and domestic economic environment, general
market demands as well as market competitio n also have great influence on our pricing
policies. More specifically, taking the amount of raw materials used and production costs
into account, the pricing of our LFP cathode mat erials is primarily based on the prevailing
market prices of lithium carbon ate listed on the SMM. According to Frost & Sullivan, it is
the industry norm to refer to the abovementioned price index when determining the price of
LFP cathode materials.
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Raw materials and suppliers
Raw materials
The primary raw materials for the product ion of LFP cathode materials are lithium
carbonate and iron phosphate. For the years ended December 31, 2021, 2022, 2023 and the
six months ended June 30, 2024, cost of principal raw materials of LFP cathode material
products, i.e. lithium carbonate and iron phosphate, amounted to approximately
RMB1,156.4 million, RMB8,902.6 million, RM B6,009.4 million and RMB1,597.6 million,
respectively, representing approximately 81.3%, 86.9%, 82.3% and 66.6% of the costs of
sales of our LFP cathode material business. We mainly source iron phosphate and lithium
carbonate from upstream manufacturers and t rading companies. During the Track Record
Period, while we have not directly procured lithium carbonate from overseas regions, our
Directors, to the best of their knowledge, understand that our major lithium carbonate
suppliers source their materials from various prominent lithium-producing countries. These
sources include, but are not limited to, the PRC, Australia, and Chile, which are globally
recognized as significant pro ducers of lithium carbonate.
We have experienced fluctuations in the costs of lithium carbonate during the Track
Record Period. According to Frost & Sulliv an, in 2021 and 2022, the average price for
lithium carbonate was RMB119.8 thousand per ton and RMB482.4 thousand per ton,
respectively. Such price increase was primar ily due to a upstream supply tightness of lithium
carbonate since 2020 resulting from the rising demand of lithium-ion battery products and
upstream supply chain disruptions caused by the COVID-19 pandemic. The average price
for lithium carbonate subsequently decreased to RMB272.3 thousand per ton in 2023
attributable to balancing between market supply and demand as lithium carbonate
production capacity gradually released. Subs equently, market price of lithium carbonate
averaged at RMB103.5 thousand per ton in the first half of 2024. The price of iron
phosphate also experienced fluctuation, though to a lesser extent, during the Track Record
Period, primarily due to rapid increase in de mand and short supply of raw materials. For a
sensitivity analysis on the impact of our costs of raw materials on our gross profit, see
‘‘Financial Information — Significant Factors Affecting Our Results of Operations — Cost
of Raw Materials.’’
We closely monitor the price trend of our raw materials and make predictions
accordingly. In line with industry practice, we factor raw material price volatility into our
product pricing. We generally discuss pricing of our LFP cathode material products with
customers and make adjustments on a monthly b asis aligned with raw material price trends.
However, since the selling price of our LFP catho de materials closely follows the prevailing
lithium carbonate prices listed on the SMM in general and the lithium carbonate prices have
experienced significant fluctuations in recen t years, our ability to transfer the risk from raw
material price volatility to our customers c ould be affected. For details, see ‘‘— Our
Businesses — LFP Cathode Materials — Cu stomers and sales — Pricing policy.’’
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To ensure the stable supply of principal ra w materials, we may enter into framework
agreements with major suppliers of raw mater ials. For further details on the key terms of
such framework agreements, see ‘‘— Our B usinesses — LFP Cathode Materials — Raw
materials and suppliers — Suppliers.’’ In addition, during the Track Record Period, some of
our major customers directly provided us with raw materials, primarily lithium carbonate,
to produce LFP cathode materials particularly during times of raw material scarcity, to
ensure adequate supply. Leveraging their siza ble scale, reputation, purchasing power, and
investments in upstream operations through vertical expansion, major battery
manufacturers can often access critical raw materials like lithium carbonate at
competitive prices. According to Frost & Sullivan, it is not uncommon in the LFP
cathode material industry for downstream customers to procure upstream raw materials
such as lithium carbonate for their suppliers as a way to ensure the timely and sufficient
supply of their raw materials. Additionall y, in 2023 when lithium carbonate prices
decreased significantly, we also explored suc h direct procurement of lithium carbonate from
customers to mitigate inventory write-down ri sks amidst price volatility. See ‘‘Risk Factors
— Risks Relating to Our Industry and Busine ss — We are exposed to risk relating to our
inventory, and our inventory of principal raw materials, including lithium carbonate and
iron phosphate, is exposed to risk arising from price fluctuation.’’ In 2022, 2023 and the
first half of 2024, the volume of lithium carbonate received under such arrangements
amounted to 1,346.0 tons, 6,781.1 tons and 1,73 1.1 tons, respectively. The relatively small
amount in the first half of 2024 was mainly b ecause we mostly procured lithium-mica
concentrate from CATL instead of lithium carbonate in this period. Costs of such lithium
carbonate were deducted directly upon the recognition of corresponding revenue from sales
of LFP cathode material to customers who supplied such lithium carbonate. The increase in
procurement of raw materials under this model during the Track Record Period is primarily
attributed to the upstream expansion of our major customers, particularly CATL. CATL’s
investments in lithium mining and lithium carb onate projects began to materialize during
this period, enhancing their ability to suppl y raw materials to its suppliers. We adopt the
same stringent quality control evaluation and assessment protocols for customer-supplied
materials as those required for other key suppliers.
Furthermore, we are in an early stage of e xpanding our production capabilities
upstream and have been producing iron phosphate in-house for our internal use. The
designed annual capacities of our Heze Plant and Xiangyang Plant for iron phosphate are
100.0 thousand tons and 50.0 thousand tons, respectively. In 2023 and the six months ended
June 30, 2024, we produced approximately 20,184 tons and 15,738 tons of iron phosphate,
respectively and procured approximately 99,537 tons and 69,909 tons of iron phosphate,
respectively. In 2023 and the six months ended June 30, 2024, approximately 105,880 tons
and 75,809 tons of iron phosphate was utilized, respectively.
Additionally, our production facility for lithium carbonate in Yichun, Jiangxi Province
has commenced trial operation since March 2024. In the first half of 2024, we used
lithium-mica concentrate procured from CAT L and other necessary raw materials obtained
from other sources to produce li thium carbonate at this facility. At full capacity, this
facility is designed to produce 40.0 thousand tons of battery-grade lithium carbonate
annually. For details, see ‘‘History and De velopment — Our Strategic Cooperation —
Acquisition of Lopal Times in 2022.’’ By producing lithium carbonate and iron phosphate
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in-house, we aim to better maintain close control over key parameters during our
production processes, make improvements ba sed on quality-related feedback, develop
diversified products tailored to customers’ requirements and specifications and, most
importantly, control the high percentage of th e costs of raw materials in the production
costs of LFP cathode materials. For details, see ‘‘— Strategies — Further expand upstream
along the LFP cathode material production value chain’’ and ‘‘— Our Businesses —
Lithium Carbonate Processing Services.’’
During the Track Record Period, we did not experience any significant shortage of raw
material supplies, and the raw materials provided by our suppliers did not have any
significant quality issues. See ‘‘Risk Factors — Risks Relating to Our Industry and Business
— We depend on a stable and adequate supply o f raw materials. Inadequate or interrupted
supply for our raw materials could adversely affect our business, financial condition and
results of operations.’’
Suppliers
We have a dedicated procurement team for our LFP cathode materials business
comprising of 43 members as of June 30, 2024, which is responsible for the procurement of
raw materials, packaging materials and machin ery and equipment according to our business
needs. We generally procure our raw materials from raw material manufacturers and
trading companies. We strictly select our su ppliers to secure the quality of raw materials
used for our production and require them to sa tisfy certain evaluation and assessment
criteria. We only procure from suppliers list ed on our qualified suppliers list. Before we add
a new supplier to our qualified suppliers list, our procurement team, together with members
of our production and quality control teams, closely evaluate various aspects of the
supplier, including its ability to meet our requi rements for raw material quality, production
capacity, delivery timelines, financial posit ion, and credit term. Potential principal raw
material suppliers are subject to onsite insp ection by us to evaluate their production
processes and quality control management. Moreover, some of our suppliers have also been
approved by our customers to ensure raw materials we used are compatible with and
suitable to their products.
We typically enter into purchase agreements and place purchase orders with our
suppliers for specific purchases. We specify th e type of product, quantity, unit price, quality
standards, payment terms, delivery timeline, delivery destination, warranty and other terms
in each purchase agreement or purchase order we send to our suppliers. Suppliers grant
various payment terms depending on factors including the order amount and the types of
raw materials ordered. We typically settle our trade payables by bank transfers or bank
acceptance notes. Some of our suppliers require full payment upfront or a certain
percentage of prepayment for raw materials, especially during times of short supply, whilst
others may offer credit term up to 30 days. For the years ended December 31, 2021, 2022
and 2023 and the six months ended June 30, 2 024, prepayments for raw materials of our
LFP cathode material business amount ed to RMB186.3 million, RMB608.1 million,
RMB89.1 million and RMB81.0 million, respectively.
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We have also entered into certain framework agreements with major suppliers of
principal raw materials such as lithium carbonate and iron phosphate to avoid shortage or
delay in the supply of raw materials. The key terms of our typical framework agreements
are as follows:
. Term. The duration of our framework agreements generally ranged from 12
months to 36 months.
. Price. The prices of principal raw materials are generally determined taking into
account the then prevailing market price posted on the SMM.
. Quantity. T h eq u a n t i t yo fr a wm a t e r i a l sw ep r ocure is typically specified in each
purchase order. To ensure stable supply, some suppliers are required to commit to
a minimum monthly supply amount that they must be able to provide if requested.
. Payment. Payment terms vary with different suppliers in accordance with the
terms of the framework agreements.
. Delivery and transfer of risks. Suppliers shall engage third-party logistics
companies to deliver products to us in accordance with the terms of the
agreements. Logistics costs are generally borne by the party responsible for
delivery of the raw materials. Risks of loss are typically transferred to us upon the
delivery of raw materials.
During the Track Record Period, we entered into two agreements with minimum
purchase requirements with two raw mate rial suppliers with details as follows:
In January 2023, we entered into a procurement agreement with a supplier for lithium
carbonate. Under this agreement we committed to procure a minimum amount of lithium
carbonate per month for the term of the agreement, unless otherwise mutually agreed by
both parties. Pursuant to the terms of the agreement, if we fail to fulfill the minimum
purchase commitment, we may be subject to pay liquidated damages. However, in view of
the temporary slowdown in demand for NEVs in the overall industry, the substantial and
continuous decline in lithium carbonate prices which squeezes the supplier’s profit margins,
and since neither party had begun performing under the procurement agreement, we
mutually agreed with this supplier to termi nate the procurement agreement in October
2023.
In June 2023, we entered into a long-term framework agreement with another
reputable raw material supplier for lithium carbonate. This agreement contains mutually
agreed upon purchase commitments over the thr ee-year contract term expiring in June 2026.
The procurement prices during the contract term are discounted prices to the average
lithium carbonate prices of the respective months listed on the SMM. We believe that this
agreement would secure our stable long-term su pply of lithium carbonate at favorable price.
Pursuant to the terms of the agreement, if we fa il to fulfill the purchase commitments as
agreed, we may be required to pay liquidated damages. In November 2023, based on mutual
agreement with the supplier, we entered int o a supplemental agreement to the long-term
framework agreement which reduced the monthly minimum purchase requirements under
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the original agreement. Although we did not meet the minimum purchase requirements for
certain months under the original agreement and the supplemental agreement, the supplier
has not sought to enforce the liquidated damages clause and we have not incurred any
liquidated damages or penalty as of the Latest Practicable Date.
As of the Latest Practicable Date, we have not experienced any disputes with the
relevant suppliers in relation to the execution of these agreements. As of the Latest
Practicable Date, with regard to our LFP cat hode material business, save as disclosed
above, (i) we did not have any agreements with minimum purchase requirements in effect
with our suppliers and (ii) we did not enter into any new agreements with minimum
purchase requirements.
We believe such agreements ensure the sufficient and stable supply of lithium
carbonate for our production needs. However, minimum purchase commitments inherently
bear risks. We may at times be obligated to purchase beyond our immediate production
needs, which could temporarily restrain our liquidity if we are unable to fully utilize our
production capacity or cause overstock of raw materials. We may also be subject to the risk
of paying liquidated damages if we are unabl e to fulfill the minimum commitments. For a
relevant risk factor, see ‘‘Risk Factors — Ris ks Relating to Our Industry and Business —
We may be required to purchase raw materials under long-term agreements containing
purchase commitments, which may exceed our p roduction needs.’’ Going forward, we may
enter into other agreements with minimum purchase commitments depending on our
prudent estimate of production needs and prices and availability of relevant raw materials.
During the Track Record Period, we did not experience any material breach of
agreements by suppliers. Neithe r had we experienced any significant difficulty in procuring
the raw materials for our LFP cathode materials business during the Track Record Period.
Lithium carbonate hedging
Established in April 2021, the Guangzhou Futures Exchange introduced lithium
carbonate futures in July 2023 offering market participants the option to leverage lithium
carbonate futures contracts to hedge against price fluctuations. We will leverage lithium
carbonate futures contracts traded on the Gu angzhou Futures Exchange to hedge against
the risk exposure of our Group against lithium carbonate fluctuations. We have
implemented internal control and hedging policies to manage and oversee our lithium
carbonate futures hedging activities. In part icular, we have established a futures hedging
risk management working group, comprising key departments such as finance,
procurement, and risk management. The working group is responsible for formulating
hedging plans, approving transactions, monitoring risks, reporting to senior management
and the Board of Directors, and managing transaction records and accounts for hedging
activities. On a revolving basis and disrega rding the amount for physical delivery of the
hedged inventories, the deposit for our hedgin g activities for lithium carbonate shall not
exceed a certain threshold which we raised to RMB800 million in April 2024. The annual
volume of our hedging is generally limited to no more than 70% of our total operation scale
for the year. The aforementioned RMB800 m illion deposit limit was primarily determined
with reference to (i) the expected consumption of lithium carbonate for the subsequent 12
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months’ production corresponding to the expected LFP cathode materials production
capacity for the same period (which is in line with the composition ratio of lithium
carbonate ranging from 21% to 25% of the mass of the final LFP cathode material product
according to Frost & Sullivan); (ii) a hedging ratio of 70% of aforesaid expected lithium
carbonate consumption; (iii) the average ma rket price of lithium carbonate during the
period since introduction of lithium carbonate futures to the Guangzhou Futures Exchange
in July 2023 up until April 2024 (when the deposit limit was set); (iv) the standard deposit
ratio of ranging from approximately 11% to 16% as required by the Guangzhou Futures
Exchange and (vi) other futures varieties of raw materials such as urea, ethylene glycol,
which are used in our daily production. On September 30, 2024, our Board of Directors
approved certain adjustments to our Company’s hedging policies, subject to approval of
shareholders of our A Shares, the procedures of which are currently expected to take place
before the Listing. The proposal introduces a maximum contract value limit of RMB2.0
billion to be held on any trading day. This daily contract value limit was supplemented to
our policy mainly to comply with guidelines of the Shanghai Stock Exchange and was
primarily determined with reference to the af oresaid RMB800 million hedging transaction
deposit limit, taking into account general deposit ratios of not exceeding 20% of
contractual value, our actual hedging scale, and future projected scales.
Considering, among other things, the current price of lithium carbonate and other
factors as described above, our Group revisited the current trading position and adopted a
lower maximum contract value limit of RM B500 million for any trading day for our
hedging activities, with the corresponding deposit reducing to not exceeding RMB80
million, based on a deposit ratio of 16%. Both of the aforesaid adjustments are expected to
remain in effect until our next annual shareholders’ meeting. The working group is required
to conduct hedging activities within this limit. Should there be a need to adjust this limit,
the working group is required to analyze and formulate a new hedging plan, which shall be
submitted to the Audit Committee of our Board of Directors for review and approval. In
addition to the contract value limit, we have e stablished a comprehensive monitoring and
review process. Considering the aforesaid adjusted maximum contract value limit and
deposit having taken into account the latest market condition as well as the expected
consumption of lithium carbonate of our Group and other factors described above, the
Joint Sponsors are of the view that maximum contract value limit of RMB500 million and
deposit of RMB80 million are not unreasonable.
The working group will closely track the changes in both the futures price trends and
the physical commodity markets, pre-determine loss-limiting thresholds and prepare
summary reports for senior management and Directors’ review on a regular basis. In
particular, the working group is required to ca lculate and settle the cumulative profit and
loss for the current year at the end of each month. If the cumulative loss for the year reaches
or exceeds RMB30 million, the working group mus t promptly report this information and
re-analyze the viability of the current hedgi ng plan and submit their findings to the Audit
Committee of the Board of Directors, who shall decide whether to continue our hedging
activities.
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Our hedging strategy primarily involves pu rchase order hedging with which we hedge
against potential price declines of lithium ca rbonate by selling futures contracts equivalent
to the volume of lithium carbonate procured and close out the futures position once the
corresponding LFP cathode material products are sold to customers. In addition, under
certain circumstances, we may strategically purchase futures contracts at 50% of the
planned procurement volume of lithium carbonate when future market prices fall below the
spot purchase price. As we close the futures positions when we proceed with the spot market
purchases, we are able to benefit from lower prices secured through the futures.
Despite the seemingly significant deposit an d daily transaction limits of our hedging
policy described above, since the launch of the lithium carbonate futures market in July
2023, our engagement in hedging activities h as been cautious and on a limited scale. As of
the Latest Practicable Date, we had balances of long positions for approximately 1,837 tons
of lithium carbonate with exposure of app roximately RMB140.8 million, which is
significantly below the limits established b y our policies. We do not enter into hedging
transactions for speculative purposes. In particular, we require the futures position to
match the actual physical inventory being hedged and the duration of the futures contracts
to generally align with the timing of the physi cal commodity transactions or exposures. In
addition, as an A Share-listed company, relevant rules and guidelines of the Shanghai Stock
Exchange also provide further requirements, including that when the confirmed gains and
losses and floating losses from our futures t ransactions reach 10% of the our most recent
audited net profit attributable owners of the Company and the absolute amount exceeds
RMB10 million, we shall promptly disclose this inf ormation, re-evaluate the effectiveness of
our hedging policies and strategies, disclose the reasons why the fair value or cash flow
changes of the hedging instruments and hedged items did not offset as expected, and
separately disclose the value changes of the hedging instruments and hedged items. For a
relevant risk factor, see ‘‘Risk Factors — Ris ks Relating to Our Industry and Business —
We may be exposed to risks from our hedging act ivities in relation to the commodity prices
of our raw materials.’’ Taking into account the above, in particular, the adjusted maximum
contract value limit, the monthly reporting and re-analyzing mechanism in the event of the
cumulative loss for the year reaching or exceeding RMB30 million, the Futures and
Derivatives Hedging Business Management System ( 期貨和衍生品套期保值業務管理制度),
the Internal Management Measures f or Futures Hedging Operations ( 期貨套期保值業務內
部控制管理辦法) issued by our Company and the relevant rules and guidelines of the
Shanghai Stock Exchange on the disclosure of information, re-evaluation of the
effectiveness of the hedging policies and strategies under the aforesaid stipulated
circumstances and our actual limited and cauti ous engagement in hedging activities since
the launch of the lithium carbonate futures market, and after reviewing the internal control
report regarding the Track Record Period an d the enhanced contro l measures adopted
subsequent to the Track Record Period, the Joint Sponsors are of the view that there are
appropriate control measures in place.
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Automotive Specialty Chemicals
We provide a diverse product portfolio of automotive specialty chemicals mainly
including diesel exhaust fluids, automobile and i ndustrial lubricants, coolants and a variety
of car maintenance products under our Lopal (龍蟠),K e l a s (可蘭素)a n d Teec (迪克)
brands. By helping to reduce harmful emissions from vehicles and enhance vehicle
efficiency, these products contribute to envir onmental sustainability. We also incorporate
various environmentally friendly productio n methods in the production of our automotive
specialty chemical products. The table below sets forth a breakdown of our revenue by
product types of the automotive specialty chemical business for the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’000 % RMB’ 000 % RMB’000 % RMB’000 %
(unaudited)
D i e s e le x h a u s tf l u i d ........ 7 9 0 , 6 3 0 3 7 . 3 6 8 8 , 8 6 1 3 9 . 1 6 2 5 , 7 3 8 3 2 . 9 3 2 3 , 1 0 2 3 4 . 4 3 0 6 , 6 0 7 3 1 . 6
Automobile and industrial
l u b r i c a n t ............. 8 4 4 , 4 0 2 3 9 . 9 6 2 3 , 5 5 3 3 5 . 4 7 0 6 , 6 1 6 3 7 . 1 3 6 2 , 9 4 8 3 8 . 7 3 6 7 , 6 2 3 3 7 . 9
C o o l a n t ............... 4 0 3 , 7 0 8 1 9 . 1 3 8 2 , 6 6 1 2 1 . 7 4 8 4 , 7 0 1 2 5 . 5 2 0 3 , 2 4 6 2 1 . 7 2 4 8 , 9 4 8 2 5 . 7
C a rm a i n t e n a n c ep r o d u c t s .... 6 1 , 9 5 5 2 . 9 5 8 , 3 3 0 3 . 3 7 0 , 2 4 0 3 . 7 3 5 , 9 7 8 3 . 8 3 6 , 9 8 8 3 . 8
Other products
Note ......... 1 8 , 0 3 0 0 . 8 9 , 4 0 9 0 . 5 1 5 , 9 1 7 0 . 8 1 2 , 7 8 3 1 . 4 9 , 9 8 1 1 . 0
Total ................. 2,118,725 100.0 1,762,814 100.0 1,903,212 100.0 938,057 100.0 970,147 100.0
Note: Mainly comprising sales of filling equipment and packaging containers for automotive specialty
chemical products.
The following table sets forth a breakdow n of our sales volume and average selling
price for our automotive specialty chemicals by product type for the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Sales
volume
Average
selling
price per
ton
Sales
volume
Average
selling
price per
ton
Sales
volume
Average
selling
price per
ton
Sales
volume
Average
selling
price per
ton
Sales
volume
Average
selling
price per
ton
t o nR M Bt o nR M Bt o nR M Bt o nR M Bt o nR M B
Diesel exhaust fluid . . . 449,808 1,758 373,821 1,843 331,370 1,888 172,281 1,875 171,095 1,792
Automobile and
industrial lubricant . 56,087 15,055 37,262 16,734 39,577 17,854 21,023 17,264 20,428 17,996
C o o l a n t .......... 8 0 , 1 0 2 5 , 0 4 0 7 3 , 8 7 4 5 , 1 8 0 9 9 , 3 7 2 4 , 8 7 8 4 1 , 2 6 7 4 , 9 2 5 5 3 , 6 4 2 4 , 6 4 1
Car maintenance
p r o d u c t s........ 1 3 , 1 2 6 4 , 7 2 0 1 1 , 7 5 8 4 , 9 6 1 1 5 , 1 4 4 4 , 6 3 8 6 , 9 0 4 5 , 2 1 1 7 , 9 7 7 4 , 6 3 7
Notes:
(1) The sales volume and average selling prices of ot her products are not meaningful and therefore are not
illustrated due to a number of different types of products combined in this category.
(2) Sales volume includes products produced under subc ontracting arrangements. See ‘‘Business — Our
Businesses — Automotive Specialty Chemicals — Subcontracting.’’
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Diesel exhaust fluids
Diesel exhaust fluid helps reduce harmful nitrogen oxides in diesel engine emissions
into nitrogen and water vapor, enabling diesel engines to run cleaner. We are a major diesel
exhaust fluid manufacturer in the PRC. With a strong dedication to product quality and
environmental protection, we are committed to developing products that could more
efficiently lower the concentration of nitroge n oxides in diesel engine emissions. In 2019,
China implemented the Limits and Measur ement Methods for Emissions from Diesel
Fuelled Heavy-duty Vehicles (also known as the China VI Standards) ( 重型柴油車污染物排
放限值及測量方法（中國第六階段）) which tightens nitrogen oxide emission standards for
heavy-duty diesel vehicles and bans produc ing, importing, and selling non-compliant
vehicles. To help our customers comply with such new standards, we correspondingly
developed a new series of diesel exhaust fluids, namely the Shengchang Pro series ( 省暢PRO
系列), adopting catalysis technology, which imp roves the rate of reduction of nitrogen
oxides in diesel engine emissions.
As a testament to our success and expertise in the diesel exhaust fluid market, we were
invited by China Society of Automotive Engineers ( 中國汽車工程學會) to participate in the
drafting of the Requirement and Test Method of Urea Solution for Motor Vehicle ( 《車用尿
素溶液技術規範》).
Kelas Shengchang Pro Series
(
可蘭素省暢PRO系列)
Kelas Jiejin No.1
(可蘭素潔勁1號)
Kelas Chichang Series
(可蘭素持暢系列)
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Automobile and industrial lubricants
Our automobile and industrial lubricant products mainly include automobile
lubricants and industrial lubricants. Our w ide range of automobile lubricant products
can be used for passenger cars and commercial vehicles and their components such as
gasoline and diesel engines, gears and gearboxes, and our industrial lubricant products are
suitable for engineering instruments used by e lectricity, cement and mining companies and
also agricultural equipment.
Lopal No.1 automobile
lubricant
(
龍蟠1號)
Lopal Xiya gasoline
engine oil
(龍蟠喜壓燃氣機油)
Lopal Sijitong diesel
engine oil
(龍蟠四季通柴油機油)
Coolants
Coolant regulates the temperature of car engines to ensure proper functioning.
Effective cooling with quality coolant products helps improve engine durability and lifespan
and therefore reduces waste. Proper functioning engines run more efficiently and reduce
fuel consumption. Additionally, our coolant products can form a layer of protective film
over the metallic surface of the cooling system which helps prevent corrosion of metals. In
July 2023, we launched a new low electrical c onductivity coolant product targeted at the
NEV market, demonstrating our commitment to focus product development efforts around
NEV solutions. We are currently supplying this new product to two major Chinese NEV
brands.
Kelas engine coolant
(
可蘭素發動機冷卻液)
Lopal anti corrosion coolant
(龍蟠拒蝕冷卻液)
Teec top configuration
antifreeze coolant
(迪克全效防凍冷卻液)
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Car maintenance products
We also provide a wide array of car maintenance products, including fuel additives and
power-boosting additives, which cover major systems of automobile operations, including
cooling system, fuel system, g earbox and braking system.
Lopal power boosters
(
龍蟠動力提升劑)
Lopal exhaust purifier
(龍蟠尾氣清淨劑)
Lopal fuel additive
(龍蟠燃油增效劑)
Production processes
We have separate production facilities and processes for the production of different
types of automotive chemicals with various check points throughout the entire production
processes. For details, see ‘‘— Our Businesses — Automotive Specialty Chemicals —
Quality control.’’ The following charts illust rate the general production processes of diesel
exhaust fluids, automobile and industrial lubricants, coolants and car maintenance
products:
Diesel exhaust fluids
Urea solution Purified water Aeration cycle Filtering
Packaging and
storing Filling Tank storing(*) Purifying
* additives may be used depending on specific product type
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Automobile and industrial lubricants
Heating/
Circulating/
Stirring
Base oil Semi-finished
product Filtering Packaging and
storing
Filling
Additives
Viscosity improver
Coolants
Circulating and
stirringPurified water Filtering and
storing Filling Packaging and
storing
Additives
Ethylene glycol
Car maintenance products
Circulating and
stirringPurified water Filtering and
filling
Packaging and
storing
Additives
Surfactant
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Production planning
Our logistics planning team is responsible for preparing our production plans,
primarily considering procure ment of raw materials, existing inventory levels and demand
from downstream customers. We will subsequently adjust production plans according to the
actual orders received from customers and real-time inventory levels to prepare monthly
production schedules.
Existing production facilities
We produce substantially all of our automotive specialty chemical products by
ourselves. The table below sets forth the location, primary products produced and GFA of
our production facilities as of t he Latest Practicable Date:
Facility Name Location Primary products produced GFA (sq.m.)
X i n g a n gP l a n t ............. J i a n g s uP r o v i n c e ,P R C A u t o m o b i l ea n di ndustrial
lubricants and coolants
40,896.6
L i s h u iP l a n t ............... J i a n g s uP r o v i n c e ,P R C D i e s e le x h a u s tf l u i d s 8 4 , 9 8 9 . 9
B i n h a iP l a n t ............... T i a n j i nM u n i c i p a l i t y ,P R C D i e s e le x h a u s tf l u i d s ,
automobile and
industrial lubricants and
coolants
50,622.0
Z h a n g j i a g a n gP l a n t .......... J i a n g s uP r o v i n c e ,P R C A u t o m o b i l ea n di ndustrial
lubricants, coolants and
car maintenance
products
30,380.1
Shandong Plant ............ S h a ndong Province, PRC Diesel exhaust fluids,
coolants and car
maintenance products
62,254.0
S i c h u a nP l a n t .............. S i c h u a nP r o v i n c e ,P R C D i e s e le x h a u s tf l u i d sa n d
coolants
41,992.5
H u b e iP l a n t............... H u b e iP r o v i n c e ,
PRC
Diesel exhaust fluids and
coolants
95,310.2
Note
Note: GFA of Hubei Plant includes the production facili ties of daily chemical operated by Hubei Green
Melon.
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Production capacity and utilization
The following table sets forth a summary of our production capacity in terms of
designed production capacity and utilization rates of automotive specialty chemicals by
product type for the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2024
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
Designed
Capacity (1)
Actual
Production (2)
Utilization
Rate (3)
(ton) % (ton) % (ton) % (ton) %
D i e s e le x h a u s tf l u i d ......... 337,666.7 363,866.4 107.8 531,500.0 353,761.2 66.6 690, 132.1 318,723.2 46.2 412,912.5 157,751.8 38.2
Automobile and industrial
l u b r i c a n t ............. 8 3 , 0 0 0 5 6 , 3 3 9 . 9 6 7 . 9 8 3 , 000.0 36,067.7 43.5 82,875.0 (4) 41,189.7 49.7 42,530.0 21,779.2 51.2
C o o l a n t ................ 100,000.0 83,418.9 83.4 100,000.0 70,745.1 70.7 113, 067.0 106,200.5 93.9 64,796.0 52,147.5 80.5
C a rm a i n t e n a n c ep r o d u c t s ..... 1 0 , 0 0 0 . 0 1 4 , 2 9 6 . 9 143.0 21,220.0 11,189.5 52.7 25,000 15,704.1 62.8 10,000.0 10,065.2 100.7
Notes:
(1) The designed production capacity of the period repre sents the effective production capacity accumulated
by months, which is calculated based on the optimal hourly production rate of production lines operating
ten hours a day, for 250 working days a year, adjuste d pro rata according to the actual days of operation
for respective production lines in a period.
(2) The actual production during the period is the total volume of the products manufactured during that
period.
(3) The utilization rate equals to the actual producti on volume divided by the de signed production capacity
during the same period.
(4) The slight decrease in designed capacity for automobile and industrial lubricants in 2023 was due to the
decommissioning of an aging facility in Zhangjiaga ng in June 2023 that had been in operation for over ten
years.
With respect to diesel exhaust fluid, our utilization rate e xceeded 100% in 2021
primarily because we increased working hours to cope with the strong demand for our
products. Therefore, we continuously increase our designed annual production capacity
during the Track Record Period with the co mmissioning of new production facilities in
Shandong, Sichuan and Hubei Provinces. The utilization rate of our diesel exhaust fluid
production lines declined from over 100% i n 2021 to 66.6% in 2022, and 46.2% in 2023,
primarily due to the addition of new production capacity in Hubei Province since the
second half of 2022. In addition, our diesel exh aust fluids and other automotive specialty
chemicals businesses were also affected by the COVID-19 pandemic. Quarantine or
restrictive public health measures disrupted the distribution and transportation of finished
products to our distributors as well as their sales operations and end-market demand in
certain regions faced temporary or prolonged disruptions due to such measures. As we
primarily plan our production volumes based on demand forecasts and actual purchase
orders from distributors, the adverse impact on their sales activities also negatively affected
our production output and utilization rates. Fur thermore, the decrease in actual production
of diesel exhaust fluid from 2022 to 2023 was also attributable to reduced sales volume,
impacted by more intense competition and more aggressive sales and marketing strategies
employed by competitors such as bundle sales.
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With respect to automobile and industrial lubr icants, utilization rate of our production
lines decreased from 67.9% in 2021 to 43.5% in 2022. Such decrease was mainly due to
reduced automobile usage and lower demand for automotive chemical products as
transportation and logistics in mainland China were affected during the COVID-19
pandemic. Following the gradual recovery from the COVID-19 pandemic in 2023,
utilization rates of relevant product ion lines increased to 49.7% in 2023.
With respect to coolants, the relatively hi gher utilization rates in the years ended
December 31, 2021 and 2023 were primarily attr ibutable to strong demands of our products
in the respective periods. The relatively lowe r utilization rate in the first half of 2024 was
mainly due to increased designed capacity in relation to the new Zhangjiagang facility. For
details, see ‘‘— Production Expansion Plans’’ below.
With respect to car maintenance products , our utilization rate exceeded 100% in 2021
primarily because we increased working hours to cope with the strong demand for our
products. The utilization rates of our car main tenance products decreased from 143.0% in
2021, respectively to 52.7% and 62.8% in 2022 and 2023, respectively, primarily due to
additional production capacity that was gradually released in 2022. Utilization rate reached
100.7% in the first half of 2024 primarily due to decommissioning of the aging facility in
Zhangjiagang. For details, see ‘‘— Production Expansion Plans’’ below.
Subcontracting
During the Track Record Period, in order to satisfy the highly time-sensitive needs of a
few customers, we subcontracted a portion of production of automotive specialty chemical
products to five diesel exhaust fluid third-party manufacturers in the vicinity of those
customers to ensure timely delivery of products. We strictly selected our third-party
manufacturers based on production processes, product storage and delivery. We regularly
inspect the quality of products produced by the third-party manufacturers. The third-party
manufacturers provide us accurate records of products and delivery. We enter into
framework subcontracting agreements with the third-party manufacturers which produce
the required products with raw materials supplied by us and based on specifications and
standards established by us. The framework su bcontracting agreements specify the agreed
subcontracting fees based on quantity specification and we place production orders to the
third-party manufacturers according to p urchase orders received from the relevant
customers. To ensure the quality of products produced by the third-party manufacturers,
we evaluate them according to production performance and quality control, and also
designate supervisory personnel to oversee the production processes. For the years ended
December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, the amount of
diesel exhaust fluid products produced by third-party manufacturers was approximately
86,899 tons, 18,481 tons, 15,169 tons and 6 ,406 tons, respectively, representing
approximately 19.3%, 4.9%, 4.6% and 3.7% of the sales volume of our diesel exhaust
fluid products for the respective periods. Our subcontracting arrangement decreased
because the new production facilities of die sel exhaust fluid in Shandong, Sichuan and
Hubei Provinces have commenced operation. The subcontracting fees paid to the
third-party manufacturers generally ranged from RMB135 per ton to RMB256 per ton,
subject to changes in order amounts, packaging requirements and geographical locations of
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third-party manufacturers. During the Track Record Period, we have also subcontracted
the production of a small amount of car maintenance products to third-party
manufacturers, which is immaterial as compared to the sales volume of our car
maintenance products.
Critical machinery and equipment
We endeavor to equip our production facilit ies with qualified equipment, which we
believe would reduce costs of labor and ensu re reliability and product quality. The key
equipment and machinery used in the production process of our automotive specialty
chemicals include raw material storage tanks, mixing tanks, bottling lines and blow molding
machines. As of the Latest Practicable Date, the majority of production equipment utilized
in the production of automotive specialty chemicals were owned by us. We periodically
conduct inspection and mainte nance for our production facilities and machinery and
equipment. Our on-site maintenance teams conduct daily checks on our production
equipment. We calculate depreciation on our equipment under our property, plant and
equipment using the straight-line method over their estimated useful lives, ranging from five
to ten years. As of the Latest Practicable Date , the remaining service life of our critical
machinery and equipment of our automoti ve specialty chemicals business was
approximately 5.2 years on average. During the Track Record Period and up to the
Latest Practicable Date, we did not experience any material or prolonged suspension of
operations due to failures of our machinery, equipment or other facilities for automotive
specialty chemicals.
The table below sets forth certain details of the critical machinery and equipment used
in the production of our automotive specialty chemicals as of June 30, 2024 :
Critical machinery and
equipment Number of units/sets Function
Raw material storage
t a n k..........
89 To store raw materials before processing
M i x i n gt a n k ...... 3 3( f o rd i e s e l
exhaust fluid)
37 (for lubricant)
45 (for coolant)
14 (for car
maintenance
products)
To mix and process raw materials of different
products according to respective
production processes
B o t t l i n gl i n e ...... 1 1 7 T os u b p a c k a g ed i f f e r e n tp r o d u c t sa c c o r d i n g
to respective packaging requirements and
specifications
Blow molding
m a c h i n e .......
62 To mold and process packaging materials
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Production expansion plans
During the Track Record Period, we have been expanding production capacity for
diesel exhaust fluids in Sichuan, Shandong and Hubei. The designed annual production
capacity of diesel exhaust fluids is expect ed to eventually reach approximately 980.0
thousand tons. In addition, following the decommissioning of an aging facility in
Zhangjiagang that had been in operation fo r over ten years, we brought a new facility
online which completed all acceptance procedures by the end of 2023. In anticipation of the
growing demand for coolant products as a result of emergence and growing popularity of
NEVs, the new facility will primarily focus on the production of coolan t products. In 2023,
utilization rate of our existing production capacity of coolan t reached 93.9%. By the end of
2024, the designed annual production capacit y of coolant of the new facility is expected to
reach approximately 43.0 thousand tons. As of the Latest Practicable Date, we do not have
any planned production facilit y under construction for our au tomotive specialty chemical
business.
Quality control
We have devoted substantial resources to the quality control of our automotive
specialty chemical products since the inception of this business. Our testing center in
Nanjing has obtained CNAS certification awarded by the China National Accreditation
Service for Conformity Assessment ( 中國合格評定國家認可委員會) in 2006, and we have
obtained and maintained ISO9001 certificati on and IATF16949 certification. As of June 30,
2024, we have a quality control team comprising of 31 members for our automotive
specialty chemical business. Following the expansion of our customers’ business, our
products are sold worldwide and are subject to different safety standards and quality
requirements of different nations. We have adopted the appropriate quality control system
and invited external experts to provide training for our quality control personnel. As a
result of our commitment to quality control management, we did not experience any
material sales returns or any material product liability or major legal claims due to quality
control issues in relation to our automotive specialty chemical products during the Track
Record Period and up to the Latest Practicable Date. Set forth below are key quality
control measures of our automoti ve specialty chemicals business:
. Quality control on product development. Our testing centers have passed the CNAS
certification to ensure quality of our product development.
. Quality control on procurement. We maintain a list of qualified suppliers. All
qualified suppliers must pass our mandatory sample test and we conduct sample
tests on raw materials upon delivery. Our quality control team would conduct
onsite inspections at our suppliers’ facilities from time to time.
. Quality control on production. Our quality control team closely monitors our
production processes to ensure compliance with our protocols and applicable
standards. Semi-finished products are also inspected by our quality control team,
and only qualified semi-finished products can be processed to the next step in
production processes.
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. Quality control on finished product and logistics. Each batch of our finished
products is tested on a sampling basis by our quality control team. Usually, our
finished products are packaged and stored at our warehouses before delivered to
our customers. We regularly monitor our warehouses and finished products in
terms of storage conditions, packaging and inventory ledgers and take safety
measure to prevent fire hazards and other similar risks to our finished products.
Research and development
As of June 30, 2024, we had 72 employees at the research and development team of our
automotive specialty chemical business. Ou r research and development team comprises
qualified professionals with skills sets includin g chemical engineering, materials engineering
and other scientific fields essential to the rese arch and development of automotive specialty
chemicals. Our testing center in Nanjing has obtained CNAS certification awarded by the
China National Accreditation Ser vice for Conformity Assessment ( 中國合格評定國家認可
委員會) in 2006. As a testament to our strong research and development capabilities, we
participated in the drafting of The Requirement and Test Method of Urea Solution for
Motor Vehicle (《車用尿素溶液技術規範》) issued by China Society of Automotive Engineers
(中國汽車工程學會). For the years ended December 31, 2021, 2022 and 2023 and the six
months ended June 30, 2024, our research and development expenses in relation to
automotive specialty chemicals amounted to approximately RMB93.1 million, RMB93.8
million, RMB91.9 million and RMB49.7 million, respectively.
Leveraging our strong research and development capabilities, we have achieved a
number of technical breakthroughs and accumulated a large amount of intellectual
properties and industry know-hows. For examp le, our Lopal series a utomobile oil, which
adopted our proprietary Hyper Zing technology ( 超級鋅技術) and ActivZing technology ( 活
力鋅技術), has high reactivity and low volatility and can effectively decompose carbon
deposition and oil sludge while forming a comp act anti-wear layer on automobile engine.
Our Lopal series automobile oil has been selected into the China LubTop Awards ( 中國潤滑
油行業年度總評榜) (previously known as China Lubricants Industry Awards) for nine
consecutive years since 2013 and obtain e dl i c e n s e so ra p p r o v a l sf r o mt h eA m e r i c a n
Petroleum Institute (API), the International Lubricant Standardization and Approval
Committee (ILSAC) and various automob ile manufacturers. We also developed the
Shengchang Pro series ( 省暢PRO
系列) diesel exhaust fluid, which adopted catalysis
technology and greatly increases the surface t ension of urea molecules and significantly
improves the rate of reduction of nitrogen oxides in diesel exhaust emissions. Our
continuous efforts on research and development of new products in the industry have been
recognized and awarded with multiple awards fr om various organizations and entities. Our
testing center in Nanjing has been awarded a s Nanjing Engineering Research Center for
Lubricant Material ( 南京市潤滑材料工程技術研究中心). As of June 30, 2024, we hold 203
patents, including 69 invention patents, in relation to our automotive specialty chemical
business, in mainland China. For details, see ‘‘— Intellectual Property.’’
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Customers, sales and distribution
We have a multi-channel sales and distribution network for our automotive specialty
chemical business, encompassing a number of online and offline sales channels. Our
multi-channel sales and distributio n network comprises the following:
. Distributors: we sell our products to distributors including gas stations, vehicle
repair plants and vehicle service centers, which use or sell our automotive
specialty chemical products in the ordina ry course of their businesses, as well as
distributors who sell to these customers. We engage distributors for their regional
sales resources, pre-existing and long-te rm relationships with local retailers and
regional logistics networks.
. Corporate clients: we directly sell our products to corporate clients, including
automobile manufacturers (including their respective 4S dealership stores) and
engineering equipment manufacturers. We believe that these large-scales
manufacturing companies directly cooperate with us primarily due to our
cross-regional operating abilities to support their businesses.
. OEM customers: we design and produce automotive specialty chemical products
to certain customers including globally le ading automotive chemical brands on an
OEM basis. Such OEM customers genera lly order mass quantities of products
according to their requirements and specifications for distribution under their
own brands and through their distribution networks.
. Online channels: we sell our products to retail consumers through our
self-operated online stores on various popular e-commerce platforms in China,
including Tmall, JD.com and Pinduoduo.
The table below sets forth a breakdown of revenue from automotive specialty chemical
products by sales channel for the periods indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’000 % RMB’ 000 % RMB’000 % RMB’000 %
(unaudited)
D i s t r i b u t o r s ........ 1 , 0 6 5 , 8 5 2 5 0 . 3 8 9 4 , 7 4 0 5 0 . 8 8 3 9 , 4 9 7 4 4 . 1 4 6 6 , 5 8 9 4 9 . 7 4 4 0 , 5 8 5 4 5 . 4
Corporate clients. . . . . 822,112 38.8 735,612 41.7 853,251 44.8 390,448 41.6 460,094 47.4
OEM customers . . . . . 196,539 9.3 105,740 6.0 176,939 9.3 66,337 7.1 52,514 5.4
Online channels . . . . . 34,222 1.6 26,722 1.5 33,525 1.8 14,683 1.6 16,954 1.8
Total ............ 2,118,725 100.0 1,762,814 100.0 1,903,212 100.0 938,057 100.0 970,147 100.0
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Distributors
Consistent with market practice in the in dustry, we sell our automotive specialty
chemical products through distributo rs. As of June 30, 2024, we have established a
nationwide distribution network comprised of 919 distributors covering 22 provinces, four
municipalities and five autonomous regions in the PRC. We select and review our
distributors based on their reputation in relevant regions, industry experience, financial
conditions, marketing capabilit ies, warehousing and delivery capabilities, business scales
and the breadth and quality of sales network.
During the Track Record Period, we have maintained good business relationships with
our distributors. The table below sets forth the movement in number of our distributors
during the Track Record Period:
As of December 31, As of June 30,
2021 2022 2023 2024
Number of distributors at the
beginning of the period. . . . . . 1,006 986 1,273 1,150
Number of new distributors (1) . . 271 567 325 186
Number of terminated
distributors (2) ............ 2 9 1 2 8 0 4 4 8 4 1 7
Number of distributors at the end
o ft h ep e r i o d............. 9 8 6 1 , 2 7 3 1 , 1 5 0 9 1 9
Notes:
(1) The number of new distributors represents those dis tributors that made purchases from us for the period
indicated but did not purchase from us for the perio d immediately preceding the period indicated.
(2) The number of terminated distributors represents t hose distributors that mad e purchases from us for the
period immediately preceding the period indicated but did not purchase from us for the period indicated.
Such distributors may purchase from us in a subsequent period.
As of June 30, 2024, the average length of our business relationships with our top five
distributors during the Track Record Period was approximately six years. For the years
ended December 31, 2021, 2022 an d 2023 and the six months ended June 30, 2024, revenue
generated from our top five distributors in mainland China amounted to approximately
RMB210.0 million, RMB145.9 million, RMB119.1 million and RMB73.8 million,
respectively, representing approximately 9.9%, 8.3%, 6.3% and 7.6%, respectively, of
our revenue from automotive specialty chemical products for the respective periods. The
significant increase in the number of distri butors at the end of 2022 was primarily due to
new individual distributors developed by our Teec brand in the corresponding year.
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We terminated distribution relationship with 291, 280, 448 and 417 distributors in
2021, 2022 and 2023 and the six months ended June 30, 2024, respectively, due to (i) their
personal reasons that they were not willing to o r not able to operate their own businesses
under the prolonged COVID-19 pandemic, (ii) th eir subpar performance, and (iii) violation
of our distribution agreements or policies inc luding selling our products outside of their
designated areas. The table below sets for th the breakdown of the number of terminated
distributors during the Track Record Period:
As of December 31, As of June 30,
2021 2022 2023 2024
P e r s o n a lR e a s o n s........... 2 4 2 2 1 8 4 1 2 4 0 6
S u b p a rP e r f o r m a n c e......... 4 4 6 0 3 4 8
Violation of distribution
a g r e e m e n t s .............. 5223
Total .................... 291 280 448 417
The table below sets forth the aggregate revenue contribution attributable to the
distributors terminated for the respective period indicated:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
RMB’000
Aggregate revenue contribution
by terminated distributors (1) .. N / A (2) 62,057 74,241 60,426
Notes:
(1) Calculated by aggregating revenue that is recognized during the period immediately preceding the period
indicated and attributable to the terminated distributors during the period indicated.
(2) Aggregate revenue contribution by terminated dis tributors during 2021 is inapplicable given that the
calculation requires revenue information from the year of 2020, which precedes the Track Record Period.
During the Track Record Period and up to the Latest Practicable Date, we had no
material unresolved disputes or lawsuits with th ese terminated distributors. For terminated
distributors that still have remaining inven tory, our policy is that we do not accept their
product return.
We typically enter into standardized distribution agreements with distributors, which
specify terms including payment method, pricing policies, designated distribution area and
delivery arrangements. To the best knowledge of our Directors, during the Track Record
Period, there was no material breach of distrib ution agreements by distributors. Set forth
below are the key terms of the standardized fr amework agreement we typically enter into
with our distributors:
. Terms. Typically one year, subject to renewal.
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. Payment and credit terms. Distributors are generally required to make full
payment before we deliver our products to them.
. Designated distribution area and product types. Distributors are only allowed to
sell designated product types within their designated distribution areas.
. Delivery of products. In general, we are responsible for delivering the products to
the location designated by distributors.
. Transfer of risks. Risks transfer to distributors once they accept delivery.
. Pricing policy. We provide recommended prices to our distributors. If distributors
deviate substantially from such prices, we are entitled to increase our distribution
price, terminate or reduce incentives, discontinue supply or terminate the
distributorships.
. Standards of business conduct. We have mutually agreed with our distributors on
anti-commercial bribery policies to re quire our employees and distributors to
conduct business leg ally and ethically.
. Sales target and incentives. We set monthly, quarterly and/or annual sales targets
for our distributors. Distributors’ failure to meet sales targets would entitle us to
adjust distribution areas or terminate the relevant distribution agreements.
Distributors are incentivized to achieve or overachieve our sales targets. If the
total purchase amount of a distributor exceeds a mutually agreed sales target, we
would provide the distributor with a certain amount of products free of charge on
future purchases of our products.
We have a seller-buyer relationship with our distributors and revenue is recognize
when distributors accept our products. Our distributors place orders with us when and to
the extent they deem appropriate based on their business operations and inventory level. To
the best knowledge of our Directors, all of our distributors are primarily engaged in
distributing automotive chemical products. We do not rely on any of our distributors
individually.
We have formulated general guidance and detailed working principles in relation to the
operation of our distributors to ensure dist ributors understand and adhere to our sales
strategies and policies. To minimize the ris k of cannibalization, we have adopted the
following measures:
(i) we provide recommended price of all of our products to our distributors to ensure
consistent pricing across different regions. If distributors deviate substantially
from such prices, we are entitled to increase our distribution price, terminate or
reduce incentives, discontinue supply or terminate the distributorships;
(ii) when recruiting new distributors, we take into account the respective geographic
coverage of our distributors to avoid potential competition among our
distributors within a region;
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(iii) we adopted a traceability system to m inimize the risk of cannibalization under
which a unique QR code is assigned to a product, allowing our sales team and
distributors to quickly access the production and distribution information of the
product. By scanning the QR code, the system helps identify incidents of cross
region sales, facilitating our sales tea m to accurately inquire and monitor the
stocking behavior of our distributors. As of the Latest Practicable Date, each
product produced under our automotive specialty chemicals business has been
assigned a unique QR code;
(iv) we require our sales team and distributors to report any incidence of
cannibalization that they identify and provide a dedicated channel in our OA
system for such purpose; and
(v) we are entitled to cancel its status as qualified distributor and suspend our supply
of products to distributors that repeatedly engage in cannibalization.
During the Track Record Period and up to the Latest Practicable Date, to the best of
our knowledge, there was no material non-compliance with the terms and conditions of our
distributor agreements and policies.
To the best knowledge of our Directors, our distributors typically engage
sub-distributors when they cannot directly cover rural or remote markets in their
designated areas. To the best knowledge of our Directors, save as disclosed in
‘‘Connected Transactions’’, all of our distrib utors and their respective sub-distributors
are Independent Third Parties. Based on th e Joint Sponsors’ due diligence, the Joint
Sponsors are not aware of any circumstances suggesting the contrary to the above. We do
not have direct contractual relationships with sub-distributors and thus have no control
over their sales activities. Our distributors choose their sub-distributors on their own and
negotiate the contractual arrangements directly with them. According to Frost & Sullivan,
it is not uncommon for companies in the industry to rely on third-party distributors to sell
their products to sub-distributors without entering into contractual relationships with such
sub-distributors.
We believe that our sales correspond to actual market demand and therefore our
products are at low risk of channel stuffing in our distribution network. Distributors are
generally required to make full payment bef ore we deliver our products to them and we
generally do not allow returns of products sold to distributors, except for quality issues. To
the best of our knowledge, distributors tend to adopt the same approach when making sales
to their sub-distributors.
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We also rely on our sales team to manage our sales and distribution networks. As of
June 30, 2024, our sales team of our automotive sp ecialty chemical business was comprised
of 166 members. During visits to our distributors, our sales team conducts physical stock
takes, communicates with our distributors to understand their sales plans, monitors their
pricing policies and provides necessary trainings to facilitate their sales performance and
avoid accumulation of inventory. Specifically, our sales team provides guidance each month
to help distributors formulate regional p romotional campaigns. We also encourage
distributors to hold local product promotion or order-placing events. We continuously
adjust and optimize our sales strategy to cop e with changing market conditions based on
market intelligence and customers’ feedback s collected by our sales team and provide
guidelines and working principles to our distributors. Based on the sales performance of
distributors, we may consider enhancing, weakening or even terminating our distribution
relationships with them.
We formulate and implement stringent policies to prevent existing employees from
working for or owning equity in any of our distributors. Our internal control policy ensures
equal treatment of our distributors. Duri ng the Track Record Period and to the best of
knowledge of our Directors, seven of our distributors were operated by our former
employees and the revenue from such distribut ors was negligible to our revenue generated
from our automotive specialty chemicals business and our Group as a whole. Save as
disclosed above, to the best knowledge of our Directors, there was no employment,
financing, family or other relationship between our distributors (including their directors,
shareholders and senior management, and thei r respective associates) and us during the
Track Record Period and up to the Latest Practicable Date.
Corporate clients
We engage direct sales to corporate clients including major automobile manufacturers
and engineering equipment manufacturers. Our automotive specialty chemical products
supplied to our corporate clients are often customized in accordance with specifications of
different corporate clients. Corporate clients also procure our products for their respective
4S dealership store networks. For the years ended December 31, 2021, 2022 and 2023 and
the six months ended June 30, 2024, revenue of automotive specialty chemical products
generated from our corporate client s was RMB822.1 million, RMB735.6 million,
RMB853.3 million and RMB460.1 million, respectively, representing 38.8%, 41.7%,
44.8% and 47.4% of total revenue generate d from our automotive specialty chemical
products for the same periods, respectively.
We generally enter into framework agreements with our corporate clients. Set forth
below are the key terms of the framework agreements we typically enter into with our
corporate clients:
. Terms. Typically one to three years.
. Purchase order. Corporate clients shall notify us of the type, unit price and
quantity of the products they require in the form of purchase orders.
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. Payment and credit terms. We typically grant corporate clients credit terms
ranging from 30 to 90 days. Corporate clients typically settle with us through
bank transfers or bank acceptance notes.
. Delivery of products. We would engage third-party logistics companies to deliver
products to corporate clients. The log istics costs are generally borne by us.
. Transfer of risks. Risks transfer to the corporate clients after they confirm receipt
of such products.
. Pricing policy. We sell our product to corporate clients at price levels that have
been mutually agreed by us and the corporate clients. In limited circumstances, we
provided best price guarantee for certain major customers. The best-price
guarantee represents our contractual commitment that the product pricing
under relevant sales agreements will re main competitive or lower compared to
the prices of comparable products over corresponding periods. We provide such
preferential pricing to major corporate clients that require additional price
protection based on their sizable procurement volumes from us. During the Track
Record Period, there were no compensation payments incurred in connection with
our contractual best-price guarantee obligations for major corporate clients.
. Product returns. Corporate clients are entitled to return products to us for quality
issues.
. Termination. Either party has the right to unilaterally terminate the agreement if
the other party breaches the agreement and fails to rectify such breach within a
reasonable period of time.
OEM customers
We design and produce automotive specialty chemical products to certain customers
including globally leading automotive c hemical brands on an OEM basis. Such OEM
customers generally order products produ ced according to their requirements and
specifications for distribution under their own brands. Pursuant to our agreements with
the OEM customers, we shall adhere to the OEM customers’ requirements and
specifications for the products produced, including production formula, package design
and delivery. Partnering with these industry leaders enable us to enhance our production
processes by adopting their valuable experience and best practices. For the years ended
December 31, 2021, 2022 and 2023 and the six mo nths ended June 30, 2024, our revenue of
automotive specialty chemical products generated from OEM customers amounted to
RMB196.5 million, RMB105.7 million, RMB176.9 million and RMB52.5 million,
respectively, representing 9.3%, 6.0%, 9.3% and 5.4% of our revenue generated from
our automotive specialty chemical products for the same period, respectively.
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Online channels
We sell our products online to fulfil ret ail consumers’ demand for more seamless
shopping experience and to enhance our brand awareness. To avoid competition and
cannibalization, we usually distinguish some of our products sold online from products sold
through other sales channels. For example, we have developed our SONIC series products
tailored for our online customers. As of June 30, 2024, we had 15 self-operated online stores
on six online channels, including Tmall, JD.com and Pinduoduo. After consumers place
orders for our products at our self-operated online stores and make payments via online
payment channels, we are responsible for the delivery and after-sales services of the orders.
Pursuant to the policies of certain online platforms, consumers’ payments are held at escrow
accounts of the online platforms which will settle with us upon the relevant consumer’s
confirmation of receipt of products, typically within 14 days after delivery. In the years
ended December 31, 2021, 2022 an d 2023 and the six months ended June 30, 2024, revenue
of automotive specialty chemical products generated from our online channels was
RMB34.2 million, RMB26.7 million, RMB33.5 m illion and RMB17.0 million, respectively,
representing 1.6%, 1.5%, 1.8% and 1.8% of our revenue generated from automotive
specialty chemicals products for t h es a m ep e r i o d ,r e s p e c t i v e l y .
Customer service
We have a dedicated customer service team a nd maintain a customer service hotline to
ensure a timely response to all customer reque sts and complaints. Our customer service
team take notes of all inquiries, requests and complaints and get in touch with our
customers with timely responses. We generall y do not allow our distributors to return or
exchange product with reasons other than quality issues. For corporate clients, we may
accept return or exchange products based on mutually agreed contract terms, including
quality defects and damaged packaging. OEM customers may return or exchange products
with quality defects. Customers from online c hannels may return products according to
return rules of relevant online platforms. This i ncludes the seven-day no hassle return policy
(‘‘七天無理由退換’’), where customers may request product return and refund within seven
days of receipt of our products subject to conditions prescribed by relevant laws and
regulations, such as the Consumers Rights and Interests Protection Law of the PRC ( 消費者
權益保護法). It also includes returns for general sit uations such as quality defects, incorrect
quantity or wrong products delivery.
As a result of our strict quality control policies, during the Track Record Period, and
up to the Latest Practicable Date, we did no t, due to material product quality issues, (i)
receive fines, product recall orders or other penalties from the PRC government or other
regulatory bodies, (ii) receive any material p roduct return request from our customers or
(iii) receive any material complaints from co nsumers. As a result, we did not record any
provision for product warranty during the Track Record Period.
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Pricing policy
We set our sales prices taking reference to va rious factors including raw material costs,
market conditions and our expected profit level. Our distributors are required to follow our
pricing policies with product prices and can s lightly adjust the price of the products where
appropriate to reflect local competition. However, if distributors deviate substantially from
our pricing policies and sell our products at prices lower than our supply prices, we are
entitled to increase our distribution price, terminate or reduce incentives, discontinue
supply or terminate the distributorships.
Branding and marketing
We strategically utilize multiple marketi ng vehicles integrating offline and online
channels and social media platforms, includin g cooperating with internet celebrities and
KOLs, to carry out promotional and advertising campaigns that focus on cultivating
markets, introducing our products and creating customers’ demand. We have also
developed a membership program whereas all consumers that purchase through our
online channels become our members and enjoy discounts according to their membership
levels. In addition, we have held offline p ress conference, sponsored commercial
advertisements on CCTV1 and CCTV6, and us ed advertising in elevators, high-speed
railway stations and on highway billboards a nd other medium to promote our products.
Raw materials and suppliers
Raw materials
The principal raw materials used in our aut omotive specialty chemical production
processes include urea, base oil, ethylene glycol and lubricant additives. Urea is used as the
raw material for the production of diesel exhaust fluids. Base oil and lubricant additives are
the principal raw materials used for the production of automobile and industrial lubricants.
Ethylene glycol is the major chemical used to produce coolants. During the Track Record
Period, our procurement costs of raw materials used in the production of our automotive
specialty chemical products amounted to R MB1,230.0 million, RMB1,114.6 million,
RMB1,144.9 million and RMB623.7 million, re spectively, representing 81.9%, 82.7%,
80.7% and 89.3% of the cost of sales of our au tomotive specialty chemicals for the same
periods, respectively.
The cost of our raw materials fluctuated during the Track Record Period. In
particular, the prices of raw materials, especi ally base oil, which is extracted from crude oil,
and urea granule, have risen significantly fr om 2021 to 2022. According to Frost & Sullivan,
in 2021 and 2022, the average price of crude oil was RMB443.5 per barrel and RMB646.6
per barrel, respectively, and the average price of urea granule was RMB2,510.5 per ton and
RMB2,820.2 per ton, respectively. Such price increase was primarily due to the inflation in
the countries of origin of our raw materials and the gradually lifted COVID-19 pandemic
restriction measures. However, rising inflat ion led to slowed economic growth and reduced
oil demand, causing crude oil prices to decline to RMB567.3 per barrel in 2023. For further
details of prices of the principal raw materials of our automotive specialty chemical
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business, see ‘‘Industry Overv iew — Overview of automotive specialty chemical industry —
Average price analysis of automotive special ty chemical raw materials and products.’’ We
typically take into account price fluctuations in raw materials in our pricing policy.
During the Track Record Period, we also lev eraged futures contracts to mitigate risks
associated with price fluctuations of certain raw materials including urea and ethylene
glycol. We have in place Group-wide hedging policies and internal control measures
regarding our overall hedging activities. F or details, see ‘‘— LFP Cathode Materials —
Lithium carbonate hedging’’ above. On September 30, 2024, our Board of Directors
approved certain adjustments to our Company’s hedging policies, subject to approval of
shareholders of our A Shares, the procedures of which is currently expected to take place
before the Listing. The proposed changes include expanding the scope of permitted
commodities, which are limite d to production-related items, to now include crude oil,
considering its relation to our lubricant products. For a relevant risk factor, see ‘‘Risk
Factors — Risks Relating to Our Industry and Business — We may be exposed to risks
from our hedging activities in relation to the commodity prices of our raw materials.’’
Principal raw materials, such as base oil and additives, used in the production
processes of our automobile specialty chem icals are primarily procured from overseas
suppliers from countries including Singapore and South Korea. We source other principal
raw materials of automotive specialty chemi cals both domestically and internationally
according to our production schedule.
In order to ensure the stable supplies of our raw materials, we have entered into
framework supply agreements with several s uppliers of the principal raw materials in
relation to our automotive specialty chemical products. Set forth below are the key terms of
our typical framework product supply agreements:
. Term. Typically six months to two years.
. Price. The prices of principal raw materials are generally determined based on
prevailing market prices of the relevant ra w materials. Under certain agreements,
we would determine the price based on a benchmark price by referring to the then
prevailing market prices. Moreover, we ha ve also entered into annual price-lock
arrangements, primarily with certain suppliers of urea granule. Such
arrangements generally allow us to mitigate risks from commodity price
volatility and provide greater certaint y for our raw material costs and budgets.
Specifically, these arrangements enable us to secure urea granule at
pre-determined prices that are set based on prevailing market price with
adjustment mechanism to cater to price fluctuation at a prescribed rate. We
periodically review and adjust the lo cked prices through negotiations with
suppliers in order to realign pricing with the latest commodity market situation.
Going forward, we intend to continue exploring such arrangements with the aim
to balance cost competitiveness with supply stability amid fluctuating market
dynamics.
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. Quantity. We specify the quantity of raw materials we procure in separate
purchase orders based on our production plan. For base oil and urea, the quantity
we procure during the term of the supply agreements are generally fixed or subject
to a minimum procurement amount. In the limited circumstances where we agreed
to minimum procurement re quirements, while we have sometimes procured less
than initially agreed, as confirmed by our Directors we do so with the consensus
of the relevant suppliers and we have not incurred any liquidated damages or
p e n a l t yd u r i n gt h eT r a c kR e c o r dP e r i o da n du pt ot h eL a t e s tP r a c t i c a b l eD a t e .
. Payment. We make payments to our suppliers ac cording to the terms specified in
the purchase agreements. Depending on the specific arrangement, some suppliers
require full payment upfront while some suppliers grant us credit terms ranging
from 30 days to 60 days.
. Delivery and transfer of risks. Suppliers are generally responsible for delivery of
the products to our designated locatio n. The risks transfer to us when the
products are delivered to the designated locations.
Suppliers
The suppliers of our automotive specialty chemical business are primarily raw material
providers. We only procure raw materials from the suppliers in our qualified suppliers list
w h om u s tp a s so u rs a m p l et e s t st ob er e g i s t e r e di ns u c hl i s t .W ec a r e f u l l ys e l e c to u r
suppliers, requiring them to pass our internal supplier selection standards and satisfy
various assessment criteria, in cluding the quality of raw materials provided, capabilities to
meet our delivery schedule, resources management and customer relationships. Our
procurement team will conduct on-site inspection on potential suppliers to evaluate their
production processes, machinery and equipmen t, quality-control procedures and to obtain
relevant certificates. In order to ensure stable supply of relevant commodity raw materials
such as ethylene glycol, we will also procured such raw materials from the open commodity
market.
We utilize an integrated procurement pl anning, inventory management, and
performance monitoring process to maintain a reasonable stock level of principal raw
materials that aligns with our production demand and schedules. We reassess our
procurement strategy and inventory replenishment logic on a monthly basis, ensuring raw
material purchase cycles and inventory parameters are updated to match demand.
Additionally, we conduct weekly reviews of multiple inventory indicators including total
inventory level, overstock situations and turnover rates. By regularly recalibrating our
procurement in alignment with continuous assessment of our current raw materials
inventory levels and consumption patterns, we believe are able to maintain reasonable levels
of principal raw materials. We procure other raw materials based on our production
demands. Moreover, we devised more than one product formula using different principal
raw materials for our key products. If certain principal raw materials of our key products
were short in supply, we can timely resort to our back-up formula of relevant products and
procure substituted raw materials to ensure that our production is not interrupted.
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During the Track Record Period, we did not experience any breach of agreements by
suppliers of our automotive specialty chemic al business that resulted in suspension or
interruption of our production operations. During the Track Record Period, we did not
experience any material shortage of raw mater ial supplies of our automotive specialty
chemical business, and the raw materials prov ided by relevant suppliers did not have any
significant quality issues.
Lithium Carbonate Processing Services
In the first half of 2024, we recorded revenue for the provision of lithium carbonate
processing service, albeit to a limited extent. This development stems from our enhanced
business cooperation with CATL Group, as outlined in several agreements, including the
Lopal Times Transfer Agreement and Lithium- mica Concentrate Procurement Framework
Agreements.
Under such business cooperation, we commenced construction of a lithium carbonate
production facility in Yichun, Jiangxi Province which commenced trial operation since
March 2024. At full capacity, this facility i s designed to produce 40.0 thousand tons of
battery-grade lithium carbonate annually.
Pursuant to the Lithium-mica Concentrat e Procurement Framework Agreements, we
received lithium-mica concentrate from C ATL Group for processing. We independently
secured other necessary raw materials for lit hium carbonate production, such as sodium
carbonate, calcium sulfa te and sodium sulfate.
In the first half of 2024, we processed approximately 220,000 tons of lithium-mica
concentrate from the CATL Group, represent ing approximately RMB162.2 million in value
with which our facility produced 6,495.0 tons o f lithium carbonate. The majority of this
output of approximately 5,753.3 tons was utilized in-house for the production of
approximately 23,000 tons of LFP cathode materials (representing approximately 30.9%
of the sales volume of LFP cathode materia ls in the first half of 2024), which we
subsequently supplied to CATL Group gene rating approximately RMB665.5 million in
revenue (representing approximately 26.9% of revenue from sales of LFP cathode materials
in the first half of 2024). The remaining 741.7 tons of lithium carbonate were processed for
a company designated by CATL (an associate company of CATL). Pursuant to the relevant
agreements with this company, the pricing for the processed lithium carbonate was set by
CATL. This pricing takes into account discussions among all parties. Revenue generated
from lithium carbonate processing for this company amounted to approximately RMB42.7
million in the first half of 2024 while we recorded negative gross margin of 1.4% for this
transaction primarily due to lack of economies of scale at the early production phase of the
facility for the relevant batches.
We believe this arrangement provides significant benefits to our operations including
stabilizing our raw material costs and supp ly of lithium carbonate and enhancing our
synergies with CATL thereby strengthening our position in the LFP cathode material
supply chain.
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Our current business strategy for the lithium carbonate processing business is primarily
governed by the Lopal Times Transfer Agreement. Under the business cooperation plans
contemplated in this agreement, we have committed the production capacity of the Yichun
facility to CATL, for a period extending fro m the completion of facility construction to
four years after achieving mass production. During this period, our lithium carbonate
processing business will primarily serve CATL and any companies they may designate. The
pricing structure for our lithium carbonate processing service under this agreement
generally accounts for our costs and operational expenses and an agreed-upon profit
component that decreases annually over the four-year commitment period. Upon Listing,
we expect our lithium carbonate processing service to CATL Group will be generally
governed by the CATL Purchase Framework Agreement entered into with CATL. For
details, see ‘‘History and Development — Ou r Strategic Cooperation — Acquisition of
Lopal Times in 2022’’ and ‘‘Connected Tran saction — Partially Exempt Continuing
Connected Transactions — Our enhanced business cooperation with CATL Group.’’
After fulfilling our initial commitment t o CATL, we may explore opportunities to
expand our customer base for lithium carbonat e processing. While our long-term strategy
for our lithium carbonate processing business remains flexible, any decision to sell or
process lithium carbonate for other customers will be subject to careful consideration of
market conditions and potential new arrangem ents we may reach with CATL, including the
possible construction of a phase 2 of the Y ichun facility. In the event we sell lithium
carbonate or provide processing services to any customer other than CATL or its
designated companies, our pricing will generally take into account the cost of raw materials,
prevailing market prices of lithium carbonate as listed on the SMM, margin for our
processing service pricing of similar product so rs e r v i c e so f f e r e db yo u rc o m p e t i t o r s ,a n d ,a s
applicable.
Other Businesses
During the Track Record Period, we also gen erated revenue from certain other sources
including sales of daily chemical products and unfinished products as well as revenue from
our emerging hydrogen business. For the years ended December 31, 2021, 2022 and 2023
and the six months ended June 30, 2023 and 2024, our revenue from others amounted to
RMB57.9 million, RMB67.0 million, RMB72.6 million, RMB24.6 million and RMB80.2
million, respectively, representing 1.4%, 0.5 %, 0.8%, 0.6% and 2.2% of our total revenue.
Driven by the PRC government’s dual objectives of ‘‘carbon emission peak’’ ( 碳達峰)
and ‘‘carbon neutrality’’ (碳中和), we have been developing our hydrogen energy business
since 2022 across upstream hydrogen production, midstream hydrogen storage, and
downstream hydrogen application sectors. In upstream hydrogen production, our first
electrolytic tank with a designed productio n capacity of 1,000 cubic meters per hour came
online in September 2023. In midstream hydrogen storage, we successfully developed the
one of first domestic nine- and twelve-liter Type IV hydrogen storage vessels for unmanned
aerial vehicles. In downstream hydrogen application, we successfully developed our
hydrogen fuel cell catalyst products that help improve hydrogen fuel cell efficiency.
Recently, we have started the trial productio n of our hydrogen fuel cell catalyst products.
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Our hydrogen energy business is still at an early stage of development, and in 2022 and
2023 and the six months ended June 30, 2024, re venue generated from our hydrogen energy
business amounted to approximately RMB0.1 million, RMB1.6 million and RMB1.3
million, respectively. Going forward, we pla n to keep developing our hydrogen energy
business and implement our sustainable de velopment strategy. For details, see ‘‘—
Strategies — Strengthen our research and development capabilities and attract
high-caliber talents.’’
MAJOR SUPPLIERS AND CUSTOMERS
Major Suppliers
Our major suppliers are primarily supplie rs of raw materials. In the years ended
December 31, 2021, 2022 and 2023 and the six m onths ended June 30, 2024, purchase from
our largest supplier in each period during the Track Record Period amounted to RMB278.5
million, RMB1,244.5 million, RMB936.5 millio n and RMB297.9 million, respectively,
representing 8.8%, 9.3%, 12.5% and 10.4%, respectively, of our total purchase amount for
the respective periods. For the same periods, purchase amount from our five largest
suppliers in each period during the Track Re cord Period, amounted to RMB1,106.5 million,
RMB3,526.3 million, RMB2,791.7 million a nd RMB1,029.1 million, respectively,
representing 34.9%, 26.4%, 37.3% and 35.9% of our total purchase amount for the
respective periods.
The following tables set forth the details of our five largest suppliers by purchase
amount for each year of the Track Record Period:
For the year ended December 31, 2021
Supplier Supply type
Year of
commencement
of business
relationship
with us Credit terms
Purchase
amount
Percentage
of total
purchase
(RMB’000) (%)
Supplier A (1) ... L i t h i u m
carbonate
2021 30 days against
monthly
clearing
278,495 8.8
Supplier B
(2) ... L i t h i u m
carbonate
2021 30 days after
invoice date
256,942 8.1
Supplier C (3) . . . Iron phosphate 2021 60% prepayment;
40% against
monthly
clearing
203,935 6.4
Supplier D
(4) ... L i t h i u m
carbonate
2021 Payment before
delivery
193,896 6.1
Supplier E (5) . . . Urea 2014 Prepayment 173,266 5.5
1,106,534 34.9
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Notes:
(1) Company mainly engaged in trading chemical pr oducts based in the PRC; Incorporated in 2014; RMB10
million registered capital. (Sources: commercial database)
(2) Company mainly engaged in producing chemical raw materials and chemical products; Incorporated in
2007; USD13 million registered capit al. (Sources: commercial database)
(3) Producer of lithium-ion battery cathode material precursor located in Hunan Province; Incorporated in
2007; RMB563.9 million regi stered capital. (Sources : commercial database)
(4) Subsidiary of its Shanghai Stock Exchange-liste d parent company headquartered in Xiamen, Fujian
Province, which focuses on integrated logistics a nd supply chain services for commodities such as
agricultural products, energy, chemicals, metals an d minerals; Incorporated in 2009; RMB200 million
registered capital. (Sources: official websit e of parent company and commercial database)
(5) Producer of nitrogenous fertilizers headquarter ed in Wuxi, Jiangsu Province; Main products include
synthesis ammonia, urea, diesel exh aust fluid, ammonium sulfate and i ndustrial grade carbon dioxide with
annual production capacity of one million tons, 1. 7 million tons, 0 .2 million tons, 30 thousand tons and
0.2 million tons, respectively; Incorporated in 19 79; RMB143.7 million registered capital. (Sources:
official website and commercial database)
For the year ended December 31, 2022
Supplier Supply type
Year of
commencement
of business
relationship
with us Credit terms
Purchase
amount
Percentage
of total
purchase
(RMB’000) (%)
Supplier F (6) ... L i t h i u m
carbonate
2021 Payment before
delivery
1,244,450 9.3
Supplier G (7) ... L i t h i u m
carbonate
2022 Payment before
delivery
751,258 5.6
Supplier H (8) ... L i t h i u m
carbonate
2022 Payment before
delivery
528,931 4.0
Supplier I (9) ... L i t h i u m
carbonate
2022 Payment before
delivery
520,337 3.9
Supplier J (10) . . . Iron phosphate 2021 Payment before
delivery
481,346 3.6
3,526,322 26.4
Notes:
(6) Company specializing in the research and devel opment, production and sales of lithium carbonate,
rubidium cesium based in the PRC; Incorporated in 2017; RMB500 million registered capital. (Sources:
official website and commercial database)
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(7) Subsidiary of its Shanghai Stock Exchange-liste d parent company headquartered in Xiamen, Fujian
Province, which focuses on integrated logistics a nd supply chain services for commodities such as
agricultural products, energy, chemicals, metals and minerals; and a fellow subsidiary of Supplier D;
Incorporated in 2018; RMB400 million registered capit al. (Sources: official website of parent company
and commercial database)
(8) Company mainly engaged in the trading of chemical products and is located in Nanchong, Sichuan;
Incorporated in 2020; RMB10 million registere d capital. (Sources: commercial database)
(9) Company mainly engaged in the trading of chemi cal products and is located in Chengdu, Sichuan;
Incorporated in 2020; RMB10 million registere d capital. (Sources: commercial database)
(10) Company engaged in, among others, sale of iron phos phate located in Panzhihua, Sichuan; Incorporated
in 2018; RMB30 million registered capi tal. (Sources: commercial database)
For the year ended December 31, 2023
Supplier Supply type
Year of
commencement
of business
relationship
with us Credit terms
Purchase
amount
Percentage
of total
purchase
(RMB’000) (%)
Supplier K (11) .. L i t h i u m
carbonate/iron
phosphate
2021 Payment before
delivery
936,474 12.5
Supplier L
(12) .. L i t h i u m
carbonate
2023 30 days after
invoice date
897,047 12.0
Supplier M (13) .. L i t h i u m
carbonate
2022 Prepayment 533,208 7.1
Supplier N (14) .. L i t h i u m
carbonate
2023 Prepayment 228,178 3.1
Supplier J . . . . . Iron phosphate 2021 Settlement every
15 days
196,755 2.6
2,791,662 37.3
Notes:
(11) A group of companies engaged in trading of lithium carbonate and iron phosphate under the common
control of an individual, including (i) a company loc ated in Yichun, Jiangxi Province; Incorporated in
2020; RMB10 million registered cap ital; (ii) a company located in Zibo, Shandong; Incorporated in 2022;
RMB10 million registered capital; and (iii) a compa ny located in China (Jiangsu) Pilot Free Trade Zone;
Incorporated in 2021; RMB10 million registere d capital. (Sources: commercial database)
(12) Subsidiary of its Shenzhen Stock Exchange- and Hong Kong Stock Exchange-listed parent company
l o c a t e di nS i c h u a nP r o v i n c e ,w h i c hi sal e a d i n gl i t h ium producer in China and globally with lithium as the
core; Incorporated in 2014; RMB2,500 million regis tered capital. (Sources: annual report and commercial
database)
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(13) Subsidiary of its Nasdaq-listed parent company h eadquartered in Santiago, Chile, which focuses on
producing potassium nitrate, lithium, specialty plant nutrients, iodine derivatives, lithium derivatives,
potassium chloride, potassium sulfate and certa in industrial chemicals; Incorporated in 2017; USD5
million registered capital. (Sources: official we bsite of parent company and commercial database)
(14) Company mainly engaged in trading of lithiu m carbonate based in the PRC; Incorporated in 2021;
RMB680 million registered capital. (Sources: o fficial website and commercial database)
For the six months ended June 30, 2024
Supplier Supply type
Year of
commencement
of business
relationship
with us Credit terms
Purchase
amount
Percentage
of total
purchase
(RMB’000) (%)
S u p p l i e rL..... L i t h i u mc a r b o n a t e 2 0 2 3 3 0d a y sa f t e ri n v o i c e
date
297,938 10.4
Supplier O (15) . . . Lithium carbonate 2024 Payment before
delivery
283,550 9.9
Supplier P (16) .... I r o np h o s p h a t e 2 0 2 3 3 0d a y sa g a i n s t
monthly clearing
157,319 5.5
S u p p l i e rG..... L i t h i u mc a r b o n a t e 2 0 2 2 P a y m e n tb e f o r e
delivery
155,430 5.4
Supplier Q (17) . . . Iron phosphate 2023 60 days against
monthly clearing
134,818 4.7
1,029,055 35.9
Notes:
(15) A group of companies engaged in supply chain organization and management related business including
material purchasing, inventory management, finishe d product sale and product delivery etc.; Incorporated
in 1999; RMB699,491.979 thousand registered capital. (Sources: official website and commercial
database)
(16) A group of companies engaged in production and sale of compound fertilizer and related business;
Incorporated in 1995; RMB1,207, 723.762 thousand registered capit al. (Sources: official website and
commercial database)
(17) Involved in production and sales of lithium-ion b attery and related ecosystem; Incorporated in 2021;
RMB1.25 billion registered capital. (Sources : official website and commercial database)
During the Track Record Period and as of the Latest Practicable Date, none of our
Directors, their associates or any of our shareholders (who owned or to the knowledge of
Directors had owned more than 5% of our issued share capital) had any interest in any of
our five largest suppliers.
During the Track Record Period and as of the Latest Practicable Date, we did not have
any material litigation, dispute or unresolved issue with our suppliers.
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Major Customers
Our customers include major lithium-ion battery manufacturers, distributors of
automotive chemical products, automobile manufacturers, engineering equipment
manufacturers, automotive chemical brands and retail consumers in China. In the years
ended December 31, 2021, 2022 and 2023 and t he six months ended June 30, 2024, the
aggregate revenue generated from our five largest customers in each period during the
Track Record Period amounted to RMB 1,739.2 million, RMB11,253.8 million,
RMB5,627.4 million and RMB2,159.8 million, re spectively, representing 42.9%, 80.0%,
64.5% and 60.5% of our total revenue for the respective periods. For the same periods,
revenue generated from our largest customer in each period during the Track Record Period
amounted to RMB1,160.4 million, RMB7,486.9 million, RMB2,648.0 million and
RMB1,123.1 million, respectively, representing 28.6%, 53.2%, 30.3% and 31.5%,
respectively, of our total revenue for the respective periods. In view of the substantial
revenue contribution by our five largest customers during the Track Record Period, we are
exposed to certain customer concentration risks, for further details on customer
concentration risk, see ‘‘Risk Factors — Ris ks Relating to Our Industry and Business —
The majority of our revenue was generated f rom a relatively small number of customers
during the Track Record Period’’ and ‘‘— Major Suppliers and Customers — Customer
Concentration.’’
The following tables set out details of our five largest customers during the Track
Record Period:
For the year ended December 31, 2021
Customer Procurement type
Year of
commencement
of business
relationship
with us Credit terms Revenue
Percentage
of total
revenue
(RMB’000) (%)
CATL Group (1) . . LFP cathode materials
and coolants
2021 Up to 60 days after
invoice date
1,160,415 28.6
Customer A (2) . . . LFP cathode materials 2021 30 days against
monthly clearing
225,605 5.6
Customer B (3) ... L u b r i c a n t s ,d i e s e l
exhaust fluids,
coolants and car
maintenance products
2005 90 days after delivery 123,839 3.1
Customer C
(4) . . . LFP cathode materials 2021 30 days 122,441 3.0
Customer D (5) ... L u b r i c a n t s ,d i e s e l
exhaust fluids,
coolants and car
maintenance products
2018 60 days after invoice
date
106,866 2.6
1,739,166 42.9
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Notes:
(1) CATL is a leading electrical machinery and equi pment manufacturer in mainland China, located in
Ningde, Fujian Province; Primarily engaged in the re search and development, manufacturing and sale of
lithium-ion batteries, lithium polymer batteries, fuel cell, power batteries, extra large capacity ESS
batteries and other equipment and instrument, and other related businesses; Incorporated in 2011;
RMB2,442.4 million re gistered capital. (Sources: official websi te, annual report and commercial database)
CATL is an indirect shareholder of two of our subsid iaries, namely, Changzhou Liyuan and Lopal Times.
For details of Changzhou Liyuan, see ‘‘History a nd Development — Our Strategic Cooperation —
Establishment of Changzhou Liyuan in 2021.’’ For det ails of Lopal Times, see Note 35(b) to Part II of the
Accountants’ Report in Appendix IA to this prospect us. Tianjin Beiterui Nano had been a supplier of
CATL Group since 2018 prior to our acquisition.
(2) Fortune 500 company in mainland China focused on st ainless steel production wi th investments in the new
energy sector; Main products include stainless steel in got, bar, rod, plate, wire, pipe and other products,
which are widely used in petroleum, chemical industr y, machinery, electric pow er, automobile and other
fields; Incorporated in 2003; RMB2.8 billion registered capital. (Sources : official website and commercial
database). Customer A is also the controlling shareholder of Customer E below.
(3) Comprehensive automobile manufacturer in mainland China mainly engaged in the research and
development, production, sales and service of commerc ial vehicles, passenger vehicles and powertrain
components with its history dating back to 1964; Incorporated in 1999 and Shanghai Stock
Exchange-listed. (Sources: offi cial website and annual report)
(4) State-owned high-tech enterprise, focused on re search and development of lithium-ion batteries;
Incorporated in 1997; RMB1.9 billion registered cap ital. (Sources: official website and commercial
database)
(5) Leading automobile company in China; Main busin ess covers research and development, production and
sales of both passenger and commercial vehicles and actively promoting comme rcialization of NEVs and
internet-connected vehicles; Sold over 5.3 million vehicles in 2022; Incorporated in 1984 and Shanghai
Stock Exchange-listed; RMB11.7 bi llion registered capital. (Sources: official website and commercial
database)
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For the year ended December 31, 2022
Customer Procurement type
Year of
commencement
of business
relationship
with us Credit terms Revenue
Percentage
of total
revenue
(RMB’000) (%)
CATL Group . . LFP cathode
materials and
coolants
2021 Up to 60 days after
invoice date
7,486,860 53.2
Customer E
(6) . . LFP cathode
materials
2021 30 days after
delivery
1,991,882 14.2
Customer F (7) . . LFP cathode
materials
2021 30 days after
invoice date
999,826 7.1
Customer G (8) . LFP cathode
materials
2021 50% payment
before delivery;
50% 30 days
against monthly
clearing
432,280 3.1
Customer H
(9) . LFP cathode
materials
2021 60 days after
invoice date
342,993 2.4
11,253,841 80.0
Notes:
(6) A fast-growing lithium-ion battery manufacture r in mainland China, focusing on the research and
development, manufacturing and sales of lithium- ion NEV battery products and ESS battery products; A
subsidiary of Customer A; Incorporated in 2017 an d Hong Kong Stock Exchange-listed; RMB2.2 billion
registered capital. (Sour ces: official website and commercial database)
(7) Globally leading lithium-ion battery manufactur er; Headquartered in Shenzhen, has production facilities
located in Guangdong Province, Jiangsu Provin ce, Zhejiang Province, Shandong Province, Jiangxi
Province, Sichuan Province, Hubei Province, and I ndia, and has branch offices globally, including the
U.S., France, Germany, South Korea and Japan; Inc orporated in 1997 and Shenzhen Stock Exchange-
and SIX Swiss Exchange-listed; RMB1.9 billion regi stered capital. (Sources: official website, annual
report and commercial database)
(8) Supplier of lithium-ion motive batteries and ES S batteries headquartered in Jiangsu Province;
Incorporated in 2019; RMB1.9 billion registered cap ital. (Sources: official website and commercial
database)
(9) Battery manufacturer in mainland China with core technologies of cell development and system
integration, providing products and solutions fr om cells, modules, BMS and sys tems, which are widely
used in new energy passeng er cars, new energy commercial vehicles, new energy construction machinery,
energy storage and electric ships markets; Incorporated in 2012 and a subsidiary of Shanghai Stock
Exchange-listed parent company; RMB1.3 billion r egistered capital. (Sources: official website and
commercial database)
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For the year ended December 31, 2023
Customer Procurement type
Year of
commencement
of business
relationship
with us Credit terms Revenue
Percentage
of total
revenue
(RMB’000) (%)
CATL Group . . LFP cathode
materials and
coolants
2021 Up to 60 days after
invoice date
2,648,020 30.3
Customer E . . . LFP cathode
materials
2021 30 days after
delivery
1,545,614 17.7
Customer F . . . LFP cathode
materials
2021 60 days against
monthly clearing
723,103 8.3
Customer I
(10) . LFP cathode
materials
2023 30 days after
invoice date
442,212 5.1
Customer J (11) . LFP cathode
materials
2021 45 days after
invoice date
268,494 3.1
5,627,443 64.5
Note:
(10) Manufacturer of lithium-ion batt ery providing comprehensive lithi um-ion battery and battery system
solutions; Incorporated in 2017; RMB1.0 billion regis tered capital. (Sources: official website and
commercial database)
(11) Focusing on research and development of lithium-i on batteries; Incorporated in 2011; RMB2.98 billion
registered capital. (Sour ces: official website and commercial database)
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For the six months ended June 30, 2024
Customer Procurement type
Year of
commencement
of business
relationship
with us Credit terms Revenue
Percentage
of total
revenue
(RMB’000) (%)
CATL Group . . LFP cathode
materials and
coolants
2021 Up to 60 days after
invoice date
1,123,140 31.5
Customer E . . . LFP cathode
materials
2021 30 days against
monthly clearing
504,837 14.1
Customer F . . . LFP cathode
materials
2021 60 days against
monthly clearing
369,278 10.4
Customer K
(12) . LFP cathode
materials and
coolants
2023 30 days against
monthly clearing
85,973 2.4
Customer L
(13) . LFP cathode
materials
2021 60 days after
invoice date
76,578 2.1
2,159,806 60.5
Notes:
(12) A Shenzhen Stock Exchange-listed holding comp any mainly involved in the manufacture and sale of
lithium-ion battery, energy storage technical service, battery rental service, battery-management systems
and other battery-related businesses; Incorporated in 1985; RMB384.6 million registered capital (Sources:
official website and commercial database)
(13) A new energy battery supplier specialized in th e research and development, production, and sales of
industrial vehicle lithium-ion batteries, new ener gy ship lithium-ion batte ries, lithium-ion cells,
heavy-duty truck energy storage products; Incorpor ated in 2016; RMB112.9 million registered capital.
(Sources: official website and commercial database)
During the Track Record Period, we had not experienced any material disputes or
termination of sales contracts with our five la rgest customers for the Track Record Period.
A so ft h eL a t e s tP r a c t i c a b l eD a t e ,w ew e r en o ta w a r eo fa n yi n f o r m a t i o no ra r r a n g e m e n t s
which would lead to cessation or terminatio n of our relationships with any of our five
largest customers for the Track Record Period. During the Track Record Period and as of
the Latest Practicable Date, none of our Di rectors, their associates or any of our
shareholder (who owned or to the best knowledge of our Directors had owned more than
5% of our share capital) had any interest in any of our five largest customers.
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Customer Concentration
For the years ended December 31, 2021 a nd 2022 and 2023 and the six months ended
June 30, 2024, we generated a majority of our revenue from our five largest customers. In
particular, for 2021, 2022 and 2023 and the six months ended June 30, 2024, revenue
generated from CATL Group amounted to RMB1,160.4 million, RMB7,486.9 million,
RMB2,648.0 million and RMB1,123.1 million, re spectively, representing 28.6%, 53.2%,
30.3% and 31.5% of our revenue for the respective periods. The relatively high revenue
contribution of CATL Group was mainly due to its large demand for LFP cathode
materials as it is one of the leading lithium-ion battery manufacturers in the world in the
highly concentrated lithium-ion battery industry. We have entered into a framework sales
and purchase agreement with CATL Group rega rding our LFP cathode material products,
setting forth general terms to be applied in each individual purchase order. The individual
purchase orders we receive from CATL Group from time to time set out the specific terms
and conditions, including pricing details, product specifications, quantities and delivery
dates. For key terms of our framework agreemen ts with customers, see ‘‘— Our Businesses
— LFP Cathode Materials — Customers and sales’’ and ‘‘Connected Transaction —
Partially Exempt Continuing Connected Transactions — CATL purchase framework
agreement.’’ Our Directors are of the view that the reliance between our major customers
and us is bilateral and our LFP cathode material business is sustainable despite such
customer concentration after taking into account the following factors:
(i) According to Frost & Sullivan, customer concentration is an industry norm in the
LFP cathode material industry. Lithium-ion battery manufacturers require
rigorous product screening procedures, which can last for months or even a
year, since the quality of cathode materials has a direct impact on the quality and
safety of lithium-ion batteries — the top priority concern of the downstream
customers. Therefore, once a supplier or its production line satisfies the
requirements of accredited suppliers, cu stomers rarely make any substantial
changes or replacements. Even if cust omers seek to switch cathode material
suppliers, it could take years with no guarantee of success. As a result, the
lithium-ion battery industry relies on a re latively small number of LFP cathode
material suppliers. According to Fro st & Sullivan, the global LFP cathode
material market is highly concentrated, w ith the top five manufacturers taking up
66.7% of the market share in 2023. In 2023, we were the fourth largest LFP
cathode material manufacturer in the wor ld and mainland China in terms of sales
volume, accounting for 6.5% of the global market share. According to Frost &
Sullivan, we were also one of the major suppliers of LFP cathode materials to
C A T LG r o u pi n2 0 2 3 .
(ii) We have developed strong and bilateral relationships with CATL Group through
long-term collaboration to steadily achieve shared goals and benefits.
CATL Group is a globally leading lithium-ion battery manufacturer. According
to CATL’s 2023 annual report, CATL took up 36.8% of the market share of the
global power battery market by usage volume in 2023. According to the same
source, for the year ended December 3 1, 2022, CATL recorded a revenue of
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approximately RMB400.9 billion, representing a 22.0% increase from the year
ended December 31, 2022. In view of the market share of CATL Group, we
believe CATL Group will continue to have stable demands for quality LFP
cathode materials. Prior to our acquisition, Tianjin Beiterui Nano had been a
supplier of CATL Group since 2018 given Tianjin Beiterui Nano’s industry
leadership and market reputation. This pre-existing business relationship
continued notwithstanding our acquisit ion of Tianjin Beiterui Nano in 2021.
Furthermore, we believe our strategic relationship with CATL Group continues to
deepen in other aspects. In 2022 and 2 023, CATL directly provided us lithium
carbonate to produce LFP cathode materials. For details, see ‘‘Our Businesses —
LFP Cathode Materials — Raw materials and suppliers.’’ In addition, we have
formed strategic partnerships with CAT L Group during the Track Record Period.
As of the Latest Practicable Date, CATL controls 5.91% and 30.0% equity
interest in two of our subsidiaries , Changzhou Liyuan and Lopal Times,
respectively. Pursuant to the terms of the equity transfer agreement regarding
CATL’s investment in Lopal Times and as part of our strategy to expand our
production capabilities upstream, CA TL Group shall supply lithium-mica
concentrate to us to be processed into lithium carbonate by Lopal Times, which
will then be used for our production of LFP cathode materials for CATL Group.
We entered into framework agreements and supplemental agreements with,
among others, CATL. Pursuant to these agreements, Lopal Times agreed to
purchase lithium-mica concentrate fro m CATL’s subsidiary for production of
battery grade lithium carbonate, which will be subsequently utilized to produce
LFP cathode material. CATL enjoys a pre ferential right to purchase such LFP
cathode materials under these arrangements. Our revenue to be received from
C A T LG r o u pt ob ed e r i v e df r o mt h i sa r r angement with procurement of lithium
carbonate from customers is expected to b e recognized as revenue from contracts
with customers under IFRS 15. For details, see ‘‘History and Development — Our
Strategic Cooperation — Acquisition of Lopal Times in 2022’’ and ‘‘Connected
Transaction — Partially Exempt Continuing Connected Transactions — Our
enhanced business cooperation with CATL Group.’’
In 2022 and 2023, the volume of lithium carbonate procured from CATL
amounted to 680.0 tons and 4,051.4 tons. In the first half of 2024, we expanded
our procurement options and acquired 197.3 thousand tons of lithium-mica
concentrate from CATL during this period. We processed this concentrate to
produce approximately 6,495.0 tons of lithium carbonate. The majority of this
output was utilized in-house for our LFP cat hode materials manufacturing, which
we subsequently supplied to CATL Group.
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We believe our cooperation with CATL in terms of lithium carbonate and
lithium-mica concentrate has helped strengthen our supply chain and
demonstrates the growing trust between our Company and CATL Group. By
leveraging CATL’s upstream investments and access to critical raw materials, we
can ensure a stable supply of high-quality lithium carbonate at competitive prices
for our LFP cathode material production, which in turn supports CATL’s battery
manufacturing operations.
With our history and strategic relationship with CATL Group, we believe we are
well positioned to capture future busines s opportunities and achieve mutually
beneficial collaboration with CATL Group.
(iii) We have made continuous efforts in exp anding and diversifying the customer base
for our LFP cathode material business. Our mass production capability, stable
supply ability and diverse product portfolio help us satisfy diversified demands
from other customers. During the Track Record Period, besides CATL Group,
some other leading lithium-ion battery manufacturers were also our customers,
including REPT BATTERO, Sunwoda and EVE. For example, Customer A
(controlling shareholder of Customer E) accounted for 5.6% of our total revenue
in 2021 and Customer E accounted for 14.2%, 17.7% and 14.1% of our total
revenue for 2022 and 2023 and the six months ended June 30, 2024, respectively.
In addition, we have entered supplier verification procedures for on-site
inspection for a number of lithium-ion battery manufacturers. Our planned new
production plant in Indonesia is also expected to aid us in our overseas business
development efforts and further diversify our customer base.
LOGISTICS AND INVENTORY MANAGEMENT
Warehousing and Logistics
During the Track Record Period, our ware housing needs were mainly satisfied by
warehouses at our production bases. Pursuant t o requirements of certain customers, we also
use external warehousing facilities that are cl oser to locations of such customers as transit
warehouses. For base oil, which is primarily used for the production of our automobile and
industrial lubricants, we also lease storag e tanks located at a port before delivery to our
production bases.
We procure delivery services from third-par ty logistics service providers. During the
Track Record Period, we collaborated with over 40 third-party logistics service providers in
total. We select logistics servi ce providers primarily based o n their qualification, track
record, geographic coverage and quotation. We maintain a list of qualified logistics service
providers and evaluate their service quality. Some customers may require us to choose
among their designated logistics service pr oviders. Our arrangements with third-party
logistics service providers allow us to provide efficient delivery services of our products,
reduce our capital investment and reduce the ris k of incurring liability for traffic accidents,
delivery delays or loss. Once our logistics service providers confirm receipt of the products
to be delivered, the risks relating to the transportation and delivery of our products are
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transferred to the logistics service provide rs. During the Track Record Period, we did not
experience any material disruption in the delivery of our products or suffer any material
loss as a result of delays in delivery or poor handling of goods.
Inventory Management
Our inventory primarily consists of raw mat erials, work-in-progress and finished
goods. We generally maintain a sufficient inventory of our principal raw materials based on
market conditions and our order quantity, while we also review our inventory levels on a
regular basis to minimize the risk of inven tory build-up. For other raw materials, we
generally make purchase orders based on our production schedules. We leverage a variety
of information technology systems to assist us in planning and managing our inventories,
such as our ERP, WMS and MES systems. Such systems provide ou r management with
real-time information and transparency of ou r inventories. For further details on our
information technology systems, see ‘‘— In formation Technology.’’ We believe that
maintaining appropriate levels of invent ories can help us better plan raw material
procurement and deliver our products to meet customer demand in a timely manner
without straining our liquidity. To ensure stable and continuous production, we generally
maintain a safety level of inventory which is de termined based on historical sales, market
demands and sales projections.
As of December 31, 2021, 2022 and 2023 and t he six months ended June 30, 2024, the
closing balance of our inventories amo unted to approximately RMB1,100.6 million,
RMB3,007.3 million, RMB1,610.2 million and RMB1,647.8 million, respectively, which
accounted for approximately 31.3%, 32.4%, 19.2% and 20.1% of our total current assets as
of the same dates, respectively. The following table sets forth our inventories turnover days
for the periods indicated:
For the year ended December 31,
For the
six months
ended June 30,
2021 2022 2023 2024
Inventory turnover days . . . . . . 87.3 64.4 95.9 90.9
— LFP cathode materials . . . . . 103.9 58.9 97.8 99.1
— Automotive specialty
c h e m i c a l s............. 8 8 . 4 1 0 7 . 9 9 0 . 3 8 0 . 6
For detailed discussion of our inventory turnover days, see ‘‘Financial Information —
Selective Key Items of Consolidated Statemen t of Financial Position — Inventories.’’
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COMPETITION
LFP Cathode Material Industry
The global LFP cathode material market is highly competitive and concentrated with
the top five LFP cathode material manufacture rs accounting for approximately 66.2% of
the global market share in terms of sales volume in 2023, with the largest LFP cathode
material manufacturer accounting for 30.5%. At the same time, sales of LFP cathode
materials in mainland China accounted for around 99% of the global LFP cathode
materials sales volume. As such, we generally compete with other large-scale LFP cathode
material manufacturers in mainland China. A ccording to Frost & Sullivan, the key barriers
to entering into the LFP cathode material indus try include, among others, (i) raw material
supply; (ii) capital barrier; (iii) talent reserve; and (iv) client recognition.
According to Frost & Sullivan, the primar y competitive factors in the LFP cathode
material market include supply, price, economies of scale, product quality, research and
development capabilities and customer recogn ition. We believe we can compete effectively
in the market by leveraging our mass productio n capability, stable supply, strong research
and development capabilities, diverse produ ct portfolio and reliable partnerships with
suppliers and customers.
Automotive Specialty Chemical Industry
According to Frost & Sullivan, the global au tomotive specialty chemical industry has
experienced significant growth due to the expansion of the automotive industry and the
increasing demand for sustainable solutions. Being one of the largest and fastest-growing
automotive markets globally, mainland China has become an active market for the
automotive specialty chemical industry. We g enerally compete with similar products of
other large and small companies, including well-known domestic and global competitors,
on a product-by-product basis. According to Frost & Sullivan, the entry barriers of the
automotive specialty chemical primarily incl ude, among others, (i) customer recognition;
(ii) sales channel; and (iii) certification and license requirements such as being ISO or IATF
certified or having CNAS certified laboratories.
According to Frost & Sullivan, the primary competitive factors in the automotive
specialty chemical market are brand recognition, price, research and development
capabilities and distribution network. We be lieve we are competitively positioned due to
our established brand reputation, strong resear ch and development capabilities, extensive
sales and distribution network and the ability to keep abreast of market trends.
For further details on the competitive la ndscapes of relevant industries and our
competitive strengths, see ‘‘Industr y Overview’’ and ‘‘— Strengths.’’
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INFORMATION TECHNOLOGY
We believe that high levels of automation, dig italization and technology are essential
for maintaining our competitive position and supporting our strategic objectives. In order
to improve our overall operational efficiency and sustain our business growth, we have
established information technology systems that empower us in planning and managing our
procurement, production, financial accounting, enterprise performance and human
resource. Our main information technology systems include the following:
. ERP system — Our enterprise resources planning system, or ERP system,
regulates our operations, inventory control, procurement, production and sales
management. Timely access to inventory and sales data allows our management to
monitor our sales performance and make appropriate adjustments in response to
the market conditions. It also facilitate s our procurement, marketing strategies
and decision-making process.
. OA system — We utilize the office automa tion, or OA system which provides a
platform for paperless information s haring and dissemination within our
Company and our subsidiaries, enhances administrative record management
and optimizes various approval proced ures for our business operations.
. MES system — We utilize the manufactu ring execution system, or MES, to
support our production process, including scheduling production plans and
real-time monitoring of the production process. The MES system is connected
with our production equipment and records and transmits information of our
production lines, including production volume and time used to our ERP system,
achieving digitalized production management, so as to improve the management
level of our production lines and production efficiency.
. LIMS system — Our laboratory information management system, or LIMS
system, is used to enhance the automation and management level of our quality
control procedures. Our LIMS system ta kes full advantage of computerized
technology and automated equipment to promote working efficiency, improve
testing accuracy and quality control management, providing timely and accurate
quality information for the production process.
. WMS system — Our warehouse management system, or WMS system, has
functions including receipt, dispatch, transfer and management, integrating
product batch management, material management, inventory, instant inventory
management and other applications of the system. WMS system can effectively
control and track the logistics and cost management of the entire process.
. TMS system — Our transportation management system, or TMS system, has
functions including order management, loading operation, dispatching and
distribution, driving management, vehicle management, personnel management,
data report and basic information maintenance. The system conducts a detailed
statistical assessment of vehicles, drivers, routes, etc., which can help improve
operational efficiency and reduce transportation costs.
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We have also adopted three digital apps to better manage the sales and distribution
network for our automotive specialty chemicals business:
. Channel Cloud ( 渠道雲) — Channel Cloud is used to distinguish customers from
each channel. It mainly strengthens the channel information management
capabilities, and mainly possesses func tions including customer procurement,
billing, inventory management, sales pro motion search, etc. Channel Cloud is
integrated with our ERP and other internal systems, ensuring unified access
management of customer information, pro duct information and selling prices, etc.
. Business Assistant ( 業務助手) app — Business Assistant app is a mobile office
management software, which enables us to better manage our off-site personnel
(mainly our sales team). It records information including attendance and
customer visitations. Additionally, the app allows for real-time collection of
orders and sales information at point-of-sales.
. Virtual Shopkeeper ( 雲掌櫃) app — Virtual Shopkeeper is a procurement and
sales platform connecting distributors and retail buyers, such as automobile repair
service shops. The platform integrates product information, policies, and order
processing. The app enables automobile repair service shop owners to view
products and promotions in real-time, conveniently place orders and view the
real-time processing status of their orders.
We plan to strengthen our information technology systems to keep up with the growth
of our business. We believe such improved systems will strengthen supply chain
management as well as improve our ability t o develop products that meet the demands
and preferences of our customers.
DATA PRIVACY AND PROTECTION
Primarily in relation to our automotive speci alty chemicals business, we collect and use
certain personal information of end consumers via our self-operated online stores and
websites, such as consumers’ network identity information, address, contact information
and transaction history which are primarily used for providing personalized services and
pushing sales promotion information. We display our privacy policy to consumers before
they use our and self-operated online stores and websites or provide sensitive personal
information to us. Our privacy policy primarily sets forth the scope of personal
information, how we collect, use, store, disclose and protect consumers’ personal
information.
To ensure the confidentiality and integr ity of our data, we have in place policies,
procedures, software and technology infrastructure to collect, use, store, retain and
transmit our consumer data in compliance w ith applicable data protection laws and
regulations of the PRC. For example, we encrypt confidential personal information and
take other necessary technological measures t o ensure the secure processing, transmission
and usage of data. We have established strin gent internal policies under which access to
privacy data is only granted to limited employees with access authorization. We provide
training to ensure that our employees are well aware of the significance of data privacy, our
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internal policies and relevant laws and regulations. We also plan to seek advice from data
privacy & compliance counsel in the future to enhance our information security system.
During the Track Record Period and up to the Latest Practicable Date, we had not
experienced any material hacking incident or IT system failure.
Data Privacy
On November 14, 2021, the Cyberspace Administration of China ( 國家互聯網信息辦公
室)( t h e‘ ‘CAC’’) released the Administration Governing the Cyber Data Security (Draft for
Comments) ( 《網絡數據安全管理條例（徵求意見稿）》) (the ‘‘ Draft Regulations on Data
Security ’’), which among other things, stipulates that data processors seeking for listing
in Hong Kong that affects or may affect national security must apply to the CAC for a
cybersecurity review. However, the Draft Regulations on Data Security provides no further
explanation or interpretation of ‘‘affects or may affect national security’’. The Draft
Regulations on Data Security has not been effe ctive as of the Latest Practicable Date and
therefore subject to further changes and interpretation. As advised by our PRC Legal
Advisor, if the Draft Regulations on Data Secu rity takes effect in its current form, we need
to fulfill corresponding obligations, including ‘‘conducting data security assessment once a
year on our own or by entrusting a data security search institution, and submitting the
previous year’s data security assessment re port to the municipal network information
department divided into districts before January 31 of each year’’, ‘‘formulating data
security training plans and organizing data security education and training for all
employees every year’’, etc.
On December 28, 2021, the CAC and certain other regulatory authorities in mainland
China published the Measures for Cybersecurity Review ( 《網絡安全審查辦法》) (the
‘‘Cybersecurity Review Measures ’’) which became effective on February 15, 2022. The
Cybersecurity Review Measures provides that, among others, (i) critical information
infrastructure operators that the purchase of cyber products and services or network
platform operators that engage in data processing activities that affect or may affect
national security shall be subject to the cybe rsecurity review by the Cybersecurity Review
Office, the department which is responsible for the implementation of c ybersecurity review
under the CAC; (ii) network platform operators with personal information data of more
than one million users that seek for listing in a foreign country are obliged to apply for a
cybersecurity review by the Cybersecurity Re view Office; and (iii) the relevant regulatory
authorities may initiate cybersecurity review if such regulatory authorities determine that
the issuer’s network products or services, or d ata processing activities affect or may affect
national security.
On December 1, 2023, our PRC Legal Adviso r conducted, on behalf of us, a phone
consultation with the China Cybersecurity Re view Technology and Certification Center ( 中
國網絡安全審查技術與認證中心) (the ‘‘CCRC ’’), which is a competent authority according
to our PRC Legal Advisor. During the consultation, the CCRC confirmed that currently,
for the proposed Listing, the Company need not to apply for the cybersecurity review.
Based on the understanding of the Cybersecurity Review Measures and the consultation
with the CCRC mentioned above, our PRC Legal Advisor is of the view that a listing on the
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Main Board currently does not fall within the scope of ‘‘listing abroad’’ which triggers
cybersecurity review as provided in the Cybersecurity Review Measures, and we currently
do not need to apply for cybersecurity review, as we had not received any notification from
relevant authorities about being identified as a c ritical information infrastructure operator
or requiring us to apply for cybersecurity review. Based on the aforementioned opinions of
our PRC Legal Advisor, our Directors are of that view that the Cybersecurity Review
Measures would not have material adverse impact on our business operations or the
proposed Listing.
Moreover, our PRC Legal Advisor is of the view that, assuming the Draft Regulations
on Data Security are implemented in the current form, the Draft Regulations on Data
Security would not have a material adverse impact on our business operations or the
proposed Listing if we fulfill corresponding o bligations. We undertake that if the Draft
Regulations on Data Security comes into eff ect, we will fulfill our obligations under the
Draft Regulations on Data Security. Based on the aforementioned opinions of our PRC
Legal Advisor and the undertakings we made, our Directors are of the view that the Draft
Regulations on Data Security (if implemented in current forms) would not have a material
adverse impact on our business operations or the proposed Listing. We will closely monitor
the legislative and regulatory development in connection with cybersecurity and data
protection and will adjust and enhance data practices in a timely manner to ensure
compliance with all applicable laws and regulations.
EMPLOYEES
We believe that our long-term growth depends on the expertise, experience and
development of our employees. As of June 30, 2024, we had 4,354 full-time employees,
substantially all of whom were stationed in mainland China. The following table sets forth
the number of our employees by function, age group and gender as of June 30, 2024 :
Number of
employees
Percentage of
Total (%)
Function
P r o d u c t i o n .................................... 2 , 2 8 2 5 2 . 4
T e c h n i c i a n .................................... 9 1 5 2 1 . 0
A d m i n i s t r a t i o n ................................. 8 5 4 1 9 . 6
S a l e s........................................ 2 0 3 4 . 7
F i n a n c e...................................... 1 0 0 2 . 3
Total ........................................ 4,354 100.0
Age
5 1o ra b o v e................................... 8 4 1 . 9
4 1t o5 0 ...................................... 6 8 1 1 5 . 6
3 1t o4 0 ...................................... 2 , 1 1 4 4 8 . 6
1 8t o3 0 ...................................... 1 , 4 7 5 3 3 . 9
Total ........................................ 4,354 100.0
Gender
F e m a l e ...................................... 9 5 4 2 1 . 9
M a l e........................................ 3 , 4 0 0 7 8 . 1
Total ........................................ 4,354 100.0
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Our employees are important assets for our development, and we place great
importance on attracting and recruiting qualified employees. Our human resource
department is responsible for recruiting employees. We recruit our employees primarily
through on-campus recruitment, mainstream recruitment platforms and referral. We treat
our employees fairly and ensure that they enjoy fair opportunities and conditions. In order
to attract and retain employees and develop the knowledge, skill level and quality of our
employees, we place a strong emphasis on training our employees. We provide training
periodically and across operational functions, including introductory training for new
employees, technical training, product training, sales training, management training and
occupational safety training, etc.
We enter into individual emp loyment contracts with our employees to cover matters
such as wages, employee benefits, safety conditions in the workplace and dispute resolution.
We also enter into standard confidentiality agreements and non-competition agreements
with our core employees, including mid to senior management personnel and engineers, as
well as sales personnel having access to impo rtant client information. As required by laws
and regulations in the PRC, we participate in various social security plans for our
employees including housing provident fund, pension insurance, medical insurance,
work-related injury insurance, maternit y insurance, and unemployment insurance.
During the Track Record Period, we had not been subject to any administrative
penalties in connection with the PRC labor laws and regulations including regulations in
relation to social insurance and housing provident fund contributions for our employees.
Our PRC Legal Advisor is of the view that we were in compliance with PRC labor laws and
regulations in material aspects during the Track Record Period.
During the Track Record Period, we have not experienced any significant difficulty in
recruiting employees, nor have we experienced any labor shortages during the Track Record
Period that materially affected our operations.
Our Company has established a labor union that represents relevant employees with
respect to labor disputes and other employee matters. During the Track Record Period, we
did not experience any major disputes with our employees, and we believe we have
maintained a good relationship with our empl oyees and is expected to remain amicable in
the future.
PROPERTIES
We occupy certain properties in the PRC in connection with our business operations.
These properties are used for non-property activities as defined under Rule 5.01(2) of the
Listing Rules. They mainly include premises for our production facilities, research and
development centers, warehouses, offices, and dormitories.
According to section 6(2) of the Companies Ordinance (Exemption of Companies and
Prospectuses from Compliance with Provisions) Notice, this prospectus is exempted from
compliance with the requirements of section 342(1)(b) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the Third Schedule
to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, which requires a
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valuation report with respect to all our Group’s interests in land or buildings, for the reason
that, as of June 30, 2024, we had no single property with a carrying amount of 15% or more
of our total assets.
Owned Land and Buildings
As of June 30, 2024, we owned 34
Note buildings in mainland China with an aggregated
GFA of 261,817.1 sq.m. The following table sets forth a summary of certain information
regarding our owned buildings as of June 30, 2024 :
Location Usage GFA
sq.m.
Nanjing, Jiangsu. . . . . . Production f acilities, research and development
centers, warehouses, o ffices, dormitories and
others
95,132.3
T i a n j i n ............ P r o d u c t i o nf a c ilities, dormitories and others 66,255.9
Zhangjiagang, Jiangsu . . Prod uction facilities 100,428.9
Total .............. 261,817.1 Note
Note:
Not inclusive of three recently constructed buildings with an aggregate GFA) of 29,099.4 sq.m., for which the
completion acceptance and fire safety acceptance filin g procedures have been completed, and upon finalizing
these, we have commenced the process of obtaining the r elevant property title certificates as of the Latest
Practicable Date.
In addition to land use rights related to the aforementioned buildings, we owned the
land use rights of six parcels of land with a to tal site area of 415,314.6 sq.m. in Nanjing and
Yichun. The following table sets forth a summary of certain information regarding such
land parcels as of June 30, 2024 :
Location
Number of
land parcels Usage GFA
sq.m.
Nanjing, Jiangsu. . . . . four Pro duction facilitie s and research
and development center
44,751.6
Yichun, Jiangxi . . . . . two Pro duction facilities 370,563.0
Total ............. 415,314.6
As of the Latest Practicable Date, our PRC L egal Advisor confirmed that, save for the
three recently constructed buildings ment ioned above and the heightened property
described under ‘‘— Legal Proceedings and Compliance — Non-compliance — Lack of
requisite permits and certificates for a heightened property’’ below, we had obtained all
relevant land use rights certificates and propert y title certificates for all of the lands and
buildings we own in mainland China, which are material to our operations.
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As of June 30, 2024, we owned a parcel of land with a total site area of 106,108 sq.m. in
Indonesia which will be used for the construction of our Indonesia Plant. For details, see
‘‘— Our Businesses — LFP Cathode Materials — Production expansion plans.’’
Leased Properties
As of June 30, 2024, we leased 13 properties in Changzhou, Tianjin, Xiangyang,
Suining, Heze, Nanjing, Shenzhen and Zhangjiagang with an aggregated GFA of 829,562.3
sq.m. used as production facilit ies, research and development centers, warehouses, offices
and dormitories to support our business operations. These leases generally have a term
ranging from approximately one to five years.
AWARDS AND RECOGNITIONS
We have received recognition with respect to our products and research and
development capabilities, includin g but not limited to the following:
Award/Recognition Awarded Entity Issuing Entity Awarding Year
China Well-known Trademark
(中國馳名商標) ..........
The Company Trademark Office of State
Administration for Industry and
Commerce ( 國家工商行政管理總
局商標局)
2015
Top 10 Lubricant Brands
in China
(中國潤滑油十大品牌) .....
The Company
www.sinolub.com (中國潤滑油
信息網)
2015–2023
Jiangsu Quality Awards
(江蘇省質量獎) ..........
The Company People’s Government of Jiangsu
Province
(江蘇省人民政府)
2016
High and New Technology
Enterprise Certificate
(高新技術企業證書).......
The Company,
Jiangsu Kelas,
Tianjin Beiterui
Nano,
Zhangjiagang
TEEC, Jiangsu
Beiterui Nano
Relevant departments of science
and technology, departments of
finance and Tax Service, State
Taxation Administration in
respective administrative regions
2020–2022
2022 Golden Globe Award —
New Spherical Shape LFP
Product — ‘‘Lithium Iron
No. 1’’ 2022 Annual Product
(2022 高工金球獎 — 新型球狀
磷酸鐵鋰產品 — 「鐵鋰1號」
2022 年度產品) ...........
Changzhou Liyuan Shenzhen Gaogong Consulting
Co., Ltd. ( 深圳市高工諮詢有限
公司)
2022
2023 (8th) China International
New Energy Industry 30 ‧60
Award (2023 年（第
八屆）中國
國際新能源產業30‧60獎) ...
Changzhou Liyuan SMM 2023
2023 Lithium Battery Material
Industry TOP 50 (2023 鋰電材
料產業T O P5 0 )..........
Changzhou Liyuan Shenzhen Gaogong Consulting
Co., Ltd. ( 深圳市高工諮詢有限
公司)
2023
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Award/Recognition Awarded Entity Issuing Entity Awarding Year
2023 World Power Battery
Conference — China’s Top
15 Most Promising
Enterprises (2023 世界動力電
池大會 — 中國最具成長力企
業十五強)..............
Changzhou Liyuan China Automotive Battery
Innovation Alliance ( 中國汽車動
力電池產業創新聯盟)
2023
INTELLECTUAL PROPERTY
Our intellectual property rights are fundamental to our success and competitiveness.
We rely on a combination of trademark, trade secret and other intellectual property laws as
well as confidentiality agreements and confid entiality clauses of other agreements with our
employees, suppliers, customers and others to protect our intellectual property. We manage
our patents, trademarks and copyrights, such as the management of authorized use of our
trademarks with distributors and customers, development, application and maintenance of
our patents, copyright registration and taking legal actions against infringers of our patents
and trademarks.
As of June 30, 2024, we had 350 patents (among which 121 are invention patents), 125
copyrights, 712 trademarks and 15 domain nam es in mainland China. For further details of
our material intellectual property rights, se et h es e c t i o nh e a d e d‘ ‘ S t a t u t o r ya n dG e n e r a l
Information — B. Further Information about O ur Business — 2. Our Material Intellectual
Property Rights’’ in Appendix IV.
During the Track Record Period and up to the Latest Practicable Date, we did not
experience any threatened or pending disputes, litigation, or legal proceedings for any
material violation of intellectual property rights of any person which would have a material
adverse effect on our business. However, despite our best efforts, we cannot be certain that
third parties will not infringe or misappropri ate our intellectual property rights or that we
will not be sued for intellectual property infri ngement. See ‘‘Risk Factors — Risks Relating
to Our Industry and Business — The failure to pr otect our intellectual property rights could
have an adverse impact on our business and competitiveness’’ and ‘‘Risk Factors — Risks
Relating to Our Industry and Business — Third parties may assert or claim that we have
infringed their intellectual property rights, which may disrupt and affect our business.’’
INSURANCE
Besides statutory social insurances as required under relevant PRC Law including
pension insurance, medical insurance, work-rel ated injury insurance, maternity insurance,
and unemployment insurance, we mainly mainta in property-related insurance to cover our
buildings, facilities, equipment and inventories.
We believe our existing insurance coverage is adequate for our existing operations and
is in line with industry standards. Neverthele ss, we may be exposed to claims and liabilities
which exceed our insurance coverage. See ‘‘Risk factors — Risks Relating to Our Industry
and Business — We have limited business insurance coverage which could expose us to
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significant costs and busines s disruption.’’ During the Track Record Period and up to the
Latest Practicable Date, we had not made, neither had we been the subject of, any insurance
claims which are of a material nature to us.
ENVIRONMENTAL, HEALTH, SAFETY AND SOCIAL RESPONSIBILITY MATTERS
Governance
We are committed to incorpor ating corporate social responsibility and sustainable
practices into all major aspects of our business operations. We view corporate social
responsibility as central to our growth strate gy and ability to generate long-term value to
our Shareholders.
We have set up a top-down ESG governance structure to oversee ESG matters and
review the implementation of ESG management strategies. Our Board maintains collective
and overall responsibility for overseeing, d etermining and addressing our ESG-related
risks. Our Board undertakes periodic evaluations of ESG-related risks and may elect to
engage independent third parties to undertake reviews of our ESG strategies, targets and
internal controls to ensure compliance. Requisi te improvements will then be implemented to
mitigate identified risks. Under the Board, th e Strategy Committee is authorized to oversee
ESG risks, develop and update ESG management strategies, and monitor the
implementation of ESG matters on behalf of the Board. The Strategy Committee reports
ESG management progress and performance to the Board on a quarterly basis. With respect
to environmental protection, concentrat ed efforts across departments including
procurement, production and research and development are coordinated to execute our
internal environmental protection policies and procedures, and manage environmental and
climate change-related risks, particularly t o reduce the utilization of hazardous materials,
energy and natural resources, and reduce the generation of waste.
To ensure a better implementation syste mi si np l a c e ,w eh a v ee s t a b l i s h e da nE S G
working group that is focused on environme ntal, social, and governance matters in
December, 2023, which will report to our Str ategy Committee. The ESG working group
consists of representatives from different departments and roles across our Group,
including administration, human resources, production, finance, legal and other, to
ensure that all aspects of our Group are represented. The primary duty of the ESG
working group is to assist our Board in executi ng ESG goals and strategies, including (i)
conducting materiality assessments on ESG-re lated risks and providing improvement
recommendations based on assessment results, ( ii) collecting ESG-related information from
various parties, including our major suppliers, customers, management team and employees
to facilitate the identification of materi al ESG issues and risks and for the purpose of
preparing ESG reports, (iii) continuously moni toring and reviewing the implementation of
our ESG risk management measures and regularly reporting to the Board, and (iv)
consulting external professionals when nece ssary to assist and elevate the ESG working
group’s efforts, with the goal of attaining leading ESG standards.
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We maintain a suite of internal policies in respect of ESG issues. Regarding
environmental matters, policies have been adopted covering, among others, (i) reduction
of greenhouse gas emissions, (ii) use of environmentally friendly production methods, (iii)
treatment of waste gas, sewage and solid waste and (iv) conservation of energy. Regarding
social matters, policies have been adopted coveri ng, among others, (i) production safety, (ii)
employee health, promotion, compensation, benefits and training and (iii) employee
complaint handling. Periodic reviews are undertaken to monitor compliance with the
foregoing policies.
Upon Listing, our Directors confirm that t hey will closely monitor and ensure strict
compliance with Corporate Governance Code and Corporate Governance Report as set out
in Appendix C1 to the Listing Rules, the Envir onmental, Social and Governance Reporting
Guide as set out in Appendix C2 to the Listing Rules and all relevant rules and regulations
in relation to environmental, social and governance aspects.
Potential Impact of ESG-related Risks and Responses
We place a heightened focus on environmental , social and climate-related matters and
their impact on our business operations and fi nancial performance. We have identified that
the environmental, social and climate-related matters that may present us with various risks
and opportunities include (i) risks related to the physical impacts of climate change and (ii)
risks related to the transition to a lower-carbon economy.
(i) Physical risks from climate change
Climate change has increased extreme weather events in recent years creating physical
risks with financial implicatio ns. For example, natural disasters and power outages caused
by climate change may disrupt industrial production. Our widespread production network
helps mitigate such risks. Our LFP Cathode pr oduction facilities and offices are located
Tianjin city, as well as Jiangsu, Sichuan, Shandong and Hubei provinces in China, along
with operations in Singapore and Indonesia. The main physical risks identified in these
locations include typhoons, rainstorms and rising temperatures. On the other hand, our
automotive specialty chemicals operations are situated in the same PRC locations as our
LFP cathode material business and primarily face risks from rainstorms. To mitigate the
impact of these physical risks, we have established emergency protocols for extreme weather
events and conduct correspon ding practice drills from time to time. These measures help
ensure our staffs’ improved responsiveness to disasters and emergencies. Additionally, we
allocate an annual budget for extreme weather preparedness and maintain a stock of flood
control and disaster relief materials. We also have emergency plans to ensure safety at our
production facilities. We also continuous ly monitor our supply chain and evaluate
alternative suppliers to mitigate impact s from such identified physical risks.
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(ii) Transition risks to a lower-carbon economy
The transition to a lower-carbon economy may involve substantial policy, legal,
technological and market changes to address climate change mitigation and adaptation.
Policy and legal transition risks include PRC laws and regulations changing in ways that
could increase our compliance costs. In response, we train relevant employees on policy and
regulatory developments to plan for compliance proactively.
In July 2024, General Office of the State Council has published the Workplan for
Accelerating the Construction of a Dual Control System for Carbon Emissions ( 《加快構建
碳排放雙控制度體系工作方案》), which identifies the chemical industry as one of the crucial
industries for establishing carbon emission accounting and monitoring systems.
Corporations should improve their carbon emission management to achieve actual
reductions. Our automotive specialty chemicals business is committed to complying with
this regulation. In 2023, we have obtained a carb on footprint certificate issued by the China
United Certification Center for one of our automotive specialty chemical products and have
introduced autonomous vehicles, automated and environmentally friendly blow molding
technology at relevant production bases to create a low-carbon production demonstration
park. In Europe, the EU has introduced Carbon Border Adjustment Mechanism and plans
to impose tariffs on carbon-intensive import s. Additionally, in July 2023, a new EU battery
regulation (Regulation 2023/1542) was approved aiming to create a harmonized legislation
for the sustainability and safety of batteries. T his directly affects our LFP cathode material
business as part of the battery industry supply chain. We have initiated various practices to
reduce our carbon emissions and improve our carbon management capabilities. Our plans
include conducting product carbon footprint calculations, annual corporate carbon
accounting, and incorporating a carbon property management system in the coming
years to establish a comprehensive carbon management mechanism.
In addition, market demand for low-carbon products could also force companies to
develop more sustainable technologies and products increasing research and development
expenses. By 2030, we plan to deploy low-carbon production lines, implement energy
conservation measures and utilize renewable energy sources across both our LFP cathode
materials and automotive specialty chemicals businesses.
(iii) Opportunities
Despite the above-mentioned physical and tr ansition risks, we also believe that climate
change may bring about opportunities to our business operations. The PRC government
announced its dual objectives of ‘‘carbon emission peak’’ and ‘‘carbon neutrality’’ at the
seventy-fifth United Nations General A ssembly. As a major LFP cathode material
provider, we intend to take advantage of such dual objectives by enabling safer,
longer-lasting and more sustainable lithium- ion batteries for vehicles, energy storage and
other end market applications. Under our automotive specialty chemicals business, we also
intend to further promote our diverse suite of automotive chemical products which we
believe contribute to environmen tal sustainability. Our diese l exhaust fluid helps reduce
harmful nitrogen oxide emissions from diesel engines. Our engine coolants minimize waste
and pollution while maximizing engine durabi lity and fuel efficiency. Our automotive and
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industrial lubricants are formulated to reduce friction, enhance fuel economy, extend
equipment life and thereby reduce waste. With the fast promotion of NEVs, we are also in
the process of developing NEV suitable chemicals that have similar environmental benefits.
Health, Safety and Social Responsibilities
Our business operations in mainland China are subject to various laws and regulations
relating to occupational health and work safety. For details, see ‘‘Regulatory Overview —
Laws and Regulations on Labor, Social Insurance and Housing Provident Fund.’’ We have
implemented internal guidelines for different aspects of production safety, including fire
safety, operation safety, warehouse safety an d emergency response. We regularly provide
training on health, safety and accident prevention for employees. We also carry out
equipment maintenance regularly to ensure their safe operations. Our occupational health
and safety management systems are ISO 45001 ce rtified. During the Track Record Period,
we did not record any accidents that had a material impact on our business or operations
and have not encountered any material non-com pliance issues relating to work safety laws
and regulations.
We focus on embracing diversity within our Group and have adopted a board diversity
policy which considers factors such as expe rience, knowledge, gender, age and cultural
background. We also promote diversity and equal treatment of all our employees and
continuously invest in the training and career development of our employees. We care about
our employee’s well-being and organize act ivities supporting wo rk-life balance.
We have been and will continue to be highly committed to sustainable corporate
responsibility projects through various charitable endeavors for different social causes. For
example, we donated ambulances to fight aga inst the COVID-19 pandemic in 2021. We also
provided scholarships to university education foundation during the Track Record Period.
Going forward, we will continue identifying imp actful charitable initiatives to which we can
contribute.
Environmental Protection
We are subject to environmental laws and regulations in mainland China including the
Environmental Protection Law of the PRC ( 《中華人民共和國環境保護法》). These laws and
regulations govern a broad range of environmental matters, including air pollution, noise
emissions and water and waste discharge. For details, see ‘‘Regulatory Overview — Laws
and Regulations on Environmental Protectio n.’’ We consider environmental protection
important and strive to ensure our facilitie s comply with relevant regulations and
standards. We have a production management system and adopted a series of
environmental protection measures, including, among others, (i) choosing energy-saving
equipment, and (ii) continuously optimizing production processes through technological
innovation and automation to increase efficiency and thereby reduce waste and carbon
dioxide emissions. Besides, the wide applic ation of LFP cathode materials in NEVs and
energy storage sectors is generally recognized to have environmental benefits. Moreover,
through our automotive specialty chemical business we are committed to producing
environmentally friendly automotive chemicals using eco-friendly production methods. For
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example, our diesel exhaust fluid helps reduce nitrogen oxides pollutant in diesel exhaust
emissions into nitrogen and water vapor. We developed a biodegradable hydraulic oil which
is over 80% biodegradable.
We evaluate our environmental performance through a number of metrics including
pollutant management, electricity usage and water usage.
Pollutant management
As of the Latest Practicable Date, we have obtained the relevant pollutant discharge
permits and registrations for all of our producti on facilities. As confir med by our Directors,
the waste we produced is processed in accordance with applicable environmental standards.
. Management of Wastewater. We generate wastewater during our production
process and such wastewater is discharged in accordance with the Comprehensive
Wastewater Discharge Standard ( 《污水綜合排放標準》) GB 8978–1996.
. Management of Waste Gas. We generate waste gas during the production process
and such waste gas was properly collected and treated prior to discharge. The
concentration limit of waste gas emissi ons is in accordance with Air Pollutant
Emission Standard ( 《大氣污染物排放標準》) DB32/4041–2021.
. Management of Solid Waste. We generate general and hazardous solid waste
during our production process. In particular, our hazardous solid wastes
primarily include waste machine oil, wast e lubricants, laboratory wastes and
waste oil vessels, and we engage qualified third-party waste treatment companies
to treat some of such hazardous solid waste.
The table below sets forth certain quantitative information regarding our pollutant
management for the periods indicated.
Year ended December 31,
Six months
ended
June 30,
Pollutant Unit 2021 2022 2023 2024
W a s t e w a t e r .......... t o n s 1 5 0 , 2 1 5 . 6 0 156,315.15 243,609.25 182,755.10
I n t e n s i t y ............ t o n s / m i l l i o nR M B
revenue
37.06 11.11 27.91 48.67
N O xe m i s s i o n s........ t o n s 1 0 . 4 3 2 2 . 2 3 2 4 . 9 9 4 3 . 5 5
I n t e n s i t y ............ t o n s / m i l l i o nR M B
revenue
0.0026 0.0016 0.0029 0.0116
S O xe m i s s i o n s ........ t o n s 4 . 6 4 1 0 . 7 9 8 . 4 1 1 8 . 0 4
I n t e n s i t y ............ t o n s / m i l l i o nR M B
revenue
0.0011 0.0008 0.0010 0.0048
P a r t i c l e se m i s s i o n s ..... t o n s 4 . 7 3 6 . 9 7 1 5 . 2 0 1 1 . 9 9
I n t e n s i t y ............ t o n s / m i l l i o nR M B
revenue
0.0012 0.0005 0.0017 0.0032
S o l i dw a s t e .......... t o n s 1 , 1 9 3 . 3 3 1 , 737.74 58,363.87 353,141.20
I n t e n s i t y ............ t o n s / m i l l i o nR M B
revenue
0.29 0.12 6.69 94.04
(1)
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Note:
(1) The significant increase in solid waste disposal and intensity since 2023 was primarily generated
during the configuration and setup of lithium ca rbonate production lines at the Yichun facility
which generated substantial solid waste by pr oducts during this process. We adopt various measures
to minimize the environmental impact includi ng, among others, (i) recycling product packing
materials to reduce the consumption of packaging materials and the generation of solid waste; and
(ii) optimizing production processes to reduce t he generation of solid w aste during the production
process, achieving clean production an d economic benefits in the meantime.
Resource consumption
The table below sets forth certain quantitative information regarding our resource
consumption for the periods indicated.
Year ended December 31,
Six months
ended
June 30,
Resource consumption Unit 2021 2022 2023 2024
F o s s i lf u e l........... G J 2 6 1 , 4 8 5 . 9 7 833,536.41 1,680,735.99 1,700,712.33
E l e c t r i c i t y ........... G J 1 0 5 , 6 3 2 . 0 358,699.2 2,177,582.40 1,435,806.35
S t e a m .............. G J 9 , 8 9 7 . 7 6 1 1 , 949.68 167,293.30 236,893.77
I n t e n s i t y ............ G J / m i l l i o nR M B
revenue
160.76 151.85 461.15 898.34
(1)
W a t e r .............. t o n s 8 8 1 , 5 6 6 . 7 5 1 , 536,446.65 1,699,676.70 1393,934.32
I n t e n s i t y ............ t o n s / m i l l i o nR M B
revenue
217.48 109.19 194.71 371.20
Note:
(1) Energy consumption intensity in creased significantly since 2023 p rimarily due to (i) the ramp-up and
commencement of production of certain of our produc tion facilities and the increase in production
volume since 2023, resulting in increased consum ption of natural gas and electricity, and (ii) the
decrease in our total revenue due to lower average selling prices of our products, which does not
directly impact energy consumption.
We will continuously strive to reduce our energy utility by improving production
efficiency, incorporating intelligent technolo gy, and optimizing produ ction management. In
addition, we will develop renewable energy fac ility to replace fossil fuel usage. With respect
to water consumption, we will endeavor to im prove water efficiency, apply water saving
production technology, and optimize water management practice.
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Greenhouse gas emission
The table below sets forth our greenhouse gas emission in 2021, 2022 and 2023 and the
six months ended June 30, 2024 :
Scope of greenhouse
gas emission (1) Emission sources Unit
Year ended December 31,
Six months
ended
June 30,
2021 2022 2023 2024
Scope 1 emission (2) . Combustion of coal, natural
gas, diesel, petrol and
liquified petroleum gas
tCO
2e 15,877.46 50,649.30 102,137.40 103,367.59
Scope 2 emission (3) . Purchased electricity and
heat
tCO 2e 62,767.28 205,881.51 363,067.33 253,167.14
Total .......... t C O 2e 78,644.74 256,530.81 465,204.73 356,534.73
Intensity ........ t C O 2e/million
RMB revenue
19.40 18.23 53.29 94.95 (4)
Notes:
(1) Greenhouse Gas emission calculation has re ferenced GHG Protocol published by the World
Resource Institute and the World Business C ouncil for Sustainable Development, China
Greenhouse Gas Emission Coefficient Library for Product Life Cycle (2022), EPA Supply Chain
GHG Emission Factors Dataset 2021 and other available carbon emission factors for Company
Reporting.
(2) As pursuant to Appendix 2 of ‘‘How to Prepare an ESG Report’’ set out by the Stock Exchange,
Scope 1 greenhouse gas emissions refer to direct em issions from equipment and operations that are
owned or controlled by our Group including natural gas used by manufacturing process, and petrol
and diesel used by our vehicles.
(3) As pursuant to Appendix 2 of ‘‘How to Prepare an ESG Report’’ set out by the Stock Exchange,
Scope 2 greenhouse gas emissions refer to energy ind irect emissions resulting from the generation of
purchased or acquired electricity, heating , cooling, and steam consumed within our Group.
(4) Greenhouse gas emission intensit y increased significantly since 2 023 primarily due to (i) the ramp-up
and commencement of production of certain of our production facilities and the increase in
production volume since 2023, resulting in increas ed consumption of natural gas and electricity, and
(ii) the decrease in our total revenue due to lower average selling prices of our products, which does
not directly impact greenhouse gas emissions.
Moreover, we strictly adhere to the standards, metric and targets set or issued by the
relevant ESG-related laws and regulations in assessing and managing our impacts on the
environment as a result of our business activ ities, such as the greenhouse gas emission in
our production. In the meantime, we are in the process of establishing more detailed
ESG-related metrics and targets after con sulting with relevant professional ESG
consultants and taking reference to the resu lts of our carbon mapping and relevant data
of industry peers.
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Approaches to improve our resource efficiency and reducing emissions
Measures Targets, impacts and achievability
Greenhouse gas emission
reduction target .....
. Closely monitor changes in
greenhouse gas emission
. Gradually replace our fossil cars with
NEVs
. Incorporate energy-efficient
equipment for new production lines
as we upgrade our current machinery
and equipment
. Purchase green electricity from
sustainable and renewable sources
when available and possible
We have set target to reduce our
operational greenhouse gas emission
intensity (scope 1 and scope 2) by
approximately 20% by 2030,
compared to its 2023 level. We will
designate special funds to implement
the measures to achieve the
greenhouse gas emission reduction
target, which, in the short run, will
incur additional costs and expenses.
In the long run, our customers and
investors will recognize our
commitment to environmental
protection, which may in turn
contribute to our revenue growth
and brand image.
Energy efficiency ...... . Advocate green office practices and
purchase energy efficient equipment
and office supplies
. Keep tracking the energy
consumption of our production
facilities, office buildings and
warehouses
. Strengthen real-time monitoring and
full-process data management of
energy consumption to address
abnormal energy consumption
patterns
We will continuously strive to reduce
our energy utility by improving
production efficiency, incorporating
intelligent technology, and
optimizing production management.
In addition, we will develop
renewable energy facility to replace
fossil fuel usage. We have set target to
reduce our energy consumption
intensity by approximately 20% by
2030, compared to its 2023 level.
Purchasing energy efficient equipment
and office suppliers may incur
additional costs in the short run, but
can help the Group to reduce energy
expenses and operational costs.
Water efficiency ...... . Actively reuse and recycle our water
usage
. Introduce recycled water systems,
water reuse systems, and rainwater
collection systems to reduce
unnecessary waste of water
. Constantly monitor water usage and
install water efficiency equipment to
reduce water usage
We have set target to reduce our water
consumption intensity by
approximately 20% by 2030,
compared to the 2023 level.
Purchasing water efficient equipment
may incur additional costs in the short
run, but can help the Group to reduce
water expenses and operational costs.
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LICENSES, PERMITS AND REGULATORY APPROVALS
During the Track Record Period and up to the Latest Practicable Date, as advised by
our PRC Legal Advisor, (i) we had complied wit h all relevant laws and regulations in all
material respects and (ii) had obtained all requisite licenses, approvals, registrations and
permits from relevant regulatory authorities for our material businesses.
The following table sets forth the licenses, permits and registrations currently held by
us, which are material to our business, taken as a whole:
No. Licenses/Permits Holder Issuing Authority Expiry Date
1. Pollutant Discharge
Permit ( 排污許可證)
Zhangjiagang TEEC Relevant
Ecological
Environment
Bureaus or
Administrative
Approval
Bureau of
respective
administrative
regions
January 18, 2028
Zhangjiagang TEEC December 10, 2025
Shandong Liyuan February 15, 2028
Sichuan Liyuan January 5, 2027
Tianjin Beiterui Nano November 19, 2027
Hubei Liyuan August 22, 2028
Lopal Times August 14, 2028
2. Receipt on the
Registration of
Pollution Discharge
for Fixed Pollution
Sources ( 固定污染
源排污登記回執)
Lopal Lubrication / July 5, 2025
Jiangsu Beiterui Nano / April 21, 2026
Jiangsu Kelas / September 19, 2028
LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
As of the Latest Practicable Date, as confirmed by our Directors, there was no
litigation, arbitration, or administrative proceedings or disputes pending or threatened
against our Company, any of our Director s or executive officers which could have a
material and adverse effect on our financial condition or results of operations. We may
from time to time become a party to various legal , arbitration or administrative proceedings
arising in the ordinary course of our business, and regardless of the outcome, any of such
legal, arbitration or administrative proceed ings is likely to result in substantial cost and
diversion of our resources, including our management’s time and attention. See ‘‘Risk
Factors — Risks Relating to Our Industry and Business — We may be involved in legal or
other proceedings arising out of our operations, including product liability claims, from
time to time and may face significant liabilities as a result.’’
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Non-compliance
During the Track Record Period and up to the Latest Practicable Date, neither we nor
our Directors had been or were involved in any m aterial non-compliance incidents that have
led to fines, enforcement actions or other pe nalties that could, individually or in the
aggregate, have a material adverse effect on the business, financial condition and results of
operations of our Group taken as a whole. However, as disclosed hereunder, we could be
subject to fines, penalties, and orders requiring that we change our practices, which could
have an adverse effect on our business and re sults of operations if our practice fails to
comply with applicable laws and regulations. See ‘‘Risk Factors — Risks Relating to Our
Industry and Business — Defects related to cer tain of our properties may adversely affect
our ability to use such properties’’ and ‘‘Risk Factors — Risks Relating to Our Industry and
Business — Increases in labor costs and the enforcement of stricter labor laws and
regulations in the region we operate may adversely affect our business and our
profitability.’’
Dispatched Workers
During the Track Record Period, some of our subsidiaries engaged dispatched workers
from employment agencies in mainland China who were assigned to work on our
production lines, to support our temporarily increased staffing needs to meet production
orders. Individuals dispatched by the service providers receive their salaries and other
employee benefits from the service provider s. According to the Interim Provisions on
Labour Dispatch ( 勞務派遣暫行規定,t h e‘ ‘Interim Provisions ’’) issued on January 24, 2014
and implemented on March 1, 2014 by the Ministry of Human Resources and Social
Security, the number of the dispatched workers shall not exceed 10% of the total number of
the employees.
During the Track Record Period, the per centage of dispatched workers engaged by
some of our subsidiaries had exceeded the 10% re gulatory threshold, ranging from 10.05%
to 24.38%. We have taken rectification mea sures for such non-compliance by directly
entering into employment contracts with required workers and closely monitoring the
number of dispatched workers we engage. As of the Latest Practicable Date, the number of
dispatched workers engaged by us had been reduced to the percentage below the regulatory
threshold and thus, we have rectified this n on-compliance. Pursuant to the Interim
Provisions and Labor Contract Law, employer who fails to comply with the relevant
requirements on labor dispatch shall be ordere d by the labor administrative authorities to
make rectification within a stipulated period . Where rectification is not made within the
stipulated period, employer may be subject to a penalty ranging from RMB5,000 to
RMB10,000 per dispatched worker exceeding the regulatory threshold. During the Track
Record Period and up to the Latest Practicable Date, none of our subsidiaries had received
any notice of rectification from the labor adm inistrative authorities. In view of (i) the
rectification made in relation to the afor esaid non-compliance, (ii) the compliance
certificates obtained from the local human resources and social security bureaus ( 人力資
源和社會保障局), all of which are competent authorities to issue such compliance
certificates as advised by our PRC Legal Advisors, in relation to the majority of our
subsidiaries, the dispatch workers engaged by which had exceeded the 10% regulatory
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threshold during the Track Record Period and the fact that no administrative penalty has
been imposed to our Company during the Track Record Pe riod, (iii) our Company’s
undertaking to fully comply with the relevan t PRC laws and regulations on labor dispatch
to prevent future recurrence in the future, our PRC Legal Advisor is of the view that the
risk that our relevant subsidiaries are exposed to pecuniary penalties imposed by the labor
administrative authorities resulting from the aforesaid non-compliance is remote.
Accordingly, our Directors are of the view that such non-compliance incident does not
constitute a neither material nor systemic non-compliance incident, and will not have a
material adverse impact on our business ope rations or financial condition as a whole.
Social Insurance and Housing Provident Fund Contributions
During the Track Record Period, we failed to make full contribution to the social
insurance fund and housing provident funds for certain employees based on their average
salaries of the immediately preceding year and/or the statutory contribution bases, and paid
the contributions for certain employees of our subsidiaries through third party payment
agents, which did not fully comply with the provisions of the Social Insurance Law of the
PRC (《中華人民共和國社會保險法》) and the Administrative Regulations on the Housing
Provident Fund ( 《住房公積金管理條例》). Based on the estimation of our Directors, the
aggregate shortfall of social insurance fund in 2021, 2022 and 2023 and the six months
ended June 30, 2024 amounted to approxi mately RMB12.3 million, RMB18.9 million,
RMB22.4 million and RMB12.6 million, respec tively, while the aggregate shortfall of
housing provident fund amou nted to approximately RMB7.8 million, RMB14.3 million,
RMB15.9 million and RMB10.3 million, respectively.
We believe this non-compliance incident o ccurred primarily because: (i) we made
standardized contribution to the social insurance fund and the housing provident funds for
certain employees based on their job title rank ing instead of making the contribution based
on their average salaries of the immediate ly preceding year and/or the statutory
contribution bases in accordance with the requirement of the relevant PRC laws and
regulations, (ii) the lack of experience of our relevant personnel who did not fully
understand the relevant requirements of the relevant PRC laws and regulations; (iii)
personal preference of our employees to have their social insurance fund and housing
provident funds paid in the accounts in a different location because of their work
arrangement; and (iv) some employees’ unw illingness to have social insurance and housing
provident fund contributions to the full extent due to the requirement that they
co-contribute and their own financial conside rations. Pursuant to the agreements entered
into between our relevant subsidiaries and third-party payment agents are required to pay
social security funds and housing provident funds for our relevant employees on time and in
full pursuant to our policies. These third part y payment agents have confirmed in writing
that they have paid such contributions on time and in full according to our agreements.
They have also confirmed in writing that they have not been subject to any administrative
penalty for social insurance and housing provident fund contributions. As of the Latest
Practicable Date, we had not received any administrative penalty, labor arbitration
application from employees or any inquiry from relevant government authorities regarding
such arrangements with third party payment agents.
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In the year ended December 31, 2021, 2022 a nd 2023 and the six months ended June 30,
2024, the number of employees whose social insurance fund and housing provident fund
contributions were paid by third party payment agents were 42, 99, 116 and 80, respectively,
representing approximately 2.0%, 2.9%, 2 .7% and 1.8% of our total employees for the
same periods. The contribution amounts in relation to third party payment agents
amounted to 2.8%, 4.7%, 6.0% and 3.4%, respectively, of our total social security and
housing provident fund contributions for the same periods.
Legal consequences and potential maximum penalties
Our PRC Legal Advisor has advised us that, under relevant PRC laws and regulations,
(i) in respect of the payment through third party payment agents, the relevant authorities in
mainland China may demand us to rectify within a stipulated deadline and we may be liable
to a fine of one to three times the amount of the relevant contributions; (ii) in respect of
outstanding social insurance contributions, the relevant authorities in mainland China may
demand us to pay the outstanding social insurance contributions within a stipulated
deadline and we may be liable to a late payment fee equal to 0.05% of the outstanding
amount for each day of delay; if we fail to make such payments, we may be liable to a fine of
one to three times the amount of the outstanding contributions. Based on the aggregate
shortfall of social insurance fund contribution, whether directly or indirectly, we estimate
the maximum potential penalties which may be imposed on us if we fail to make required
payments within the stipulated period required by the competent government authorities to
equal to three times of the shortfall amount, being RMB36.9 million, RMB56.7 million,
RMB67.2 million and RMB37.8 million for the y ears ended December 31, 2021, 2022 and
2023 and the six months ended June 30, 2024, respectively. We undertake to pay any such
shortfall contributions of social insurance and overdue charge within the prescribed period
after receipt of notice from relevant competent government authorities. In which case, no
fine will be further imposed on our Group.
Our PRC Legal Advisor has also advised us that, pursuant to relevant PRC laws and
regulations, (i) in respect of the payment through third party payment agents, the housing
provident fund management center may order rec tification within a prescribed time limit. If
the rectification is not made within such time limit, a fine ranging from RMB10,000 to
RMB50,000 may be imposed; (ii) in respect of outstanding housing provident fund, if we
fail to pay the full amount of housing provident fund as required, the housing provident
fund management center may order it to make the outstanding payment within a prescribed
time limit. If the payment is not made within su ch time limit, an application may be made to
the PRC courts for compulsory enforcement. As advised by our PRC Legal Advisor, there
is no expressed legal provisions or regulati ons that imposes a penalty on the Group for
shortfall contributions for housing provident fund contributions but we may be ordered to
pay the shortfall amount. Such outstanding amount, whether directly or indirectly,
amounted to approximately RMB7.8 milli on, RMB14.3 million, RMB15.9 million and
RMB10.3 million for the years ended Decembe r 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, respectively. If we were ordered to make such payment, we will do so
within the prescribed time period.
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Moreover, for social insurance, 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 ( 《關於貫徹落實國務院常務會議精神切實做好穩定社保費徵收工作的緊
急通知》) promulgated on September 21, 2018, it is prohibited for administrative
enforcement authorities to self-organize centr alized collection of enterprises’ historical
social insurance arrears. The Notice on Imp lementing Measures to Further Support and
Serve the Development of Private Economy ( 《國家稅務總局關於實施進一步支持和服務民營
經濟發展若干措施的通知》) (Shui Zong Fa [2018] No. 174) promulgated by the SAT and
became effective on November 16, 2018, repea ted that tax authorities at all levels may not
organize self-collection of arrears of taxpayers including private enterprises in the previous
years. The Notice on Promulgation of the Comprehensive Plan for the Reduction of Social
Insurance Premium Rate ( 《國務院辦公廳關於印發降低社會保險費
率綜合方案的通知》)
(Guo Ban Fa [2019] No. 13), promulgated by the General Office of the State Council on
April 1, 2019, emphasized that in the process of the reform of the collection system, it is not
allowed to conduct self-collection of historica l unpaid arrears from enterprises, and it is not
allowed to adopt any method of increasing the actual payment burden of small and micro
enterprises to avoid causing difficulties in the production and operation of the enterprise.
Remedies and rectification measures taken
We have obtained written compliance confirm ation letters from the relevant competent
government authorities, which confirmed that no administrative penalties had been
imposed on us in connection with the matter of social insurance and housing provident
fund contributions. Further, we, along with the Joint Sponsors, the PRC legal advisor of
the Joint Sponsors and Underwriters and the Reporting Accountants have conducted
interviews with the relevant competent govern ment authorities covering the majority of the
employees in question, which confirmed that, among our subsidiaries that have been
interviewed (i) as of the date of interviews, the accounts for the social insurance and
housing provident fund had been set up; (ii) as of the date of interviews, no administrative
penalties had been imposed on us in connect ion with the matter of social insurance and
housing provident fund contributions; and (iii) in the event of failure to make full
contribution to the social insurance fund and housing provident funds for certain employees
based on their average salaries of the immediately preceding year and/or the statutory
contribution bases, the possibility of the re levant competent government authorities
actively ordering payment of the shortfall contributions without complaint being lodged or
imposing administrative penalties withou t first ordering payment of the shortfall
contributions are relatively remote.
The competent government authorities from which written compliance confirmation
letters were obtained are local human resources and social security bureaus ( 人力資源和社
會保障局) and housing provident fund management centers ( 住房公積金管理中心). The
relevant government officials interviewed include directors, deputy directors and labor
inspection inspectors, etc. of the competent go vernment authorities. As advised by our PRC
Legal Advisor, the government authorities re ferred to above are the competent government
authorities responsible for administering the contribution of social insurance fund or
housing provident fund of our Company and the aforesaid government officials were
competent to represent the rele vant government authorities.
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As of the Latest Practicable Date, (i) we had not been subject to any material
administrative penalties on social insurance and housing provident funds; (ii) we had not
received any notification from the relevant au thorities in mainland China requiring us to
pay shortfalls or the penalties with respect to so cial insurance and housing provident funds;
(iii) we were neither aware of any material pen ding employee complaints nor were involved
in any material pending labor disputes with our employees with respect to social insurance
and housing provident funds, and (iv) interviews were conducted with the relevant
competent government authorities covering the majority of the employees to confirm that in
the event of failure to make full contributi on to the social insurance fund and housing
provident funds for certain employees based on their average salaries of the immediately
preceding year and/or the statutory contribu tion bases, the possibility of the relevant
competent government authorities actively ord ering payment of the shortfall contributions
without complaint being lodged or imposing administrative penalties without first ordering
payment of the shortfall contributions are relatively remote.
Subject to (i) employees’ cooperation in co mplying with the applicable payment base,
which also requires additional contributions from them and (ii) employees’ cooperation in
participating in social insurance and housing fund schemes where they temporarily reside,
we are committed to use our best efforts to comply in a manner as required by the relevant
government authorities. We undertake that we will be making contributions for our
employees in a manner as required as soon as practicable once we receive the notification
from the relevant government authorities, if any, to require us to make contribution for the
shortfall amounts or to amend our policies or practice in this regard, so that we will not
receive administrative punishment from the relevant government authorities due to the
failure of making the contributions in time.
In addition, in order to ensure ongoing compliance, we have also adopted a number of
enhanced internal control mea sures. We have assigned designated personnel to monitor the
status of payments of social insurance and provident fund contributions on a regular basis
in order to ensure that we have made these payments for employees on time in compliance
with the applicable laws and r egulations or in a manner as required by the relevant
government authorities. We are in the process of communicating with our employees with a
view to seeking their understanding and co operation in complying with the applicable
payment base, which also requires additional contributions from them. We have enhanced
our internal control measures in this regard. We expect to continue to consult our legal
advisors on a regular basis for advice on relevant PRC laws and regulations to keep abreast
of relevant regulatory developments. We will provide our senior management, human
resources department and relevant staffs with training regarding the legal and regulatory
requirements applicable to its operations.
Furthermore, Mr. Shi and Ms. Zhu have undertaken to our Company that they would
indemnify and keep indemnified our Company a gainst any damage, loss or liability suffered
by our Company or any other member of our Company arising out of or in connection with
the above non-compliance.
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In view of the above, in particular, our Company’s undertaking, the confirmations
from and interviews with relevant authorities, and the facts stated above, our PRC Legal
Advisor is of the view that the risk of our Company being imposed of the administrative
penalty for the aforementioned non-compliance incidents is relatively remote. Considering
(i) the nature and reasons for such non-compliances, (ii) our undertakings to make timely
payments when required to avoid any relevan t fines, (iii) the confirmations from and
interviews with relevant authorities, (iv) the opinion of our PRC Legal Advisors, and (v) the
relevant government policies outlined above, our Directors are of the opinion that this
non-compliance incident does not constitute a material nor systemic non-compliance
incident, and will not have a material adverse impact on our business operations or
financial condition as a whole. Based on the above, no provision has been made in relation
to this incident.
Lack of requisite permits and certificates for a heightened property
Prior to our acquisition of Tianjin Beiterui Nano (the ‘‘ Acquisition ’’), Tianjin Beiterui
Nano heightened certain areas of one of the leased properties in Tianjin. Such heightened
property is mainly used for production and occupies approximately 3,000.0 sq.m. Since this
property was constructed on top of a property leased from a third party, Tianjin Beiterui
Nano could not obtain relevant building ownership certificates. As such, as advised by our
PRC Legal Advisor, the heightened property c onstitutes an unauthorized building work. To
the best knowledge of our Directors, such non-compliance including failure to obtain
relevant construction permits occurred primar ily because the handling personnel of Tianjin
Beiterui Nano prior to the Acquisition was not familiar with the relevant regulatory
requirements. As of the Latest Practicable Date, Tianjin Beiterui Nano has obtained the
Construction Projects Comp letion Inspection Fire Control Filing Certificate ( 建設工程竣工
驗收消防備案受理憑證), and we were not aware of any incidents that have arisen due to the
safety conditions of such heightened construction. We expect to continue using such
properties as production facility for LFP cat hode materials while we are actively exploring
potential rectifying measures. As advised by our PRC Legal Advisor, the Law on Urban
and Rural Planning of the PRC ( 中華人民共和國城鄉規劃法) provides that failing to obtain
the construction planning permit or conducting the construction work without being in
compliance with the construction planning permit, (i) the relevant government authorities
at or above the county level shall order the constru ction to stop; (ii) if r ectification measures
can be taken to eliminate the impact on the imple mentation of the plan, corrections shall be
made within a time limit and a fine of no less than 5.0% but not more than 10.0% of the
construction costs shall be imposed; and (iii) if rectification measures cannot be taken to
eliminate the impact, the construction shal l be demolished within a prescribed period of
time. If the construction cannot be demolished , the illegal income shall be confiscated, and
a fine of not more than 10.0% of the construction costs may be imposed.
In addition, the Construction Law of the PRC ( 中華人民共和國建築法)p r o v i d e st h a t
before the commencement of a construction pr oject, the party in charge of construction
shall apply to the construction administrative department of the people’s government at or
above the county level where the project is located for a construction permit in accordance
with relevant laws and regulations. Those who commence construction without obtaining a
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construction permit or without commencement report shall be ordered to make corrections,
and those who do not meet the conditions for conducting construction shall be ordered to
stop construction and may be fined.
As advised by our PRC Legal Advisor, ba s e do nt h ea f o r e m e n t i o n e dl a w s ,t h e
maximum exposure for such defect is that the relevant government authority may require
the heightened property to be demolished within a prescribed period of time. If the
heightened property cannot be demolished, the relevant government authority may
confiscate the illegal income, and impo se a fine of not more than 10.0% of the
construction costs of the heightened property. We undertake to proactively arrange for
the heightened demolition if so required by the relevant government authority in order to
avoid confiscation of the illegal income. The construction costs of the heightened property
amounted to approximately RMB4.0 million. Taking into account estimated costs and
expenses for demolition and site restoration, transportation and reinstallation of
equipment, rental and fit-out expenses for alternative premises, we estimate cost for
relocation would amount to approximately RMB4.5 million in the event we are ordered to
demolish the heightened property.
As of the Latest Practicable Date, we had not been subject to any administrative
penalties by the relevant competent authorities because of the abovementioned defect.
We are of the view that the aforementioned defect does not constitute a material
non-compliance incident and would not materially and adversely affect our business, results
of operations and financial conditions, primarily considering the facts state above and the
following factors: (i) we have obtained wri tten confirmations from the Tianjin Baodi
Economic Development District Management Committee ( 天津寶坻經濟開發區管理委員
會), the local Planning and Natural Resources Bureau ( 規劃和自然資源局), Housing and
Construction Committee ( 住房和建設委員會), and Municipal Comprehensive
Administrative Law Enforcement Support Team ( 城市管理綜合行政執法支隊) stating that
Tianjin Beiterui Nano was not subject to any a dministrative penalties from any of these
government authorities. In addition, Tianjin Baodi Economic Development District
Management Committee also stated in its written confirmation that (a) necessary
assistance will be provided to Tianjin Beiter ui Nano in obtaining required construction
permits and building ownership certificates pertaining to the heightened construction, (b)
Tianjin Beiterui Nano will neither be compelled to demolish the heightened construction
nor be subjected to any penalties regarding thes e defects; (ii) the original lessor has assumed
full responsibility and consequences for t he defects, and has committed to use its best
efforts to assist us in obtaining all requisite permits and certificates; and (iii) we have
obtained an indemnity from Mr. Shi and Ms. Zhu, our Controlling Shareholders, to
indemnify our Group against any claims, fi nes, economic losses and expenses which may
arise from such defects.
Furthermore, with an aim to actively rectify the issue, Tianjin Beiterui Nano has
purchased the relevant leased property and corresponding land use rights for a
consideration of approximately RMB37.0 millio n and obtained the relevant property title
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certificate in March 2024 and is in the process of actively communicating with relevant
government authorities to supplement the requisite permits and certificates as of the Latest
Practicable Date.
As advised by our PRC Legal Advisor, the local Planning and Natural Resources
Bureau ( 規劃和自然資源局), Housing and Construction Committee ( 住房和建設委員會),
and Municipal Comprehensive Adminis trative Law Enforcement Support Team ( 城市管理
綜合行政執法支隊) are the competent government authorities responsible for administering
unauthorized building works in the Tianjin Baodi District. According to our PRC Legal
Advisor, based on relevant public available information from the official website of the
Baodi District People’s Government of Tianjin Municipality ( 天津市寶坻區人民政府), the
Tianjin Baodi Economic Development District Management Committee ( 天津寶坻經濟開發
區管理委員會) is a district-level administrative authority responsible for matters relating to
planning and construction, industrial development, investment service, finance, statistics,
safety and environmental protection in the Tianjin Baodi Economic Development District.
As such, while it is not the direct competent a uthority administrating local planning,
natural resources or housing construction, it does have a collaborative function with
competent government authorities in administer ing construction projects and worksites. See
‘‘Risk Factors — Risks Relating to Our Industry and Business — Defects related to certain
of our properties may adversely affect our ability to use such properties.’’
In an effort to prevent future recurrenc e of similar issues regarding our future
construction projects, we have expanded the scope of our internal review for new
construction projects to encompass compliance with regulatory and permitting
requirements. If necessary, external legal counsel may also be engaged to provide advice
on permits and certifications regarding our new construction projects.
Non-registration of lease agreements
As of the Latest Practicable Date, we had not filed the lease agreements for eight of our
leased properties (accounting for approximately 77.5% of the aggregate GFA of our leased
properties) with relevant local housing admini stration authorities as required under the
PRC law since the relevant lessors have not obtain ed relevant title certifications. We believe
that the reasons the lessors failed to obtain the relevant title certificates and therefore are
unable to file for lease agreement registrations were beyond our control. The
above-mentioned leased properties are pr imarily used for our production facilities,
research and development centers, office s, dormitories and others. Our PRC Legal
Advisor has advised us that the non-registration and filing of the relevant property lease
will not affect the validity of the lease contrac ts and the legal use of the leased properties
and therefore would not result in us being required to vacate the leased properties.
However, competent governmen t authorities may order us to complete the filing within the
prescribed period, and if we fail to rectify, a penalty ranging from RMB1,000 to
RMB10,000 per lease agreement may be imposed on us as a result of delay in filing. As of
the Latest Practicable Date, we had not received any notice from any regulatory authority
with respect to potential administrative penalties or enforcement actions as a result of our
failure to file the lease agreements describe d above, and we will register relevant lease
agreements as soon as relevant lessors have obtained the title certificates or such agreements
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could be registered. In addition, we have estab lished internal guidelines and enhanced our
internal control procedures requiring us to seek the lessors’ agreement to register lease
agreements before signing in order to ensu re compliance with applicable PRC laws and
regulations. Considering the facts and our PRC Legal Advisors’ advice state above, our
Directors are of the opinion that the non-regis tration of lease agreements do not constitute
a material or systemic non-compliance incident, and the failure to register these lease
agreements will not have any material adverse effect on our operations and financial
position.
Lack of title certificates for certain leased properties
As of the Latest Practicable Date, lessors of eight of the leased properties with a GFA
of 643,273.6 sq.m. had not provided us with the r elevant building title certificates. Such
leased properties are used for o ur production facilities, resear ch and development centers,
offices, dormitories and others. We believe that the reasons the lessors failed to provide us
with the relevant title certificates were beyond our control. In order to minimize the
potential adverse impacts on our operations, we have maintained communications with
such lessors regarding the progress of rectifi cation of the title defects. We have obtained
written confirmations from relevant government authorities, which are the competent
authorities to give the such confirmations as advised by our PRC Legal Advisor, that the
relevant lessors are entitled to lease the properties to others or have obtained other
documentation such as construction project planning permits. Considering the
abovementioned written confirmations from competent government authorities and
alternative documentation obtained, our Dire ctors are of the view that such irregularities
do not constitute a material or systemic non -compliance, and will not have any material
adverse effect on our operations and financial positions as a whole. In addition, we have
established internal guidelines and enhanced our internal control procedures to improve our
evaluation of the new leased properties fr om a compliance perspective, and we will make
careful inspections of the title of leased proper ties before signing the lease in the future. We
will also consult our external legal advisor with regard to reviewing the title certificates and
other documents of our new leased properties in order to ensure compliance with applicable
laws and regulations.
Lack of title certificate and relevant planni ng permits for a facility under construction
In connection with our lithium carbon ate production facility in Yichun, our
subsidiary, Lopal Times, commenced construction of a lithium residue treatment and
comprehensive utilization proje ct in early 2024. However, the land pertaining to this project
is designated as agriculture land (including forest land) rather than construction land.
While Lopal Times has received the ‘Approval for Use of Forest Land’ ( 使用林地審核同意
書) issued by the Forestry Bureau of Jiangxi Province, which is a prerequisite for converting
forest land into construction land, as of the Latest Practicable Date, Lopal Times has not
completed all the requisite approval procedures for converting agriculture land to
construction use. Consequently, Lopal Times has not obtained the relevant land use right
certificate and planning permits pertaining t he relevant land as of the Latest Practicable
Date.
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As advised by our PRC Legal Advisor, pursuant to relevant laws and regulations
including the Land Administration Law of the PRC ( 中華人民共和國土地管理法)a n dt h e
Law on Urban and Rural Planning of the PRC ( 中華人民共和國城鄉規劃法), failure to
obtain the relevant land use right certificate and planning permits, as well as complete the
required procedures before commencing construction, may result in orders to cease
construction, return the land, restore the land to its original condition, require demolition
of any constructions already undertaken, be subject to fines.
According to the ‘Explanatory Statement’ ( 情況說明) issued by the Natural Resources
Bureau of Yifeng County ( 宜豐縣自然資源局) on April 24, 2024, it is confirmed that the
Lopal Times is in the process of applying for t he relevant title certificate and planning
permits and completing approval procedures for the aforementioned lithium residue
treatment project, and upon completion of r eview, it is expected that there will be no
substantive obstacles to obtaining the relevant title certificates and planning permits. The
bureau confirmed that it will not pursue legal lia bility or impose administrative penalties on
our Lopal Times and/or the responsible persons for the aforementioned matters. In
addition, according to the ‘Natural Resources Compliance Certificate’ ( 自然資源合規證明)
issued by the same bureau on July 18, 2024, it is confirmed that Lopal Times is in strict
compliance with relevant laws and regulations pertaining to natural resource management,
territorial spatial planning, urban and rural construction, with no violations identified in
these areas. The bureau has not initiated any investigations, imposed administrative
penalties, nor are there any ongoing or poten tial disputes or litigations involving the
bureau. The bureau also confirmed that it had not received any third-party reports,
complaints or claims against Lopal Times.
Our PRC Legal Advisor is of the view that the aforementioned defect would not have a
material adverse impact on the current business operations of the Group on the basis of (i)
Lopal Times is proactively completing the requisite approval procedures and obtaining
relevant land use right certificate and plann ing permits, (ii) the abovementioned written
Explanatory Statements issued by the Natural Resources Bureau of Yifeng County
confirming, among other things, that there are no substantive obstacles for Lopal Times to
obtain the title certificate and planning per mits and it will not pursue legal liability or
impose administrative penalti es on Lopal Times and/or the res ponsible persons, and (iii) as
of the Latest Practicable Date, we had not been subject to any investigation or
administrative penalties from the Natural R esources Bureau of Yifeng County due to the
abovementioned defect. Considering the view of our PRC Legal Advisors and its basis,
including our receipt of the written confirmatio ns obtained from the relevant authorities,
and the fact that lithium residue treatment a nd comprehensive utilization project has not
made any revenue contribution during the Track Record Period, and such non-compliance
had not resulted in any adverse impact on our LFP cathode material production, our
Directors are of the view that such non-compliance does not constitute a material
non-compliance incident, and will not have any material adverse effect on our operations
and financial positions.
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As advised by our PRC Legal Advisor, the Natural Resources Bureau of Yifeng
County is the competent government authority responsible for matters including conversion
of agricultural land to construction land and land expropriation approval, issuance of
planning permits and imposing penalties for illegal transfer of land and unauthorized
conversion of agricultural land to construction land, and therefore is a competent authority
to give the such Explanatory Statemen t and the compliance certificate.
Despite all the above immaterial non-comp liance incidents, our Directors are of the
view, and the Joint Sponsors concurs, that our Directors are suitable to act as Directors
under Rules 3.08 and 3.09 of the Listing Rules and that the Company is suitable for listing
under Rule 8.04 of the Listing Rules.
Verbal Warning by the Shanghai Stock Exchange
On March 28, 2023, our Company and Mr. Shen as our chief financial officer received
a verbal warning (the ‘‘ Verbal Warning ’’) from the Shanghai Stock Exchange for an error in
the accounting of our financial liability whi ch affected our consolidated financial
statements for the financial year ended December 31, 2021, the three months ended
March 31, 2022 and the six months ended June 30, 2022 (collectively, the ‘‘ relevant financial
statements ’’).
The error in the accounting of our financi al liability was in relation to the capital
increase of Changzhou Liyuan in December 2021 and June 2022, pursuant to which the
minority equity holders of Changzhou Liyuan were granted the right to demand us to
repurchase their equity interest in Changz h o uL i y u a nu n d e rc e r t a i nc o n d i t i o n s .I n
preparing the relevant financial statements, we inadvertently failed to recognize our
potential obligation to repurchase the equity interest in Changzhou Liyuan as our financial
liability under our accounting treatment. P ursuant to the 2021 Listed Company Annual
Report Accounting Supervision Report (2021 年上市公司年報會計監管報告) issued by the
CSRC, if we are under a contractual obligation to repurchase our equity instrument in cash
which cannot be unconditionally exempted, we should recognize the present value of the
amount of consideration required to fulfil our obligation to repurchase such equity
instrument as our financial liability in o ur consolidated financial statements.
Upon seeking advice from and confirming the accounting treatment with our
independent auditors, our Company passed a Board resolution on September 16, 2022 to
rectify the relevant figures in the relevant fin ancial statements and made a clarification
announcement on September 17, 2022 to explain the accounting error and how such error
was being rectified. We also strengthened our efforts to supervise the accounting work,
improve the competence of our financial personnel including Mr. Shen and strengthen the
training on the accounting standards and policies, so as to better understand the disclosure
requirements and avoid recurrence of simila r breaches. Specific measures include:
. Passed a Board Resolution on September 16, 2022, to rectify the relevant figures
in the affected financial statements and made a clarification announcement on
September 17, 2022 to explain the accounti ng error and how it was being rectified.
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. Commenced providing specific training to responsible employees, including Mr.
Shen, on the disclosure requirement under the Stock Listing Rules of the Shanghai
Stock Exchange and No. 15 of Rules for the Preparation of Information
Disclosure by Companies Issuing Public Securities — General Provisions on
Financial Reports ( 公開發行證券的公司信息披露編報規則第15號 — 財務報告的
一般規定).
. Hired two additional personnel with CPA qualifications after the Verbal
W a r n i n g .T h e s et w oC P A sa r es t r a t e g i cally positioned separately at our
headquarters, overseeing group-wide financial reporting processes and ensuring
consistency in accounting practices across the organization, and at our production
bases respectively, providing direct supe rvision of financial data collection and
initial reporting at the operational level.
. Relevant accounting staff have attended training in relation to PRC GAAP and
HKFRS.
. We are also committed to engage or consult external accounting experts when
encountering complex accounting issues , and maintain regular communication
with reporting accountants to clarify any points of uncertainty as needed.
Furthermore, we have engaged an internal control consultant to perform an internal
control review on our internal control systems, including those pertaining to our Group’s
financial reporting. We have established and issued comprehensive accounting policies to
regulate accounting treatment and approval controls. The internal control consultant has
completed internal review procedures in August 2024. We have not received any further
recommendations or findings from the internal control consultant. Despite the Verbal
Warning against Mr. Shen, our Directors (other than Mr. Shen) are of the view and
concurred by the Joint Sponsors, that Mr. Shen is suitable to act as a Director under Rules
3.08 and 3.09 of the Listing Rules having considered the following reasons:
. as stated in the Verbal Warning, as there are uncertainties and difficulties in the
application of accounting standard in the relevant accounting treatment and the
accounting error does not affect the profits of our Company, the breach and its
impact to the market were minor;
. as advised by our PRC Legal Advisor, according to the Measures for the
Implementation of Disciplinary Actions and Supervisory Measures of the
Shanghai Stock Exchange (Revised in 2022) ( 上海證券交易所紀律處分和監管措
施實施辦法（2022 年修訂）), the Verbal Warning was neither an administrative
penalty nor a disciplinary action imposed by the Shanghai Stock Exchange. As
such, our Directors are of the view that the Verbal Warning does not constitute a
non-compliance incident of the Company;
. as advised by our PRC Legal Advisor, under the PRC Company Law, there are
five circumstances that would affect a p erson’s eligibility for appointment of
directors, supervisors and senior officers, namely (1) any person who does not
have civil capacity or who has limited civil capacity; (2) any person who has been
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convicted of any criminal offence in the nature of corruption, bribery, disseizing,
misappropriation or disrupting the economic order of the socialist market and the
five-year period has not elapsed since any penalty imposed has been completed, or
any person who has ever been deprived of his political rights due to any crime and
a five-year period has not elapsed since the penalty imposed was completed; (3)
any former director, factory director or manager of a company or enterprise
which has been declared bankrupt and liquidated in circumstances where he was
personally responsible for the bankruptcy of the company or enterprise, and a
three-year period has not elapsed since the bankruptcy and liquidation of the
company or enterprise was completed; (4) any former legal representative of a
company or enterprise which has had its business license revoked and has been
ordered to close its business operations due to any violation of law in
circumstances where the former legal representative was personally liable for
the revocation of the business license and a three-year period has not elapsed since
the date of revocation; or (5) any person who has significant unpaid due debts.
The Verbal Warning does not fall into any of the above;
. no monetary fine or other penalty was imposed on our Company or Mr. Shen and
Mr. Shen remained to be qualified to serve as a Director of our Company;
. there has not been any occurrence of other similar events in our Company when
Mr. Shen served as a Director of our Company; and
. Mr. Shen received directors’ training from our Hong Kong legal advisor and he
has confirmed that he fully understands his obligations as a director of a company
listed on the Hong Kong Stock Exchange, in particular the directors’ fiduciary
duties and the relevant disclosure requirements under the Listing Rules.
RECENT REGULATORY DEVELO PMENT IN MAINLAND CHINA
Regulations Relating to Overseas Listing
On February 17, 2023, the CSRC promulgated the Trial Measures for Administration
of the Overseas Securities Offering and Listing by Domestic Enterprises ( 《境內企業境外發
行證券和上市管理試行辦法》) (the ‘‘Trial Measures ’’) and five supporting guidelines, which
took effect on March 31, 2023. The Trial Measures comprehensively reformed the
regulatory regime for overseas offering and lis ting of PRC domestic companies’ securities,
either directly or indirectly, into a filing-based system. According to the Trial Measures,
PRC domestic companies that seek to offer and list securities in overseas markets, either in
direct or indirect means, are required to fulfill the filing procedure with the CSRC and
report relevant information. Where an issue r submits an application for initial public
offering to competent overseas regulato rs, filing application with the CSRC shall be
submitted within three business days therea fter. As advised by our PRC Legal Advisor, our
Listing is a direct overseas listing by dome stic company under the Trial Measures. See
‘‘Regulatory Overview — Laws and Regulations in the PRC — Laws and Regulations on
Overseas Offering and Listing.’’ We have sub mitted the filing application to CSRC within
three business days after our submission of the a pplication of listing to the Stock Exchange.
Our Group will comply with the filing require ments under the Trial Measures. The CSRC
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publicly informed us that it accepted our filing application on November 3, 2023. In
addition, as advised by our PRC Legal Advisor, we do not fall under any of the prohibited
circumstances that would disallow an overseas listing as stipulated in the Trial Measures.
On January 18, 2024, the CSRC has issued a notification on our Company’ completion of
the PRC filing procedures for the listing of our H Shares on the Stock Exchange and the
Global Offering.
RISK MANAGEMENT AND INTERNAL CONTROL
We have in place a reasonable internal control and risk management system to address
the strategic, operational, financial, legal, investment and market risks identified in relation
to our operations. This system comprises var ious measures and policies, including budget
management, procurement management, expenditure management, sales and development
management, safety and environmental prote ction management, investment management,
financial leverage management, connected party transaction controls, anti-fraud and
whistleblowing procedures, information disc losure controls, human resources management,
IT management and financial and operational controls and monitoring procedures.
To monitor the implementation of our risk management policies and corporate
governance measures after the Global Offering, we have adopted and will continue to
adopt, among others, the following risk management measures:
. establish the strategy committee to evaluate and make recommendations on (i)
long-term development strategies and plans; (ii) major financing proposals where
Board approval is required by our Artic les of Association; (iii) major capital
expenditures or investments where Board approval is required by our Articles of
Association; and (iv) other key matters that may affect our development. The
strategy committee consists of three Directors, being Mr. Shi, Mr. Zhang Yi and
Mr. Li Qingwen. For details of the qualific ation and experience of these members,
see ‘‘Directors, Supervisors and Senior Management.’’
. establish the audit committee to review our financial reporting process and
internal control system, set up the risk management and internal audit
procedures, provide advice and comments to our Board and perform other
duties and responsibilities a s may be assigned by the Board. The audit committee
will consist of three Directors, being Ms. Geng Chengxuan, Mr. Ye Xin and Mr.
Hong Kam Le. For details of the qualificat ion and experience of these members,
see ‘‘Directors, Supervisors and Senior Management.’’
. establish anti-fraud policies to identif y, prevent and punish unethical and illegal
conducts, as well as whistle-blowing procedures to encourage our employees to
bring those conducts to the attention of our senior management and Board of
Directors and ensure the protection of whistle-blowers;
. adopt various policies to ensure our compliance with the Listing Rules, including
but not limited to policies in respect of risk management, connected transactions
and information disclosures;
BUSINESS
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. engage accounting firms to provide professional advice and consultations with
respect to our risk management; and
. arrange for our Directors and senior management to attend training seminars on
the Listing Rules’ requirements and the responsibilities of a director of a Hong
Kong listed company.
Some jurisdictions or organizations have implemented measures that impose economic
sanctions against certain countries or aga inst targeted industry sectors, groups of
companies or persons, and/or organizations wi thin such countries. Such sanctions involve
uncertainties and could negatively impact o ur ability to work with existing and future
customers and suppliers. In response, we have adopted the following internal control
measures to identify and minimize our exposure to sanctions risk:
. implementing a sanctions response management protocol which equips our
employees with a structured process for evaluating sanctions risks and
determining appropriate actions;
. actively monitoring sanctions laws and regulations to stay on top of changes that
may impact our business operation, and make appropriate adjustments to our
protocols and procedures;
. maintaining and periodically updatin g a list of sanctioned parties based on
publicly available sanctions lists to prescreen customers, suppliers and other
business partners;
. promptly seeking appropriate advice from external legal counsel and experts upon
identifying material sanctions risks in our operations; and
. providing relevant training on sancti ons compliance and related issues to our
senior management members and relevant employees.
Our Board is responsible for overseeing our overall risk management, such as
determining risk management objectives and p olicies. The Board has authorized the senior
management to design and implement procedures that ensure the effective implementation
of risk management objectives and policies. The senior management review the effectiveness
of implemented procedures and the rationality of risk management objects and policies
through monthly reports submitted by functional department. After due consideration, our
Directors are of the view that our current internal control measures are adequate and
effective. For further details of our risk manage ment measures, see ‘‘Directors, Supervisors
and Senior Management — Board Committees — Audit Committee.’’
BUSINESS
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OUR CONTROLLING SHAREHOLDERS
Immediately following the completion of the Global Offering (assuming the
Over-allotment Option is not exercised and the options granted under the 2023 Share
Option Scheme are not exercised), Mr. Shi, Ms. Zhu (Mr. Shi’s wife) and Nanjing Bailey
will directly own approximately 31.98%, 3.55% and 0.29% respectively of the total issued
share capital of our Company, representing approximately 32.08%, 3.56% and 0.29%,
respectively, of the voting rights of the Com pany. Lopal International was the general
partner of Nanjing Bailey and was owned as to 90% by Mr. Shi and as to 10% by Ms. Zhu
as of the Latest Practicable Date. Accordingly, Mr. Shi, Ms. Zhu, Lopal International and
Nanjing Bailey will be a group of Controll ing Shareholders controlling in aggregate
approximately 35.81% of the total issued sh are capital of our Company, representing
approximately 35.93% of the voting rights of our Company, upon Listing.
For details of Mr. Shi and Ms. Zhu, see ‘‘Directors, Supervisors and Senior
Management — Board of Directors.’’ For det ails of Nanjing Bailey and Nanjing Lopal
International, see ‘‘History and Devel opment — Corporate Structure — Corporate
Structure as of the Latest Practicable Date.’’
I N T E R E S T SO FO U RC O N T R O L L I N GS H AREHOLDERS IN OTHE RB U S I N E S S E S
Each of our Controlling Shareholders and Directors confirms that he/she does not
have any interest in a business, apart from the business of our Company, which competes or
is likely to compete, directly or indirectl y, with our businesses, which would require
disclosure under Rule 8.10 of the Hong Kong Listing Rules.
Mr. Shi has been the chairman of Hunan Farnlet New Energy Technology Co., Ltd.
(湖南法恩萊特新能源科技有限公司)( ‘ ‘Hunan Farnlet ’’) since June 2021 and Ms. Zhu has
been a director of Hunan Farnlet since May 2022. As of the Latest Practicable Date, Mr.
Shi directly held 45% of the equity interes t in Hunan Farnlet, Nanjing Duoli Venture
Capital Center (Limited Partnership) ( 南京多利創業投資中心（有限合夥）)( ‘ ‘Nanjing Duoli ’’)
held 4.5% of the equity interest in Hunan Farnlet, and Nanjing Hongli Venture Capital
Center (Limited Partnership) ( 南京弘利創業投資中心（有限合夥）)( ‘ ‘Nanjing Hongli ’’) held
4.5% equity interest in Hunan Farnlet. As of the Latest Practicable Date, Nanjing Duoli
was managed by and owned as to 34.22% by Ms. Zhu as its general partner, and owned as
to 18.15% by Mr. Zhang Yi (our executive Director), 17.01% by Mr. Shen Zhiyong (our
executive Director), 2.27% by Mr. Lu Zhenya (our executive Director) and 2.27% by Mr.
Qin Jian (our executive Director); Nanjing Hongli was managed by and owned as to 80% by
Mr. Shi as its general partner, owned as to 10% by Ms. Zhu and owned as to 10% by Lopal
International. There is clear delineation between Hunan Farnlet and our Group. Hunan
Farnlet is primarily engaged in the production o f lithium-ion electroly te in mainland China.
Our Group is not involved in the production of lithium-ion electrolyte. Hunan Farnlet is
not in competition with our Group, as lithium-ion electrolyte (which Hunan Farnlet
produces) and LFP cathode materials (which our Group produces) are different raw
materials that are commonly used in para llel with each other in the production of
lithium-ion batteries.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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As of the Latest Practicable Date, Lopal International directly owned the entire equity
interest of each of Jiangsu Meiduo Technology Co., Ltd. ( 江蘇美多科技有限公司)( ‘ ‘Jiangsu
Meiduo ’’) and Shandong Meiduo (together with Jiangsu Meiduo, the ‘‘ Meiduo Companies ’’).
We have agreed to acquire all equity interest s in Shandong Meiduo in line with our strategic
expansion upstream along the production value chain and such acquisition has not
completed as of the Latest Practicable Dat e pending satisfaction of the Production
Condition. Upon completion of such acquisition, Shandong Meiduo will be wholly-owned
by our Group. For more details, see ‘‘History and Development — Major Acquisitions and
Disposals — Acquisition of Shandong Meiduo.’’ Mr. Shi has been a director of Jiangsu
Meiduo since its incorporation in September 2022 and a director of Shandong Meiduo since
its incorporation in September 2022. There was clear delineation between Meiduo
Companies and our Group. Meiduo Companie s are primarily engaged in the business of
recycling of lithium-ion batteries. Our Group was not involved in recycling of lithium-ion
batteries during the Track Record Period and that the Shandong Meiduo Acquisition is in
line with our strategic expansion upstream along the production value chain.
For the purpose of the listing of our A Shares on the Shanghai Stock Exchange and in
order to avoid any potential competition between our Group and the companies controlled
by Mr. Shi and/or Ms. Zhu, Mr. Shi and Ms. Zhu provided a non-competition undertaking
in favor of our Company on February 10, 2015 (the ‘‘ Non-competition Undertaking ’’).
Pursuant to the Non-competition Undertaking, each of Mr. Shi and Ms. Zhu has
undertaken that:
(1) he/she does not and will not directly or i ndirectly engage or participate in any
activities in or outside of the PRC which are in the same or similar areas as, or
which compete with, our Company’s present or future businesses, or own any
equity or similar interests in economic entities, organizations or economic
associations which compete with our Company, whether by way of investments,
gaining of control, formation of joint ventures, entering into cooperation or
otherwise; and will not assist, procure or represent any third party to directly or
indirectly engage in activities which are in the same or similar areas as, or which
compete with, our Company’s present or future businesses; he/she is not and will
not become a director, supervisor or other senior management member of any
such economic entities, organizations or economic associations; he/she does not
have and will not obtain control of any such economic entities, organizations or
economic associations;
(2) as long as he/she remains as a Director and within six months after he/she resigns
as a Director, he/she will not directly or indirectly engage or participate in any
activities which compete with or may com pete with, our Company’s businesses, or
own any interests in economic entities, organizations or economic associations
which compete with our Company, or acquire control of any such economic
entities, organizations or economic associations, or become a senior management
member or key technical personnel of any such economic entities, organizations
or economic associations;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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(3) if he/she fails to perform the above undertakings or fails to perform the above
undertakings promptly, (i) our Company will promptly and fully disclose the
relevant facts and specific reasons of such failure to perform; (ii) he/she will
promptly provide legal, reasonable and effective supplemental or replacement
undertakings to protect the interests of our Company and its investors to the
greatest extent; (iii) our Company will submit the said supplemental or
replacement undertakings to our Shareholders in general meeting for approval;
(iv) any gains resulting from his/her failure to perform the above undertakings or
failure to perform the above undertakings promptly will belong to our Company;
(v) if his/her failure to perform the above undertakings or failure to perform the
above undertakings promptly has caused any damage to our Company or its
investors, he/she will compensate our Company or its investors in accordance with
the law;
(4) the above undertakings shall take e ffect immediately upon the signing of the
Non-competition Undertaking, and such undertakings shall remain effective,
unchangeable and irrevocable as long as he/she holds no less than 5% of our
Shares or exerts material control over our Company.
INDEPENDENCE FROM OUR CON TROLLING SHAREHOLDERS
Our Directors consider that we are capable of carrying out our business independently
from our Controlling Shareholders and their resp ective close associates after the Listing,
taking into account the following factors:
Management Independence
Our Board comprises five (5) executive Dir ectors, one (1) non-executive Director and
four (4) independent non-executive Directors. Although Mr. Shi is an executive Director
and Ms. Zhu is a non-executive Director , and both of them are our Controlling
Shareholders, our management and operational decisions are made by our Board and
senior management, all of whom have substantial experience in the industry in which we are
engaged and/or in their respective fields of expertise. Also, Mr. Shi and Ms. Zhu have a
track record of devoting sufficient time and energy to discharge their duties as our Directors
and senior management and they will contin ue to focus on our Group’s business. When
performing their duties as Directors, they have been and will continue to be supported by
the separate and senior management team of the Group. The balance of power and
authority is ensured by the operation of the senior management and our Board. See
‘‘Directors, Supervisors and Senior Management’’ for further details.
In addition, although Mr. Shi and Ms. Zhu are our Controlling Shareholders, we
consider that our Board and senior management will function independently from our
Controlling Shareholders because of the following reasons:
. each of our Directors is aware of his fiduciary duties as a Director which require,
among others, that he must act for the benefit of and in the best interests of our
Company and not allow any conflict between his duties as a Director and his
personal interests;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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. four (4) out of our ten (10) Directors are independent non-executive Directors
who have extensive experience in differen t professions. They have been appointed
pursuant to the requirements under the Hong Kong Listing Rules to ensure that
the decisions of the Board are made only after due consideration of independent
and impartial opinions. We believe our independent non-executive Directors will
bring independent judgment to the decision-making process of our Board;
. our Directors shall not vote in any Board resolution approving any contract or
arrangement or any other proposal in which he or any of his close associates have
a material interest and shall not be counted in the quorum present at the
particular Board meeting; and
. we have adopted a series of corporate governance measures to manage conflicts of
interest, if any, between our Group and our Controlling Shareholders which
would support our independent management. See ‘‘— Corporate Governance
Measures.’’
Based on the above, our Directors are satisfied that our Board as a whole together with
our senior management team are able to perform the managerial role in our Group
independently.
Operational Independence
We do not rely on our Controlling Shareholders and their close associates for our
business development, staffing, logistics , administration, finance, internal audit,
information technology, sales and marketing, or our 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 the
Controlling Shareholders and their close associates. In addition, we have our own
headcount of employees for our operations and management for human resources.
Even though some of our distributors are our connected persons as disclosed in
‘‘Connected Transactions’’, we have independent access to suppliers and customers and an
independent management team to handle our day-to-day operations. We are also in
possession of all relevant licenses, certificat es, facilities and intellectual property rights
necessary to carry on and operate our princ ipal businesses and we have sufficient
operational capacity in terms of capital and employees to operate independently.
Based on the foregoing, our Directors believe that we are able to operate independently
of the Controlling Shareholders and their close associates.
Financial Independence
We have independent internal control and accounting systems. We also have an
independent finance department responsible for discharging the treasury function. We make
financial decisions according to our own business needs.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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We have obtained certain bank loans which were secured by guarantees provided by
Mr. Shi and/or Ms. Zhu (the ‘‘ Controlling Sharehol ders’ Guarantees ’’). As of August 31,
2024, we had an aggregate of approximatel y RMB2,075.8 million of bank borrowings
guaranteed by Mr. Shi and/or Ms. Zhu (the ‘‘ Guaranteed Loans ’ ’ ) .O u to ft h eG u a r a n t e e d
Loans, the one with the latest maturity date will mature on August 10, 2030.
Our Directors are of the view that prematur e discharge of all outstanding Controlling
Shareholders’ Guarantees before the Listing would be impractical and unduly onerous to
the Group and would not be in the best interests of our Group and our Shareholders,
considering that early discharge of the Contro lling Shareholders’ Guar antees would require
renegotiation of the terms with the relevant banks, and the renegotiation would be
time-consuming and may affect our normal operation.
Notwithstanding the above, our Directors are of the view that we are financially
independent of our Controlling Shareholders and/or their close associates for the following
reasons:
(1) we have a strong track record of obtaining financing independently. As of August
31, 2024, our aggregate bank borrowings obtained independently, i.e. our
aggregate bank borrowings deducted by our bank borrowings guaranteed by
Mr. Shi and/or Ms. Zhu, amounted to approximately RMB5,487.0 million,
representing approximately 72.55% of our total bank borrowings. As of August
31, 2024, the total amount of banking facilities obtained by our Group
independently and available for drawdown was approximately RMB1,063.4
million. After June 30, 2024 and up to Augu st 31, 2024, we have a lso obtained new
bank facilities amounted to RMB1,226.9 million, which are not guaranteed by our
Controlling Shareholders or their close associates. Furthermore, we have
continuously been able to conduct various types of fundraising activities in
addition to obtaining bank facilities. Fo r instance, in May 2022, we underwent a
non-public offering of our A Shares to independent investors and raised
approximately RMB2,175.6 million in n et proceeds (after d eduction of the
underwriting commissions and other offering related expenses). Moreover, we
conducted several rounds of capital incr eases in our operating subsidiaries by
independent investors during the Track Record Period. During the Track Record
Period, Changzhou Liyuan has raised capital of over RMB730.4 million by
independent investors;
(2) the Guaranteed Loans do not account for a huge portion of our total borrowings.
As of August 31, 2024, the aggregate balance of the Guaranteed Loans were
approximately RMB2,075.8 million, repr esenting approximately 27.45% of our
total bank borrowings; and
(3) we are capable of obtaining independent financing and resources to cover the
Guaranteed Loans. As of August 31, 2024, we have unutilized banking facilities of
RMB1,063.4 million which were not guaran teed by our Controlling Shareholders.
Besides, we have obtained letters from financial institutions who have indicated
that they were willing to provide our Group with facilities in the sum of RMB2.0
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
–3 3 6–


--- page 347 ---
billion without guarantees from our Contr olling Shareholders on comparable
terms, subject to regulatory requirement s, negotiation of detailed terms and the
customary credit policies of such financial institutions. After Listing, we expect to
carry out further fundraising activities in onshore and offshore markets depending
on, among other things, market conditions, our business needs and our financial
conditions subject to compliance with app licable regulatory requirements. In view
of the foregoing, and having considered our proven track record of obtaining
financing independently and business relationships with financial institutions, we
believe that after Listing, we will be capable of obtaining financing on comparable
terms to existing loans obtained by our Group from financial institutions in the
PRC without requiring guarantees by our Controlling Shareholders which can be
used as general working capital in recognition of our standalone credit.
Based on the above, our Directors believe that we have the ability to operate
independently of our Controlling Shareholders a nd their respective close associates from a
financial perspective and are able to maintain financial independence from, and do not
place undue reliance on, our Controlling Sharehol ders and their respective close associates.
CORPORATE GOVERNANCE MEASURES
Our Company will comply with the provisions of the Corporate Governance Code in
Appendix C1 to the Hong Kong Listing Rules, which sets out principles of good corporate
governance. Our Directors recognize the im portance 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:
. as part of our preparation for the Global Offering, we have amended our Articles
of Association to comply with the Hong Kong Listing Rules. In particular, our
Articles of Association provide that a Director shall not vote on any resolution in
which such Director have a material interest in the company involved, and if the
laws and regulations and the rules of the stock exchange where our Shares are
listed imposed any further restrictions on directors’ attendance at board meetings
and voting, such laws, regulatio n and rules shall be complied with;
. we have established internal control mechanisms to identify connected
transactions. Upon the Listing, if we enter into connected transactions with any
of our Controlling Shareholders or their respective associat es, our Company will
comply with the applicable Hong Kong Listing Rules;
. we are committed that our Board should include a balanced composition of
executive and non-executive Directors (including independent non-executive
Directors). We have appointed four (4) independent non-executive Directors
and we believe our independent non-executive Directors possess sufficient
experience and they are free of any business or other relationship which could
interfere in any material manner with the exercise of their independent judgment
and will be able to provide an impartial and external opinion to protect the
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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interests of our public Shareholders. Details of our independent non-executive
Directors are set out in ‘‘Directors, Supervisors and Senior Management — Board
of Directors — Independent Non-executive Directors;’’
. in the event that the independent non-executive Directors are requested to review
any conflicts of interests circumstances between our Group on the one hand and
our Controlling Shareholders and/or o ur Directors on the other hand, our
Controlling Shareholders and/or our Dire ctors shall provide the independent
non-executive Directors with all necessary information and our Company shall
disclose the decisions of the independent non-executive Directors either through
our annual report or by way of announcements; and
. we have appointed Guotai Junan Capital Limited as our compliance advisor,
which will provide advice and guidance to us in respect of compliance with the
applicable laws and the Hong Kong Listin g Rules including various requirements
relating to directors’ duties and corporate governance.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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OVERVIEW
We have entered into certain transactio ns with certain parties which will, upon the
Listing, become our connected persons. Upon the Listing, the transactions disclosed under
this section will constitute continuing connected transactions under Chapter 14A of the
Listing Rules.
The historical amounts disclosed for th e years ended December 31, 2021, 2022 and
2023 and the six months ended June 30, 2024 in respect of continuing connected
transactions in this section constitute only a portion of the amounts disclosed in respect
of our Group’s related party transactions for the years ended December 31, 2021, 2022 and
2023 and the six months ended June 30, 2024 as set out in Note 39 to Part II of the
Accountants’ Report set forth in Appendix IA. Our Group sold raw materials to Shandong
Meiduo amounting to approximately RMB0.02 million after the end of the Track Record
Period and up to the Latest Practicable Date and we do not currently expect to enter into
transactions with Shandong Meiduo prior to completion of Shandong Meiduo Acquisition.
Should any transactions with Shandong Meiduo materialises after the Listing and prior to
the completion of the Shandong Meiduo Acquisition, we will comply with the applicable
requirements under Chapter 14A of the Listing Rules in due course and further
announcement(s) will be made if and when necessary. The related party transactions
which do not constitute continuing connected transactions requiring disclosure in this
section include transactions with Nantong Jutu Trading Co., Ltd. ( 南通聚途商貿有限公司),
Nanjing Ruifute Chemical Co., Ltd. ( 南京瑞福特化工有限公司) and Hubei Fengli New
Energy Technology Co., Ltd. ( 湖北豐鋰新能源科技有限公司), who will not be classified as
our connected persons upon the Listing.
RELATIONSHIP WITH OUR CONNECTED PERSONS
Name Connected relationship
M r .S h i..................... M r .S h ii sa ne x e c u t i v eD i r e c t o ra n daC o n t r o lling
Shareholder. He will therefore be our connected
person upon the Listing.
M s .Z h u .................... M s . Z h u i s a n o n - e x e c u t i v e D i r e c t o r a n d a
Controlling Shareholder. She will therefore be
our connected person upon the Listing.
Nanjing Weilejia Lubricants Co., Ltd.
(南京威樂佳潤滑油有限公司)
(‘‘Nanjing Weilejia ’ ’ ) ...........
Mr. Qin Jian is an executive Director and will
therefore be our connected person upon the
Listing. As Mr. Xue Lingjian ( 薛領建), Mr. Qin
Jian’s brother-in-law, owns approximately 100%
of the equity interest in Nanjing Weilejia, Nanjing
Weilejia will be a majority-controlled company
and thus an associate of Mr. Qin Jian upon the
Listing. Therefore, Nan jing Weilejia will become
our connected person upon the Listing.
CONNECTED TRANSACTIONS
–3 3 9–


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Name Connected relationship
Taizhou Hengan Commerce Co., Ltd.
(泰州市恆安商貿有限公司)
(‘‘Taizhou Hengan ’ ’ )...........
As Ms. Shi Zhenhong ( 石珍紅), Mr. Shi’s younger
sister, owns 100% of the equity interest in Taizhou
Hengan, Taizhou Hengan will be a
majority-controlled company and thus an
associate of Mr. Shi upon the Listing. Therefore,
Taizhou Hengan will become our connected
person upon the Listing.
Taizhou Changnengrui Commerce
Co., Ltd. ( 泰州市暢能瑞商貿有限
公司)( ‘ ‘Taizhou Changnengrui ’’) . . .
As Ms. Shi Shuhong ( 石書紅)a n dM s .S h i
Zhenhong ( 石珍紅), both Mr. Shi’s sisters, own
98% and 2%, respectively, of the equity interest in
Taizhou Changnengrui, Taizhou Changnengrui
will be a majority-controlled company and thus
an associate of Mr. Shi upon the Listing.
Therefore, Taizhou Changnengrui will become
our connected person upon the Listing.
t h eC A T LC PG r o u p ........... L o p a l T i m e s i s a d i r e c t n o n - w h o l l y o w n e d
subsidiary of our Company, which is owned as
to 70% by our Company and 30% by Yichun
Times. As Yichun Times owns 30% of the equity
interest in Lopal Times, Yichun Times is a
substantial shareholder of a subsidiary of our
Company and thus will be a connected person of
our Company upon the Listing. As Yichun Times
will be a connected person of our Company upon
the Listing, the CATL CP Group (comprising
CATL, its subsidiaries and 30%-controlled
companies (excludin g Lopal Times)) will be
associates of Yichun Times and will therefore
become connected persons of our Company upon
the Listing.
CONNECTED TRANSACTIONS
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SUMMARY OF OUR CONTINUING CONNECTED TRANSACTIONS
Set out below is a brief summary of our continuing connected transactions and the
relevant waivers sought:
Transactions
Applicable Listing
Rules Waiver sought
Proposed annual cap for the
years ending December 31,
2024 2025 2026
(RMB million)
Fully exempt continuing connected transaction
Provision of guarantees
by Mr. Shi,
Ms. Zhu and CATL
Rule 14A.90 N/A N/A N/A N/A
Partially exempt continuing connected transactions
Weilejia Framework
A g r e e m e n t .......
Rule 14A.35
Rule 14A.76(2)
Rule 14A.105
Announcement 8.85 8.85 8.85
Hengan Framework
A g r e e m e n t .......
Rule 14A.35
Rule 14A.76(2)
Rule 14A.105
Announcement 6 6 6
Changnengrui
Framework
A g r e e m e n t .......
Rule 14A.35
Rule 14A.76(2)
Rule 14A.105
Announcement 15 15 15
CATL Sales
Framework
A g r e e m e n t .......
Rule 14A.35
Rule 14A.101
Rule 14A.105
Announcement 994 N/A N/A
CATL Purchase
Framework
A g r e e m e n t .......
Rule 14A.35
Rule 14A.101
Rule 14A.105
Announcement 3,373 N/A N/A
FULLY EXEMPT CONTINUING C ONNECTED TRANSACTION
Guarantees Provided by Mr. Shi, Ms. Zhu and CATL
We expect to continue certain guarantee arrangement with Mr. Shi, Ms. Zhu and
CATL, pursuant to which Mr. Shi, Ms. Zhu and CATL agree to provide guarantees in
favour of our Group for certain bank loans we obtained for financing our development and
operations. For further details of the guarantee arrangement with Mr. Shi and/or Ms. Zhu,
see ‘‘Relationship with Our Controlling Shareholders — Independence from Our
Controlling Shareholders — Financial I ndependence.’’ CATL agreed to provide
guarantee in favour of Lopal Times (a subsidiary of our Company and owned as to 70%
by our Group and 30% by a wholly-owned subsidiary of CATL) for certain bank loans
obtained by Lopal Times for financing its development and operations, the guarantee
amount of which is proportionate to CATL’s equity interest in Lopal Times. Our Directors
are of the view that the guarantees, being a fo rm of financial assistance (as defined under
the Hong Kong Listing Rules) provided by Mr. Shi, Ms. Zhu and CATL for our benefit, are
conducted on normal commercial terms and are not secured by the assets of our Company,
CONNECTED TRANSACTIONS
–3 4 1–


--- page 352 ---
they will be exempted from the reporting, annual review, announcement, circular (including
independent financial advice) and independent Shareholders’ approval requirements under
Chapter 14A of the Listing Rules.
PARTIALLY EXEMPT CONTINUIN G CONNECTED TRANSACTIONS
Weilejia Framework Agreement
Description of the transactions
On October 14, 2024, our Company and Nan jing Weilejia entered into a framework
agreement (the ‘‘Weilejia Framework Agreement ’’), the principal terms and other details of
which are set out below:
Parties : (i) Our Company; and
(ii) Nanjing Weilejia
Term : From the Listing Date to December 31, 2026 (both dates
inclusive)
Subject matter : Our Company (i) appoints Nanjing Weilejia as a
distributor of our Group’s Kelas (可蘭素)b r a n d
products (the ‘‘ Kelas Brand Products ’’) in the PRC and
(ii) may supply our Group’s Lopal (龍蟠) brand products
(the ‘‘Lopal Brand Products ’’) in the PRC to Nanjing
Weilejia.
Product distribution,
sales and pricing
: Our Group shall supply Kelas Brand Products as ordered
by Nanjing Weilejia from time to time at prices set
according to the distributor price lists provided by our
Group (which may be adjusted and updated by our
Group from time to time), and Nanjing Weilejia shall
distribute such Kelas Brand Products to its customers at
prices that generally follow the guidance price lists
provided by our Group from time to time and only
within the regions as agreed between Nanjing Weilejia
and our Group.
Our Group may supply Lopal Brand Products as ordered
by Nanjing Weilejia from time to time at prices arrived
after taking into account the price lists provided by our
Group (which may be adjusted and updated by our
Group from time to time), the order size and
transportation costs. Our Group may from time to time
offer discounts to the prices set out in the price lists as
part of our Group’s promotional efforts.
Sales rebate for
distribution of Kelas
Brand Products
: Consistent with our commercial terms with our other
distributors of Kelas Brand Products, our Group
provides sales rebates to Nanjing Weilejia on an annual
basis.
CONNECTED TRANSACTIONS
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--- page 353 ---
Our Group and Nanjing Weilejia may from time to time
agree in writing the specific types of Kelas Brand
Products that are or are not subject to the sales rebate
arrangement, and the specific types of Kelas Brand
Product sales that are included or excluded from
calculating the annual sales rebates.
Every year, depending on the percentage of the agreed
annual sales target that Nanjing Weilejia is able to
achieve, Nanjing Weilejia shall be entitled to a sales
rebate calculated by multiplying the actual annual sales
of Kelas Brand Products achieved by Nanjing Weilejia to
an annual rebate rate.
Conditions precedent
and performance
obligations
: Unless relevant waiver(s) have been granted by the
CSRC, the Shanghai Stock Exchange or the Hong
Kong Stock Exchange, the Weilejia Framework
Agreement and the performance of the Weilejia
Framework Agreement shall be conditional upon our
Company’s fulfilment of the reporting, annual review,
announcement, circular and independent Shareholders’
approval obligations, and compliance with other
requirements relating to related party/connected
transactions under the rules of the Shanghai Stock
Exchange and the Listing Rules, where applicable.
If the waiver(s) granted by the CSRC, the Shanghai
Stock Exchange or the Hong Kong Stock Exchange
imposes any conditions or if there are any amendments
to the relevant provisions of the Listing Rules, the
performance of the Weilejia Framework Agreement shall
adhere to such conditions and rule amendments.
If the CSRC, the Shanghai Stock Exchange or the Hong
Kong Stock Exchange has any regulatory comments on
the Weilejia Framework Agreement or there are any
amendments to the relevant provisions of the rules of the
Shanghai Stock Exchange or the Listing Rules, the
performance of the Weilejia Framework Agreement
shall adhere to such regulatory comments and rule
amendments.
If according to the requirements of the rules of the
Shanghai Stock Exchange, the Listing Rules or the
applicable laws and regulations, any party shall obtain
the approval from any relevant authority of the Weilejia
Framework Agreement, the performance of the Weilejia
Framework Agreement shall be conditional upon the
obtaining of such approval.
CONNECTED TRANSACTIONS
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--- page 354 ---
Reasons for and benefits of the transactions
As discussed in ‘‘Business — Our Products — Automotive Specialty Chemicals —
Customers, sales and distribution’’, we r ely on our distribution network as one of the
channels for the sales of our automotive specialty chemical products. Taking into account
(i) our long-standing business relationshi p with Nanjing Weilejia, which began in around
2012; (ii) Nanjing Weilejia’s past performance i n meeting our sales targets; (iii) our pricing
policy adopted for the transactions under the Weilejia Framework Agreement is consistent
with our pricing policy for other distributors of our Kelas Brand Products and (iv) sales to
Nanjing Weilejia will enable us to maintain our coverage to meet demands of our Lopal
Brand Products in the market, our Directors are of the view that it is commercially
beneficial for us to continue to appoint Nanjing Weilejia as one of our distributors and to
continue the sales of Lopal Brand Products to N anjing Weilejia, and it is in the interests of
our Group and Shareholders to enter in to the Weilejia Framework Agreement.
Historical transaction amounts
For each of the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, the aggregate amount of purchase price for our Kelas Brand Products
(net of any sales rebate) and Lopal Brand Products payable by Nanjing Weilejia to our
Group was approximately RMB5.3 million, RMB5.8 million, RMB6.9 million and RMB3.3
million, respectively.
Proposed annual caps
The proposed annual caps for the transactions contemplated under the Weilejia
Framework Agreement for the years ending December 31, 2024, 2025 and 2026 are set out
below:
Proposed annual caps for the years ending
December 31,
2024 2025 2026
(RMB million) (RMB million) (RMB million)
Amount of purchase price for our Kelas Brand
Products and Lopal Brand Products payable
by Nanjing Weilejia under the Weilejia
F r a m e w o r kA g r e e m e n t ................ 8 . 8 5 8 . 8 5 8 . 8 5
Note: Such revenue has taken into account any sales rebate or sales discount to Nanjing Weilejia.
CONNECTED TRANSACTIONS
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--- page 355 ---
Basis of annual caps
The proposed annual caps above are determined after taking into account the
following factors: (i) the historical aggregate amount of purchase price for our Kelas Brand
Products and Lopal Brand Products payable by Nanjing Weilejia to our Group during the
Track Record Period, particularly noting that t he historical transaction amount increased
from approximately RMB5.8 million f or the year ended December 31, 2022 to
approximately RMB6.9 million for the year e nded December 31, 2023, representing an
increase of 20.6% in the transaction amount for the year ended December 31, 2023, and we
consider the sales to Nanjing Weilejia will c ontinue to increase at a similar magnitude for
the years ending December 31, 2024, 2025 and 2026; (ii) the expected demand for our Kelas
Brand Products and Lopal Brand Products in Nanjing City; (iii) our expected target sales
and product mix of our Kelas Brand Product s to be allocated to Nanjing Weilejia for
distribution; (iv) the estimated purchase orders of Lopal Brand Products from Nanjing
Weilejia for the years ending December 31, 2024, 2025 and 2026; and (v) any potential
fluctuation in selling price after taking int o account the selling price of our Kelas Brand
Products and Lopal Brand Products was, and expected will continue to be, largely affected
by costs of raw materials and supply and d emand of our products and we experienced
significant fluctuations in costs of raw materi als leading to changes in selling prices of our
Kelas Brand Products and Lopal Brand Products during the Track Record Period.
Implications under the Listing Rules
Based on the annual caps, we expect that, on an annual basis, the highest applicable
percentage ratio calculated in accordance with Rule 14.07 of the Listing Rules in respect of
the transactions contemplated under the We ilejia Framework Agreement will exceed 0.1%
but be less than 5%. By virtue of Rule 14A.76(2) of the Listing Rules, such transactions will
be subject to the reporting, annual review and announcement requirements, but be exempt
from the circular (including independent fina ncial advice) and independent Shareholders’
approval requirements under Chapter 14A of the Listing Rules.
CONNECTED TRANSACTIONS
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--- page 356 ---
Hengan Framework Agreement
Description of the transactions
On October 14, 2024, our Company and Taizhou Hengan entered into a framework
agreement (the ‘‘ Hengan Framework Agreement ’’), the principal terms and other details of
which are set out below:
Parties : (i) Our Company; and
(ii) Taizhou Hengan
Term : From the Listing Date to December 31, 2026 (both dates
inclusive)
Subject matter : Our Company appoints Taizhou Hengan as a distributor
of our Lopal Brand Products and Kelas Brand Products
in the PRC.
Sales targets : Our Group and Taizhou Hengan shall agree on the
annual, quarterly and monthly sales targets for our
Lopal Brand Products and Kelas Brand Products in
writing from time to time.
Product distribution
and pricing
: Our Group shall supply Lopal Brand Products and Kelas
Brand Products as ordered by Taizhou Hengan from time
to time at prices set according to the distributor price
lists provided by our Group (which may be adjusted and
updated by our Group from time to time), and Taizhou
Hengan shall distribute such Lopal Brand Products and
Kelas Brand Products to its customers at prices that
generally follow the guidance price lists provided by our
Group from time to time and only within the regions as
a g r e e db e t w e e nT a i z h o uH e n g a na n do u rG r o u pi n
writing. Our Group may from time to time offer
discounts to the prices set out in the distributor price
lists as part of our Group’s promotional efforts.
Pricing policy : The prices of our Lopal Brand Products and Kelas Brand
Products included in our distributor price lists are
determined using the cost-plus method. Our costs
associated with our Lopal Brand Products and Kelas
Brand Products mainly include raw materials costs.
We provide the same distributor price lists to all of our
distributors and our pricing policy is the same across all
of our distributors.
CONNECTED TRANSACTIONS
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--- page 357 ---
Sales rebate : Consistent with our commercial terms with our other
distributors of Lopal Brand Products and Kelas Brand
Products, our Group provides sales rebates to Taizhou
Hengan on a quarterly basis and on an annual basis.
Our Group and Taizhou Hengan may from time to time
agree in writing the specific types of Lopal Brand
Products and Kelas Brand Products that are or are not
subject to the sales rebate arrangement, and the specific
types of Lopal Brand Product and Kelas Brand Products
sales that are included or excluded from calculating the
quarterly and/or annual sales rebates.
For every quarter, if Taizhou Hengan is able to achieve
the agreed quarterly sales target, Taizhou Hengan shall
be entitled to a sales rebate calculated by multiplying the
actual sales of Lopal Brand Products and Kelas Brand
Products achieved by Taizhou Hengan (excluding sales of
Lopal Brand Products and Kelas Brand Products subject
to discounts to prices set out in the distributor price lists)
to a quarterly rebate rate.
In addition, for every year, depending on percentage of
the agreed annual sales target that Taizhou Hengan is
able to achieve, Taizhou Hengan shall be entitled to a
sales rebate calculated by multiplying the actual annual
sales of Lopal Brand Products and Kelas Brand Products
a c h i e v e db yT a i z h o uH e n g a nt oa na n n u a lr e b a t er a t e .
CONNECTED TRANSACTIONS
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--- page 358 ---
Conditions precedent
and performance
obligations
: Unless relevant waiver(s) have been granted by the
CSRC, the Shanghai Stock Exchange or the Hong
Kong Stock Exchange, the Hengan Framework
Agreement and the performance of the Hengan
Framework Agreement shall be conditional upon our
Company’s fulfilment of the reporting, annual review,
announcement, circular and independent Shareholders’
approval obligations, and compliance with other
requirements relating to related party/connected
transactions under the rules of the Shanghai Stock
Exchange and the Listing Rules, where applicable.
If the waiver(s) granted by the CSRC, the Shanghai
Stock Exchange or the Hong Kong Stock Exchange
imposes any conditions or if there are any amendments
to the relevant provisions of the Listing Rules, the
performance of the Hengan Framework Agreement shall
adhere to such conditions and rule amendments.
If the CSRC, the Shanghai Stock Exchange or the Hong
Kong Stock Exchange has any regulatory comments on
the Hengan Framework Agreement or there are any
amendments to the relevant provisions of the rules of the
Shanghai Stock Exchange or the Listing Rules, the
performance of the Hengan Framework Agreement
shall adhere to such regulatory comments and rule
amendments.
If according to the requirements of the rules of the
Shanghai Stock Exchange, the Listing Rules or other
applicable laws and regulations, any party shall obtain
the approval from any relevant authority of the Hengan
Framework Agreement, the performance of the Hengan
Framework Agreement shall be conditional upon the
obtaining of such approval.
Reasons for and benefits of the transactions
As discussed in ‘‘Business — Our Products — Automotive Specialty Chemicals —
Customers, sales and distribution’’, we r ely on our distribution network as one of the
channels for the sales of our automotive specialty chemical products. Taking into account
(i) our long-standing business relationship with Taizhou Hengan, which began in around
2014; (ii) Taizhou Hengan’s past performance in meeting our sales targets; and (iii) our
pricing policy adopted for the transactions under the Hengan Framework Agreement is
consistent with our pricing policy for other distributors of our Lopal Brand Products and
CONNECTED TRANSACTIONS
–3 4 8–


--- page 359 ---
Kelas Brand Products, our Directors are of the view that it is commercially beneficial for us
to continue to appoint Taizhou Hengan as one of our distributors, and it is in the best
interests of our Group and Shareholders to enter into the Hengan Framework Agreement.
Historical transaction amounts
For each of the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, the aggregate amount of purchase price (net of any sales rebate) for
our Lopal Brand Products and Kelas Brand Products payable by Taizhou Hengan to our
Group was approximately RMB4.0 million, RMB3.7 million, RMB4.5 million and RMB3.1
million, respectively.
Proposed annual caps
The proposed annual caps for the transactions contemplated under the Hengan
Framework Agreement for the years ending December 31, 2024, 2025 and 2026 are set out
below:
Proposed annual caps for the years ending
December 31,
2024 2025 2026
(RMB million) (RMB million) (RMB million)
Our revenue receivable from Taizhou Hengan
under the Hengan Framework Agreement Note 666
Note: Such revenue has taken into account any sales rebate or sales discount to Taizhou Hengan.
Basis of annual caps
The proposed annual caps above are determined after taking into account the
following factors: (i) the historical aggregate amount of purchase price for our Lopal Brand
Products and Kelas Brand Products payable by Taizhou Hengan to our Group during the
Track Record Period; (ii) the expected demand for our Lopal Brand Products and Kelas
Brand Products in Yangzhou C ity; and (iii) our expected target sales and product mix of
our Lopal Brand Products and Kelas Brand Products to be allocated to Taizhou Hengan for
distribution.
In particular, the proposed annual caps were determined based on the annual historical
transaction amount in the year ended Decem ber 31, 2021, amounting to approximately
RMB4 million, taking into account a marg in of approximately RMB2 million for any
unexpected change in price or product demand. In view of the gradual recovery of the
logistics market from COVID-19, as evidenced by the significant re-bounce of the historical
transaction amount for the year ended December 31, 2022 to approximately RMB4.5
million for the year ended December 31, 2023, r epresenting an increase of 21.9% in the
transaction amount for the year ended December 31, 2023, the transaction amount in 2023
recovered to a comparable level in 2021 and r ecorded transaction amount of RMB3 million
CONNECTED TRANSACTIONS
–3 4 9–


--- page 360 ---
for the six months ended June 30, 2024, our Directors expect that the demand for our
automotive specialty chemicals in the sec ond half of 2024 will continue to transact at a
similar magnitude as in the first half of 2024.
Listing Rules implications
For details on the Listing Rules implica tions of the Hengan Framework Agreement,
see ‘‘— Changnengrui Framework Agreemen t — Listing Rules implications’’ below.
Changnengrui Framework Agreement
Description of the transactions
On October 14, 2024, our Company and Taizhou Changnengrui entered into a
framework agreement (the ‘‘ Changnengrui Framework Agreement ’’), the principal terms and
other details of which are set out below:
Parties : (i) Our Company; and
(ii) Taizhou Changnengrui
Term : From the Listing Date to December 31, 2026 (both dates
inclusive)
Subject matter : Our Company appoints Taizhou Changnengrui as a
distributor of our Lopal Brand Products and Kelas
B r a n dP r o d u c t si nt h eP R C .
Sales targets : Our Group and Taizhou Changnengrui shall agree on the
annual, quarterly and monthly sales targets for our
Lopal Brand Products and Kelas Brand Products in
writing from time to time.
Product distribution
and pricing
: Our Group shall supply Lopal Brand Products and Kelas
Brand Products as ordered by Taizhou Changnengrui
from time to time at prices set according to the
distributor price lists provided by our Group (which
may be adjusted and updated by our Group from time to
time), and Taizhou Changnengrui shall distribute such
Lopal Brand Products and Kelas Brand Products to its
customers at prices that generally follow the guidance
price lists provided by our Group from time to time and
only within the regions as agreed between Taizhou
Changnengrui and our Group in writing. Our Group
may from time to time offer discounts to the prices set
out in the distributor price lists as part of our Group’s
promotional efforts.
CONNECTED TRANSACTIONS
–3 5 0–


--- page 361 ---
Pricing policy : The prices of our Lopal Brand Products and Kelas Brand
Products included in our distributor price lists are
determined using the cost-plus method. Our costs
associated with our Lopal Brand Products and Kelas
Brand Products mainly include raw materials costs.
We provide the same distributor price lists to all of our
distributors and our pricing policy is the same across all
of our distributors.
Sales rebate : Consistent with our commercial terms with our other
distributors of Lopal Brand Products and Kelas Brand
Products, our Group provides sales rebates to Taizhou
Changnengrui on a quarterly basis and on an annual
basis.
Our Group and Taizhou Changnengrui may from time to
time agree in writing the specific types of Lopal Brand
Products and Kelas Brand Products that are or are not
subject to the sales rebate arrangement, and the specific
types of Lopal Brand Product and Kelas Brand Products
sales that are included or excluded from calculating the
quarterly and/or annual sales rebates.
For every quarter, if Taizhou Changnengrui is able to
achieve the agreed quarterly sales target, Taizhou
Changnengrui shall be entitled to a sales rebate
calculated by multiplyin g the actual sales of Lopal
Brand Products and Kelas Brand Products achieved by
Taizhou Changnengrui (excluding sales of Lopal Brand
Products and Kelas Brand Products subject to discounts
to prices set out in the distributor price lists) to a
quarterly rebate rate.
In addition, for every year, depending on percentage of
the agreed annual sales target that Taizhou
Changnengrui is able to achieve, Taizhou Changnengrui
shall be entitled to a sales rebate calculated by
multiplying the actual annual sales of Lopal Brand
Products and Kelas Brand Products achieved by
Taizhou Changnengrui to an annual rebate rate.
CONNECTED TRANSACTIONS
–3 5 1–


--- page 362 ---
Conditions precedent
and performance
obligations
: Unless relevant waiver(s) have been granted by the
CSRC, the Shanghai Stock Exchange or the Hong
Kong Stock Exchange, the Changnengrui Framework
Agreement and the performance of the Changnengrui
Framework Agreement shall be conditional upon our
Company’s fulfilment of the reporting, annual review,
announcement, circular and independent Shareholders’
approval obligations, and compliance with other
requirements relating to related party/connected
transactions under the rules of the Shanghai Stock
Exchange and the Listing Rules, where applicable.
If the waiver(s) granted by the CSRC, the Shanghai
Stock Exchange or the Hong Kong Stock Exchange
imposes any conditions or if there are any amendments
to the relevant provisions of the Listing Rules, the
performance of the Changnengrui Framework
Agreement shall adhere to such conditions and rule
amendments.
If the CSRC, the Shanghai Stock Exchange or the Hong
Kong Stock Exchange has any regulatory comments on
the Changnengrui Framework Agreement or there are
any amendments to the relevant provisions of the rules of
the Shanghai Stock Exchange or the Listing Rules, the
performance of the Changnengrui Framework
Agreement shall adhere to such regulatory comments
and rule amendments.
If according to the requirements of the rules of the
Shanghai Stock Exchange, the Listing Rules or other
applicable laws and regulations, any party shall obtain
the approval from any relevant authority of the
Changnengrui Framework Agreement, the performance
of the Changnengrui Framework Agreement shall be
conditional upon the obtaining of such approval.
Reasons for and benefits of the transactions
As discussed in ‘‘Business — Our Products — Automotive Specialty Chemicals —
Customers, sales and distribution’’, we r ely on our distribution network as one of the
channels for the sales of our automotive specialty chemical products. Taking into account
(i) our long-standing business relationship with Taizhou Changnengrui, which began in
around 2011; (ii) Taizhou Changnengrui’s past performance in meeting our sales targets;
and (iii) our pricing policy adopted for the transactions under the Changnengrui
Framework Agreement is consistent with our p ricing policy for other distributors of our
Lopal Brand Products and Kelas Brand Products, our Directors are of the view that it is
CONNECTED TRANSACTIONS
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--- page 363 ---
commercially beneficial for us to continue to appoint Taizhou Changnengrui as one of our
distributors, and it is in the best interests of our Group and Shareholders to enter into the
Changnengrui Framework Agreement.
Historical transaction amounts
For each of the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, the aggregate amount of purchase price for our Lopal Brand Products
and Kelas Brand Products (net of any sales re bate) payable by Taizhou Changnengrui to
our Group was approximately RMB14.3 m illion, RMB8.7 million, RMB9.1 million and
RMB6.5 million, respectively. The decrease in the transaction amount in 2022 was due to
the decrease in demand for our Lopal Brand Products and Kelas Brand Products as a result
of the decrease in road traffic in the rele vant regions in mainland China in 2022.
Proposed annual caps
The proposed annual caps for the transactions contemplated under the Changnengrui
Framework Agreement for the years ending December 31, 2024, 2025 and 2026 are set out
below:
Proposed annual caps for the years ending
December 31,
2024 2025 2026
(RMB million) (RMB million) (RMB million)
Amount of purchase price for our Lopal Brand
Products and Kelas Brand Products payable
by Taizhou Changnengrui under the
C h a n g n e n g r u iF r a m e w o r kA g r e e m e n t ..... 1 5 1 5 1 5
Note: Such revenue has taken into account any sales rebate or sales discount to Taizhou Changnengrui.
Basis of annual caps
The proposed annual caps above are determined after taking into account the
following factors: (i) the historical aggregate amount of purchase price for our Lopal Brand
Products and Kelas Brand Products payable by Taizhou Changnengrui to our Group
during the Track Record Period; (ii) the expected demand for our Lopal Brand Products
and Kelas Brand Products in Taizhou City; and (iii) our expected target sales and product
mix of our Lopal Brand Products and Kelas Brand Products to be allocated to Taizhou
Changnengrui for distribution.
For the years ending December 31, 2024, 2 025 and 2026, the proposed annual caps
were determined based on the highest annual historical transaction amount during the
Track Record Period, which was recorded in the year ended December 31, 2021, amounting
to approximately RMB14.3 million, taking in to account a relatively small margin of
approximately 5% for any unexpected change in price or product demand. In view of the
re-bounce from a decrease in transaction amount from 2021 to 2022 to an increase in
transaction amount from approximately RMB8 .7 million for the year ended December 31,
CONNECTED TRANSACTIONS
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--- page 364 ---
2022 to approximately RMB9.1 million for the year ended December 31, 2023 and that the
transaction amount amounted to RMB6.5 millio n for the six months ended June 30, 2024,
our Directors expect that the demand for our au tomotive specialty chemicals will recover in
the near future, and that the historical transaction amount for the year ended December 31,
2021 would be an appropriate reference in determining the proposed annual caps.
In addition, the margin of approximately 5% for unexpected change in price or
product demand was determined after taking into account the following factors: (i) the
selling price of our Lopal Brand Products and Kelas Brand Products was, and is expected to
continue to be, largely affected by costs of raw materials and supply and demand of our
products and we experienced significant fluctuations in costs of raw materials leading to
changes in selling prices of our Lopal Brand Pr oducts and Kelas Brand Products during the
Track Record Period, (ii) the expected resumed demand for the Lopal Brand Products and
Kelas Brand Products (specifically, our automotive specialty chemical products that
Taizhou Changnengrui distributed for our Group during the Track Record Period) from
Taizhou Changnengrui following the recovery of transportation and logistics in mainland
China post-COVID-19 considering the potential growth in automotive specialty chemical
industry in the near future and the long-term stable cooperation between our Group and
Taizhou Changnengrui and (iii) a relatively s table expected target sales considering the
historical transaction amount for the year ended December 31, 2023 and Taizhou
Changnengrui’s previous performance in meeting sales targets.
Listing Rules implications
As Ms. Shi Shuhong ( 石書紅), the majority equity holder of Taizhou Changnengrui,
and Ms. Shi Zhenhong ( 石珍紅), the 100% equity holder of Taizhou Hengan, are sisters, the
transactions contemplated under the Changn engrui Framework Agreement and the Hengan
Framework Agreement are aggregated for the purpose of classification of connected
transactions in accordance with Rule 14A.81 of the Listing Rules.
The aggregated proposed annual caps for the transactions contemplated under the
Changnengrui Framework Agreement and the Hengan Framework Agreement for the years
ending December 31, 2024, 2025 and 2026 are set out below:
Proposed annual caps for the years ending
December 31,
2024 2025 2026
(RMB million) (RMB million) (RMB million)
Aggregated proposed annual caps for the
transactions contemplated under the
Changnengrui Framework Agreement and the
H e n g a nF r a m e w o r kA g r e e m e n t .......... 2 1 2 1 2 1
CONNECTED TRANSACTIONS
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--- page 365 ---
Based on the aggregated annual caps, we expect that, on an annual basis, the highest
applicable percentage ratio calculated in acc ordance with Rule 14.07 of the Listing Rules in
respect of the transactions contemplated u nder the Changnengrui Framework Agreement
and the Hengan Framework Agreement will exceed 0.1% but be less than 5%. By virtue of
Rule 14A.76(2) of the Listing Rules, such tran sactions will be subject to the reporting,
annual review and announcement requirements, but be exempt from the circular (including
independent financial advice) and independent Shareholders’ approval requirements under
Chapter 14A of the Listing Rules.
Our Enhanced Business Cooperation with CATL Group
Following the acquisition of equity interests in Lopal Times by our Group in 2022, our
Group has continuously enhanced our cooperation with CATL Group to leverage on the
expertise of CATL Group in the research, production and sales of NEV battery and
charging systems.
During the Track Record Period and prior to the Listing, we have entered into
procurement agreements and framework agreements with CATL Group. Pursuant to the
procurement agreements, CATL Group has agreed to purchase certain raw materials and
other products from us for their daily production operations. Moreover, we have entered
into framework agreements and supplemental agreements (the ‘‘ Lithium-mica Concentrate
Procurement Framework Agreements ’’) with and among others CATL, pursuant to which
Lopal Times agreed to purchase lithium-mica concentrate from CATL’s subsidiary, which
will be used for Lopal Times’s production of battery grade lithium carbonate, at a discount
to the price posted on the Shanghai Metal Market (the ‘‘ SMM’’). Such lithium carbonate
produced by Lopal Times during the Track Record Period and up to the Latest Practicable
Date were either (i) sold to CATL Group or a company designated by CATL (an associate
company of CATL) or (ii) utilized in-house by subsidiaries of Changzhou Liyuan.
Furthermore, Changzhou Liyuan and its subsidiaries procured lithium carbonate from
CATL Group for the production of LFP. CATL Group will enjoy a preferential right to
purchase from Changzhou Liyuan such LFP produced and we may sell any unpurchased
LFP products to Independent Third Parties on the same or better terms. Our revenue to be
received from CATL Group to be derived from this arrangement with procurement of
lithium carbonate from customers is expected to be recognized as revenue from contracts
with customers under IFRS 15.
CONNECTED TRANSACTIONS
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--- page 366 ---
As we expect to continue selling and purcha sing raw materials and other products to
and from CATL Group after the Listing, we have entered into a continuing connected
transaction agreement (sales) (the ‘‘ CATL Sales Framework Agreement ’’) and a continuing
connected transaction agreement (purchase) (the ‘‘ CATL Purchase Framework Agreement ’’)
with CATL. Upon the CATL Sales Framework Agreement and the CATL Purchase
Framework Agreement becoming effective, all the transactions contemplated under the
abovementioned subsisting procurement agreements, sales agreements and the
Lithium-mica Concentrate Procurement Framework Agreements will be covered by the
framework of the CATL Sales Framework Agreement and the CATL Purchase Framework
Agreement (as the case may be), the princip al terms of which shall apply. We expect to
renew the CATL Sales Framework Agreem e n ta n dt h eC A T LP u r c h a s eF r a m e w o r k
Agreement with CATL upon expiry.
CATL Sales Framework Agreement
Description of the transactions
On October 9, 2024, our Company an d CATL entered into the CATL Sales
Framework Agreement, the principal terms and other details of which are set out below:
Parties : (i) Our Company; and
(ii) CATL
Term : From the Listing Date to December 31, 2024 (both dates
inclusive)
Subject matter : CATL CP Group may supply products (the ‘‘ CATL
Products ’’) to our Group, including but not limited to
raw materials and/or other processed products required
by our Group in our daily production operations. All
purchase transactions by our Group from CATL CP
Group of CATL Products, may it be raw materials such
as lithium-mica concentrat e or processed products such
as lithium carbonate, will be covered under the same
agreement, i.e. the CATL Sales Framework Agreement.
Pricing policy : The price of the CAT L Products to be supplied by CATL
CP Group to our Group shall be determined on normal
commercial terms and on an arm’s length basis. We shall
take into account (i) the prevailing market price of the
relevant materials posted on the SMM, the PRC
government or other industry recognized organizations
a n d( i i )t h ec o s to fp r o d u c t i o no ft h er e l e v a n tC A T L
Products.
CONNECTED TRANSACTIONS
–3 5 6–


--- page 367 ---
Conditions precedent
and performance
obligations
: Unless relevant waiver(s) have been granted by the Hong
Kong Stock Exchange, the CATL Sales Framework
Agreement and the performance of the CATL Sales
Framework Agreement shall be conditional upon our
Company’s fulfilment of the reporting, annual review,
announcement, circular and independent Shareholders’
approval obligations, and compliance with other
requirements relating to connected transactions under
the Listing Rules.
If the waiver(s) granted by the Hong Kong Stock
Exchange imposes any conditions or if there are any
amendments to the relevant provisions of the Listing
Rules, the performance of the CATL Sales Framework
Agreement shall adhere to such conditions and rule
amendments.
If the Hong Kong Stock Exchange has any regulatory
comments on the CATL Sales Framework Agreement or
there are any amendments to the relevant provisions of
the Listing Rules, the performance of the CATL Sales
Framework Agreement shall adhere to such regulatory
comments and rule amendments.
If according to the requirements of the Listing Rules or
other applicable laws and regulations, any party shall
obtain the approval from any relevant authority of the
CATL Sales Framework Agreement, the performance of
the CATL Sales Framework Agreement shall be
conditional upon the obtaining of such approval.
CONNECTED TRANSACTIONS
–3 5 7–


--- page 368 ---
Reasons for and benefits of the transactions
We entered into the CATL Sales Framework Agreement with CATL in order to ensure
the sufficient and stable supply of raw materials and other processed products for our
production needs. The transactions contemplated under the CATL Sales Framework
Agreement are beneficial for the growth of our business, as we can secure supply of critical
raw materials and other processed products at competitive prices to expand our production
capabilities by leveraging CATL’s sizable sca le, reputation and purchasing power. Given
the established relationship between our Company and CATL, our Directors are of the view
that CATL is capable of providing raw materials and other processed products in a reliable
and cost-effective manner with competitive prices as compared to the Independent Third
Parties in respect of materials of similar specification, model, type and quality, and it is in
the interests of our Group and Shareholders to enter into the CATL Sales Framework
Agreement.
Historical transaction amounts
For each of the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, the aggregate amount of purchase price of the CATL Products payable
by our Group to the CATL CP Group was approximately nil, RMB312.1 million,
RMB853.4 million and RMB177.1 million, respectively.
Proposed annual cap
The proposed annual cap for the transactions contemplated under the CATL Sales
Framework Agreement for the year ending December 31, 2024 is set out below:
Proposed annual cap
for the year ending
December 31, 2024
(RMB million)
Amount of purchase price for CATL Products payable by our Group to
CATL CP Group under the CATL Sales Framework Agreement. . . 994
Basis of annual caps
The proposed annual cap above is determined after taking into account the following
factors: (i) the expected expansion of our production capabilities, including but not limited
to the production of iron phosphate and lithium carbonate; (ii) the estimated procurement
quantity of the CATL Products that has been or may be purchased by our Group from
CATL CP Group, including but without limitation the estimated tons of lithium-mica
concentrate required by our Group from CATL CP Group under the Lithium-mica
Concentrate Procurement Framework Agreem ents for the year ending December 31, 2024
and (iii) the historical transaction amount paid by our Group to CATL CP Group during
the Track Record Period.
CONNECTED TRANSACTIONS
–3 5 8–


--- page 369 ---
The Company considers that the separate annual caps for the CATL CP Group’s (i)
supply of raw materials and other processed products to the Group, respectively, and (ii)
purchase of products manufactured and processed by the Group, respectively would not be
necessary nor desirable for the proposed continuing connected transactions between the
CATL CP Group and the Group. Please see ‘‘CATL Purchase Framework Agreement —
Basis of annual caps’’ in this section for the details of bases.
Listing Rules implications
As (i) CATL is a connected person at the subsid iary level, (ii) our Board (including all
the independent non-executive Directors) has approved the CATL Sales Framework
Agreement and the transaction s contemplated thereunder and (iii) all the independent
non-executive Directors have confirmed th at the terms of the CATL Sales Framework
Agreement are fair and reasonable, on normal commercial terms or better and in the
interests of our Company and our Shareholders as a whole, by virtue of Rule 14A.101 of the
Listing Rules, the CATL Sales Framework Agreement will be subject to the reporting,
annual review and announcement requirements, but be exempt from the circular (including
independent financial advice) and independent Shareholders’ approval requirements under
Chapter 14A of the Listing Rules.
CATL Purchase Framework Agreement
Description of the transactions
On October 9, 2024, we entered into the CAT L Purchase Framework Agreement with
the CATL, the principal terms and other details of which are set out below:
Parties : (i) Our Company; and
(ii) CATL
Term : From the Listing Date to December 31, 2024 (both dates
inclusive)
Subject matter : CATL CP Group may purchase products (the ‘‘ Lopal
Products ’’) manufactured and/or processed by our Group
in accordance with the specifications provided by CATL
CP Group (including the products processed by our
Group using raw materials provided by CATL CP
Group). All sale transactions from our Group to CATL
CP Group of Lopal Products including but without
limitation LFP cathode mater ials will be covered under
the same agreement, i.e. the CATL Purchase Framework
Agreement.
CONNECTED TRANSACTIONS
–3 5 9–


--- page 370 ---
Pricing policy : The price shall be determined on normal commercial
terms and on an arm’s length basis. We shall take into
account (i) the price of the relevant materials posted on
the SMM, the PRC government or other industry
recognized organizations and (ii) the production cost of
the Lopal Products (whereby raw materials are supplied
to our Group for processing, the processing cost of the
Lopal Products). Our Group will provide to our
customers material price lists (which may be adjusted
a n du p d a t e db yu sf r o mt i m et ot i m e )a n dm a yf r o mt i m e
to time offer discounts on the Lopal Products as part of
their promotional efforts.
Conditions precedent
and performance
obligations
: Unless relevant waiver(s) have been granted by the Hong
Kong Stock Exchange, the CATL Purchase Framework
Agreement and the performance of the CATL Purchase
Framework Agreement shall be conditional upon our
Company’s fulfilment of the reporting, annual review,
announcement, circular and independent Shareholders’
approval obligations, and compliance with other
requirements relating to connected transactions under
the Listing Rules.
If the waiver(s) granted by the Hong Kong Stock
Exchange imposes any conditions or if there are any
amendments to the relevant provisions of the Listing
Rules, the performance of the CATL Purchase
Framework Agreement shall adhere to such conditions
and rule amendments.
If the Hong Kong Stock Exchange has any regulatory
comments on the CATL Purchase Framework
Agreement or there are any amendments to the relevant
provisions of the Listing Rules, the performance of the
CATL Purchase Framework Agreement shall adhere to
such regulatory comments and rule amendments.
If according to the requirements of the Listing Rules or
other applicable laws and regulations, any party shall
obtain the approval from any relevant authority of the
CATL Purchase Framework Agreement, the
performance of the CATL Purchase Framework
Agreement shall be conditio nal upon the obtaining of
such approval.
CONNECTED TRANSACTIONS
–3 6 0–


--- page 371 ---
Reasons for and benefits of the transactions
We entered into the CATL Purchase Framework Agreement with CATL in order to
leverage on CATL’s sales network and sizab le base of customers. The transactions
contemplated under the CATL Purchase Framework Agreement are beneficial for the
growth of our business, as sales t o CATL CP Group will allow us to utilize their sizable base
of customers and help increase the cover age and demand of our LFP cathode material
products in the market. Given the established relationship between our Group and CATL
Group, our Directors are of the view that it is mutually beneficial and economical for us to
sell our LFP cathode material products to CATL CP Group, and it is in the interests of our
Group and Shareholders to enter into the CATL Purchase Framework Agreement.
Historical transaction amounts
For each of the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, the aggregate amount of purchase price of the Lopal Products payable
by CATL CP Group to our Group was approxi mately RMB1,160.4 million, RMB7,799.0
million, RMB3,501.4 million and RMB1,277.7 million, respectively.
Proposed annual cap
The proposed annual cap for the transactions contemplated under the CATL Purchase
Framework Agreement for the year ending December 31, 2024 is set out below:
Proposed annual cap
for the year ending
December 31, 2024
(RMB million)
Amount of purchase price for Lopal Products payable by CATL CP
Group to our Group under the CATL Purchase Framework
A g r e e m e n t ........................................ 3 , 3 7 3
Basis of annual caps
The proposed annual cap above is determined after taking into account the following
factors: (i) the expected expansion of our production capabilities, including but not limited
to the production of iron phosphate and lithium carbonate; (ii) the estimated purchase
orders of Lopal Products from CATL CP G roup for the year ending December 31, 2024
taking into account the estimated purchase quantity of the Lopal Products that has been or
will be purchased by CATL CP Group as produced by our Group using the lithium-mica
concentrate acquired by our Group from CATL CP Group pursuant to the Lithium-mica
Concentrate Procurement Fr amework Agreement and (iii) the historical transaction
amount paid by CATL CP Group to our Group during the Track Record Period.
CONNECTED TRANSACTIONS
–3 6 1–


--- page 372 ---
The Company considers that the separate annual caps for the CATL CP Group’s (i)
supply of raw materials and other processed products to the Group, respectively, and (ii)
purchase of products manufactured and processed by the Group, respectively would not be
necessary nor desirable for the proposed continuing connected transactions between the
CATL CP Group and the Group on the following bases:
1. The fundamental nature of the raw materials and products involved in these
transactions is essentially homogeneous and integral to the lithium-ion battery
manufacturing process. In terms of the CA TL CP Group’s supply of raw materials
and other processed products to the Group, the same material or product may be
considered as a raw material as well as a processed product depending on the
stages of the lithium-ion battery manufa cturing process. For instance, it is
expected that lithium-mica concentrate and lithium carbonate may be sold by the
CATL CP Group to the Group, and lithium carbonate and LFP cathode materials
a r ee x p e c t e dt ob es o l db yt h eG r o u pt oC A T LC PG r o u p .S i n c ei nt h ep r o d u c t i o n
process, lithium carbonate can be considered as a processed product from
lithium-mica concentrate as well as a ra w material for the production of LFP
cathode materials, it is impracticable a nd unnecessary to set separate annual caps
for these transactions. The same logic applies to the CATL CP Group’s purchase
of products manufactured and processed by the Group. The products
manufactured and processed by the Group are not the ultimate end products,
namely lithium-ion batteries but are a part of the lithium-ion battery
manufacturing process. Considering the similarities in nature and purposes of
the raw materials and processed products supplied by and the manufactured and
processed products purchased by the CATL CP Group, further separate annual
caps would not serve any meaningful purpose for potential investors to
understand our business model and transactions with the CATL CP Group; and
2. Setting respective annual caps for raw materials and processed products supplied
by, or manufactured and processed products purchased by the CATL CP Group
may adversely affect the Group’s business. The lithium-ion battery industry is
characterized by rapid technological advancements and fluctuating market prices
for raw materials. These factors, coupled with the international demand for
electric vehicles, necessitate a flexible approach to purchasing and manufacturing
strategies. The Group must be able to swiftly adapt to changes in market
conditions, customer preferences, and technological developments to remain
competitive. By setting narrow annual caps for specific raw materials and
processed products, the Gro up’s ability to make timely and strategic adjustment
in relation to processing raw materials and manufacturing products would be
severely hindered. Moreover, the Group’s competitiveness in the lithium-ion
battery industry heavily relies on its ca pacity to secure a stable supply of
high-quality raw materials at competitive prices. Imposing restrictive annual caps
on raw materials and processed products supplied by the CATL CP Group would
limit the Group’s bargaining power and it s ability to negotiate favorable terms,
which could result in higher production costs, reduced profit margins, and a
diminished ability to compete effectiv ely in the market. Therefore, setting
respective annual caps for raw materials and processed products would not only
CONNECTED TRANSACTIONS
–3 6 2–


--- page 373 ---
impede the Group’s operational flexib ility but also undermine its overall
competitiveness in the highly dynamic and competitive lithium-ion battery
industry.
Listing Rules implications
As (i) CATL is a connected person at the subsid iary level, (ii) our Board (including all
the independent non-executi ve Directors) has approved the CATL Purchase Framework
Agreement and the transaction s contemplated thereunder and (iii) all the independent
non-executive Directors have confirmed that the terms of the CATL Purchase Framework
Agreement are fair and reasonable, on normal commercial terms or better and in the
interests of our Company and our Shareholders as a whole, by virtue of Rule 14A.101 of the
Listing Rules, such transactions will be subject to the reporting, annual review and
announcement requirements, but be exempt from the circular (including independent
financial advice) and independent Shareholders’ approval requirements under Chapter 14A
of the Listing Rules.
WAIVER APPLICATION
As the continuing connected transactions described in ‘‘— Partially Exempt
Continuing Connected Transactions’’ above in this section have been and will continue to
be carried out by our Group on a continuing and recurring basis and are expected to extend
over a period of time, our Directors are of the view that compliance with the announcement
requirement under Chapter 14A of the Listing Rules would impose unnecessary
administrative costs and burden to our Gro up. Accordingly, pursuant to Rule 14A.105 of
the Listing Rules, we have applied to the Stock Exchange for, and the Stock Exchange has
granted, a waiver from strict compliance with the announcement requirement under the
Listing Rules relating to each of the aforeme ntioned continuing connected transactions
subject to the conditions that (a) the aggregate amounts of the transactions as contemplated
under each of the aforementioned continuing connected transactions for each relevant
financial year shall not exceed the relevant amounts set forth in the respective proposed
annual caps as stated above; and (b) we will co mply with the other relevant requirements
under Chapter 14A of the Listing Rules applicable to the aforementioned continuing
connected transactions.
In the event of any future amendments to the Listing Rules imposing more stringent
requirements than those as of the date of this prospectus on the continuing connected
transactions referred to in this section, we will take immediate steps to ensure compliance
with such new requirements.
DIRECTORS’ VIEW
Our Directors (including the independent non-executive Directors) are of the view that
(i) the continuing connected transactions described above have been entered into in the
ordinary and usual course of our business and on normal commercial terms or better, (ii)
the terms of the continuing connected transactions described above are fair and reasonable
and in the interest of our Group and Sharehold ers as a whole, and (iii) the proposed annual
CONNECTED TRANSACTIONS
–3 6 3–


--- page 374 ---
caps for the continuing connected transactions described in ‘‘— Partially Exempt
Continuing Connected Transactions’’ above in this section are fair and reasonable and in
the interests of our Group and Shareholders as a whole.
JOINT SPONSORS’ VIEW
After due and careful enquiries, taking into account the information provided by our
Company and Directors, the Joint Sponsors are of the view that (i) the continuing
connected transactions described in ‘‘— Partially Exempt Continuing Connected
Transactions’’ above in this section have been entered in the ordinary and usual course
of business of our Group and on normal commercial terms or better; (ii) the terms of the
aforementioned continuing connected transactions are fair and reasonable and in the
interests of our Group and Shareholders as a whole; and (iii) the pro posed annual caps for
the aforementioned continuing connected transactions are fair and reasonable and in the
interests of our Group and Shareholders as a whole.
CONNECTED TRANSACTIONS
–3 6 4–


--- page 375 ---
BOARD OF DIRECTORS
Our Board comprises ten Directors, in cluding five executive Directors, one
non-executive Director and four independent non-executive Directors. The following
t a b l es e t sf o r t hi n f o r m a t i o ni nr e l a t i o nt oo u rD i r e c t o r s :
Name Age Position(s)
Date of Joining Our
Group
Date of
Appointment as
Director
Roles and
Responsibilities
Relationship with Other
Directors, Supervisors
or Senior Management
Members
Mr. Shi Junfeng
(石俊峰) .......
59 Chairman of our
Board, executive
Director,
general manager
March 2003 March 11, 2003 Formulating the overall
development
strategies and
overseeing the
operation of the
Group
Husband of Ms. Zhu
Xianglan and uncle
of Mr. Qin Jian
Mr. Lu Zhenya
(呂振亞)( f o r m e r
name: Lu Zhenya
(呂貞亞) ) .......
59 Executive Director March 2003 January 20, 2014 Overseeing the overall
management and
operation of the
Group
None
Mr. Qin Jian ( 秦建) . . 53 Executive Director,
deputy general
manager
March 2003 January 20, 2014 Overseeing the overall
management and
operation of the
Group
Nephew of Ms. Zhu
Xianglan and Mr.
Shi Junfeng
Mr. Shen Zhiyong
(沈志勇) .......
59 Executive Director,
chief financial
officer
March 2003 January 20, 2014 Managing the financial
functions of the
Group
None
Mr. Zhang Yi ( 張羿) . 46 Executive Director,
secretary of our
Board, joint
company
secretary
December 2004 September 13, 2022 Managing the
operation of the
Board
None
Ms. Zhu Xianglan
(朱香蘭) .......
58 Non-executive
Director
November 2013 November 27, 2013 Responsible for
providing guidance
for the overall
d e v e l o p m e n to fo u r
Group
Wife of Mr. Shi
Junfeng and aunt of
Mr. Qin Jian
M r .L iQ i n g w e n
(李慶文) .......
68 Independent
non-executive
Director
March 2020
Note March 26, 2020 Providing independent
advice and
judgment to our
Board
None
Mr. Ye Xin ( 葉新). . . 41 Independent
non-executive
Director
March 2020 March 26, 2020 Providing independent
advice and
judgment to our
Board
None
Ms. Geng Chengxuan
(耿成軒) .......
58 Independent
non-executive
Director
September 2021 September 27, 2021 Providing independent
advice and
judgment to our
Board
None
Mr. Hong Kam Le
(康錦里) .......
45 Independent
non-executive
Director
Listing Date October 9, 2023
(effective from
the Listing
Date)
Providing independent
advice and
judgment to our
Board
None
Note: Mr. Li was appointed and resigned as independent Director in January 2014 and June 2014, respectively,
and was re-appointed as independent Director in March 2020.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
–3 6 5–


--- page 376 ---
Executive Directors
Mr. Shi Junfeng ( 石俊峰), aged 59, is the founder of our Company, the chairman of our
Board, an executive Director, and the general manager of our Company. He is the husband
of Ms. Zhu Xianglan, our non-executive Director and uncle of Mr. Qin Jian, our executive
Director. In March 2003, Mr. Shi founded our Company and has been a Director and
general manager since then, and was further appointed as the chairman of our Board in
January 2014. He was redesignated as an executive Director in September 2023. He is
primarily responsible for formulating the overa ll development strategies and overseeing the
operation of our Group. He is currently the e xecutive director and general manager of
Lopal International, one of our Controlling Shareholders. He currently also serves as a
director and/or senior management member in other subsidiaries of our Group, including
but not limited to being the general manager of Jiangsu Kelas, the general manager of
Lopal Lubrication, the chairman of the board of directors of Changzhou Liyuan, the
general manager and executive director of Lopal Times, and the chairman of the board of
directors of Zhangjiagang TEEC.
Mr. Shi has over 30 years of experience in automotive-related industries. Prior to
joining our Group, from August 1986 to May 2001, Mr. Shi worked at Yuejin Motor
(Group) Corporation Co., Ltd. ( 躍進汽車集團有限公司), a company principally engaged in
the manufacturing and sales of automobiles and automotive parts, as a staff of its
technology center. Since June 2021, Mr. Shi has been the chairman of the board of directors
of Hunan Farnlet New Energy Technology Co., Ltd ( 湖南法恩萊特新能源科技有限公司), a
company principally engaged in the manufact uring of lithium-ion electrolyte in the PRC,
and is primarily responsible for formulating the overall investment strategies and business
plans of the company.
Mr. Shi received his bachelor’s degree in organic synthetic materials from Hunan
University ( 湖南大學) in the PRC in July 1986. He obtained his qualification as senior
engineer ( 高級工程師) issued by the Ministry of Machine-Building and Electronics Industry
(機械電子工業部) in November 1998. He has also been a member of the 12th Executive
Committee of the Jiangsu Federation of Industry and Commerce ( 江蘇省工商業聯合會執委)
since July 2022. Mr. Shi has earned various awards and recognitions. Mr. Shi received a
certificate of the National High Level Talent Support Scheme ( 國家高層次人才特殊支持計
劃) issued by the Organization Department of the Central Committee of the CPC ( 中
共中央
組織部) and the Ministry of Human Resources and Social Security ( 人力資源和社會保障部)
in 2016 and a certificate of the Nanjing Technological Top Experts Scheme ( 南京科技頂尖
專家集聚計劃) issued by the Nanjing Talent Work Leading Group ( 南京市人才工作領導小
組) for the period of February 2018 to February 2021. He also received the honorary
credential of a Top 10 Influential Figure in Jiangsu China ( 感動中國江蘇十大感動人物)b y
Modern Express Post ( 現代快報) in December 2013 and a certificate of Outstanding
Entrepreneur in Nanjing ( 南京市優秀民營企業家) issued by the CPC Nanjing Municipal
Committee and Nanjing Municip al People’s Government in 2014.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
–3 6 6–


--- page 377 ---
Mr. Shi was a director or a member of the senior management of the following
dissolved companies prior to its dissolution:
Name of Enterprise
Place of
Incorporation
Nature of
Business Status
Date of
Dissolution
Reason of
Dissolution Mr. Shi’s Position
LOPAL TECH. (HK) CO.,
LIMITED ( 龍蟠科技（香
港）有限公司) ........
Hong Kong General trading Deregist ration August 6, 2021 Cessation of
business
Director
Jiangsu Liyuan Battery
Materials Co., Ltd. ( 江蘇
鋰源電池材料有限公司).
PRC Sales of LFP Deregistrati on April 12, 2022 Cessation of
business
Executive director
and legal
representative
Nanjing Weiyi Data
Technology Co., Ltd.
(南京微蟻數據科技有限
公司).............
PRC E-commerce
platform
operation
services
Deregistration June 24, 2022 Cessation of
business
General manager
Mr. Shi confirmed that, to the best of his knowledge, (i) the aforesaid companies were
solvent immediately prior to their dissolution, (ii) there was no wrongful act on his part
leading to the dissolution, and (iii) he is not a ware of any actual or potential claim that has
been or will be made against him as a result of the dissolution.
M r .L uZ h e n y a(呂振亞) (with former name as Lu Zhenya ( 呂貞亞)), aged 59, is an
executive Director. He joined our Company as the director of office and deputy general
manager in March 2003 and was appointed as Director in January 2014. He was
redesignated as an executive Director in September 2023. He is primarily responsible for
overseeing the overall management and operation of our Group.
Prior to joining our Group, from January 1992 to August 2001, he worked as vice
factory director at Jiangsu Suzhong Pesticides Chemical ( 江蘇蘇中農藥化工廠), a company
principally engaged in the manufactu ring of herbicides and pesticides.
Mr. Lu obtained his associate degree in industrial and civil construction from
Shanghai Tonji University ( 上海同濟大學) in the PRC in July 1986. He obtained his
qualification as economist ( 經濟師) issued by Yangzhou Science and Technology Cadres
Bureau ( 揚州市科技幹部局) in April 1995. He was appointed as a party representative of
Qixia District, Nanjing City at the Ninth Party Congress ( 中共南京市棲霞區第九屆黨代表)
in July 2011.
Mr. Qin Jian ( 秦建), aged 53, is an executive Director and the deputy general manager
of our Company. He was appointed as Director in January 2014 and was redesignated as an
executive Director in September 2023. Mr. Qin is the nephew of Mr. Shi Junfeng and Ms.
Zhu Xianglan, our executive Director and non-executive Director, respectively. Mr. Qin has
over 27 years of experience in the automobile chemical products industry. Prior to joining
our Group, from November 1996 to February 2003, he worked at Nanjing Fulima
Lubricants Co., Ltd. ( 南京富利瑪潤滑油有限責任公司) as a sales manager. He joined our
Group as the sales director of our Compan y from March 2003 to August 2009, and was
successively appointed as the deputy general manager of Jiangsu Kelas in August 2009 and
the deputy general manager of our Company in January 2014. He currently also serves as a
director and/or senior management member in other subsidiaries of our Group, including
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
–3 6 7–


--- page 378 ---
but not limited to being an executive director of Jiangsu Kelas, the general manager of
Changzhou Liyuan, and the general manager of Zhangjiagang TEEC. He is responsible for
overseeing the overall management and operation of our Group.
Mr. Qin obtained his postgraduate degree in senior manager business administration at
Nanjing Normal University ( 南京師範大學) in the PRC in May 2008.
Mr. Qin was an officer in charge or supervisor of the following dissolved companies
prior to their dissolution:
Name of Enterprise
Place of
Incorporation
Nature of
Business Status
Date of
Dissolution
Reason of
Dissolution
Mr. Qin’s
Position
Jiangsu Lopal Petrochemical
Co Ltd Nanjing Branch
(江蘇龍蟠石化有限公司
南京分公司) .........
PRC Sales of
lubricating oil,
brake fluid
and antifreeze
Deregistration Octobe r 7, 2023 Cessation of
business
Officer in charge
Nanjing Fulima Lubricants
Co., Ltd. ( 南京富利瑪潤
滑油有限責任公司)....
PRC Sale of
lubricating oil,
grease,
antifreeze,
brake fluid,
additive
blending,
automotive
parts and
accessories
Deregistration Octobe r 12, 2013 Cessation of
business
Supervisor
Mr. Qin confirmed that, to the best of his knowledge, (i) the aforesaid companies were
solvent immediately prior to their dissolution, (ii) there was no wrongful act on his part
leading to the dissolution, and (iii) he is not a ware of any actual or potential claim that has
been or will be made against him as a result of the dissolution.
Mr. Shen Zhiyong ( 沈志勇), aged 59, is an executive Director and the chief financial
officer of the Company. Mr. Shen joined our Group as chief financial officer in March 2003
and was appointed as Director in January 2014. He was redesignated as an executive
Director in September 2023. He is responsible for managing the financial functions of our
Group. He currently also serves as a director and/or senior management member in other
subsidiaries of our Group, including but not limited to being an executive director of Lopal
Lubrication, an executive director of Sichuan Liyuan, an executive director and general
manager of Jiangsu Beiterui Nano, an executive director of Tianjin Beiterui Nano, an
executive director of Hubei Liyuan, an executive director of Shandong Liyuan, and a
director of Changzhou Liyuan.
Mr. Shen has over 27 years of experience in accounting and finance. Prior to joining
our Group, from April 1997 to February 2003, Mr. Shen worked at Taizhou Gaogang
District Huzhuang Supply and Marketing Cooperative ( 泰州市高港區胡莊供銷合作社)
(formerly known as Taixing Huzhuang Supply and Marketing Cooperative ( 泰興市胡莊供
銷合作社)), which was deregistered in June 2023, with his last position as an accountant.
Mr. Shen completed a course in EMBA at Nanjing University Business School ( 南京大學商
學院) in the PRC in December 2007. Mr. Shen obtained the certificate of accounting
professional issued by Ta ixing Finance Bureau ( 泰興市財政局) in April 2002. He also
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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obtained the international accountants certificate issued by the China Association of Chief
Financial Officers and the certificate of membership issued by the Association of
International Accountants in January 2021.
Mr. Shen was a director of the following di ssolved company prior to its dissolution:
Name of Enterprise
Place of
Incorporation
Nature of
Business Status
Date of
Dissolution
Reason of
Dissolution
Mr. Shen’s
Position
Nanjing Weiyi Data
Technology Co., Ltd.
(南京微蟻數據科技
有限公司)..........
PRC E-commerce
platform
operation
services
Deregistration June 24, 2022 Cessation of
business
Executive director
and legal
representative
Mr. Shen confirmed that, to the best of his knowledge, (i) the aforesaid company was
solvent immediately prior to its dissolution , (ii) there was no wrongful act on his part
leading to the dissolution, and (iii) he is not a ware of any actual or potential claim that has
been or will be made against him as a result of the dissolution.
On March 28, 2023, our Company and Mr. Shen as our chief financial officer received
a verbal warning from the Shanghai Stock Exchange for an error in the accounting of our
financial liability which affect ed our consolidated financial statements for the financial year
ended December 31, 2021, the three months end ed March 31, 2022 and the six months ended
J u n e3 0 ,2 0 2 2 .F o rd e t a i l s ,s e e‘ ‘ B u s i n ess — Legal Proceedings and Compliance —
Non-compliance — Verbal Warning by the Shanghai Stock Exchange.’’
Mr. Zhang Yi ( 張羿), aged 46, is an executive Director, the secretary of our Board and
the joint company secretary of our Company. He joined our Group as the director of supply
chain management centre and director of OEM marketing from December 2004 to
December 2013, a supervisor and director of OEM marketing from January 2014 to
February 2016, and has been serving as the secretary of our Board since March 2016. He
was appointed as a Director in September 2022 and was redesignated as an executive
Director in September 2023. He was also appointed as our joint company secretary in
September 2023. He is primarily responsible for managing the operation of our Board. Mr.
Zhang currently also serves as a director in other subsidiaries of our Group, including but
not limited to being a director of Zhangjiagang TEEC and Changzhou Liyuan.
Mr. Zhang has over 26 years of experience in the manufacturing industry. Prior to
joining our Group, from 1997 to 2004, Mr. Zhang worked as an engineer at Huafei Colour
Display Systems Co., Ltd. ( 華飛彩色顯示系統有限公司), a company principally engaged in
the manufacturing and sales of display systems which was deregistered on June 27, 2014.
Mr. Zhang completed the university level of professional studies in business
administration through the completion of online courses from Southwest University of
Science and Technology ( 西南科技大學) in the PRC in July 2022. Mr. Zhang obtained his
qualification as board secretary of listed companies of the Shanghai Stock Exchange
granted by the Shanghai Stock Exchange on March 3, 2016.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 380 ---
Non-executive Directors
Ms. Zhu Xianglan ( 朱香蘭), aged 58, is a non-executive Director. She joined our Group
as a Director in November 2013 and was redesignated as a non-executive Director in
September 2023. Ms. Zhu is the wife of Mr. Shi Junfeng, our executive Director, and aunt of
Mr. Qin Jian, our executive Director. She is p rimarily responsible for providing guidance
for the overall development of our Group.
Ms. Zhu worked at Nanjing Kangai Hospital ( 南京康愛醫院) as the principal nurse
from August 1986 to October 2006. Ms. Zhu has over 11 years of experience in business
management. Ms. Zhu was an executive director and general manager of Lopal
International from October 2013 to June 202 3, and she has been the representative of the
managing partner of Nanjing Bailey since October 2013. Both Lopal International and
Nanjing Bailey are our Controlling Shareholders.
Ms. Zhu obtained her associate degree in Ch inese medicine from Nanjing University of
Chinese Medicine ( 南京中醫藥大學) (formerly known as Nanjing University of Chinese
Medicine ( 南京中醫學院) in the PRC in December 1994.
Independent Non-executive Directors
M r .L iQ i n g w e n(李慶文), aged 68, was appointed and resigned as our independent
Director in January 2014 and June 2014, respectively. He was re-appointed as independent
Director in March 2020 and was appointed as our independent non-executive Director in
September 2023. Mr. Li is primarily responsible for providing independent advice and
judgment to our Board.
Mr. Li was the president of China Automotive News ( 中國汽車報) from May 1998 to
January 2016 and has been the vice president of Auto Talents Committee of China Talents
Society ( 中國人才研究會汽車人才專業委員會) since January 2016. Mr. Li has been (i) an
independent director of Xuchang Yuandong Drive Shaft Co Ltd ( 許昌遠東傳動軸股份有限
公司) (stock code: 002406), a company listed on the Shenzhen Stock Exchange, since July
2020; and (ii) an independent non-executiv e director of New Focus Auto Tech Holdings
Limited ( 新焦點汽車技術控股有限公
司) (stock code: 360), a company listed on the Hong
Kong Stock Exchange, since January 2023. He was also an independent director of
Chongqing Changan Automobile Co Ltd ( 重慶長安汽車股份有限公司) (stock code:
000625), a company listed on the Shenzhen Stock Exchange, from March 2016 to June 2022.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Mr. Li was the chairman of the board and legal representative, or a supervisor of the
following dissolved companies prior to their dissolution:
Name of Enterprise
Place of
Incorporation
Nature of
Business Status
Date of
Dissolution
Reason of
Dissolution Mr. Li’s Position
Beijing Wenli Baiye
Newspaper Distribution
Co Ltd ( 北京文力百業報
刊發行有限責任公司). .
PRC Books
wholesale
Deregistration September 10,
2007
Cessation of
business
Chairman of the
board and
legal
representative
Shenzhen Yichuang
Huifeng Economic
Information Consulting
Co Ltd ( 深圳一創慧鋒經
濟信息諮詢有限公司). .
PRC Economic
information
consultation
Deregistration December 5,
2018
Cessation of
business
Supervisor
Beijing Yichuang
Yuanhang Investment
Management Co Ltd
(北京一創遠航投資管理
有限公司).........
PRC Investment
and asset
management
Deregistration July 8, 2024 Cessation of
business
Director
Mr. Li confirmed that, to the best of his knowledge, (i) the aforesaid companies were
solvent immediately prior to their dissolution, (ii) there was no wrongful act on his part
leading to the dissolution, and (iii) he is not a ware of any actual or potential claim that has
been or will be made against him as a result of the dissolution.
Mr. Li obtained his master’s degree in economics from Harbin Engineering University
(哈爾濱工程大學) in July 1994.
Mr. Ye Xin ( 葉新), aged 41, was appointed as our independent Director and
independent non-executive Director in March 2020 and September 2023, respectively.
Mr. Ye is primarily responsible for providing independent advice and judgment to our
Board.
Since July 2016, Mr. Ye has been the partner of Beijing Jingsh Law Firm Nanjing
Office ( 北京市京師（南京）律師事務所). Mr. Ye was appointed as a member of the Advisory
Committee of the People’s Government of Liuhe District, Nanjing in December 2017. He
was accredited as Top Ten Lawyers in Pukou District, Nanjing ( 南京市浦口區十佳律師)
and served as a visiting professor of Taizhou University ( 泰州學院) from June 2019 to June
2023.
Mr. Ye obtained his bachelor’s degree in law from Jiangsu Normal University ( 江蘇師
範大學), formerly known as Xuzhou Normal University ( 徐州師範大學) in the PRC in June
2007.
Ms. Geng Chengxuan ( 耿成軒), aged 58, was appointed as our independent Director
and independent non-executive Director in September 2021 and September 2023,
respectively. She has also served as the chairlady of the audit committee of our Board
since September 27, 2021. Ms. Geng is primarily responsible for providing independent
advice and judgment to our Board.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Ms. Geng was a lecturer and associate professor at the department of accounting of
Lanzhou University of Finance and Economics ( 蘭州財經大學), formerly known as
Lanzhou Business School ( 蘭州商學院), in the PRC from June 1989 to June 2003. Ms.
Geng was appointed as the director of the Institute of Finance and Accounting ( 財務與會計
研究所所長) in September 2013 and the director of the School Accounting Professional
Degree Graduate Training Steering Committee ( 會計專業學位研究生培養指導委員主任)i n
April 2015. She was also appointed as a member of the independent director professional
committee of the Listed Companies Association of Jiangsu Province ( 江蘇省上市公司協會
獨立董事專業委員會) in August 2018 and April 2023, respectively. Ms. Geng worked at the
College of Economics and Management of Nanjing University of Aeronautics and
Astronautics ( 南京航空航天大學) in the PRC as the professor and tutor of doctoral
students since May 2010.
Ms. Geng has been an independent director a nd the chairlady of the audit committee
of the board of directors of (i) XCMG Construction Machinery Co., Ltd. ( 徐工集團工程機
械股份有限公司) (stock code: 000425), a company listed on the Shenzhen Stock Exchange,
since June 2021 and (ii) Wuxi Huaguang Environmental Energy Group Co., Ltd. ( 無錫華光
環保能
源集團股份有限公司) (stock code: 600475), a company listed on the Shanghai Stock
Exchange, since May 2022. Ms. Geng was also (i) an independent director and a member of
the audit committee of Jiangsu Etern Co Ltd ( 江蘇永鼎股份有限公司) (stock code: 600105),
a company listed on the Shanghai Stock Exchange, from August 2015 to August 2021, (ii)
an independent director and the chairlady of the audit committee of Xuzhou Handler
Special Vehicle Co Ltd ( 徐州海倫哲專用車輛股份有限公司) (stock code: 300201), a
company listed on the Shenzhen Stock Exchange, from June 2015 to December 2020, (iii)
an independent director of Nanjing Pub lic Utilities Development Co., Ltd. ( 南京公用發展股
份有限公司) (stock code: 000421), a company listed on the Shenzhen Stock Exchange, from
May 2015 to May 2021, (iv) an independent director and the chairlady of the audit
committee of Focus Technology Co., Ltd. ( 焦點科技股份有限公司) (stock code: 002315), a
company listed on the Shenzhen Stock Exchange, from January 2017 to May 2023, (v) an
independent director and the chairlady of the audit committee of the board of directors of
Nanjing Port Co., Ltd. ( 南京港股份有限公司) (stock code: 002040), a company listed on the
Shenzhen Stock Exchange, from June 2020 to October 2023 and (vi) an independent
director of Canny Elevator Co., Ltd. ( 康力電梯股份有限公司) (stock code: 002367), a
company listed on the Shenzhen Stock Exchange, from May 2023 to February 2024.
The Board has considered Ms. Geng’s experience in financing and accounting and
noted that Ms. Geng, being an experienced professor in accounting and financial related
disciplines at universities in the PRC and a former member of the independent director
professional committee of the Listed Compan ies Association of Jiangsu Province, also
h o l d so rh e l do f f i c ea sc h a i r l a d yo rm e m b e ro faudit committee in six other listed companies
as disclosed above. As chairlady or member of audit committee of listed issuer, Ms. Geng
was responsible for, among others, reviewin g listed issuer’s financial information and
relevant disclosure, monitoring and evaluating external and internal audit works performed
by the listed issuers, making recommendations on the appointment and change of external
audit firms and monitoring and assessing the in ternal controls of the listed issuers. Thus,
the Board is of the view that Ms. Geng possess in -depth practical knowledge and experience
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 383 ---
in overseeing and monitoring the financial reporting, internal control and other accounting
related affairs of listed issuers and has the relevant accounting or related financial
management experience for the purpose of Rule 3.10(2) of the Listing Rules.
Ms. Geng obtained her PhD degree in man agement science and engineering from
Nanjing University of Aeronautics and Astronautics ( 南京航空航天大學)i nt h eP R Ci n
April 2010.
Mr. Hong Kam Le ( 康錦里), aged 45, was appointed as our independent Director and
independent non-executive Director in October 2023 (effective from the Listing Date). Mr.
Hong will be primarily responsible for providing independent advice and judgment to our
Board.
Mr. Hong was admitted as a solicitor in Hong Kong in September 2007 and has more
than 14 years of experience in the legal industry. Mr. Hong has been a partner of DeHeng
Law Offices (Hong Kong) LLP, formerly known as Chungs Lawyers, since November 2018
and previously served as a partner of Li & Partners from February 2016 to October 2018.
From December 2013 to June 2021, Mr. Hong served as the company secretary and
authorized representative of Shengli Oil & Gas Pipe Holdings Limited ( 勝利油氣管道控股有
限公司) (stock code: 1080), a company listed on the Main Board of the Hong Kong Stock
Exchange. From September 2015 to July 2020 , he also served as one of the joint company
secretaries of Jujiang Cons truction Group Co., Ltd. ( 巨匠建設集團股份有限公司)( s t o c k
code: 1459), a company listed on the Main Board of the Hong Kong Stock Exchange. From
March 2022 to February 2023, Mr. Hong served as one of the joint company secretaries and
authorized representative of Dadi International Group Limited ( 大地國際集團有限公司)
(stock code: 8130), a company listed on the GEM of the Hong Kong Stock Exchange. From
July 2022 to February 2023, Mr. Hong also served as the company secretary and authorized
representative of Kidztech Holdings Limited ( 奇士達控股有限公司) (stock code: 6918), a
company listed on the Main Board of the Hong Kong Stock Exchange. Mr. Hong has
served as an independent non-executive director of Hong Kong Johnson Holdings Co., Ltd.
(香港莊臣控股有限公司) (stock code: 1955), a company listed on the Main Board of the
Hong Kong Stock Exchange, since September 2019, and as the company secretary and
authorized representative of Uju Holding Limited ( 優矩控股有限公司) (stock code: 1948), a
company listed on the Main Board of the Hong Kong Stock Exchange, since October 2022.
Mr. Hong obtained a bachelor’s degree in commerce and a bachelor’s degree in laws
from The University of Sydney in June 2003 and May 2004, respectively, and a
postgraduate certificate in laws from The University of Hong Kong in June 2005.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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SUPERVISORY COMMITTEE
Our Supervisory Committee comprises thre e Supervisors. The following table sets
forth information in relation to our Supervisors:
Name Age
Date of joining
our Group
Date of
appointment as
Supervisor Roles and responsibilities
Mr. Xue Jie
(薛傑) ......
58 May 2005 January 20,
2014
Supervising the finances, the
Directors and senior
management of our Group
Mr. Zhou Lin
(周林) ......
45 March 2003 January 15,
2014
Supervising the finances, the
Directors and senior
management of our Group
Ms. Chang
Huihong
(常慧紅). . . .
29 July 2020 July 15, 2024 Supervising the finances, the
Directors and senior
management of our Group
Mr. Xue Jie ( 薛傑), aged 58, was appointed as our Supervisor in January 2014. He has
also been serving as the sales director of the marketing department of our Company since
May 2005. He currently also serves as a supervisor in other subsidiaries of our Group,
including but not limited to Sichuan Liyuan, Jiangsu Kelas and Lopal Lubrication. He is
responsible for supervising the finances, the Directors and senior management of our
Group.
Prior to joining our Group, Mr. Xue worked as a director of the chassis room of
Nanjing Dongfeng Special Purpose Vehicle Co., Ltd. Nanjing Dongfeng Special Purpose
Vehicle Manufacturing Factory ( 南京東風專用車製造總廠) from January 1992 to
November 1999, and from May 2004 to December 2004. Mr. Xue worked as the
technician manager of Nanjing Xugong Automobile Co., Ltd. ( 南京徐工汽車製造有限公
司), formerly known as Nanjing Chunlan Automobile Manufacturing Co., Ltd. ( 南京春蘭汽
車製造有限公司), a company principally engaged in manufacturing of vehicles, from
December 1999 to April 2004, and vice gener al manager of Nanjing Golden Dragon Bus
Co., Ltd ( 南京金龍客車製造有限公司), a company principally engaged in the manufacturing
of vehicles, from January 2005 to April 2005.
Mr. Xue was a supervisor of the followi ng dissolved companies prior to their
dissolution:
Name of Enterprise
Place of
Incorporation
Nature of
Business Status
Date of
Dissolution
Reason of
Dissolution
Mr. Xue’s
Position
Jiangsu Liyuan Battery
Materials Co., Ltd.
(江蘇鋰源電池材料
有限公司).........
PRC Sales of LFP Deregistrati on April 12, 2022 Cessation of
business
Supervisor
Nanjing Weiyi Data
Technology Co., Ltd.
(南京微蟻數據科技
有限公司).........
PRC E-commerce
platform
operation
services
Deregistration June 24, 2022 Cessation of
business
Supervisor
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 385 ---
Mr. Xue confirmed that, to the best of his knowledge, (i) the aforesaid companies were
solvent immediately prior to their dissolution, (ii) there was no wrongful act on his part
leading to the dissolution, and (iii) he is not a ware of any actual or potential claim that has
been or will be made against him as a result of the dissolution.
Mr. Xue obtained his bachelor’s degree in automotive major in the department of
mechanical engineering from South China University of Technology ( 華南理工大學)i nt h e
PRC in July 1988.
Mr. Zhou Lin ( 周林), aged 45, was appointed as our Supervisor in January 2014. He is
responsible for supervising the finances, the Directors and senior management of our
Group. Mr. Zhou has been serving as the financial manager of our Company since March
2003. He currently also serves as supervisor and/or senior management members in other
subsidiaries of our Group. Mr. Zhou obtained his graduation certificate in internet of
things application technology via the Sel f-taught Higher Education and Examination ( 高等
教育自學考試) from Hunan University of Arts and Science ( 湖南文理學院)i nt h eP R Ci n
December 2022.
Ms. Chang Huihong ( 常慧紅), aged 29, was appointed as a Su pervisor in July 2024. She
is responsible for supervising the finances, the Directors and senior management of our
Group. Ms. Chang has been serving as a director of the industrial investment and financing
management department of the Company since January 2024. She also worked as a
specialist at the industrial investment and financing management department of the
Company from July 2020 to January 2024 after she joined our Company in July 2020.
Ms. Chang obtained her bachelor’s degree in surveying and mapping engineering
major from the Binjiang College of Nanjin g University of Information Science and
Technology ( 南京信息工程大學濱江學院) in the PRC in June 2017 and her master’s degree
in business administration major from Nan jing University of Information Science and
Technology ( 南京信息工程大學) in the PRC in June 2020.
Other Disclosure Pursuant to Rule 13.51(2) of the Listing Rules
Save as disclosed in this prospectus, each of our Directors and Supervisors confirms
with respect to himself or herself that he or she (1) did not hold other long positions or short
positions in the Shares, underlying Shares, debentures of our Company or any associated
corporation (within the meaning of Part XV of the SFO) as of the Latest Practicable Date;
(2) had no other relationship with any Directors, Supervisors, senior management,
Controlling Shareholders or substantial sh areholders of our Company as of the Latest
Practicable Date; (3) did not hold any other major appointment or directorships in the three
years prior to the Latest Practicable Date in any public companies of which the securities
are listed on any securities market in Hong Kong and/or overseas; and (4) there are no other
matters concerning our Director’s appointment that need to be brought to the attention of
our Shareholders and the Stock Exchange or shall be disclosed pursuant to Rules
13.51(2)(h) to (v) of the Listing Rules.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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CONFIRMATION FROM OUR DIRECTORS
Rule 3.09D of the Listing Rules
Each of our Directors confirms that he or she (i) has obtained the legal advice referred
to under Rule 3.09D of the Listing Rules in October 2023, and (ii) understands his or her
obligations as a director of a liste d issuer under the Listing Rules.
Rule 3.13 of the Listing Rules
Each of our independent non-executive Directors has confirmed (i) his/her
independence as regards each of the factors referred to in Rules 3.13(1) to (8) of the
Listing Rules, (ii) he/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 Lates t Practicable Date, and (iii) that there are
no other factors that may affect his/her independence at the time of his/her appointments.
SENIOR MANAGEMENT
Our executive Directors and senior management are responsible for the day-to-day
management and operation of our business. For information concerning our executive
Directors, see ‘‘— Board of Directors — Executive Directors.’’ The table below sets out
certain information regarding our senior management:
Name Age Position(s)
Date of Joining
Our Group
Date of
Appointment as
Senior Management
Member Roles and Responsibilities
Relationship with Other
D i r e c t o r so rS e n i o r
Management Members
Mr. Shi Junfeng
(石俊峰) .......
59 Chairman of our
Board, executive
Director,
general manager
March 2003 March 11, 2003 Formulating the overall
development
strategies and
overseeing the
operation of the
Group
Husband of Ms. Zhu
Xianglan and uncle
of Mr. Qin Jian
Mr. Qin Jian ( 秦建) . . 53 Executive Director,
deputy general
manager
March 2003 January 20, 2014 Overseeing the overall
management and
operation of the
Group
Nephew of Ms. Zhu
Xianglan and Mr.
Shi Junfeng
Mr. Shen Zhiyong
(沈志勇) .......
59 Executive Director,
chief financial
officer
March 2003 March 11, 2003 Managing the financial
functions of the
Group
None
Mr. Zhang Yi
(張羿) .........
46 Executive Director,
secretary of our
Board, joint
company
secretary
December 2004 March 9, 2016 Managing the operation
of the Board
None
Mr. Shi Junfeng ( 石俊峰), aged 59, is our general manager. Please see ‘‘Board of
Directors — Executive Directors’’ in this section for Mr. Shi’s biography.
Mr. Qin Jian ( 秦建), aged 53, is our deputy general manager. Please see ‘‘Board of
Directors — Executive Directors’’ in this section for Mr. Qin’s biography.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Mr. Shen Zhiyong ( 沈志勇), aged 59, is our chief financial officer. Please see ‘‘Board of
Directors — Executive Directors’’ in this section for Mr. Shen’s biography.
Mr. Zhang Yi ( 張羿), aged 46, is the secretary of our Board. Please see ‘‘Board of
Directors — Executive Directors’’ in this section for Mr. Zhang’s biography.
JOINT COMPANY SECRETARIES
Mr. Zhang Yi ( 張羿), aged 46, is our joint company secretary. Please see ‘‘Board of
Directors — Executive Directors’’ in this section for Mr. Zhang’s biography.
Ms. Cheung Lai Ha ( 張麗霞) was appointed as our joint company secretary in
September 2023. Ms. Cheung, aged 45, is an assistant vice president of Governance Services
of Computershare Hong Kong Investor Services Limited, a professional services provider
specializing in corporate services. She has over 14 years of experience in corporate
governance field. Ms. Cheung obtained her bachelor’s degree in business administration
from Lingnan University in November 2002 and the degree in master of corporate
governance from The Hong Kong Metropolitan University, formerly known as The Open
University of Hong Kong, in June 2011. Ms. Cheung has been admitted as an associate
member of The Hong Kong Chartered Governance Institute and an associate member of
The Chartered Governance Institute in the United Kingdom in July 2013.
BOARD COMMITTEES
Our Board delegates certain responsibilit ies to various dedicated committees. In
accordance with relevant PRC laws, regulations, the Articles and the Hong Kong Listing
Rules, we have formed four board committees, namely, the audit committee of the Board
(the ‘‘Audit Committee ’’), the remuneration and evaluati on committee of the Board (the
‘‘Remuneration and Evaluation Committee ’’), the nomination committee of the Board (the
‘‘Nomination Committee ’’) and the strategy committee of the Board (the ‘‘ Strategy
Committee ’’).
Audit Committee
Upon Listing, the Audit Committee will consist of three members, namely Ms. Geng
Chengxuan, Mr. Ye Xin and Mr. Hong Kam Le, ou r independent non-executive Directors.
Ms. Geng Chengxuan has been appointed as the chairlady of the Audit Committee, and is
our independent non-executive Director possessing the relevant accounting or related
financial management expertise. The primary duties of the Audit Committee are to review
and supervise the financial reporting proce ss and internal control system of our Group,
oversee the audit process, review and oversee the existing and potential risks of our Group
and perform other duties and respon sibilities as assigned by our Board.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Remuneration and Evaluation Committee
The Remuneration and Evaluation Committee consists of two independent
non-executive Directors, being Mr. Li Qingwen and Ms. Geng Chengxuan and one
executive Director, Mr. Lu Zhenya. Mr. Li Qingwen has been appointed as the chairman of
the Remuneration and Evaluation Committee. Th e primary duties of the Remuneration and
Evaluation Committee are to establish and review the policy and structure of the
remuneration for our Directors and senior management and make recommendations on
employee benefit arrangement.
Nomination Committee
The Nomination Committee consists of two independent non-executive Directors,
being Mr. Ye Xin and Ms. Geng Chengxuan and one executive Director, Mr. Shi. Mr. Ye
Xin has been appointed as the chairman of the Nomination Committee. The primary duties
of the Nomination Committee are to review the structure, size and composition of the
Board, assess the independence of the independent non-executive Directors and make
recommendations to the Board on the appointment and re-appointment of Directors and
succession planning for Directors.
Strategy Committee
The Strategy Committee consists of one independent non-executive Director, Mr. Li
Qingwen and two executive Directors, being Mr. Shi and Mr. Zhang Yi. Mr. Shi has been
appointed as the chairman of the Strategy Committee. The primary duties of the Strategy
Committee are to make recommendations to our Board on our business objectives, general
strategic development plan and specific strategic development plans.
BOARD DIVERSITY
We have adopted our board diversity policy (the ‘‘ Board Diversity Policy ’’) which sets
out the objective and approach to achieve and maintain diversity on our Board. Our Board
Diversity Policy provides that our Company should endeavour to ensure that our Board
members have the appropriate balance of skills , experience and diversity of perspectives
that are required to support the execution of its business strategy.
Pursuant to our Board Diversity Policy, we se ek to achieve Board diversity through the
consideration of a number of factors, includin g but not limited to professional experience,
skills, knowledge, gender, age, cultural and ed ucation background, ethnicity and length of
service. Our Nomination Committee is delegated by our Board to be responsible for
compliance with relevant code governing boar d diversity under the CG Code. After Listing,
our Nomination Committee will review our Bo ard Diversity Policy from time to time to
ensure its continued effectiveness and we will disclose in our corporate governance report
about the implementation of our Board Diversity Policy on an annual basis.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Our Board comprises ten members, in cluding five executive Directors, one
non-executive Director and four independent non-executive Directors. Our Directors
have a balanced mix of experiences, including overall management and strategic
development, business and risk management, and finance and accounting experiences.
Our Directors, ranging from 41 years old to 68 years old, are able to bring a balance of
diversity perspectives to our Board. We have taken steps to promote gender diversity of our
Board and currently two of our Directors are female. Going forward, we will continue to
apply the principle of appointments based on merits with reference to our Board Diversity
Policy as a whole. In particular, taking into account the business needs of our Group and
changing circumstances from time to time that may affect our Group’s business plans, we
will actively identify female individuals s uitably qualified to become our Board members
and we aim to maintain at least one female Director on our Board, subject to our Directors
(i) being satisfied with the competence and e xperience of the relevant candidates after a
comprehensive review process ba sed on reasonable criteria; and (ii) fulfilling their fiduciary
duties to act in the best interests of our Company and our Shareholders as a whole when
deliberating on the appointment. To further ensure gender diversity of our Board in the
long run, our Group will also identify and sel ect several female individuals with a diverse
range of skills, experience and knowledge in different fields from time to time and maintain
a list of such female individuals who posse ss qualities to become our Board members in
order to develop a pipeline of potential successors to our Board, and our Board and our
Nomination Committee will assess our Board composition annually in accordance with the
CG Code. We are also committed to adopting a similar approach to promote diversity of
the management (including but not limited to the senior management) of our Company to
further enhance the effectiveness of our corp orate governance. Going forward and with a
view to developing a pipeline of potential successors to our Board that may meet the
targeted gender diversity ratio set out above, we will (i) make appointments based on merits
with reference to board diversity as a whole; (ii) take steps to promote gender diversity at all
levels of our Group by recruiting staff of diffe rent gender; (iii) consider the possibility of
nominating female management members who have the necessary skills and experience to
our Board; and (iv) provide career development opportunities and more resources in
training female staff with the aim of promoting them to senior management or our Board so
that we will have a pipeline of female senior m anagement and potential successors to our
Board in a few years’ time. After due consideration, our Board believes that based on the
meritocracy of our Directors, the compositi on of our Board satisfies our Board Diversity
Policy.
WAIVER GRANTED BY THE STOCK EXCHANGE
We have applied to the Stock Exchange for, and the Stock Exchange has granted, a
waiver from strict compliance with the requir ement of Rules 8.12 and 19A.15 of the Listing
Rules in relation to the requirement of management presence in Hong Kong. Please see
‘‘Waivers from Strict Compliance with the Hong Kong Listing Rules and Exemptions from
Compliance with the Companies (Winding up a nd Miscellaneous Provisions) Ordinance —
Waiver in Relation to Management Presence in Hong Kong’’ for details of the waiver.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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We have applied to the Stock Exchange for, and the Stock Exchange has granted, a
waiver from strict compliance with the requir e m e n to fR u l e s3 . 2 8a n d8 . 1 7o ft h eL i s t i n g
Rules in relation to the academic or professional qualifications of our Company’s joint
company secretaries. Please see ‘‘Waiver s from Strict Compliance with the Hong Kong
Listing Rules and Exemptions from Compliance with the Companies (Winding up and
Miscellaneous Provisions) Ordinance — Waiver in Relation to Joint Company Secretaries’’
for details of the waiver.
CORPORATE GOVERNANCE
Our Directors recognise the importance of good corporate governance in management
and internal procedures so as to achieve effe ctive accountability. Our Group will comply
with the CG Code, except for the deviation from the code provision C.2.1 of Part 2 of the
CG Code. Mr. Shi is the chairman of our Board and the general manager of our Company
and he has been managing our Group’s business and supervising the overall operations of
our Group since its foundation in 2003. Our Directors consider that vesting the roles of the
chairman of our Board and the general manager of our Company in Mr. Shi is beneficial to
the management and business development of our Group and will provide a strong and
consistent leadership to our Group. Our Board will continue to review and consider
splitting the roles of the chairman of our Board and the general manager at a time when it is
appropriate and suitable by taking into account the circumstances of our Group as a whole.
Save as disclosed in this section, our Group is in compliance with all the code
provisions of the CG Code.
COMPENSATION OF DIRECTORS, SUPE RVISORS AND SENIOR MANAGEMENT
Our Directors, Supervisors and membe rs of our senior management receive
compensation from our Company in the form of f ees, salaries, retirement benefits scheme
contributions, other social security costs, housing benefits and other employee benefits,
share-based compensation, allowances and other benefits in kind.
The aggregate amount of remuneration paid to our Directors and Supervisors
(including fees, salaries, retirement benefits scheme contributions, other social security
costs, housing benefits and other employee benefits, share-based compensation, allowances
and other benefits in kind) for the years ended December 31, 2021, 2022 and 2023 and the
six months ended June 30, 2024 were approx imately RMB6.3 million, RMB6.5 million,
RMB5.4 million and RMB4.9 mi llion, respectively.
The aggregate amount of wages, salaries and bonuses, retirement benefit expenses,
social security costs, housing benefits and other employee benefits and share-based
compensation paid to our five highest paid in dividuals of our Company, including nil, one,
nil and three Director(s), during the years ended December 31, 2021, 2022 and 2023 and the
six months ended June 30, 2024 were approx imately RMB12.3 million, RMB10.7 million,
RMB5.0 million and RMB4.7 mi llion, respectively.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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It is estimated that remuneration, excluding discretionary bonus, equivalent to
approximately RMB7.0 million in aggregate will be paid and granted to our Directors
and Supervisors by us in respect of the financial year ending December 31, 2024 under
arrangements in force at the date of this prospectus.
No remuneration was paid by us to our Directors, Supervisors or the five highest paid
individuals as an inducement to join or upon joining us or as a compensation for loss of
office in respect of the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024. Further, none of our Directors or Supervisors had waived or agreed to
waive any remuneration during the same pe riods. Save as disclosed above, no other
payments have been paid, or are payable, by our Company or our subsidiary to our
Directors, Supervisors or the five highest paid individuals during the Track Record Period.
Our Board will review and determine the rem uneration and compensation packages of
our Directors, Supervisors and senior managem ent which, following the Listing, will receive
recommendation from the Remuneration and Evaluation Committee which will take into
account salaries paid by comparable compani es, time commitment and responsibilities of
our Directors, Supervisors and senior man agement and performance of our Group.
COMPETITION
Each of our Directors confirms that as of the Latest Practicable Date, he or she did not
have any interest in a business which competes or is likely to compete, directly or indirectly,
with our business and requires disclosure under Rule 8.10 of the Listing Rules.
COMPLIANCE ADVISOR
We have appointed Guotai Junan Capital Limited as our compliance advisor (the
‘‘Compliance Advisor ’’) upon listing of our Shares on the Stock Exchange in compliance with
Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, the
Compliance Advisor will provide advice t o us when consulted by us in the following
circumstances:
. before the publication of any regulatory announcement, circular or financial
report;
. where a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
. where we propose to use the proceeds of the Global Offering in a manner different
from that detailed in this prospectus or where our business activities,
developments or results deviate from any forecast, estimate, or other
information in this prospectus; and
. where the Stock Exchange makes an inquiry of our Company regarding unusual
movements in the price or trading volume of the H Shares, the possible
development of a false market in the Shares, or any other matters in
accordance with Rule 13.10 of the Listing Rules.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Meanwhile, pursuant to Rule 3A.24(1) of the Listing Rules, the Compliance Advisor
shall inform us on a timely basis of any amendment or supplement to the Hong Kong
Listing Rules issued by the Hong Kong Stock Exchange from time to time and any new or
amended law, regulation or code in Hong Kong applicable to our Company. The
Compliance Advisor shall also provide advice to us on the continuing requirements under
the Listing Rules and applicable laws and regulations.
The term of the appointment of the Compliance Advisor shall commence on the Listing
Date and end on the date on which our Company distributes its annual report in respect of
its financial results for the first full financ ial year commencing after the Listing Date and
this appointment may be subject to extension by mutual agreement.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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So far as our Directors are aware, immediately following the completion of the Global
Offering and assuming that the Over-allotment Option is not exercised and the options
granted under the 2023 Share Option Scheme are not exercised, the following persons will
have an interest or a short position in our Shares or underlying Shares which will be
required to be disclosed to our Company and the Hong Kong Stock Exchange pursuant to
the provisions of Division 2 and 3 of Part XV of the SFO or will be, directly or indirectly,
interested in 10% or more of the nominal value of any class of share capital (excluding the
2,082,400 A Shares as treasury shares) carrying rights to vote in all circumstances at general
meetings of our Company or any of our subsidiaries:
As of the Latest Practicable Date and
immediately prior to the Global Offering
Immediately after the Global Offering (assuming the
Over-allotment Option is not exercised and the options granted
under the 2023 Share Option Scheme are not exercised)
Name of
shareholder Nature of interest
Description of
Shares
Number of
Shares (1)
Approximate
percentage of
interest in our
Company (2)
Approximate
percentage of
voting rights
in our
Company (4)
Number of
Shares (1)
Approximate
percentage of
interest in our
Company
Approximate
percentage of
interest in our
AS h a r e s(3)
Approximate
percentage of
voting rights
in our
Company (5)
Mr. Shi (6), (7) . Beneficial owner A Shares 212,662,195 (9) 37.63% 37.77% 212,662,195 31.98% 37.63% 32.08%
Interest held by
controlled
corporation
A Shares 1,901,208 0.34% 0.34% 1,901,208 0.29% 0.34% 0.29%
Interest of spouse A Shares 23,618,649 4.18% 4.20% 23,618,649 3.55% 4.18% 3.56%
Ms. Zhu (8) . . . Beneficial owner A Shares 23,618,649 4.18% 4.20% 23,618,649 3.55% 4.18% 3.56%
Interest of spouse A Shares 214,563,403 37.97% 38.11% 214,563,403 32.26% 37.97% 32.36%
Notes:
(1) All interests stated are long positions.
(2) The calculation is based on the total number of 565,078,903 Shares in issue as of the Latest Practicable
Date.
(3) The calculation is based on the total number of 665, 078,903 Shares in issue immediately following the
completion of the Global Offering and without taking into account any Shares which may be issued
pursuant to the exercise of the Over-allotment Opt ion or the options granted under the 2023 Share Option
Scheme.
(4) The calculation is based on the total number of 562 ,996,503 Shares in issue and excluding the 2,082,400 A
Shares as treasury shares as of the Latest Practicable Date.
(5) The calculation is based on the total number of 662, 996,503 Shares in issue immediately following the
completion of the Global Offering excluding the t reasury shares and without taking into account any
Shares which may be issued pursuant to the exercise of the Over-allotment Option or the options granted
under the 2023 Share Option Scheme.
(6) Mr. Shi is the spouse of Ms. Zhu. By virtue of the SFO, Mr. Shi is deemed to be interested in the Shares in
which Ms. Zhu is deemed to be interested upon Listin g. In addition, Mr. Shi and Ms. Zhu may be taken to
have an interest in those treasury shares held by t he Company as shareholders controlling more than
one-third or more voting power in the Company. As o f the Latest Practicable Date, the Company held
2,082,400 A Shares as treasury shares.
SUBSTANTIAL SHAREHOLDERS
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(7) As of the Latest Practicable Date, Nanjing Bailey h eld 1,901,208 A Shares. Nanjing Bailey is a limited
partnership established under in the PRC, which is man aged by Lopal International as its general partner.
Lopal International is a limited liability compa ny established in the PRC, which is owned as to 90% by
Mr. Shi and 10% by Ms. Zhu. Accordingly, Mr. Shi is deemed to be interested in the Shares held by
Nanjing Bailey.
(8) Ms. Zhu is the spouse of Mr. Shi. By virtue of the SFO, Ms. Zhu is deemed to be interested in the Shares in
which Mr. Shi is deemed to be interested upon Listing. In addition, Mr. Shi and Ms. Zhu may be taken to
have an interest in those treasury shares held by t he Company as shareholders controlling more than
one-third or more voting power in the Company. As o f the Latest Practicable Date, the Company held
2,082,400 A Shares as treasury shares.
(9) As of the Latest Practicable Date, out of the 212,6 62,195 A Shares beneficially owned by Mr. Shi, an
aggregate of 56,800,000 A Shares of Mr. Shi were subject to pledges granted under certain loan and credit
facilities in favor of certain PRC financial instit utions regulated by the NAFR and/or the CSRC. For
further details of the share pledges granted by Mr. Shi, see ‘‘— Share Pledges by Mr. Shi’’ below.
Save as disclosed above and in ‘‘Statuto ry and General Information — C. Further
Information about Our Directors and Substantial Shareholders — 1. Disclosure of
Interests’’ in Appendix IV, our Directors ar e not aware of any person who will, immediately
following the completion of the Global Offe ring and assuming that the Over-allotment
Option is not exercised and the options granted under the 2023 Share Option Scheme are
not exercised, have an interest or a short position in the Shares or underlying Shares which
will be required to be disclosed to our Company and the Hong Kong Stock Exchange under
the provisions of Divisions 2 and 3 of Part XV o f the SFO or will be, directly 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 meetings of any other member of our Group
(excluding the 2,082,400 A Shares as treasury shares in case of our Company).
SHARE PLEDGES BY MR. SHI
In order to obtain financing for his personal needs, Mr. Shi has from time to time
pledged the A Shares he owned to certain PRC financial institutions as collateral. As of the
Latest Practicable Date, Mr. Shi has pledged 56,800,000 A Shares, representing
approximately 10.05% of the total issued sh are capital of our Company as security in
favour of certain PRC financial institutions regulated by the NAFR and/or the CSRC
(collectively, the ‘‘ PRC Regulated Financial Institutions ’’) which will continue to subsist
after Listing.
The loan and credit facilities of Mr. Shi secured by share pledges in respect of the A
Shares he holds are subject to margin call, close-out or loan-to-value ratio requirements
that would be triggered by a material variation in value of our A Shares. Nevertheless, Mr.
Shi can opt to repay a portion of the relevant outstanding loans and/or provide additional
margin funds in the event such margin call or loan-to-value ratio requirement is triggered to
avoid having to pledge additional Shares in resp ect of such loan or credit facilities. Mr. Shi
will only pledge additional Shares to the extent permissible under the Hong Kong Listing
Rules and further announcement(s) will be made by the Company as and when appropriate
and required under the Hong Kong Listing Rules.
To the best knowledge of our Directors having made all reasonable enquiries, there has
not been any adverse credit records against Mr. Shi in respect of any breach of repayment
obligations under its indebtedness.
SUBSTANTIAL SHAREHOLDERS
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BEFORE THE GLOBAL OFFERING
As of the Latest Practicable Date, the regi stered share capital of the Company was
RMB565,078,903, comprising 565,078,903 A Shares (including 2,082,400 A Shares as
treasury shares) with a nominal value of RMB1.00 each, all of which are listed on the
Shanghai Stock Exchange.
Description of Shares Number of Shares
Approximate % of
issued share capital
AS h a r e s........................... 5 6 5 , 0 7 8 , 9 0 3 (1) 100%
Note: (1) These A Shares include 2,082,400 A Shares whi ch are held by our Company as treasury shares.
UPON COMPLETION OF THE GLOBAL OFFERING
Immediately after the Global Offering (assu ming that the Over-allotment Option is not
exercised and the options granted under the 2 023 Share Option Scheme are not exercised),
the share capital of the Company will be as follows.
Description of Shares Number of Shares
Approximate % of
issued share capital
AS h a r e s........................... 5 6 5 , 0 7 8 , 9 0 3 (1) 84.96%
H Shares to be issued pursuant to the Global
O f f e r i n g .......................... 1 0 0 , 0 0 0 , 0 0 0 1 5 . 0 4 %
Total .............................. 665,078,903 100%
Note: (1) These A Shares include 2,082,400 A Shares whi ch are held by our Company as treasury shares.
Immediately after the Global Offering (assu ming that the Over-allotment Option is
fully exercised and the options granted under the 2023 Share Option Scheme are not
exercised), the share capital of the Company will be as follows:
Description of Shares Number of Shares
Approximate % of
issued share capital
AS h a r e s........................... 5 6 5 , 0 7 8 , 9 0 3 (1) 83.09%
H Shares to be issued pursuant to the Global
O f f e r i n g .......................... 1 1 5 , 0 0 0 , 0 0 0 1 6 . 9 1 %
Total .............................. 680,078,903 100%
Note: (1) These A Shares include 2,082,400 A Shares whi ch are held by our Company as treasury shares.
SHARE CAPITAL
–3 8 5–


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OUR SHARES
Upon the completion of the Global Offering, the Shares will consist of A Shares and H
Shares. The A Shares and H Shares are all ordinary Shares in the share capital of the
Company. Apart from certain qualified domestic institutional investors in mainland China,
the qualified investors in mainland China under the Shanghai-Hong Kong Stock Connect
and the Shenzhen-Hong Kong Stock Connect (if our H Shares are eligible securities for that
purpose) and other persons who are entitled to hold our H Shares pursuant to relevant PRC
Law or upon approvals of any competent authorities, H Shares generally cannot be
subscribed for by or traded between legal or natural persons in mainland China.
Shanghai-Hong Kong Stock Connect has e stablished a stock connect mechanism
between mainland China and Hong Kong. Our A Shares can be subscribed for and traded
by investors in mainland China, qualified foreign institutional investors or qualified foreign
strategic investors and must be traded in Renminbi. As our A Shares are eligible securities
under the Northbound Trading Link, they can also be subscribed for and traded by Hong
Kong and other overseas investors pursuant to the rules and limits of Shanghai-Hong Kong
Stock Connect. If our H Shares are eligible securities under the Southbound Trading Link,
they can also be subscribed for and traded by investors in mainland China in accordance
with the rules and limits of Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong
Stock Connect.
A Shares and H Shares are regarded as one class of Shares under the Articles of
Association and will rank pari passu with each other in all other respects and, in particular,
will rank equally for all dividends or distributions declared, paid or made after the date of
this prospectus. Dividends in respect of our Shares may be paid by us in Hong Kong dollars
or Renminbi. In addition to cash, dividends may be distributed in the form of Shares.
As of the Latest Practicable Date, 2,082, 400 A Shares were held by our Company as
treasury shares, which shall only be used by our Company in connection with employees’
share incentive scheme(s) of our Company. These A Shares were repurchased by our
Company during the period from October 14, 2022 to March 24, 2023. If such 2,082,400 A
Shares are not utilised within 36 months from the relevant date of repurchase, all such
unutilised A Shares shall be cancelled. Upon adoption of any share scheme(s) of our
Company which will be funded by such 2,082,400 A Shares after Listing, such 2,082,400 A
Shares may be transferred out of treasury for the purpose of and pursuant to such share
scheme(s) of our Company and our Company w ill comply with applicable requirements
under Rule 19A.39E of the Hong Kong Listing Rules as and when appropriate and
required.
SHARE CAPITAL
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APPROVAL FROM HOLDERS OF A SHARES REGARDING THE GLOBAL
OFFERING
We have obtained approval from our A Shareholders to issue H Shares and seek the
listing of the H Shares on the Hong Kong Stock Exchange. Such approval was obtained at
the general meeting of our Company held on O ctober 9, 2023 and is subject to the following
conditions:
(i) Size of the Offer
The proposed number of H Shares to be offered initially shall not exceed
113,015,000 H Shares (that is, not exceed ing 16.67% of the total issued number of
shares as enlarged by the H Shares to be issued pursuant to the Global Offering). The
number of H Shares to be issued pursuant to the exercise of the Over-allotment Option
shall not exceed 129,967,000 H Shares (that is, not exceeding 15% of the total number
of H Shares to be offered initially pursuant to the Global Offering).
(ii) Method of Offering
The method of offering shall be by way of a public offer for subscription in Hong
Kong and an international offering to institutional and professional investors.
(iii) Target Investors
The H Shares shall be issued to Hong Kong public investors, other overseas
investors who meet the relevant requirement s, qualified domestic investors eligible to
invest in overseas securities according t o PRC Law and other investors who comply
with the relevant regulatory requirements.
(iv) Price Determination Basis
The issue price of the H Shares will be determined after due consideration of the
interests of existing Shareholders, the accep tance of investors and issuance risks and in
accordance with international practices through the demands for orders and book
building process, subject to the domestic and overseas capital market conditions and
by reference to the valuation level of comparable companies in domestic and overseas
markets.
(v) Valid Period
The issue of H Shares and listing of H Shares on the Hong Kong Stock Exchange
shall be completed within 18 months from the date when the Shareholders’ meeting was
held on October 9, 2023.
There is no other approved offering plans for any other shares except for the Global
Offering.
SHARE CAPITAL
–3 8 7–


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2023 SHARE OPTION SCHEME
We have adopted the 2023 Share Option Scheme, the principal terms of which are
summarized in ‘‘Statutory and General Information — A. Further Information about Our
Group — 5. 2023 Share Option Scheme’’ in Appendix IV.
SHAREHOLDERS’ GENERAL MEETINGS
For details of circumstances under which our Shareholders’ general meetings are
required, see ‘‘Summary of the Articles of Association’’ in Appendix III.
SHARE CAPITAL
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You should read the following discussion and analysis on our financial condition and
results of operations together with our consolidated financial statements as of and for each
of the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2023 and 2024, including the notes thereto, included in the Accountants’ Report set out in
Appendix IA to this prospectus. Our consolidated financial statements have been prepared in
accordance with IFRSs. Potential investors should read the whole of the Accountants’
Report set out in Appendix IA to this prospectus and not rely merely on the information
contained in this section. The following discussion and analysis contain forward-looking
statements that involve risks and uncertainties. For additional information regarding these
risks and uncertainties, see ‘‘Risk Factors.’’
OVERVIEW
During the Track Record Period, we principally engaged in the production and sales of
LFP cathode materials and automotive specialty chemicals.
We achieved strong growth from 2021 to 2022. Our revenue increased by 247.1% from
RMB4,053.5 million for the year ended Decemb er 31, 2021 to RMB14,071.6 million for the
year ended December 31, 2022. In addition, our net profit increased by 137.6% from
RMB433.4 million for the year ended Decemb er 31, 2021 to RMB1,029.9 million for the
year ended December 31, 2022. This was primarily attributable to the strong growth of our
LFP cathode material business since we expanded our presence in the LFP cathode material
industry through the acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano,
w h i c ha r ee n g a g e di nb u s i n e s s e si nt h ef i e l do fL F Pc a t h o d em a t e r i a l s ,i nJ u n e2 0 2 1 ,i nt e r m s
of both sales volume and average selling prices, driven by the rapid development and
growth in demand of downstream NEV and energy storage industries and the significant
increase in the price of principal raw materials, such as lithium carbonate, attributable to
tightness in upstream supply.
However, we recorded a net loss of RMB1,5 14.2 million for the year ended December
31, 2023 as compared to a net profit of RMB 1,029.9 million for year ended December 31,
2022. This was primarily driven by the unprecedented volatility i n lithium carbonate market
prices. Specifically, we recorded a gros s loss of RMB57.5 million for the year ended
December 31, 2023 compared to a gross prof it of RMB2,433.3 million for the year ended
December 31, 2022 as lithium carbonate market prices undergoing an unprecedented sharp
d e c l i n ei n2 0 2 3a f t e ra ne x t e n d e dh i g hp r i c eenvironment created a temporary mismatch
between cost of sales of LFP cathode materials and its revenue contribution for the year
ended December 31, 2023. We recorded a 44.8% year-on-year decrease in revenue from
sales of LFP cathode materials in 2023, mainly attributable to a significant decrease in
average selling price of LFP cathode material s which closely follows the prevailing lithium
carbonate market price which experienced sharp decreases during the year. Due to the
continuous decline of lithium carbonate market prices through 2023, our cost of sales for
LFP cathode materials stayed ele vated relative to the selling prices which had to be lowered
to reflect the sharp decline in lithium carb onate prices during the year. In addition, we
recognized provision for impairment loss of inventories of RMB554.5 million in 2023 as a
result of the decrease in recoverable amounts of inventories attributable to the declining
raw material prices.
FINANCIAL INFORMATION
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--- page 400 ---
The market challenges we faced in 2023 continued into the first half of 2024, although
we saw some signs of improvement. For the six months ended June 30, 2024, we recorded a
total revenue of RMB3,568.6 million, represen ting a decrease from RMB3,814.2 million for
the same period in 2023. Revenue generated fro m sales of LFP cathode material decreased
from RMB2,851.5 million in the first half of 2023 to RMB2,475.6 million in the first half of
2024. This decrease was mainly attributable t o two factors affecting average selling price of
our LFP cathode materials, including (i) the decline in lithium carbonate market prices, and
(ii) an increase in sales of LFP cathode mater ials with procurement of lithium carbonate
and raw materials from customers which res ult in lower revenue recognized and lower
average selling price. Despite these challeng es, we saw an improvement in our gross profit,
recording RMB344.0 million in the first half o f 2024 compared to a gross loss of RMB241.4
million in the first half of 2023. Our net loss also decreased from RMB811.5 million in the
first half of 2023 to RMB260.2 million in the fi rst half of 2024. These i mprovements were
primarily due to the increased sales of LFP cathode materials with procurement of lithium
carbonate and raw materials from customers, partially reducing the Group’s exposure to
raw material price fluctuations.
SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our results of operations were mainly affected and are expected to continue to be
affected by the following factors:
Customer Demand in Different End Markets that We Serve
Our main products include LFP cathode materials used for production of lithium-ion
batteries and automotive specialty chemicals used for automotive repair and maintenance.
Accordingly, our results of operation have b een and are expected to continue to be affected
by the demand in downstream lithium-ion battery market and the automotive market.
During the two years ended December 31, 2022, the strong growths in our downstream
markets have been the main drivers of our business growth, and the upward tendencies in
our downstream markets are expected to furt her boost the demand for our products in the
future. However, softening near-term dema nd sentiments along with the broader global
economic slowdown in 2023 and the continuation of these market challenges in the first half
of 2024 have adversely impacted the demand in downstream lithium-ion battery market and
NEV industries.
LFP cathode material is currently the most extensively used cathode material for the
production of lithium-ion batteries used in a wide variety of end markets including NEV
and energy storage industries. With the initia tives to achieve ‘‘carbon peak’’ and ‘‘carbon
neutrality’’, governments continue to impleme nt favorable policies to accelerate the growth
of NEVs and energy storage facilities both dom estically and globally, which in turn drives
the growing demand on LFP cathode material s. According to Frost & Sullivan, the market
size of the LFP cathode material industry in mainland China by sales volume is expected to
grow from 2,056.0 thousand tons in 2024 to 3,884.0 thousand tons in 2028, representing a
CAGR of 17.2%.
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The rising demand for automotive speci alty chemicals largely depends on the
expansion of automotive industry and the increasing demand for sustainable solutions.
Currently, substantially all of the sales of our automotive specialty chemical products are
conducted in mainland China, where automotiv e ownership continues to be on the rise and
government policies attach great importance to energy conservation and emission
reduction. According to Frost & Sullivan, automobile ownership in mainland China is
estimated to reach 430.5 million units by 2 028, growing at a CAGR of 5.0% between 2024
and 2028. In recent years, the Chinese government has continued to issue environmental
protection related rules and regulations which exert great influence on the automobile
manufacturing industry as well as the downstream and upstream industries thereof. Tighter
regulations will reinforce the entry barrier in terms of regulatory compliance for the
automotive specialty chemical industry and boost demand for sustainable products that are
able to keep abreast with the latest regulatory adjustments. According to Frost & Sullivan,
the market size of each of diesel exhaust fluid, automotive lubricant, coolant and car
maintenance product industries in mainland China by sales volume is expected to grow at a
CAGR of 9.4%, 1.8%, 8.5% and 4.0%, respectively, during the period from 2024 to 2028.
Cost of Raw Materials
The primary raw materials for the product ion of LFP cathode materials are lithium
carbonate and iron phosphate. We have experienced fluctuations in the market prices of
lithium carbonate and iron phosphate to different extents since 2021 due to changes in
supply and demand. The price of lithium carbonate experienced a significant increase from
2021 to 2022, escalating from RMB119.8 thousand per ton in 2021 to RMB482.4 thousand
per ton in 2022, and then dropped to RMB272.3 thousand per ton in 2023 and RMB103.5
thousand per ton in the first half of 2024. The price of iron phosphate increased from
RMB14.3 thousand per ton in 2021 to RMB20.8 thousand per ton in 2022, and then
decreased to RMB14.0 thousand per ton in 2023 and RMB10.4 thousand per ton in the first
half of 2024. For the year ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2023 and 2024, costs of lithium carbonate and iron phosphate amounted to
RMB1,156.4 million, RMB8,902.6 million, RMB6 ,009.4 million, RMB2,940.1 million and
RMB1,597.6 million, respectively, representi ng 38.9%, 76.5%, 68.4%, 72.5% and 49.5% of
our cost of sales for the same periods.
The prices of such raw materials are largely affected by upstream availability and the
supply and demand conditions in downstream indu stries. Any significant fluctuation in the
prices of such raw materials could affect our cost of sales and have a significant impact on
our profitability in view of the inherent prod uction and delivery cycle. Our LFP cathode
material products are priced primarily based on a number of factors, such as costs of raw
materials and production costs. Generally, LFP cathode material prices closely follow the
prevailing lithium carbonate prices listed on the SMM. Therefore, any fluctuation in
principal raw material prices will affect th e gross profit of our LFP cathode material
business. According to Frost & Sullivan, the average price of lithium carbonate and iron
phosphate dropped from RMB482.4 thousand per ton and RMB20.8 thousand per ton in
2022 to RMB272.3 thousand per ton and RMB14.0 thousand per ton in 2023, and further
dropped to RMB103.5 thousand per ton and RMB10.4 thousand per ton in the first half of
2024 respectively. Following such sharp decrease, the average selling price of our LFP
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cathode material products decreased by approximately 51.5% from RMB128,699 per ton in
2022 to RMB62,464 per ton in 2023, and decreased by approximately 56.4% from
RMB76,189 per ton in the first half of 2023 to RMB33,228 per ton in the first half of 2024,
while cost of sales of LFP cathode materials only dropped by approximately 28.8% and
28.0%, respectively, during the same peri ods. As a result, we recorded gross loss of
RMB57.5 million as well as provision for impairment loss of inventories of RMB554.5
million in 2023, which largely contributed to ou r net loss of RMB1,514.2 million in the year.
The market challenges we faced in 2023 continued into the first half of 2024, although we
saw some signs of improvement. For the si x months ended June 30, 2024, we recorded a
total revenue of RMB3,568.6 million, repres enting a decrease from RMB3,814.2 million in
the same period of 2023. Our LFP cathode material segment revenue decreased from
RMB2,851.5 million in the first half of 2023 to RMB2,475.6 million in the first half of 2024.
This decrease was mainly attributable to two fac tors affecting average selling price of our
LFP cathode materials, including (i) the decline in lithium carbonate market prices, and (ii)
an increase in sales of LFP cathode materials with procurement of lithium carbonate and
raw materials from customers which result in lower revenue recognized and lower average
selling price. Despite these challenges, we saw an improvement in our gross profit, recording
RMB344.0 million in the first half of 2024 com pared to a gross loss of RMB241.4 million in
the first half of 2023. Our net loss also decreased from RMB811.5 million in the first half of
2023 to RMB260.2 million in the first half of 2 024. These improvements were primarily due
to the increased sales of LFP cathode materials with procurement of lithium carbonate and
raw materials from customers, partially redu cing the Group’s exposure to raw material
price fluctuations. If we are unable to manag e our business in line with such price decline,
whether through timely price adjustment to our LFP cathode materials or improving
inventory management level, our profitab ility and financial condition could be further
affected.
The principal raw materials of automotive specialty chemicals include base oil, urea
and ethylene glycol. Due to the inflation in t he countries of origin of raw materials and the
gradually lifted COVID-19 pandemic restric tion measures, raw material prices for
automotive specialty chemical products expe rienced significant variations. The global
average crude oil price per barrel rose from RMB443.5 in 2021 to RMB646.6 in 2022, and
then decreased to RMB567.3 in 2023. The avera ge price of urea granule in mainland China
increased from RMB2,510.5 per ton in 2021 to RMB2,820.2 per ton in 2022, and then
decreased to RMB2,460.9 per ton in 2023. The average price of ethylene glycol in mainland
China continuously decreased from RMB5,2 39.2 per ton in 2021 to RMB4,116.7 per ton in
2023. For the year ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2023 and 2024, the total costs of base oil, urea and ethylene glycol amounted to
RMB718.0 million, RMB691.8 million, RMB691.4 million, RMB355.9 million and
RMB338.1 million, respectively, representi ng 47.8%, 51.3%, 48.7%, 50.5% and 48.4% of
the cost of sales of automotive specialty chemicals for the same periods.
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The following sensitivity analysis illustrate s the impact of hypothetical fluctuations of
cost of principal raw materials, namely lithium carbonate and iron phosphate, on our gross
profit during the Track Record Period, assuming all other variables remained constant. The
cost of lithium carbonate accounted for 25.3%, 64.3%, 55.2%, 60.7% and 29.3% of our
cost of sales in 2021, 2022, 2023 and the six months ended June 30, 2023 and 2024,
respectively; and the cost of iron phosphate accounted for 13.6%, 12.2%, 13.2%, 11.8%
and 20.2% of our cost of sales for the same periods, respectively. The hypothetical
fluctuation rates are set by reference to the general range of changes in the prices of
different raw materials that our Group exp erienced during the Track Record Period.
Effect on gross profit
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
Gross profit/
(loss)
Gross profit/
(loss)
Gross profit/
(loss)
Gross profit/
(loss)
Gross profit/
(loss)
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Change in cost of lithium carbonate
+/–50% . . . . . . . . . . . . . . . . . . –/+375,817 –/+3,738,474 –/+2,423,268 –/+1,230,833 –/+472,602
+/–75% . . . . . . . . . . . . . . . . . . –/+563,725 –/+5,607,710 –/+3,634,902 –/+1,846,249 –/+708,902
+/–100% . . . . . . . . . . . . . . . . . –/+751,633 –/+7,476,947 –/+4,846,536 –/+2,461,665 –/+945,203
Change in cost of iron phosphate
+/–10% . . . . . . . . . . . . . . . . . . –/+40,473 –/+142,569 –/+116,291 –/+47,844 –/+65,236
+/–20% . . . . . . . . . . . . . . . . . . –/+80,945 –/+285,137 –/+232,583 –/+95,687 –/+130,473
+/–50% . . . . . . . . . . . . . . . . . . –/+202,363 –/+712,843 –/+581,456 –/+239,219 –/+326,182
The Management and Expansion of Our Production Capacity
The growth in our revenue and market share depends to a large extent on our ability to
manage and expand our production capacity effectively. In order to meet growing customer
demand for our products, we have in the past few years increased our production capacity
and output. As of the Latest Practicable Date, we operated five and seven production
facilities in mainland China for manufactu ring LFP cathode mater ials and automotive
specialty chemicals, respectively. Our capita l expenditures, which were primarily used for
the construction of our production facilitie s, amounted to RMB666.1 million, RMB2,233.7
million, RMB3,209.9 million, RMB1,405.9 million and RMB562.5 million for the year
ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024,
respectively.
Despite the softening near-term demand sentiments and inventory destocking measures
of downstream lithium-ion battery and NEV manufacturers in view of the unprecedented
volatility in lithium carbonate market price s in 2023 and the continuation of these market
challenges in the first half of 2024, downstre am demand for LFP cathode materials is still
considerable. Going forward, we plan to further expand our production capacity to cope
with the expected increase in demand for LFP cathode materials. We decided to expand the
geographical coverage of our production network by establishing an overseas production
plant in Indonesia following the globalization trend of the industry. We also plan to
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construct additional LMFP production lines at our Xiangyang Plant. LMFP, such as our M
series product, is currently considered a promi sing cathode material as it combines the high
safety feature of lithium iron phosphate with the higher energy density and power density of
lithium manganese phosphate. For details on our production expansion plan, see ‘‘Business
— Our Businesses — LFP Cathode Materials — Production expansion plans.’’
We believe that as our sales volume grows and our operational efficiency increases, our
production costs as a percentage of revenue will tend to decrease due to economies of scale.
However, if we are unable to generate sufficient revenue and profit to cover our substantial
production costs, we will be faced with excess production capacities and our financial
condition and results of operations could be adversely affected.
Diversified Business Lines and Product Mix
During the Track Record Period, we have be en dedicated to promoting sustainable
development of new energy resources through advancing our different business lines. For
the automotive industry, we continued to provide high quality automotive specialty
chemicals aiming to enhancing automotive and industrial functions efficiently while
producing minimum harm to the environment; for new energy application and
conservation, we continued to expand our LFP cathode materials market share. We are
also in the progress of increasing our presence in other green energy industries such as
hydrogen energy segment. Our profitability h as been and will continue to be affected by the
effectiveness of the combination of our different business lines and their respective
dominance.
Benefited from our brand reputation established by our traditional automotive
specialty chemical business line and leveraging our strong research and development
capabilities and extensive customer base, we were able to tap into the LFP cathode material
industry effectively and efficiently. We expanded our presence in the LFP cathode materials
industry through the acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano in
June 2021 and our revenue derived from LFP cathode materials increased significantly by
552.3% from RMB1,876.8 million for the yea r ended December 31, 2 021 to RMB12,241.9
million for the year ended December 31, 2022.
In terms of LFP cathode materials, we off er diversified products with different
characteristics, including S series products with high compaction and high capacity, T series
products engineered for improved charging efficiency and capacitance at low-temperatures,
Z series products produced from recycled raw materials and M series LMFP cathode
material products. Factors such as production process, compaction, capacity and
magnification of different product types affect our manufacturing and direct labor costs,
while price fluctuation of our main raw materia ls, market acceptance and supply-demand
dynamics affect directly the selling prices of our products. As for automotive specialty
chemicals, we mainly offer diesel exhaust fl uid, automobile and industrial lubricant,
coolants and car maintenance products. The div erse automotive specialty chemical product
portfolio we provide cultivate customer loyal ty effectively. As such, our profitability has
been and will continue to be affected by the mix of our products.
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Research and Development
Our results of operations partially depend on our ability to maintain our technical
edge, keep abreast with the technological upgrade and timely adapt to evolving industry
trends. Therefore, we have continuously invested in research and development to maintain
and promote our technological capabilities. Our research and development expenses
amounted to RMB208.0 million, RMB615.5 million, RMB485.7 million, RMB265.6 million
and RMB203.6 million for the year ended De cember 31, 2021, 2022 and 2023 and the six
months ended June 30, 2023 and 2024, respectively, representing 5.1%, 4.4%, 5.6%, 7.0%
and 5.7% of our total revenue for the same periods.
BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance with IFRSs,
which comprise all standards and interpretations approved by the IASB. All IFRSs effective
for the accounting period commencing from J anuary 1, 2024, together with the relevant
transitional provisions and the related interpretations issued by the IASB, have been
consistently applied by the Group in the preparation of the consolidated financial
statements throughout the Track Record Period.
The historical financial information has been prepared on the historical cost basis
except for certain financial instruments that are measured at fair values at the end of each
reporting period.
Acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano
In June 2021, we, through Changzhou Liyuan, acquired the entire equity interest in
Tianjin Beiterui Nano and Jiangsu Beiterui Nano at considerations of RMB328.6 million
and RMB515.8 million, respectively. For deta ils, see ‘‘History and Development — Major
Acquisitions and Disposals — Acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui
Nano’’ and the Accountants’ Reports of Tianjin Beiterui Nano and Jiangsu Beiterui Nano
as set out in Appendix IB and Appendix IC respectively to this prospectus.
We have consolidated the results of operations of Tianjin Beiterui Nano and Jiangsu
Beiterui Nano since June 1, 2021 in accord ance with the relevant equity transfer
agreements, which stipulated that in case of the date of completion of equity transfers
falling on or before 15th of the month, the results of operations of the subject matter
companies shall be so consolidated. The equity transfers were both completed on June 11,
2021, the date on which the equity transfers were registered at the relevant authorities. The
pre-acquisition financial information of Tianjin Beiterui Nano for the five months ended
May 31, 2021 are set forth in Appendix IB to this prospectus. The pre-acquisition financial
information of Jiangsu Beiterui Nano for the period from January 28, 2021 (date of
incorporation) to May 31, 2021 are set forth in Appendix IC to this prospectus.
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MATERIAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
We have identified certain accounting policie s that are significant to the preparation of
our financial statements. Some of our accounting policies involve subjective assumptions
and estimates, as well as complex judgments relating to accounting items. In each case, the
determination of these items requires management judgments based on information and
financial data that may change in future periods. Uncertainty about these assumptions and
estimates could result in outcomes that could re quire a material adjustment to the carrying
amounts of the assets or liabilities affected in the future. When reviewing our financial
statements, you should consider (i) our select ion of critical accounting policies; (ii) the
judgment and other uncertainties affecting t he application of such policies; and (iii) the
sensitivity of reported results to changes in conditions and assumptions. For details on our
material accounting policies, judgments and estimates, see Note 4 and Note 5 to Part II of
the Accountants’ Report in Appendix IA to this prospectus.
SUMMARY OF RESULTS OF OPERATIONS DURING THE TRACK RECORD
PERIOD
The following table sets forth a summary of our consolidated results of operations for
the periods indicated. This information sh ould be read together with our consolidated
financial statements and related notes included elsewhere in this prospectus. The results of
operations in any particular period are not necessarily indicative of our future trends.
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue ....................... 4,053,505 14,071,643 8,729,479 3,814,204 3,568,612
Cost of sales . . . . . . . . . . . . . . . . . . . . (2,973,747) (11,638,338) (8,786,960) (4,055,637) (3,224,638)
Gross profit/(loss) ................. 1,079,758 2,433,305 (57,481) (241,433) 343,974
Other income, gains and losses . . . . . . . . . 37,316 95,335 92,288 72,711 134,067
(Impairment losses)/r eversal of impairment
losses on financial assets . . . . . . . . . . . (23,134) (70,362) (18,966) 36,334 30,458
Selling and distribution expenses. . . . . . . . (172,759) (176,859) (196,537) (105,676) (80,664)
Administrative expenses . . . . . . . . . . . . . (156,470) (319,796) (868,973) (350,699) (262,110)
Research and development expenses. . . . . . (207,953) (615,549) (485,724) (265,631) (203,587)
Share of results of associates . . . . . . . . . . (279) 16,956 (23,583) (2,657) (11,877)
Finance costs . . . . . . . . . . . . . . . . . . . . (49,757) (202,143) (261,377) (108,457) (130,395)
Listing expenses . . . . . . . . . . . . . . . . . . — — (10,216) (7,030) (13,395)
Profit/(loss) before taxation ........... 506,722 1,160,887 (1,830,569) (972,538) (193,529)
Income tax (expense)/credit . . . . . . . . . . . (73,304) (130,941) 316,368 161,051 (66,691)
Profit/(loss) for the year/period ......... 433,418 1,029,946 (1,514,201) (811,487) (260,220)
Profit/(loss) for the year/period
attributable to:
Owners of the Company . . . . . . . . . . . . . 351,103 752,897 (1,233,291) (654,008) (217,820)
Non-controlling interests . . . . . . . . . . . . . 82,315 277,049 (280,910) (157,479) (42,400)
433,418 1,029,946 (1,514,201) (811,487) (260,220)
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DESCRIPTION OF KEY COMPONENTS OF OUR RESULTS OF OPERATIONS
Revenue
We currently conduct our business mainly in mainland China and substantially all of
our revenue derives from domestic customers.
Our revenue increased by 247.1% from RMB 4,053.5 million in 2021 to RMB14,071.6
million in 2022. Our revenue decreased by 38.0% from RMB14,071.6 million in 2022 to
RMB8,729.5 million in 2023. Our revenue decr eased by 6.4% from RMB3,814.2 million for
the six months ended June 30, 2023 to RMB3, 568.6 million for the six months ended June
30, 2024.
Revenue by types of products and services
During the Track Record Period, our revenue primarily derived from sales of LFP
cathode materials and automotive specialty ch emicals. Our automotive specialty chemicals
primarily include diesel exhaust fluid, automobile and industrial lubricant, coolants and car
maintenance products. The following table sets forth a breakdown of our revenue by types
of products and services for the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
LFP cathode materials . . 1,876,842 46.3 12,241,873 87.0 6,753,628 77.4 2,851,523 74.8 2,475,580 69.4
— Without procurement
of lithium
carbonate and
raw materials from
customers . . . . . . 1,876,842 46.3 12,084,887 85.9 6,186,681 70.9 2,673,665 70.1 1,696,977 47.6
— With procurement of
lithium carbonate
and raw materials
from customers
(1) . — — 156,986 1.1 566,947 6.5 177,858 4.7 778,603 21.8
Automotive specialty
c h e m i c a l s ........ 2 , 1 1 8 , 7 2 5 5 2 . 3 1 , 7 6 2 , 8 1 4 1 2 . 5 1 , 9 0 3 , 2 1 2 2 1 . 8 9 3 8 , 0 5 7 2 4 . 6 9 7 0 , 1 4 7 2 7 . 2
— Diesel exhaust fluid . . 790,630 19.5 688,861 4.9 625,738 7.1 323,102 8.5 306,607 8.6
— Automobile and
industrial lubricant 844,402 20.8 623,553 4.4 706,616 8.1 362,948 9.5 367,623 10.3
—C o o l a n t .......... 4 0 3 , 7 0 8 1 0 . 0 3 8 2 , 6 6 1 2 . 7 4 8 4 , 7 0 1 5 . 6 2 0 3 , 2 4 6 5 . 3 2 4 8 , 9 4 8 7 . 0
— Car maintenance
p r o d u c t s ....... 6 1 , 9 5 5 1 . 5 5 8 , 3 3 0 0 . 4 7 0 , 2 4 0 0 . 8 3 5 , 9 7 8 0 . 9 3 6 , 9 8 8 1 . 0
— Other products
(2) . . . . 18,030 0.5 9,409 0.1 15,917 0.2 12,783 0.4 9,981 0.3
Processing income from
lithium carbonate . . . — — — — — — — — 42,685 1.2
Others (3) ........... 5 7 , 9 3 8 (4) 1.4 66,956 0.5 72,639 0.8 24,624 0.6 80,200 2.2
Total ............. 4,053,505 100.0 14,071,643 100.0 8,729,479 100.0 3,814,204 100.0 3,568,612 100
Notes:
(1) Revenue from sales of LFP cathode materials with p rocurement of lithium carbonate and raw materials
from customers is recognized on a net basis, excl uding cost of lithium carbonate and raw materials
procured from customers.
(2) Mainly comprising revenue from sales of filling equipment and packaging containers for automotive
specialty chemical products.
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(3) Mainly comprising revenue from sales of daily chemical products and unfinished products as well as
revenue from our emerging hydrogen energy business.
(4) Including revenue from selling of small amount s of LFP cathode materials produced by third party
contract manufacturers we engaged. During the Tr ack Record Period and prior to the acquisitions of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano, revenue generated from selling of such LFP cathode
materials amounted to RM B4.2 million in 2021.
We engaged third party contract manufacturers to produce small amounts of LFP
cathode materials in 2020 and the first half of 2021 to start building knowledge and
relationships in the emerging NEV supply chain. Revenue from trading of such LFP
cathode materials was classified as revenue from other businesses. We then expanded our
presence in the LFP cathode material indust ry by acquiring Tianjin Beiterui Nano and
Jiangsu Beiterui Nano in June 2021. Since then, we had experienced the strong growth of
our LFP cathode material business driven by the rapid development and growth in demand
of downstream NEV and energy storage industries as well as the significant increase in the
price of principal raw materials, such as lithium carbonate.
We recorded revenue from sales of automotive specialty chemicals of RMB2,118.7
million, RMB1,762.8 million, RMB1,903.2 million, RMB938.1 million and RMB970.1
million in 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024,
respectively. The decrease in revenue from sales of automotive specialty chemicals in 2022
and 2023 was primarily due to (i) the declined demand for our products as transportation
and logistics in mainland China were affected during the COVID-19 pandemic, and (ii) the
more intense market competition, such as bundle sales by our competitors as sales and
marketing strategies.
We engaged in the processing services of lithium carbonate and recognized processing
income from lithium carbonate of RMB42.7 m illion for the six months ended June 30, 2024.
For detailed analysis on revenue by types of products and services, see ‘‘— Period to
Period Comparison of Results of Operations.’’
Revenue by sales channels
The following table sets forth a breakdown of our revenue by sales channels for the
periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
D i s t r i b u t o r s ......... 1 , 0 6 5 , 8 5 2 2 6 . 3 8 9 4 , 7 4 0 6 . 4 8 4 1 , 0 8 2 9 . 6 4 6 6 , 5 8 9 1 2 . 2 4 5 1 , 9 9 7 1 2 . 7
Corporate clients. . . . . . 2,756,892 68.0 13,044,441 92.7 7,659,571 87.8 3,266,595 85.7 3,045,348 85.3
OEM customers . . . . . . 196,539 4.9 105,740 0.8 195,391 2.2 66,337 1.7 53,874 1.5
Online channels . . . . . . 34,222 0.8 26,722 0.1 33,435 0.4 14,683 0.4 17,393 0.5
Total ............. 4,053,505 100.0 14,071,643 100.0 8,729,479 100.0 3,814,204 100.0 3,568,612 100.0
The products we sold to distributors wer e substantially auto motive specialty
chemicals. The products we sold to corporate clients were primarily LFP cathode
materials. Therefore, the fluctuations of revenue contribution from distributors and
corporate clients were generally in line wit h the fluctuations of revenue from sales of
automotive specialty chemicals and L FP cathode materials, respectively.
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We sell certain automotive specialty chemicals to OEM customers who generally order
mass quantities of products produced according to their requirements and specifications for
distribution under their own brands. To the best knowledge of our Directors, some of these
customers have subsequently established or expanded their own p roduction facilities,
leading to the decrease in our revenue from OEM customers from 2021 to 2022. The
increase in revenue from OEM customers in 2023 was primarily due to an increase in
demand for our products from some other remaining OEM customers. Revenue from OEM
customers then decreased in the first half of 2024. This change primarily reflects normal
fluctuations in order patterns and demand cycles of OEM customers which may vary from
time to time.
We also sell automotive specialty chemicals to retail consumers through our
self-operated online stores on various popular e-commerce platforms in China. The
decreases in revenue from online channels in 2022 were primarily due to lower demand for
online purchases of automotive specialty chemicals and the delayed delivery of our products
sold through online channels during the COVID -19 pandemic. The increase in revenue from
online channels in 2023 was pri marily driven by an increase in the demand for automotive
specialty chemicals following the recovery of transportation and logistics in mainland
China. The increase in revenue from online channels for the six months ended June 30, 2024
as compared to that in the corresponding period in 2023 was primarily due to the increase in
online sales volume of our diesel exhaust fluid.
Sales volume and average selling prices
Our sales volume is mainly driven by the m arket demand of our products, which is in
turn primarily affected by the development of downstream industries, industry policies and
the quality of our products. The selling price of our products is largely affected by cost of
raw materials and the supply and demand of our products. The following table sets forth
the sales volume and average selling price s per ton of LFP cathode materials and
automotive specialty chemica ls for the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
Sales volume
Average
selling
price
per ton Sales volume
Average
selling
price
per ton Sales volume
Average
selling
price
per ton Sales volume
Average
selling
price
per ton Sales volume
Average
selling
price
per ton
ton RMB ton RMB ton RMB ton RMB ton RMB
LFP cathode materials . . 30,505 61,526 95,120 128,699 108,120 62,464 37,427 76,189 74,503 33,228
Automotive specialty
chemicals
— Diesel exhaust fluid . . 449,808 1,758 373,821 1,843 331,370 1,888 172,281 1,875 171,095 1,792
— Automobile and
industrial lubricant 56,087 15,055 37,262 16,734 39,577 17,854 21,023 17,264 20,428 17,996
—C o o l a n t .......... 8 0 , 1 0 2 5 , 0 4 0 7 3 , 8 7 4 5 , 1 8 0 9 9 , 3 7 2 4 , 8 7 8 4 1 , 2 6 7 4 , 9 2 5 5 3 , 6 4 2 4 , 6 4 1
— Car maintenance
p r o d u c t s ....... 1 3 , 1 2 6 4 , 7 2 0 1 1 , 7 5 8 4 , 9 6 1 1 5 , 1 4 4 4 , 6 3 8 6 , 9 0 4 5 , 2 1 1 7 , 9 7 7 4 , 6 3 7
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Notes:
(1) The sales volume and average selling prices of ot her products are not meaningful and therefore are not
illustrated due to a number of different types of products combined in this category.
(2) Sales volume includes products produced under subc ontracting arrangements. See ‘‘Business — Our
Businesses — Automotive Specialty Chemicals — Subcontracting.’’
According to Frost & Sullivan, the average i ndustry prices of LFP cathode materials
were approximately RMB55,000 per ton, RMB125,000 per ton, RMB72,200 per ton and
RMB37,400 per ton in 2021, 2022, and 2023 and the six months ended June 30, 2024,
respectively. For details, see ‘‘Industry Overview — Average Price Analysis of LFP Cathode
Material.’’
For 2021, our average selling price of RMB61,526 per ton was mainly based on our
sales after the expansion of our LFP cathode material business through the acquisitions of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano in June 2021, when market prices were
elevated in the second half of the year due to a substantial increase in lithium carbonate
prices, and therefore was higher than the full-year industry average in 2021.
For 2022, our average selling price of RMB128 ,699 per ton was largely aligned with the
industry average of RMB125,000 per ton, following the significant growth in the LFP
cathode material industry in the year.
For 2023 and the six months ended June 30, 2024, our relatively lower average selling
price compared to average industry prices wa s attributable to an increase in sales of LFP
cathode materials with procurement of lithium carbonate and raw materials from
customers. In these cases, costs of such customer-supplied raw materials were deducted
upon revenue recognized, resulting in a lower average selling price.
For further detailed analysis, see ‘‘— Period to Period Comparison of Results of
Operations.’’
Cost of Sales
Our cost of sales primarily consists of cost of raw materials, manufacturing overheads,
depreciation of production facilities and mach inery, employee benefit expenses and other
costs such as transportation costs, tax ch arges and subcontracting service fees.
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The following table sets forth a breakdown of our cost of sales by nature for the
periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
Cost of raw materials. . . 2,391,727 80.4 10,519,529 90.4 7,465,178 85.0 3,545,899 87.4 2,327,372 72.1
— Lithium carbonate . . . 751,633 25.3 7,476,947 64.3 4,846,536 55.2 2,461,665 60.7 945,203 29.3
— Iron phosphate . . . . . 404,725 13.6 1,425,686 12.2 1,162,913 13.2 478,437 11.8 652,364 20.2
—B a s eo i l ......... 2 9 4 , 5 0 9 9 . 9 2 4 7 , 4 8 9 2 . 1 2 6 9 , 6 5 4 3 . 1 1 4 7 , 4 3 1 3 . 6 1 3 1 , 7 3 2 4 . 1
— Ethylene glycol . . . . . 139,254 4.7 145,084 1.2 170,832 1.9 76,259 1.9 96,179 3.0
—U r e a ........... 2 8 4 , 1 9 6 9 . 6 2 9 9 , 2 4 6 2 . 6 2 5 0 , 8 7 2 2 . 9 1 3 2 , 2 2 8 3 . 3 1 1 0 , 2 1 7 3 . 4
— Other raw materials
(1) 517,410 17.3 925,077 8.0 764,371 8.7 249,879 6.1 391,677 12.1
Manufacturing overheads 216,820 7.3 486,801 4.2 643,297 7.3 208,681 5.1 459,766 14.3
D e p r e c i a t i o n ........ 5 8 , 6 3 9 2 . 0 1 4 2 , 8 0 2 1 . 2 2 7 3 , 5 3 4 3 . 1 1 1 0 , 7 3 6 2 . 7 2 0 5 , 2 9 0 6 . 4
Employee benefit expenses 54,362 1.8 88,032 0.8 125,966 1.4 48,977 1.2 83,880 2.6
Others
(2) ........... 2 5 2 , 1 9 9 8 . 5 4 0 1 , 1 7 4 3 . 4 2 7 8 , 9 8 5 3 . 2 1 4 1 , 3 4 4 3 . 6 1 4 8 , 3 3 0 4 . 6
Total ............. 2,973,747 100.0 11,638,338 100.0 8,786,960 100.0 4,055,637 100.0 3,224,638 100.0
Notes:
(1) Including other raw materials used in our produc tion and raw materials procured from third-party
manufacturers for subc ontracting purposes.
(2) Including without limitation tr ansportation costs, tax charges and subcontracting service fees.
Our cost of sales increased significant ly by 291.4% from RMB2,973.7 million in 2021
to RMB11,638.3 million in 2022, primarily du e to our sales growth and the significant
increase in raw material prices. Our cost of sales decreased by 24.5% from RMB11,638.3
million in 2022 to RMB8,787.0 million in 2023, primarily due to (i) the decrease in cost of
raw materials as a result of the reduced sales of LFP cathode materials in 2023 and (ii) the
increase in sales of LFP cathode materials with procurement of lithium carbonate and raw
materials from customers from RMB157.0 million in 2022 to RMB566.9 million in 2023,
cost of which was deducted directly upon the recognition of such revenue. Our cost of sales
decreased by 20.5% from RMB4,055.6 million for the six months ended June 30, 2023 to
RMB3,224.6 million for the six months ended Jun e 30, 2024, primarily due to the decrease
in cost of lithium carbonate along with the decline in its market price.
During the Track Record Period, cost of raw materials constituted the largest portion
of our cost of sales. For the year ended December 31, 2021, 2022 and 2023 and the six
months ended June 30, 2023 and 2024, cost of raw materials amounted to RMB2,391.7
million, RMB10,519.5 million, RMB7,465.2 million, RMB3,545.9 million and RMB2,327.4
million, respectively, accounting for approximately 80.4%, 90.4%, 85.0%, 87.4%, and
72.1% of our total cost of sales for the same periods. During the Track Record Period, our
cost of raw materials were mainly affected by (i) change in our product mix, especially the
significant increase in sales of our LFP cathode materials in 2022, as a result of our
acquisitions of Tianjin Beiterui Nano and J iangsu Beiterui Nano in June 2021 and (ii)
fluctuations in the market prices of our principal raw materials, such as lithium carbonate
FINANCIAL INFORMATION
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and iron phosphate for LFP cathode materials and base oil, ethylene glycol, urea for
automotive specialty chemicals.
Manufacturing overheads primarily consist of utilities expenses, cost of spare parts and
maintenance expenses. Deprecia tion represents the depreciation of our production facilities,
such as plants and machineries. Employee ben efit expenses consist of wages, salaries and
bonuses paid to manufacturing personnel. Other cost of sales includes without limitation
transportation costs, tax charges and subcontracting service fees.
The following table sets forth a breakdown of our cost of sales by types of products
and services for the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
LFP cathode materials . . 1,423,164 47.9 10,245,027 88.0 7,297,947 83.1 3,329,185 82.1 2,398,341 74.4
Automotive specialty
c h e m i c a l s ........ 1 , 5 0 2 , 5 7 0 5 0 . 5 1 , 3 4 7 , 5 7 2 1 1 . 6 1 , 4 1 8 , 9 8 6 1 6 . 1 7 0 5 , 3 8 3 1 7 . 4 6 9 8 , 2 2 3 2 1 . 7
— Diesel exhaust fluid . . 602,167 20.2 533,990 4.6 488,342 5.5 235,968 5.8 221,158 6.9
— Automobile and
industrial lubricant 536,221 18.0 474,759 4.1 514,624 5.9 282,048 7.0 258,251 8.0
—C o o l a n t .......... 3 0 3 , 5 9 8 1 0 . 2 2 9 2 , 9 3 5 2 . 5 3 5 6 , 8 6 9 4 . 1 1 4 9 , 8 1 4 3 . 7 1 8 5 , 2 8 1 5 . 7
— Car maintenance
p r o d u c t s ....... 4 4 , 8 6 3 1 . 5 3 8 , 4 2 4 0 . 3 4 9 , 1 5 1 0 . 5 2 6 , 9 1 6 0 . 7 2 4 , 8 0 6 0 . 8
— Other products (1) . . . . 15,721 0.6 7,464 0.1 10,000 0.1 10,637 0.2 8,727 0.3
Processing income from
lithium carbonate . . . — — — — — — — — 43,289 1.3
Others (2) ........... 4 8 , 0 1 3 1 . 6 4 5 , 7 3 9 0 . 4 7 0 , 0 2 7 0 . 8 2 1 , 0 6 9 0 . 5 8 4 , 7 8 5 2 . 6
Total ............. 2,973,747 100.0 11,638,338 100.0 8,786,960 100.0 4,055,637 100.0 3,224,638 100.0
Notes:
(1) Mainly comprising cost of sales of filling equipment and packaging c ontainers for automotive specialty
chemical products.
(2) Mainly comprising cost of sales of daily chemical p roducts and unfinished products as well as cost of sales
of our emerging hydrogen energy business.
FINANCIAL INFORMATION
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Gross Profit/(Loss) and Gross Profit/(Loss) Margin
Our gross profit/loss represents the difference between total revenue and total cost of
sales. Gross profit/loss margin represents gross profit/loss as a percen tage of total revenue.
For the year ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2023 and 2024, our overall gross profi t/(loss) amounted to RMB1,079.8 million,
RMB2,433.3 million, RMB(57.5) million, RMB(241.4) million and RMB344.0 million,
respectively. Our overall gross profit/(loss) margins was 26.6%, 17.3%, (0.7)%, (6.3)% and
9.6%,respectively, for the same periods. The following table sets forth a breakdown of our
gross profit/(loss) and gross profit/(loss) margins by types of major products and services
for the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
LFP cathode materials . . 453,678 24.2 1,996,846 16.3 (544,319) (8.1) (477,662) (16.8) 77,239 3.1
— Without procurement
of lithium carbonate
and raw materials
from customers . . . 453,678 24.2 1,960,487 16.2 (624,744) (10.1) (480,670) (18.0) (6,728) (0.4)
— With procurement of
lithium carbonate
and raw materials
from customers . . . — — 36,359 23.2 80,425 14.2 3,008 1.7 83,967 10.8
Automotive specialty
c h e m i c a l s ........ 6 1 6 , 1 5 5 2 9 . 1 4 1 5 , 2 4 2 2 3 . 6 4 8 4 , 2 2 6 2 5 . 4 2 3 2 , 6 7 4 2 4 . 8 2 7 1 , 9 2 4 2 8 . 0
— Diesel exhaust fluid . . 188,463 23.8 154,871 22.5 137,396 22.0 87,134 27.0 85,449 27.9
— Automobile and
industrial lubricant 308,181 36.5 148,794 23.9 191,992 27.2 80,900 22.3 109,372 29.8
—C o o l a n t .......... 1 0 0 , 1 1 0 2 4 . 8 8 9 , 7 2 6 2 3 . 4 1 2 7 , 8 3 2 2 6 . 4 5 3 , 4 3 2 2 6 . 3 6 3 , 6 6 8 2 5 . 6
— Car maintenance
p r o d u c t s ....... 1 7 , 0 9 2 2 7 . 6 1 9 , 9 0 6 3 4 . 1 2 1 , 0 8 9 3 0 . 0 9 , 0 6 2 2 5 . 2 1 2 , 1 8 2 3 2 . 9
Lithium carbonate
p r o c e s s i n g s e r v i c e s . . . —— —— —— —— ( 6 0 4 ) ( 1 . 4 )
Our LFP cathode material products are priced primarily based on a number of factors,
such as raw materials and production costs. Generally, LFP cathode material prices closely
follow the prevailing lithium carbonate pri ces listed on the SMM, rendering the initial
procurement cost of consumed raw materi als higher than the selling price of our LFP
cathode materials when the price of lithium carbonate is in a decline cycle. Therefore, any
fluctuation in principal raw material prices wi ll affect the gross profit of our LFP cathode
material business. The gross profit margin of LFP cathode materials decreased from 24.2%
in 2021 to 16.3% in 2022, primarily because the growth of our cost of sales in the year
outpaced that of our revenue due to our purchases of lithium carbonate in the fourth
quarter of 2022 when its price was high. Despite we recorded gross profit of RMB80.4
million for sales of LFP cathode materials wi th procurement of lithium carbonate and raw
materials from customers, the sharp declin e in raw material prices, especially lithium
carbonate, in 2023 resulted in overall gross loss of LFP cathode material products in the
year. We recorded gross profit of LFP cath ode materials of RMB77.2 million for the six
FINANCIAL INFORMATION
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months ended June 30, 2024, primarily due to the increased sales of LFP cathode materials
with procurement of lithium carbonate and raw materials from customers, partially
reducing the Group’s exposure to raw material price fluctuations.
The relatively low profit margin of our sales of automotive specialty chemicals business
for the years ended December 31, 2022 and 202 3 and the six months ended June 30, 2024
was mainly due to (i) the declined demand for the products as transportation and logistics
in the PRC were affected by the COVID-19 pandemic, and (ii) the more intense market
competition, such as bundle sales by the competitors as sales and marketing strategies.
The slight decrease in the gross profit marg in of diesel exhaust fluid from 23.8% in
2021 to 22.5% in 2022 was primarily due to (i) th e intense market competition and (ii) the
increase in prices of raw materials. The gros s profit margin of diesel exhaust fluid then
remained relatively stable at 22.0% in 2023. The gross profit margin of diesel exhaust fluid
remained relatively stable at 27.0% and 27.9% for the six months ended June 30, 2023 and
2024, respectively.
The gross profit margin of automobile and i ndustrial lubricant decreased from 36.5%
in 2021 to 23.9% in 2022, primarily due to an increase in raw material prices, especially base
oil. The gross profit margin of automobile and industrial lubricant then increased to 27.2%
in 2023, primarily due to the decrease in ra w material prices in 2023. The gross profit
margin of automobile and industrial lubricant increased from 22.3% for the six months
ended June 30, 2023 to 29.8% for the same period in 2024, primarily due to the decline in
raw material prices.
The gross profit margin of coolants remain ed relatively stable at 24.8% and 23.4% in
2021 and 2022, respectively. The gross profit margin of coolants then increased to 26.4% in
2023, primarily due to the decrease in the market prices of raw materials. The gross profit
margin of coolants remained relatively stab le at 26.3% and 25.6% for the six months ended
June 30, 2023 and 2024, respectively.
The relatively low gross profit margin of car maintenance products in 2021 was
primarily due to the change in product mix as we promoted and sold more windshield
washer fluid in the year which had a relatively low gross profit margin compared to other
car maintenance products. The increase in the proportion of sales of windshield washer
fluid also contributed to furt her decrease in the gross profit margin of car maintenance
products from 34.1% in 2022 to 30.0% in 2023. The gross profit margin of car maintenance
products increased from 25.2% for the six months ended June 30, 2023 to 32.9% for the
same period in 2024, primarily due to change in product mix.
We recorded negative gross margin of 1.4% for lithium carbonate processing services
in the first half of 2024, primarily due to lack of economies of scale at the early production
phase of the facility for the relevant batches.
FINANCIAL INFORMATION
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The following table sets forth a break down of our gross profit/(loss) and gross
profit/(loss) margins by sales channels for the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
Gross profit/
(loss)
Gross
profit/
(loss)
margin
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
D i s t r i b u t o r s ......... 3 6 5 , 6 3 0 3 4 . 3 2 5 2 , 9 6 5 2 8 . 3 2 3 6 , 6 6 2 2 8 . 1 1 0 6 , 1 2 8 2 2 . 7 1 4 4 , 6 7 3 3 2 . 0
Corporate clients. . . . . . 649,997 23.6 2,156,843 16.5 (344,057) (4.5) (360,380) (11.0) 181,462 6.0
OEM customers . . . . . . 48,231 24.5 10,441 9.9 32,389 16.6 5,799 8.7 9,115 16.9
Online channels . . . . . . 15,900 46.5 13,056 48.9 17,525 52.4 7,020 47.8 8,724 50.2
Total ............. 1,079,758 26.6 2,433,305 17.3 (57,481) (0.7) (241,433) (6.3) 343,974 9.6
During the Track Record Period, the fluctuations in gross profit of sales to distributors
and corporate clients were generally in line with t hat in gross profit of automotive specialty
chemicals and LFP cathode materials, respectively.
The decrease in gross profit of sales to distributors in 2022 was primarily due to more
intense competition in the automotive speci alty chemical market and the increase in raw
material market prices in the year. The gross profit of sales to distributors then remained
relatively stable in 2023. The gross profit of s ales to distributors increased compared with
that for the six months ended June 30, 2023, primarily due to change in product mix as we
sold more coolants to distributors that had rel atively higher gross pr ofit margin compared
with other types of products sold to distributors.
The gross profit of sales to corporate clients was largely affected by the changes in raw
material prices of LFP cathode materials, e specially lithium carbonate, as LFP cathode
material prices closely followed the prevailin g lithium carbonate prices listed on the SMM.
The gross profit of sales to OEM customer s decreased in 2022, primarily due to an
increase in the proportion of sales to OEM cus tomers who provided us with raw materials
for production. The gross profit of sales to OEM customers then increased in 2023
primarily due to a decrease in raw material market prices in the year. The decrease in raw
material prices further contributed to the increase in gross profit margin of sales to OEM
customers in the first half of 2024.
The gross profit of sales through online cha nnels remained relatively stable during the
Track Record Period. The increase in gross profit margin of online sales from 2021 to 2023
was primarily due to change in product mix, suc h as the increased online sales of gasoline
vehicle lubricant which was generally sold at higher prices. The increase in gross profit
margin of online sales in the first half of 2024 compared with that in the same period in 2023
was primarily due to the increased online sales of diesel exhaust fluid that had relatively
higher gross profit margin compared with other types of products sold online.
FINANCIAL INFORMATION
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Other Income, Gains and Losses
Our other income, gains and losses primar ily consist of (i) interest income on bank
deposit, (ii) government grants, (iii) loss on di sposal of property, plant and equipment, (iv)
gain on early termination of leases, (v) gain on disposal of interests in an associate, (vi) gain
or loss from changes in fair value of financial assets at fair value through profit or loss
(‘‘FVTPL ’’), (vii) loss from changes in fair value of other borrowings at FVTPL and (viii)
loss or gain from changes in fair value of derivatives.
The following table sets forth a breakdown of our other income, gains and losses for
the periods indicated:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest income on bank deposi t . . . 3,897 14,956 31,335 12,286 12,273
Government grants . . . . . . . . . . . 22,687 47,145 86,517 52,688 106,093
Loss on disposal of property, plant
and equipment. . . . . . . . . . . . . (2,096) (273) (948) (1,172) (388)
Gain on early termination of leases . — 14,078 — — 1,823
Gain on disposal of interests
in an associate. . . . . . . . . . . . . — — 16,583 16,583 —
Gain/(loss) from changes in fair
value of financial assets at FVT PL 8,389 16,288 46,900 15,357 (5,539)
Loss from changes in fair value of
other borrowings at FVTPL . . . . — — (106,250) (24,884) (16,355)
(Loss)/gain from changes in fair
value of derivatives. . . . . . . . . . — — (876) — 30,319
Others . . . . . . . . . . . . . . . . . . . 4,439 3,141 19,027 1,853 5,841
Total .................... 37,316 95,335 92,288 72,711 134,067
Interest income on bank deposit is affected by the balance of our cash at banks. The
significant increase in interest income on bank deposit from 2021 to 2023 was primarily
attributable to (i) the proceeds from our non-public offering in 2022, (ii) our cash generated
from operating activities and the addition of bank borrowings in 2023. For details of our
non-public offering in 2022, see ‘‘History and Development — Establishment and Major
Shareholding Changes of Our Company — Share Capital Changes in 2022.’’ Our interest
income on bank deposit remained relatively stable at RMB12.3 million for the six months
ended June 30, 2023 and 2024, respectively.
Government grants primarily consist of tax refunds, operating subsidies and various
industry-specific subsidies granted by the government authorities to reward the Group’s
effort for technological innovation. The government grants we received were generally
non-recurring in nature. To the best knowled ge of our Directors, there are no unfulfilled
FINANCIAL INFORMATION
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conditions relating to these government grants. The increase in government grants during
the Track Record Period was primarily attributable to equipment and rent subsidies for our
Pengxi Plant.
Loss or gains on disposal of property, plant and equipment mainly comprise loss or
gains on disposal of machinery and equipment.
Gain on early termination of leases derives from the return of a parcel of leasehold
land to the lessor, the local government.
Gain on disposal of interests in an associate i n 2023 represented our gain on disposal of
our interest in Sichuan Yingda Lithium New Material Co., Ltd. ( 四川省盈達鋰電新材料有
限公司,‘ ‘Sichuan Yingda ’’).
Gain from changes in fair value of financial assets at FVTPL represents gain or loss
from our listed and unlisted equity investments in PRC companies, our unlisted fund
investment and the wealth management products we purchased. The wealth management
products were issued by regulated commercial banks in the PRC and were low-risk in
nature. The wealth management products were structured deposits with financial
institutions with maturities within one year. The returns of the structured deposits were
typically made up of both guaranteed minimum returns and variable returns tied to the
performance of certain underlying financial assets, such as gold spot price and currency
exchange rates. The returns of these inves tments were determined by reference to the
performance of the expected return rates stated in the contracts. We believe the wealth
management products we purchased are of low risks considering their guaranteed minimum
returns and short terms.
We incurred loss from changes in fair value of other borrowings at FVTPL amounting
to RMB106.3 million, RMB24.9 million and RM B16.4 million in 2023 and the six months
ended June 30, 2023 and 2024, respectively. O ther borrowings derived from the repurchase
right granted to certain new investors of Changzhou Liyuan in connection with its capital
increases in 2021 and the first half of 2024. For details of the capital increase and the
repurchase right, see ‘‘History and Development — Our Strategic Cooperation —
Establishment of Changzhou Liyuan in 2021 and Subsequent Capital Increases.’’ Under
the repurchase right, the new investors shall have the right, in the event of certain
circumstances, to demand our Company or its designated party to repurchase the equity
interest in Changzhou Liyuan held by them. Su ch capital contribution by the investors was
accounted for as a liabilit y of the Group in substance.
Loss or gain from changes in fair value of derivatives represents the loss or gain from
lithium carbonate futures we invested in to hedge against price fluctuations of lithium
carbonate. We recorded loss from changes in fair value of derivatives of approximately
RMB876,000 in 2023 and gain from changes in fair value of derivatives of RMB30.3 million
as affected by the fluctuations in lithium carbonate prices and the timing of our investment
in and disposal of lithium carbonate futures.
FINANCIAL INFORMATION
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(Impairment Losses)/Reversal of Im pairment Losses on Financial Assets
Impairment losses on financial assets prima rily represent the impairment losses on our
trade and other receivables calculated based on the expected credit loss rates of our trade
and other receivables at the end of the report ing period. We recorded impairment losses on
financial assets of RMB23.1 million, RMB 70.4 million and RMB19.0 million in 2021, 2022
and 2023, respectively, whereas we recorded reversal of impairment losses on financial
assets of RMB36.3 million and RMB30.5 milli on for the six months ended June 30, 2023
and 2024, respectively.
Selling and Distribution Expenses
Our selling and distribution expenses primar ily consist of (i) advertising expenses, (ii)
employee benefit expenses, (iii) travel expense s, (iv) consulting service fees, such as service
fees paid to external parties for introduc ing sales opportunities to us, (v) business
entertainment expenses and (vi) depreciation and amortization.
The following table sets forth a breakdown of our selling and distribution expenses for
the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
Advertising expenses . . . 60,681 35.1 67,558 38.2 73,968 37.6 38,696 36.6 14,483 18.0
Employee benefit expenses 59,763 34.6 60,230 34.0 57,247 29.1 32,068 30.3 31,998 39.7
T r a v e le x p e n s e s ....... 1 8 , 6 1 1 1 0 . 8 1 6 , 9 7 2 9 . 6 2 1 , 6 5 1 1 1 . 0 1 0 , 0 7 9 9 . 5 9 , 7 4 8 1 2 . 1
Consulting service fees . . 14,449 8.4 13,087 7.4 17,627 9.0 13,142 12.4 12,442 15.4
Business entertainment
e x p e n s e s......... 5 , 2 0 2 3 . 0 6 , 5 7 6 3 . 7 1 4 , 2 2 7 7 . 2 5 , 2 1 4 4 . 9 6 , 0 7 0 7 . 5
Depreciation and
amortization . . . . . . 3,071 1.8 5,576 3.2 5,311 2.7 2,718 2.6 1,538 1.9
Others
Note .......... 1 0 , 9 8 2 6 . 3 6 , 8 6 0 3 . 9 6 , 5 0 6 3 . 4 3 , 7 5 9 3 . 7 4 , 3 8 5 5 . 4
Total ............. 172,759 100.0 176,859 100.0 196,537 100.0 105,676 100.0 80,664 100.0
Note: Others mainly include office expenses, warehouse ren ts, maintenance expenses, training expenses, etc.
In 2021, 2022 and 2023 and the six months en ded June 30, 2023 and 2024, our selling
and distribution expenses amounted to R MB172.8 million, RMB176.9 million, RMB196.5
million, RMB105.7 million and RMB80.7 million, re spectively, representing 4.3%, 1.3%,
2.3%, 2.8% and 2.3% of our total revenue for the same periods. The decrease in our selling
and distribution expenses as a percentage of revenue in 2022 was primarily because selling
and distribution expenses as a percentage of revenue from sales of LFP cathode materials
was relatively lower than that of our traditional automotive specialty chemicals. LFP
cathode materials are mainly sold to corporate clients whilst sales to distributors are mainly
sales of automotive specialty chemicals, thus a much smaller sales team is required by our
LFP cathode material business as compared to that of our automotive specialty chemical
business. The increase in our selling and distri bution expenses as a pe rcentage of revenue in
2023 was primarily due to (i) further increase in selling and distribution expenses mainly
attributable to (a) the increase in advertisin g expenses due to more billboard and elevator
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advertising and (b) the increase in travel expenses and business entertainment expenses as a
result of our efforts in expanding customer base and maintaining relationship with existing
customers and (ii) the decrease in revenue from sales of LFP cathode materials in the
period. Our selling and distribution expenses as a percentage of revenue remained relatively
stable for the six months ended June 30, 2023 and 2024, respectively.
Administrative Expenses
Our administrative expenses primarily cons i s to f( i )e m p l o y e eb e n e f i te x p e n s e s ,( i i )
provision for impairment loss of inventorie s, (iii) depreciation and amortization, (iv)
share-based payment expenses in connection with our share option scheme adopted on
November 20, 2020, (v) consulting service fees, (vi) security expenses, (vii) business
entertainment expenses, (viii) office expens es and (ix) provision for impairment loss of
goodwill.
The following table sets forth a breakdown of our administrative expenses for the
periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
Employee benefit expenses 61,888 39.6 118,111 36.9 121,089 13.9 66,126 18.9 89,743 34.2
Provision for impairment
loss of inventories . . . 2,226 1.4 72,567 22.7 554,547 63.8 222,327 63.4 69,494 26.5
Depreciation and
amortization . . . . . . 21,231 13.6 35,847 11.2 44,188 5.1 20,369 5.8 32,039 12.2
Share-based payment
e x p e n s e s......... — — 4 , 4 3 2 1 . 4 2 , 6 8 2 0 . 3 1 2 , 9 0 7 3 . 7 4 , 6 6 4 1 . 8
Consulting service fees . . 24,046 15.4 13,971 4.4 14,534 1.7 7,746 2.2 10,702 4.2
Security expenses. . . . . . 6,425 4.1 8,071 2.5 9,832 1.1 4,473 1.3 5,024 1.9
Business entertainment
e x p e n s e s......... 5 , 5 8 0 3 . 6 7 , 3 7 5 2 . 3 1 0 , 2 2 9 1 . 2 4 , 2 0 8 1 . 2 4 , 9 8 5 1 . 9
O f f i c ee x p e n s e s ....... 1 5 , 5 4 4 9 . 9 6 , 3 9 1 2 . 0 9 , 2 4 2 1 . 1 4 , 1 2 1 1 . 2 6 4 3 0 . 2
Provision for impairment
loss of goodwill . . . . — — 28,881 9.0 72,773 8.4 1,406 0.3 25,249 9.6
Others
Note .......... 1 9 , 5 3 0 1 2 . 4 2 4 , 1 5 0 7 . 6 2 9 , 8 5 7 3 . 4 7 , 0 1 6 2 . 0 1 9 , 5 6 7 7 . 5
Total ............. 156,470 100.0 319,796 100.0 868,973 100.0 350,699 100.0 262,110 100.0
Note: Others mainly include service charges, depreciatio n of right-of-use assets, travel expenses, etc.
In 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, our
administrative expenses amounted to RMB 156.5 million, RMB319 .8 million, RMB869.0
million, RMB350.7 million and RMB262.1 million, re spectively, representing 3.9%, 2.3%,
10.0%, 9.2% and 7.3% of our total revenue for the same periods. The decrease in our
administrative expenses as a percentage of revenue in 2022 was primarily due to the
significant revenue growth of 247.1% in 2022, partially attributable to revenue growth of
our LFP cathode material business in the year, which outpaced the growth of our
administrative expenses of 104.3% in the same year. The increase in our administrative
expenses as a percentage of revenue in 2023 as compared to that in 2022 was primarily due
to (i) further increase in administrative expe nses mainly attributable to the increase in the
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provision for impairment loss of inventories due to continuous decrease in raw material
prices, especially lithium carbonate, and (ii) the decrease in revenue from sales of LFP
cathode materials in 2023. The decrease in ou ra d m i n i s t r a t i v ee x p e n s e sa sap e r c e n t a g eo f
revenue for the six months ended June 30, 2 024 as compared to that in the corresponding
period in 2023 was primarily due to a decrease in provision for impairment loss of
inventories as the market price of lithium carb onate was less volatile in the first half of 2024
in comparison to th e first half of 2023.
We recognized provision for impairme nt loss of inventories of RMB2.2 million,
RMB72.6 million, RMB554.5 million, RMB 222.3 million and RMB69.5 million in 2021,
2022 and 2023 and the six months ended June 30, 2023 and 2024, respectively. The large
amounts of provision for impairment loss of inventories recorded since 2022 were primarily
due to the continuous decrease in raw material prices, especially lithium carbonate, since
late 2022.
We recognized provision for impairme nt loss of goodwill of RMB28.9 million,
RMB72.8 million, RMB1.4 million and RMB25.2 million in 2022 and 2023 and the six
months ended June 30, 2023 and 2024 as the respective recoverable amounts of certain
subsidiaries acquired during the Track Record Period were estimated to be lower than their
respective carrying amounts. For details, see Note 17 to Part II of th e Accountants’ Report
in Appendix IA to this prospectus.
Research and Development Expenses
Our research and development expenses prima rily consist of (i) direct materials used
for research and development activities, (ii) em ployee benefit expenses, (iii) depreciation,
(iv) processing and testing fees and (v) technical service fees paid to patent agents.
The following table sets forth a breakdown of our research and development expenses
for the periods indicated:
For the year ended December 31, For the six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 % RMB’00 0 % RMB’000 % RMB’ 000 % RMB’000 %
(unaudited)
Direct materials . . . . . . 159,662 76.8 523,066 85.0 365,324 75.2 206,438 77.7 124,664 61.2
Employee benefit expenses 31,850 15.3 67,773 11.0 87,119 17.9 43,981 16.6 55,245 27.1
D e p r e c i a t i o n ........ 8 , 0 1 9 3 . 9 1 4 , 4 3 5 2 . 3 1 9 , 6 3 6 4 . 0 7 , 9 6 1 3 . 0 1 3 , 0 5 5 6 . 4
Processing and testing fees 2,510 1.2 3,053 0.5 4,158 0.9 1,275 0.5 480 0.2
Technical service fees . . . 2,846 1.4 2,194 0.4 1,623 0.3 997 0.4 3,369 1.7
Others
Note .......... 3 , 0 6 6 1 . 4 5 , 0 2 8 0 . 8 7 , 8 6 4 1 . 7 4 , 9 7 9 1 . 8 6 , 7 7 4 3 . 3
Total ............. 207,953 100.0 615,549 100.0 485,724 100.0 265,631 100.0 203,587 100.0
Note: Others include travel expenses , waste disposal fees, etc.
In 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, our research
and development expenses amounted to RMB208.0 million, RMB6 15.5 million, RMB485.7
million, RMB265.6 million and RMB203.6 million, re spectively, representing 5.1%, 4.4%,
5.6%, 7.0% and 5.7% of our total revenue for the same periods.
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Share of Results of Associates
Our share of results of associates represents profit or loss attributable to us from our
investments in associates, including Sichuan Yingda and Hubei Fengli New Energy
Technology Co., Ltd. ( 湖北豐鋰新能源科技有限公司,‘ ‘Hubei Fengli ’’). We disposed our
interest in Sichuan Yingda in the first half of 2023. In 2021, 2022 and 2023 and the six
months ended June 30, 2023 and 2024, our share of results of associates amounted to
RMB(279,000), RMB17.0 million, RMB(23.6) million, RMB(2.7) million and RMB(11.9)
million, respectively.
Finance Costs
Our finance costs mainly comprise interest expenses on bank borrowings, lease
liabilities, discounted bills and converti ble bonds. In 2021, 2022 and 2023 and the six
months ended June 30, 2023 and 2024, our fin ance costs amounted to RMB49.8 million,
RMB202.1 million, RMB261.4 million, RMB108.5 million and RMB130.4 million,
respectively.
The following table sets forth a breakdown of our finance costs for the periods
indicated:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest expenses on:
— Bank borrowings . . . . . . . . . . . 42,592 118,406 191,345 90,122 97,044
— Lease liabilities . . . . . . . . . . . . 3,644 21,316 50,761 12,102 23,549
— Discounted bills . . . . . . . . . . . 3,521 62,421 19,271 6,233 9,802
Total .................... 49,757 202,143 261,377 108,457 130,395
Listing Expenses
Our listing expenses represent expenses related to the Global Offering. Our listing
expenses recorded in the consolidated statements of profit or loss and other comprehensive
income amounted to nil, nil, RMB10.2 millio n, RMB7.0 million and RMB13.4 million in
2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, respectively. For
details, see ‘‘— Listing Expenses’’ in this section.
Income Tax (Expense)/Credit
The enacted income tax rates applicable to our PRC entities may fluctuate because of
the preferential tax treatments, changes in income before taxes, and the recognition of
deferred tax assets and liabilities for lo sses and gains to be carried forward.
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In 2021 and 2022 and the six months ended June 30, 2024, we incurred income tax
expenses of RMB73.3 million, RMB130.9 milli on and RMB66.7 million, respectively, with
effective income tax rates of 14.5%, 11.3% and 34.5%. In 2023 and the six months ended
June 30, 2023, we recorded income tax cre dit of RMB316.4 million and RMB161.1 million,
respectively.
Under the EIT Law and the Implementation Regulation of the PRC Enterprise Income
Tax Law (《中華人民共和國企業所得稅法實施條例》,t h e‘ ‘Implementation Regulation of the
EIT Law ’’), the tax rate of the PRC subsidia ries is 25% unless subject to taxed at
preferential rates set out in Note 10 to Part II of the Accountants’ Report in Appendix IA
to this prospectus.
According to applicable laws and regulatio ns, taxable income of the subsidiary in
Singapore is subject to corporate income tax at the rate of 17% for the year ended
December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024.
Profit/(Loss) for the Year/Period
In 2021 and 2022, we recorded profit fo r year of RMB433.4 million and RMB1,029.9
million, respectively. For the same years, our net profit margin was 10.7% and 7.3%,
respectively. In 2023 and the six months ended June 30, 2023 and 2024, we recorded loss for
the year/period of RMB1,514.2 million, RMB811.5 million and RMB260.2 million,
respectively.
PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Revenue
Our total revenue decreased slightly by 6.4% from RMB3,814.2 million for the six
months ended June 30, 2023 to RMB3,568.6 million for the six months ended June 30, 2024,
primarily due to a decrease in revenue from sales of LFP cathode materials of RMB375.9
million, partially offset by an increase in revenue from sales of automotive specialty
chemicals of RMB32.1 million.
Sales of LFP cathode materials
Revenue from sales of LFP cathode materials decreased by 13.2% from RMB2,851.5
million for the six months ended June 30, 202 3 to RMB2,475.6 million for the six months
ended June 30, 2024, primarily due to a decrease in the average selling price of our LFP
cathode materials from RMB76,189 per ton in the first half of 2023 to RMB33,228 per ton
in the first half of 2024 mainly attributable to (i) the decline in lithium carbonate market
prices, and (ii) an increase in sales of LFP ca thode materials with procurement of lithium
carbonate and raw materials from customers w hich result in lower revenue recognized and
lower average selling price. Despite the decrease in average selling price, sales volume of our
LFP cathode materials increased significan tly from 37,427 tons in the first half of 2023 to
74,503 tons in the first half of 2024.
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Sales of automotive specialty chemicals
Revenue from sales of automotive specialt y chemicals increased slightly by 3.4% from
RMB938.1 million for the six months ended June 30, 2023 to RMB970.1 million for the six
months ended June 30, 2024, primarily due to the increase in revenue from sales of coolants,
partially offset by the decrease in revenue from sales of diesel exhaust fluid.
Our revenue from sales of diesel exhaust fluid decreased slightly by 5.1% from
RMB323.1 million for the six months ended June 30, 2023 to RMB306.6 million for the six
months ended June 30, 2024, primarily due to a 4.4% decrease in average selling price of
diesel exhaust fluid mainly attributable to the decrease in the market price of urea, the
major raw material of diesel exhaust fluid, in the period.
Our revenue from sales of automobile and ind ustrial lubricant remained relatively
stable at RMB362.9 million and RMB367.6 million for the six months ended June 30, 2023
and 2024, respectively.
Our revenue from sales of coolants increased by 22.5% from RMB203.2 million for the
six months ended June 30, 2023 to RMB248. 9 million for the six months ended June 30,
2024, primarily due to a 30.0% increase in sales volume of coolants mainly attributable to
increased sales of coolants for NEVs and overse as sales, partially offset by a 5.8% decrease
in average selling price of coolants as a result o f the increased sales of coolants to corporate
clients.
Our revenue from sales of car maintenance products remained relatively stable at
RMB36.0 million and RMB37.0 million for the s ix months ended June 30, 2023 and 2024,
respectively.
Processing income from lithium carbonate
We engaged in the processing services of lithium carbonate and recognized processing
income from lithium carbonate of RMB42.7 m illion for the six months ended June 30, 2024.
Sales of others
O u rr e v e n u ef r o ms a l e so fo t h e r si n c r e a sed significantly by 225.7% from RMB24.6
million for the six months ended June 30, 2023 to RMB80.2 million for the six months
ended June 30, 2024, primarily due to an increase in sales of unfinished products.
Cost of sales
Our cost of sales decreased by 20.5% from RMB4,055.6 million for the six months
ended June 30, 2023 to RMB3,224.6 million f or the six months e nded June 30, 2024,
primarily due to (i) the decrease in cost of r aw materials, especially cost of lithium
carbonate, as a result of the decline in the principal raw material prices in the first half of
2024, and (ii) the increase in the proportion of sales of LFP cathode materials with
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procurement of lithium carbonate and raw materials from customers from 4.7% of our total
revenue in the first half of 2023 to 21.8% of our total revenue in the first half of 2024, cost
of which was deducted directly upon recognition of such revenue.
Gross profit/(loss)
We recorded gross loss of RMB241.4 million f or the six months ended June 30, 2023,
while we recorded gross profit of RMB344.0 m illion for the six months ended June 30, 2024.
This was primarily due to the increased sales of LFP cathode materials with procurement of
lithium carbonate and raw materials from c ustomers, partially reducing the Group’s
exposure to raw material price fluctuations.
Other income, gains and losses
Our other income, gains and losses incre ased by 84.5% from RMB72.7 million for the
six months ended June 30, 2023 to RMB134. 1 million for the six months ended June 30,
2024, primarily due to (i) an increase in govern ment grants of RMB53.4 million attributable
to the increase in equipment and rent subsi dies for our Pengxi Plant, and (ii) gain from
changes in fair value of derivatives of RMB30.3 million representing gain from lithium
carbonate futures we invested in to hedge against price fluctuations of lithium carbonate,
partially offset by (iii) a decrease in gain from changes in fair value of financial assets at
FVTPL of RMB20.9 million mainly derived from the loss on our unlisted fund investment,
and (iv) a decrease in gain on disposal of interests in an associate as the relevant transaction
was made in the first half of 2023.
(Impairment losses)/reversal of imp airment losses on financial assets
The reversal of impairment losses on fin ancial assets decreased by 16.0% from
RMB36.3 million for the six months ended June 30, 2023 to RMB30.5 million for the six
months ended June 30, 2024, primarily due to the collection of our receivables.
Selling and distribution expenses
Our selling and distribution expenses decreased by 23.7% from RMB105.7 million for
the six months ended June 30, 2023 to RMB8 0.7 million for the six months ended June 30,
2024, primarily due to a decrease in advertis ing expenses of RMB24.2 million as a result of
the reduction in billboard advertising for cost saving purposes.
Administrative expenses
Our administrative expenses decreased by 25.3% from RMB350.7 million for the six
months ended June 30, 2023 to R MB262.1 million for the six months ended June 30, 2024,
primarily due to (i) a decrease in provision for impairment loss of inventories of RMB152.8
million as the market price of major raw materia ls, especially lithium carbonate, was less
volatile in the first half of 2024 in comparison to the first half of 2023, partially offset by (ii)
an increase in employee benefit expenses of RMB23.6 million as a result of increased
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headcount and, (iii) an increase in provis ion for impairment loss of goodwill as the
respective recoverable amounts of certain subs idiaries acquired were estimated to be lower
than their respective carrying amounts.
Research and development expenses
Our research and development expenses d ecreased by 23.3% from RMB265.6 million
for the six months ended June 30, 2023 to RM B203.6 million for the six months ended June
30, 2024, primarily due to (i) a decrease in dir ect materials of RMB81.8 million as a result of
t h ed e c r e a s ei nt h em a r k e tp r i c eo fm a j o rr a wm a terials in the period, partially offset by (ii)
an increase in employee benefit expense s of RMB11.3 million mainly attributable to
increased headcount.
Share of results of associates
We recorded loss on share of results of associates of RMB2.7 million and RMB11.9
million for the six months ended June 30, 2023 an d 2024, respectively, as the associates we
invested incurred losses during both periods.
Finance costs
Our finance costs increased by 20.2% f rom RMB108.5 million for the six months
ended June 30, 2023 to RMB130.4 million for th e six months ended June 30, 2024, primarily
due to (i) an increase in interest expenses on le ase liabilities of RMB11.4 million as a result
of the increased leases for the expansion o f our production capabilities as well as our
increased finance leases, (ii) an increase in in terest expenses on bank borrowings of RMB6.9
million along with our increased bank loans, a nd (iii) an increase in interest expense in
discounted bills of RMB3.6 million as a result of the increased use of discounted bills by
Changzhou Liyuan to meet its working capital needs.
Listing expense
Our listing expense increased by 91.4% f rom RMB7.0 million for the six months ended
June 30, 2023 to RMB13.4 million for the six months ended June 30, 2024 attributable to
the preparation for the Global Offering.
Income tax (expense)/credit
We recorded income tax credit of RMB161.1 million for the six months ended June 30,
2023, while we recorded income tax expense of RMB66.7 million for the six months ended
June 30, 2024, primarily (i) the significant d ecrease in loss before taxation by RMB779.0
million, (ii) tax effect of expenses that were not deductible for tax purposes of RMB25.9
million and (iii) tax effect of temporary di fference not recognised of RMB98.0 million.
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Profit/(loss) for the period
As a result of the foregoing, our loss for the period decreased by 67.9% from
RMB811.5 million for the six months ended June 30, 2023 to RMB260.2 million for the six
months ended June 30, 2024.
Year Ended December 31, 2023 Compar ed to Year Ended December 31, 2022
Revenue
Our total revenue decreased by 38.0 % from RMB14,071.6 million in 2022 to
RMB8,729.5 million in 2023, primarily due to a decrease in revenue from sales of LFP
cathode materials of RMB5,488.3 million, part ially offset by an increase in revenue from
sales of automotive specialty chemicals of RMB140.4 million.
Sales of LFP cathode materials
Revenue from sales of LFP cathode materials decreased by 44.8% from RMB12,241.9
million in 2022 to RMB6,753.6 million in 2023, wh ich was primarily due to a decrease in the
average selling price of our LFP cathode ma terials from RMB128,699 per ton in 2022 to
RMB62,464 per ton in 2023 attributable to (a) the decline in market prices of principal raw
materials of LFP cathode materials in 2023 and (b) the increase in sales of LFP cathode
materials with procurement of lithium carbonate and raw materials from customers from
RMB157.0 million in 2022 to RMB566.9 million in 2023, cost of which was deducted
directly upon the recognition of such revenue , partially offset by an increase in the sales
volume of our LFP cathode materials from 95,120 tons in 2022 to 108,120 tons in 2023. Our
revenue from relevant customers who provided us with raw materials in 2023 increased as
compared to that in 2022. The increase in the sales volume of our LFP cathode materials in
2023 was primarily attributable to the rebal ancing between supply and demand dynamics of
the LFP cathode material market and our increased production capacity in the year.
Our sales volume growth rate was lower compared to the overall mainland China LFP
cathode materials market, which experienced an approximately 50.2% increase from 1.1
million tons in 2022 to 1.6 million tons in 2023. This discrepancy can be attributed to
several factors within the context of a complex and rapidly evolving market landscape. The
unprecedented industry volatility in early 20 23 and the fierce competition of a buyer’s
market affected the our ability to secure ad ditional purchase orders. However, such
industry growth of around 50% was not even across all industry players. According to
Frost & Sullivan, among the top five companie s in the LFP cathode material industry in
Mainland China, only two companies have re corded growth rates higher than the market
average. This was primarily due their strong m arket position, relationship with major
downstream customers and relatively more comprehensive customer base. Additionally, our
production capacity increased by approximately 120% increase from 2022 to 2023, which
was notably higher than the capacity increases of most other major industry players,
according to Frost & Sullivan. The correspondin g ramp-up and productio n line verification
procedures by customers also affected our production and sales in 2023.
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Sales of automotive specialty chemicals
Revenue from sales of automotive specialty chemicals increased by 8.0% from
RMB1,762.8 million in 2022 to RMB1,903.2 millio n in 2023, primarily due to the increases
in revenue from sales of automobile and industr ial lubricant, coolants and car maintenance
products as a result of resumed demand for such products following the recovery of
transportation and logistics in mainland Ch ina, partially offset by a decrease in revenue
from diesel exhaust fluid.
Our revenue from sales of diesel exhaust f l u i dd e c r e a s e db y9 . 2 %f r o mR M B 6 8 8 . 9
million in 2022 to RMB625.7 million in 2023, primarily due to an 11.4% decrease in the
sales volume of diesel exhaust fluid. Such decrease and deviation from overall market
increasing trend of 11.9% was mainly caused by increased competition from lower-tier
brands leveraging their cost advantages to offer products at prices lower than ours and
other major industry players’. Certain competitors also employed aggressive sales and
marketing strategies such as bundle sales, f urther impacting our sale volume. The average
selling price of diesel exhaust fluid remain ed relatively stable at RMB1,843 per ton and
RMB1,888 per ton in 2022 and 2023, respectively. Our positioning as higher-tier brand is
also evidenced in our average selling price, whi ch is slightly higher than the average selling
price in the market of RMB1,740.1 per ton and RMB1,736.1 per ton in 2022 and 2023,
respectively.
Our revenue from sales of automobile and industrial lubricant increased by 13.3%
from RMB623.6 million in 2022 to RMB706. 6 million in 2023, primarily due to (i) a 6.7%
increase in the average selling price of auto mobile and industrial lubricant, which was
mainly attributable to an increase in sales of g asoline vehicle lubricant which was generally
sold at higher prices, and (ii) a 6.2% increas e in sales volume of automobile and industrial
lubricant in 2023, which is largely consiste nt with the overall market growth of 2.0%, and
was mainly attributable to increased sales to a major corporate client’s international
business.
Our revenue from sales of coolants inc reased by 26.7% from RMB382.7 million in
2022 to RMB484.7 million in 2023, primarily due to a 34.5% increase in sales volume of
coolants as a result of the increased demand f ollowing the recovery of transportation and
logistics in mainland China. This growth outpaced the market growth in mainland China of
6.1% and was largely attributable to increases in orders from our major corporate clients,
including a major NEV manufacturer and one of China’s largest heavy-duty truck
manufacturers as a result of our customer development efforts. The average selling price of
coolants decreased from RMB5,180 per ton in 2022 to RMB4,878 per ton in 2023, primarily
due to the decrease in raw material market prices.
Our revenue from sales of car maintenance products increased by 20.4% from
RMB58.3 million in 2022 to RMB70.2 million in 2 023, primarily due to a 28.8% increase in
sales volume of coolants as a result of the increased demand following the recovery of
transportation and logistics in mainland China. This growth outpaced the market growth in
mainland China of 3.8% and was mainly a result of our customer development efforts,
including establishing business relationship with a major automobile manufacturer as well
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as extending our cooperation with a major gas station operator by supplying a broader
range of our car maintenance products. The average selling price of car maintenance
products decreased from RMB4,961 per ton in 2022 to RMB4,638 per ton in 2023, primarily
due to the decrease in raw material market prices.
Sales of others
Our revenue from sales of others increased by 8.4% from RMB67.0 million in 2022 to
R M B 7 2 . 6m i l l i o ni n2 0 2 3 ,p r i m a r i l yd u et oa ni n c r e a s ei ns a l e so fb y - p r o d u c t so fL F P
cathode materials, such as ammonium sulfate.
Cost of sales
Our cost of sales decreased by 24.5% from RMB11,638.3 million in 2022 to
RMB8,787.0 million in 2023, primarily due to (i) the decrease in cost of raw materials as
a result of the reduced sales of LFP cathode materials and the declined principal raw
material prices in 2023, and (ii) the increase in the proportion of sales of LFP cathode
materials with procurement of lithium carbonate and raw materials from customers from
1.1% of our total revenue in 2022 to 6.5% of our total revenue in 2023, cost of which was
deducted directly upon recognition of such revenue.
Gross profit/(loss)
We recorded gross profit of RMB2,433.3 m illion in 2022. Despite we recorded gross
profit of RMB80.4 million for sa les of LFP cathode materials with procurement of lithium
carbonate and raw materials from customer s in 2023, we recorded overall gross loss of
RMB57.5 million in the year. This was primarily due to the significant decrease in raw
material prices, especially lithium carbon ate, in 2023. Generally, LFP cathode material
prices closely follow the prevailing lithium carbonate prices listed on the SMM. When the
prices of lithium carbonate are in a decline cycle, as was the case in 2023, we might record
declining gross profit margin or even loss as the initial procurement cost of consumed raw
materials is high whilst the selling price of finished products is low.
Other income, gains and losses
Our other income, gains and losses decreased by 3.2% from RMB95.3 million in 2022
to RMB92.3 million in 2023, primarily due to (i) an increase in loss from changes in fair
value of other borrowings at FVTPL of RMB106.3 million with reference to valuation
carried out by an independent professional valuer, partially offset by (ii) an increase in
government grants of RMB39.4 million attribu table to the increase in equipment and rent
subsidies for our Pengxi Plant, (iii) an increase in gain from changes in fair value of
financial assets at FVTPL of RMB30.6 million m ainly attributable to gain on investments
in wealth management products, (iv) an increase in gain on disposal of interests in an
associate of RMB16.6 million as we disposed ou r interest in Sichuan Yingda in the first half
of 2023, and (v) an increase in interest income of RMB16.4 million.
FINANCIAL INFORMATION
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Impairment losses on financial assets
Impairment losses on financial assets d ecreased by 73.0% from RMB70.4 million in
2022 to RMB19.0 million in 2023, primarily due to a decrease in the balances of our trade
and other receivables.
Selling and distribution expenses
Our selling and distribution expenses in creased by 11.1% from RMB176.9 million in
2022 to RMB196.5 million in 2023, primarily due to (i) an increase in business
entertainment expenses of RMB7.7 million as a result of our efforts in expanding
customer base and maintaining relationship with existing customers, (ii) an increase in
advertising expenses of RMB6.4 million a s a result of more billboard and elevator
advertising, (iii) an increase in travel exp enses of RMB4.7 million and (iv) an increase in
consulting service fees of RMB4.6 million primarily consist of fees paid to external parties
for introducing sales opportunities to us. To the best knowledge of our Directors, these
external parties are Independent Third Parties. Our Directors believe such cooperation
could bring us additional opportunities to reach new customers for sales of our products.
Administrative expenses
Our administrative expenses increased by 171.7% from RMB319.8 million in 2022 to
RMB869.0 million in 2023, primarily due to an in crease in provision f or impairment loss of
inventories of RMB482.0 million as a result of the decrease in market prices of our principal
raw materials, especially lithium carbonate, in 2023.
Research and development expenses
Our research and development expenses d ecreased by 21.1% from RMB615.5 million
in 2022 to RMB485.7 million in 2023, primarily due to (i) a decrease in direct materials of
RMB157.7 million as a result of the decreased raw material prices, partially offset by (ii) an
increase in employee benefit expenses o f RMB19.3 million as a result of increased
headcount and pay rises.
Share of results of associates
We recorded profit on share of results of associates of RMB17.0 million in 2022, while
we incurred loss on share of results of associates of RMB23.6 million in 2023, as the
associates we invested incurred losses in 2023.
Finance costs
Our finance costs increased by 29.3% from RMB202.1 million in 2022 to RMB261.4
million in 2023, primarily due to (i) an increase in interest expenses on bank borrowings of
RMB72.9 million as a result of the addition o f bank borrowings in the year and (ii) an
increase in lease liabilities of RMB29.4 million, partially offset by (iii) a decrease in interest
expenses on discounted bills of RMB43.2 million.
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Listing expense
We did not incur any listing expense in 2022, while we incurred listing expense of
R M B 1 0 . 2m i l l i o ni n2 0 2 3i nr e l a t i o nt ot h eG l o b a lO f f e r i n g .
Income tax (expense)/credit
We incurred income tax expense of RMB1 30.9 million in 2022 while we recorded
income tax credit of RMB316.4 million in 2023, primarily because we recorded loss before
taxation in 2023.
Profit/(loss) for the year
As a result of the foregoing, we recorded pr ofit for year of RMB1,029.9 million in 2022
while we incurred loss for the year of RMB1,514.2 million in 2023.
Year Ended December 31, 2022 Compar ed to Year Ended December 31, 2021
Revenue
Our total revenue increased significantly by 247.1% from RMB4,053.5 million in 2021
to RMB14,071.6 million in 2022, primarily due t o (i) an increase in revenue from sales of
LFP cathode materials of RMB10, 365.1 million, partially offset by (ii) a decrease in revenue
from sales of automotive specialty chemicals of RMB355.9 million.
Sales of LFP cathode materials
Our revenue from sales of LFP cathode mater ials increased significantly by 552.3%
from RMB1,876.8 million in 2021 to RMB12,241. 9 million in 2022, primarily due to (i) the
full year effect of the consolidation of results of operations of Tianjin Beiterui Nano and
Jiangsu Beiterui Nano which we acquired in June 2021, (ii) an increase in the sales volume
of LFP cathode materials from 30,505 tons in 2021 to 95,120 tons in 2022 driven by the
r a p i dd e v e l o p m e n ta n dg r o w t hi nd e m a n do fd o w n s t r e a mN E Va n de n e r g ys t o r a g e
industries, and (iii) an increase in the avera ge selling price of our LFP cathode materials
from RMB61,526 per ton in 2021 to RMB128,699 per ton in 2022 as a result of the
increased prices of our principal raw materials, lithium carbonate and iron phosphate, in
2022.
Sales of automotive specialty chemicals
Our revenue from sales of automotive specialty chemicals decreased by 16.8% from
RMB2,118.7 million in 2021 to RMB1,762.8 m illion in 2022, primarily due to a decrease in
sales volume of our products. Sales volume of our diesel exhaust fluid, automobile and
industrial lubricant, coolants and car maintenance products decreased by 16.9%, 33.6%,
7.8% and 10.4%, respectively, in 2022 as compared to that in 2021, primarily due to (i) the
declined demand for our products as transportation and logistics in mainland China were
affected during the COVID-19 pandemic, and (ii) the more intense market competition,
FINANCIAL INFORMATION
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such as bundle sales by our competitors as sales and marketing strategies. The decrease in
revenue from sales of automotive specialty che micals was partially offset by an increase in
the average selling prices of our p roducts resulted from the increased raw material prices.
Our sales of automotive specialty chemical products in Eastern China accounted for a
significant portion of our total revenue generated from automotive specialty chemical
products. In 2022, prolonged COVID-19 containment measures significantly disrupted
business operations at major areas across Eastern China, especially in Shanghai which
experienced an extended lockdown for almost two months. As a result, the sales volume of
our automotive specialty chemical products in Eastern China decreased notably. Such
decrease had accounted for over 50% of the overall decrease in the sales volume of our
automotive specialty chemicals in 2022. Furt hermore, sales of our automotive specialty
chemical products in 2022 were also challenged by increased competition from lower-tier
brands, which gained additional market share during supply chain disruptions caused by
COVID-19 as consumers tended to opt for more affordable alternatives in view of economic
uncertainties. This trend has contributed to a decrease in sales volumes for some major
industry players including us.
Sales of others
Our revenue from sales of others incre ased by 15.7% from RMB57.9 million in 2021 to
RMB67.0 million in 2022, primarily due to an inc rease in revenue from sales of ethylene
glycol.
Cost of sales
Our cost of sales increased significant ly by 291.4% from RMB2,973.7 million in 2021
to RMB11,638.3 million in 2022, primarily a ttributable to an increase in cost of raw
materials of RMB8,127.8 million as a result of our sales growth of LFP cathode materials
and the increase in prices of our principal raw materials in 2022.
Gross profit and gross profit margin
As a result of the foregoing, our gross profit increased significantly by 125.3% from
RMB1,079.8 million in 2021 to RMB2,433.3 m illion in 2022. However, our overall gross
profit margin decreased from 26.6% in 2021 to 17.3% in 2022, primarily because (i) the
growth of our cost of sales in the year outpaced that of our revenue due to our purchases of
lithium carbonate in the fourth quarter of 2022 when its price was high and (ii) we were
gradually ramping up mass production of LFP ca thode materials following the acquisitions
of Tianjin Beiterui Nano and Jiangsu Beiterui Nano in June 2021, and economies of scale
have yet to be fully rea lized for this business.
FINANCIAL INFORMATION
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Other income, gains and losses
Our other income, gains and losses increas ed significantly by 155.5% from RMB37.3
million in 2021 to RMB95.3 million in 2022, prima rily due to (i) an increase in government
grants of RMB24.5 million mainly attributable to equipment and rent subsidies for our
Pengxi Plant, (ii) gain on early termination of leases of RMB14.1 million mainly
attributable to the disposal of land use righ ts and (iii) an increase in interest income on
bank deposit of RMB11.1 million mainly attrib utable to proceeds from our non-public
offering in 2022. For details on our non-public offering in 2022, see ‘‘History and
Development — Establishment and Major Shareholding Changes of Our Company —
Share Capital Changes in 2022.’’
Impairment losses on financial assets
Our impairment losses on financial assets increased significantly by 204.8% from
RMB23.1 million in 2021 to RMB70.4 million in 2 022, primarily due to the increase in the
balances of our trade and other receivables as a result of business expansion.
Selling and distribution expenses
Our selling and distribution expenses increased slightly by 2.4% from RMB172.8
million in 2021 to RMB176.9 million in 2022, primarily due to an increase in advertising
expenses of RMB6.9 million mainly to promote sa les of our automotive specialty chemicals
through more offline advertising and live steaming marketing.
Administrative expenses
Our administrative expenses increased si gnificantly by 104.3% from RMB156.5 million
in 2021 to RMB319.8 million in 2022, primarily due to (i) an increase in employee benefit
expenses of RMB56.2 million primarily att ributable to the full year effect of the
consolidation of results of operations of T ianjin Beiterui Nano and Jiangsu Beiterui
N a n ow h i c hw ea c q u i r e di nJ u n e2 0 2 1a n d( i i )a nincrease in provision for impairment loss
of inventories of RMB70.3 million in view of the declining principal raw material prices.
Research and development expenses
Our research and development expenses increased significantly by 195.9% from
RMB208.0 million in 2021 to RMB615.5 million in 2022, primarily due to (i) an increase in
direct materials used of RMB363.4 million primarily attributable to the increase in the
number of research and development projects and (ii) an increase in employee benefit
expenses of RMB35.9 million primarily att ributable to the full year effect of the
consolidation of results of operations of T ianjin Beiterui Nano and Jiangsu Beiterui
N a n ow h i c hw ea c q u i r e di nJ u n e2 0 2 1 .
FINANCIAL INFORMATION
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Share of results of associates
We incurred loss on share of results of associates of RMB279,000 in 2021, while we
recorded profit on share of results of associ ates of RMB17.0 million in 2022, primarily due
to the increase in net profit of Hubei Fengli.
Finance costs
Our finance costs increased significantly by 305.8% from RMB49.8 million in 2021 to
RMB202.1 million in 2022, primarily due to (i) an increase in interest expenses on bank
borrowings of RMB75.8 million as a result of th e increased balance of our bank loans, (ii)
an increase in interest expenses on lease lia bilities of RMB17.7 million as a result of our
increased number of leases and (iii) an incre ase in interest expenses on discounted bills of
RMB58.9 million. Our Directors believe that th e use of discounted bills could improve our
working capital.
Income tax expense
Our income tax expense increased by 78.6% from RMB73.3 million in 2021 to
RMB130.9 million in 2022, primarily due to the increased taxable income.
Profit for the year
As a result of the foregoing, our profit for the year increased significantly by 137.6%
from RMB433.4 million in 2021 to RMB1,029.9 million in 2022.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth a summary of our cash flows for the periods indicated:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Net cash from/(used in) operating
activities . . . . . . . . . . . . . . . . (823,847) (1,863,457) 1,408,230 (439,687) 71,400
Net cash used in investing acti vities. (828,430) (2,596,083) (2,6 41,508) (3,019,795) (1,073,174)
Net cash from financing activities . . 1,592,020 5,154,730 2,6 49,637 3,720,217 330,193
Net (decrease)/increase in cash and
cash equivalents ............ (60,257) 695,190 1,416,359 260,735 (671,581)
Cash and cash equivalents at
beginning of the year/period . . . . 893,531 833,133 1,529,373 1,529,373 2,958,603
Effect of foreign exchange rate
changes, net . . . . . . . . . . . . . . (141) 1,050 12,871 2,570 (1,083)
Cash and cash equivalents at end of
year/period, representing bank
balances and cash ........... 833,133 1,529,373 2,958, 603 1,792,678 2,285,939
FINANCIAL INFORMATION
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N e tC a s hf r o m / ( U s e di n )O p e r a t i n gA c t i v i t i e s
For the six months ended June 30, 2024, our net cash from operating activities of
RMB71.4 million was primarily attributable to loss before taxation of RMB193.5 million,
as adjusted by non-cash and non-operational items totaling RMB524.2 million, changes in
working capital and income tax paid of RM B16.1 million. Changes in working capital
mainly consisted of (i) an increase in invent ories of RMB107.3 million, (ii) a decrease in
trade and other receivables of RMB240.4 m illion and (iii) a decrease in trade and other
payables of RMB423.2 million.
For the six months ended June 30, 2023, our net cash used in operating activities of
RMB439.7 million was primarily attributable to loss before taxation of RMB972.5 million,
as adjusted by non-cash and non-operational items totaling RMB499.6 million, changes in
working capital and income tax paid of RM B80.8 million. Changes in working capital
mainly consisted of (i) an increase in invent ories of RMB167.1 million, (ii) a decrease in
trade and other receivables of RMB408.8 million a nd (iii) a decrease in contract liabilities of
RMB165.2 million.
For the year ended December 31, 2023, our net cash from operating activities of
RMB1,408.2 million was primarily attributab le to loss before taxation of RMB1,830.6
million, as adjusted by non-cash and non-ope rational items totaling RMB1,399.3 million,
changes in working capital and income tax p aid of RMB98.2 million. Changes in working
capital mainly consisted of (i) a decrease in in ventories of RMB843.1 million, (ii) a decrease
in trade and other receivables of RMB787.8 m illion, (iii) an increase in trade and other
payables of RMB656.0 million and (iv) a decrease in contract liabilities of RMB403.8
million.
For the year ended December 31, 2022, our net cash used in operating activities of
RMB1,863.5 million was primarily attributable to profit before taxation of RMB1,160.9
million, as adjusted by non-cash and non-ope rational items totaling RMB606.8 million,
changes in working capital and income tax paid of RMB149.7 million. Changes in working
capital mainly consisted of (i) an increase in inventories of RMB1,979.3 million, (ii) an
increase in trade and other receivables of RM B2,468.2 million, (iii) an increase in trade and
other payables of RMB604.8 million and (iv) an in crease in contract liabilities of RMB365.6
million.
For the year ended December 31, 2021, our net cash used in operating activities of
RMB823.8 million was primarily attributab le to profit before taxation of RMB506.7
million, as adjusted by non-cash and non-ope rational items totaling RMB178.8 million,
changes in working capital and income tax p aid of RMB47.9 million. Changes in working
capital mainly consisted of (i) an increas e in inventories of RMB592.4 million, (ii) an
increase in trade and other receivables of RM B141.1 million and (iii) a decrease in trade and
other payables of RMB752.3 million.
FINANCIAL INFORMATION
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N e tC a s hU s e di nI n v e s t i n gA c t i v i t i e s
For the six months ended June 30, 2024, our n et cash used in investing activities
amounted to RMB1,073.2 million, which was prim arily attributable to (i) net cash used in
the purchase of financial assets at FVTPL, ma inly representing our investments in wealth
management products, of RMB787.1 million, an d (ii) purchase of property, plant and
equipment of RMB558.6 million, partially of fset by (iii) withdrawal of pledged bank
deposits of RMB263.1 million.
For the six months ended June 30, 2023, our n et cash used in investing activities
amounted to RMB3,019.8 million, which was prim arily attributable to (i) net cash used in
the purchase of financial assets at FVTPL o f RMB1,517.6 million and (ii) purchase of
property, plant and equipment of RMB1,367.8 million.
For the year ended December 31, 2023, our n et cash used in investing activities
amounted to RMB2,641.5 million, which was pr imarily attributable to (i) purchase of
financial assets at FVTPL of RMB11,703.1 million and (ii) purchase of property, plant and
equipment of RMB3,166.8 million, partially offset by (iii) proceeds from disposal of
financial assets at FVTPL of RMB11,721.2 million.
For the year ended December 31, 2022, our n et cash used in investing activities
amounted to RMB2,596.1 million, which was primarily attributable to purchase of
property, plant and equipment of RMB2,222.5 million.
For the year ended December 31, 2021, our n et cash used in investing activities
amounted to RMB828.4 million, which was prim arily attributable to (i) purchase of
property, plant and equipment of RMB65 7.8 million, and (ii) net cash outflow from
acquisition of subsidiaries of RMB206.5 million p artially offset by (iii) net proceeds from
disposal of financial assets at FVTPL of RMB100.4 million.
Net Cash from Financing Activities
For the six months ended June 30, 2024, our net cash from financing activities
amounted to RMB330.2 million, which was prim arily attributable to (i) addition of bank
borrowings of RMB3,624.2 million and (ii) deemed disposal of subsidiaries without loss of
control of RMB385.4 million, representing proceeds from the capital increases of
Changzhou Liyuan in the first half of 2024, partially offset by (iii) repayment of bank
borrowings of RMB3,474.5 million.
For the six months ended June 30, 2023, our net cash from financing activities
amounted to RMB3,720.2 million, which was prim arily attributable to (i) addition of bank
borrowings of RMB7,222.2 million, partially o ffset by (ii) repayment of bank borrowings of
RMB3,278.5 million.
For the year ended December 31, 2023, our net cash from financing activities
amounted to RMB2,649.6 million, which was prim arily attributable to (i) addition of bank
borrowings of RMB9,892.7 million, partially o ffset by (ii) repayment of bank borrowings of
RMB6,701.3 million.
FINANCIAL INFORMATION
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For the year ended December 31, 2022, our net cash from financing activities
amounted to RMB5,154.7 million, which was prim arily attributable to (i) addition of bank
borrowings of RMB5,463.4 million and (ii) proceeds from issuance of shares of
RMB2,175.5 million attributable to a non-pub lic offering of the Company in May 2022,
partially offset by (iii) repayment of bank borrowings of RMB1,988.5 million.
For the year ended December 31, 2021, our net cash from financing activities
amounted to RMB1,592.0 million, which was prim arily attributable to (i) addition of bank
borrowings of RMB1,960.2 million and (ii) deemed disposal of subsidiaries without loss of
control of RMB345.0 million, partially offset by (iii) repayment of bank borrowings of
RMB585.6 million.
WORKING CAPITAL
The following table sets forth the details of our current assets and current liabilities as
of the dates indicated:
As of December 31, As of June 30,
As of
August 31,
2021 2022 2023 2024 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current assets
Inventories . . . . . . . . . . . . . . . 1,100,586 3,007,275 1,610,238 1,647,787 1,702,005
Trade and other receivables . . . . 1,556,172 4,195,192 3,395,047 3,337,159 3,610,166
Tax recoverable . . . . . . . . . . . . 8,279 6,818 14,214 15,653 6,586
Financial assets at FVTPL . . . . 431 30,738 59,527 841,126 730,869
Derivative financial instruments . — — 950 56 —
Pledged bank deposits. . . . . . . . 19,499 500,308 350,726 87,612 255,308
Cash and cash equivalents . . . . . 833,133 1,529,373 2,958,603 2,285,939 1,902,249
Total current assets ......... 3,518,100 9,269,704 8,389,305 8,215,332 8,207,183
Current liabilities
Trade and other payables . . . . . 927,502 2,246,764 2,902,805 2,431,671 3,034,700
Tax payable . . . . . . . . . . . . . . 59,117 82,509 4,934 18,436 14,469
Bank and other borrowings . . . . 1,075,631 4,039,370 6,405,976 6,071,229 5,023,196
Lease liabilities . . . . . . . . . . . . 157,431 297,391 294,752 220,759 188,225
Derivative financial instruments . — — 4,062 3,434 55
Contract liabilities . . . . . . . . . . 60,186 425,740 21,940 30,127 30,424
Deferred income . . . . . . . . . . . 5,291 9,337 10,298 14,346 13,400
Total current liabilities ....... 2,285,158 7,101,111 9,644,767 8,790,002 8,304,469
Net current assets/(liabilities) ... 1,232,942 2,168,593 (1,255,462) (574,670) (97,286)
We recorded net current assets of RMB1 ,232.9 million and RMB2,168.6 million as of
December 31, 2021 and 2022, re spectively. We recorded net current liabilities of
RMB1,255.5 million as of December 31, 2023 , RMB574.7 million as of June 30, 2024 and
RMB97.3 million as of August 31, 2024, res pectively. We relied on short-term bank
borrowings to finance our working capital needs.
FINANCIAL INFORMATION
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Our net current liabilities decreased by 8 3.1% from RMB574.7 million as of June 30,
2024 to RMB97.3 million as of August 31, 2024, p rimarily due to (i) a decrease in bank and
other borrowings of RMB1,048.0 million as a r esult of the repayment of our short-term
bank loans, partially offset by (ii) an increase in trade and other payables of RMB603.0
million.
Our net current liabilities decreased b y 54.2% from RMB1,255.5 million as of
December 31, 2023 to RMB574.7 million as of Jun e 30, 2024, primarily due to (i) a decrease
in trade and other payables of RMB471.1 million, mainly attributable to the settlement of
part of our bills payable and (ii) a decrease in bank and other borrowings of RMB334.7
million as we repaid some of our short-term bank loans.
We recorded net current liabilities of RMB 1,255.5 million as of December 31, 2023 as
compared with net current assets of RMB2,1 68.6 million as of December 31, 2022, primarily
due to (i) a decrease in inventories of RMB1,397 .0 million attributable to impairment losses
on inventories in view of the sharp decline of lithium carbonate prices in 2023, (ii) a
decrease in trade and other receivables of R MB800.1 million as a result of the decreased
sales in 2023 and (iii) an increase in bank and other borrowings of RMB2,366.6 million,
partially offset by (iv) an increase in cash and cash equivalent of RMB1,429.2 million.
Our net current assets increased by 75. 9% from RMB1,232.9 million as of December
31, 2021 to RMB2,168.6 million as of December 3 1, 2022, primarily due to (i) an increase in
inventories of RMB1,906.7 million and (ii) an increase in trade and other receivables of
RMB2,639.0 million, partially offset by (iii) an increase in trade and other payables of
RMB1,319.3 million and (iv) an increase in b ank and other borrowings of RMB2,963.7
million.
Working Capital Statement
Taking into account the estimated net proceeds from the Global Offering and the
financial resources available to us, including our cash generated from operating activities,
our cash and cash equivalents and our available bank loans and banking facilities, our
Directors are of the opinion, and the Joint Sponsors concur, that we have sufficient funds to
meet our working capital requirements for at least the next twelve months from the date of
this prospectus.
Our Directors confirm that there were no material defaults in payment of trade and
non-trade payables and borrowings, and/or breaches of financial covenants during the
Track Record Period and up to the date of this prospectus.
FINANCIAL INFORMATION
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SELECTED KEY ITEMS OF STATEMENT OF FINANCIAL POSITION
Inventories
Our inventories primarily consist of raw materials, such as lithium carbonate, iron
phosphate, base oil, ethylene glycol, urea and lubricant additives, work in progress and
finished goods. The following table sets forth a breakdown of our inventories as of the dates
indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
R a wm a t e r i a l s ............. 7 2 4 , 8 2 1 1 , 5 1 2 , 2 9 9 3 5 0 , 7 3 8 4 6 6 , 5 7 5
W o r ki np r o g r e s s ........... 5 0 , 4 5 7 3 7 , 3 8 5 8 2 , 0 1 0 8 8 , 4 2 5
F i n i s h e dg o o d s ............. 3 2 5 , 3 0 8 1 , 4 5 7 , 5 9 1 1 , 1 7 7 , 4 9 0 1 , 0 9 2 , 7 8 7
Total .................... 1,100,586 3,007,275 1,610,238 1,647,787
Our inventories increased significant ly by 173.2% from RMB1,100.6 million as of
December 31, 2021 to RMB3,007.3 million a s of December 31, 2022. Such increase was
primarily due to (i) our expansion in the LFP cathode material business through the
acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano in June 2021, (ii) the
expansion of our production capabilities to sat isfy the growing customer demand following
the construction of our Pengxi Plant and ex pansion of our Jintan Plant and (iii) the
significant increase in the prices of our principal raw material prices. The price of lithium
carbonate experienced a significant increase from 2021 to 2022, escalating from RMB119.8
thousand per ton to RMB482.4 thousand per ton. The price of iron phosphate increased
from RMB14.3 thousand per ton in 2021 to RMB20.8 thousand per ton in 2022. In view of
the sharp increase in the market prices of principal raw materials and due to the shortage of
supply of raw materials, we strategically procured raw materials in advance to secure
sufficient raw material supplies for our produ ction, which partially contributed to the
increase in our inventory balance. Our i nventories then decreased by 46.5% from
RMB3,007.3 million as of December 31, 2022 to RMB1,610.2 million as of December 31,
2023, primarily due to an unprecedented sh arp decline in the lithium carbonate market
prices in 2023. Our inventories remained relatively stable at RMB1,610.2 million as of
December 31, 2023 and RMB 1,647.8 million as of June 30, 2024, respectively.
The provision for impairment loss recognized of inventories amounted to RMB2.2
million, RMB72.6 million, RMB554.5 milli on, RMB222.3 million and RMB69.5 million in
2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, respectively. The
significant increases in provision for impa irment loss of our inventories in 2022 and 2023
were primarily due to the significant decrease in the market price of lithium carbonate, one
of our principal raw materials, from RMB482.4 thousand per ton in 2022 to RMB272.3
thousand per ton in 2023. The market price of lit hium carbonate was less volatile in the first
half of 2024 in comparison to the first half of 2023, leading to a decrease in provision for
impairment loss in the period c ompared with that in the same period in 2023. For details of
our measures to mitigate against fluctuatio no nr a wm a t e r i a lc o s t s ,s e e‘ ‘ B u s i n e s s—O u r
FINANCIAL INFORMATION
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Businesses — LFP Cathode Materials — Raw materials and suppliers — Raw materials’’
and ‘‘Business — Our Businesses — Automoti ve Specialty Chemicals — Raw materials and
suppliers — Raw materials.’’
The following table sets forth an aging analysis of our inventories:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
W i t h i n1y e a r .............. 1 , 0 8 4 , 3 8 3 2 , 9 6 1 , 8 0 5 1 , 5 8 7 , 7 5 8 1 , 6 1 0 , 0 5 1
1t o2y e a r s ............... 1 5 , 7 1 9 4 5 , 4 7 0 2 2 , 4 6 4 3 7 , 7 3 6
2t o3y e a r s ............... 4 8 4 — 1 6 —
O v e r3y e a r s ............... — — — —
Total .................... 1,100,586 3,007,275 1,610,238 1,647,787
The following table sets forth our inventories turnover days for the periods indicated:
For the year ended December 31,
For the
six months
ended June 30,
2021 2022 2023 2024
Inventory turnover days . . . . . . 87.3 64.4 95.9 90.9
— LFP cathode materials . . . . . 103.9 58.9 97.8 99.1
— Automotive specialty
c h e m i c a l s............. 8 8 . 4 1 0 7 . 9 9 0 . 3 8 0 . 6
Note: Inventory turnover days are calculated by the aver age of the beginning and ending balance of inventory
for the year/period divided by cost of sales for the year and multiplied by 365/180 days (as the case may
be) or 214 days for the calculation of turnover days for LFP cathode materials in 2021.
We generally maintain a sufficient invento ry of our principal raw materials based on
market conditions and our order quantity, while we also review our inventory level on a
regular basis to maintain a reasonable level of inventory. Our inventory turnover days
decreased from 87.3 days in 2021 to 64.4 days in 2022, primarily due to the expansion of our
LFP cathode material business which had faster inventory turnover for the year ended
December 31, 2022. Our inventory turnover days then increased to 95.9 days in 2023,
primarily due to the increase in inventory tur nover days of LFP cathode materials. Despite
decreases in both revenue and cost of sales of LFP cathode materials in 2023, the inventory
level of LFP cathode materials increased, primary due to (i) production volume outpacing
actual orders received as our production plans factored in indicative orders that were higher
than the binding actual orders received; (ii) major customers’ increased use of transit
warehouses before they formally conduct acceptance inspection and utilize our products;
and (iii) necessary production of our new production plants, Heze Plant and Xiangyang
Plant, to pass customers’ verification procedures. Our inventory turnover days then
decreased to 90.9 days in the first half of 2024, primarily due to the decrease in the average
balance of inventories in the period mainly a ttributable to the decreased market price of
major raw materials, such as lithium carbonate.
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As of August 31, 2024, RMB942.2 million, or 54.5% of our inventories as of June 30,
2024 (without taking into account impairm ent losses on inventories) had been used,
consumed or sold subsequently.
Trade and Other Receivables
Our trade receivables primarily arise from sales to customers on credit. The credit
period is generally from one month to three months. Our other receivables mainly comprise
value added tax recoverable, prepayments for p urchases of non-current assets, prepayments
to suppliers and prepayments for advertising and marketing expenses. The following table
sets forth the breakdown of our trade and other receivables as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables . . . . ....... 8 5 7 , 9 9 7 2 , 1 2 1 , 0 0 5 2 , 1 7 4 , 9 1 4 1 , 5 4 9 , 5 7 1
B i l l sr e c e i v a b l e............. 3 4 7 , 1 9 7 1 , 0 3 8 , 6 9 0 4 7 9 , 1 2 2 1 , 0 3 6 , 2 4 4
Other receivables
— Value added tax recoverable . 63,199 264,861 483,859 452,064
— Prepayments for purchases of
n o n - c u r r e n ta s s e t s ........ 1 0 5 , 5 0 0 5 9 9 , 6 8 4 2 2 2 , 4 3 4 6 3 , 7 3 6
— Prepayments to suppliers . . . . 247,239 669,793 152,727 171,577
— Prepayments for advertising
and marketing expenses. . . . 1,140 30,326 4,968 1,190
—O t h e r s
Note .............. 4 0 , 5 4 0 1 0 0 , 8 4 3 1 0 3 , 7 5 6 1 2 7 , 7 0 4
457,618 1,665,507 967,744 816,271
Total .................... 1,662,812 4,825,202 3,621,780 3,402,086
Note: The remaining other receivables were mainly de posits paid in the ordinary course of our business.
Our trade and other receivables increased s ignificantly by 190.2% from RMB1,662.8
million as of December 31, 2021 to RMB4,825.2 m illion as of December 31, 2022, primarily
due to our expansion in the LFP cathode material business through the acquisitions of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano in June 2021. Our trade and other
receivables then decreased by 24.9% to RMB3,621.8 million as of December 31, 2023,
primarily due to a decrease in sales of LFP cat hode materials in 2023. Our trade and other
receivables remained relatively stable at RMB3,621.8 million as of June 30, 2023 and
RMB3,402.1 million as of June 30, 2024, respectively.
We strive to maintain strict control over our outstanding receivables and minimize the
credit risk. For trade receivables, the manage ment of the Group assesse s the collectability of
the trade receivables regularly and on a case-by-case basis for the determination of any loss
allowance for the trade receivables by taking into account the customers’ financial
condition, current creditworthiness, past settlement history, business relationship with the
Group and other factors such as current market conditions. Certain customers which have
significant outstanding trade receivables and balances due to the Group were assessed for
FINANCIAL INFORMATION
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allowance for credit losses individually. For the remaining debtors, we have applied the
s i m p l i f i e da p p r o a c hi nI F R S9t om e a s u r et h el o s sallowance at lifetime expected credit loss,
as our historical credit loss experience does not indicate significant different loss patterns
for different customer segments and the allowance for credit losses based on the past due
status is not further distinguished between our customer bases. As of December 31, 2021,
2022 and 2023 and June 30, 2 024, loss allowance for trad e receivables amounted to
RMB53.1 million, RMB121.6 million, RMB124.0 million and RMB92.2 million,
respectively. Our Directors are of the view t hat the provision for impairment losses of
our trade receivables is sufficient and not excessive.
The following table sets forth an aging analysis of our trade receivables, net of
allowance for expected credit losses prese nted based on revenue recognition date:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
W i t h i n1y e a r .............. 8 5 2 , 3 0 9 2 , 1 1 3 , 0 0 4 2 , 1 6 1 , 7 1 0 1 , 5 2 8 , 9 3 5
1t o2y e a r s ............... 1 , 9 2 0 7 , 6 2 7 1 2 , 2 4 4 1 9 , 7 3 4
2t o3y e a r s ............... 2 , 6 0 8 3 0 8 7 2 0 6 8 0
3t o4y e a r s ............... 1 , 1 5 9 6 2 1 8 2 1 5 9
4y e a r st o5y e a r s........... 1 4 5 8 6 3
Total .................... 857,997 2,121,005 2,174,914 1,549,571
The following table sets forth our trade receivable turnover days for the periods
indicated:
For the year ended December 31,
For the
six months
ended June 30,
2021 2022 2023 2024
Trade receivable turnover days. . 49.4 38.6 89.8 93.9
— LFP cathode materials . . . . . 71.3 37.2 101.0 113.5
— Automotive specialty
c h e m i c a l s .............. 4 0 . 4 5 0 . 4 5 3 . 5 5 5 . 5
Note: Trade receivable turnover days are calculated based on the average of the beginning and ending balance
of trade receivables for the year/period divided by t otal revenue for the year and multiplied by 365/180
days (as the case may be) or 214 days for the calcula tion of turnover days for LFP cathode materials in
2021.
Our trade receivable turnover days decrea sed from 49.4 days in 2021 to 38.6 days in
2022, primarily due to the rapid revenue growth of LFP cathode material business. Our
trade receivable turnover days then increased to 89.8 days in 2023, primarily due to the
increase in trade receivable turnover days of LFP cathode materials as a result of reduced
revenue contribution from LFP cathode materials and the delay of payment from certain
customer in consideration of the slowdown of the overall market condition in 2023. Our
trade receivable turnover days remained rela tively stable at 89.8 days and 93.9 days in the
first half of 2023 and 2024, respectively.
FINANCIAL INFORMATION
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As of August 31, 2024, RMB2,355.8 millio n, or 69.2% of our trade and other
receivables as of June 30, 2024 had been settled subsequently.
Property, Plant and Equipment
Our property, plant and equipment consist of construction in progress, buildings, plant
and machinery, motor vehicles, other equipment and leasehold improvement. The following
table sets forth a breakdown of our property, plant and equipment as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Construction in progress . . . . . . 533,581 1,364,909 2,575,729 2,040,704
B u i l d i n g s................. 3 3 9 , 1 7 5 3 6 0 , 3 9 0 5 6 6 , 6 2 6 9 6 8 , 3 0 6
P l a n ta n dm a c h i n e r y ......... 6 3 9 , 1 0 9 1 , 5 9 1 , 0 7 6 2 , 9 3 0 , 6 2 0 3 , 5 0 6 , 4 8 6
M o t o rv e h i c l e s............. 7 , 9 5 2 9 , 2 8 6 1 5 , 4 0 4 1 6 , 6 3 1
O t h e re q u i p m e n t ............ 5 1 , 0 3 6 9 3 , 5 4 7 1 1 9 , 3 1 7 1 2 9 , 4 9 4
L e a s e h o l di m p r o v e m e n t ....... 3 5 , 1 9 8 1 1 5 , 8 0 6 1 5 2 , 2 3 3 1 4 4 , 7 4 5
Total .................... 1,606,051 3,535,014 6,359,929 6,806,366
Our property, plant and equipment increased significantly by 120.1% from
RMB1,606.1 million as of December 31, 2021 to RMB3,535.0 million as of December 31,
2022, primarily due to the expa nsion and/or construction o f our production facilities in
Sichuan, Hubei, Shandong, Tianjin and Jiangsu. Our property, plant and equipment further
increased by 79.9% to RMB6,359.9 million as o f December 31, 2023, primarily due to (i) the
construction of our production facilities in Hubei, Shandong and Jiangxi, and (ii)
construction of the new office building and factory in Zhangjiagang, Jiangsu. Our
property, plant and equipment remained r elatively stable at RMB6,359.9 million and
RMB6,806.4 million as of June 30, 2 023 and 2024, respectively.
Right-of-use Assets
During the Track Record Period, we lease vari ous offices, warehouses and factories for
our operations. Lease terms are negotiated on an individual basis and contain a wide range
of different terms and conditions. In determining the lease term and assessing the length of
the non-cancellable period, the Group applies the definition of a contract and determines
the period for which the contract is enforceable.
Other Intangible Assets
Our other intangible assets primarily consis t of computer software and patent. We test
other intangible assets annually for impairment, or more frequently, if there are indications
that other intangible assets might be impaired. Our intangible assets have finite useful lives.
Our computer software and patent are amortized on a straight-line basis over 5 years and 30
years, respectively.
FINANCIAL INFORMATION
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Estimated impairment of property, plant and equipment, right-of-use assets and other
intangible assets
Property, plant and equipment, right-of- use assets and other intangible assets are
stated at costs less accumulated depreciatio n/amortization and impairment, if any. In
determining whether an asset is impaired, We have to exercise judgment and make
estimation, particularly in assessing: (1) wh ether an event has occurred or any indicator that
may affect the asset value; (2) whether the carrying value of an asset can be supported by
the recoverable amount, in the case of value in use, the net present value of future cash
flows which are estimated based upon the continued use of the asset; and (3) the appropriate
key assumptions to be applied in estimating the recoverable amounts including cash flow
projections and an appropriate discount rate. We are also required to test for impairment of
capitalised development costs assets not available for use on an annual basis. When it is not
possible to estimate the recoverable amount of an individual asset (including right-of-use
assets), we estimate the recov erable amount of the cash generating unit to which the assets
belong, including allocation of corporate assets when a reasonable and consistent basis of
allocation can be established, otherwise re coverable amount is determined at the smallest
group of cash generating units, for which the relevant corporate assets have been allocated.
Changing the assumptions and estimates, including the discount rates or the growth rate in
the cash flow projections, could materially affect the recoverable amounts. Despite we
noted certain impairment indicators, based on the abovementioned assessment carried out
by our Group periodically, no impairment loss on property, plant and equipment,
right-of-use assets or other intangible asse ts was recognized during the Track Record
Period.
For detail of the carrying amounts of property, plant and equipment, right-of-use
assets and other intangible assets subject to i mpairment assessments and impairment losses
that have been recognised, see Notes 15, 16 and 18 to Part II of the Accountants’ Report in
Appendix IA to this prospectus.
Goodwill
We had goodwill of RMB390.1 million, RMB362.6 million, RMB289.8 million and
RMB264.6 million as of December 31, 2021, 2022 and 2023 and June 30, 2024, respectively.
For the years ended December 31, 2022 and 2023 and for the six months ended June 30,
2024, we recognized provision for impair ment loss of goodwill of RMB28.9 million,
RMB72.8 million and RMB25.2 million, respective ly, as the respective recoverable amounts
of certain subsidiaries acquired during the Track Record Period were estimated to be lower
than their respective carrying amounts.
FINANCIAL INFORMATION
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Goodwill is allocated to our cash-generating units (‘‘ CGUs ’’) as follows:
As of December 31,
As of
June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Jiangsu Ruilifeng and its subsidiaries
(‘‘Jiangsu Ruilifeng CGU ’ ’ ) ......... 2 0 6 , 7 2 7 1 7 7 , 8 4 6 1 7 7 , 8 4 6 1 7 7 , 8 4 6
Changzhou Liyuan and its subsidiaries
(‘‘Changzhou Liyuan CGU ’ ’ ) ........ 1 8 3 , 3 4 7 1 8 3 , 3 4 7 1 1 1 , 9 8 0 8 6 , 7 3 1
L o p a lT i m e s ..................... — 1 , 4 0 6 — —
390,074 362,599 289,826 264,577
The recoverable amounts of the CGUs are determined based on value-in-use
calculations based on cash flow forecasts derived from the most recent financial budgets
and estimated future cash flows covering a 5 -year period and with the beyond budgeted
period using zero growth rate approved by our Directors.
The key assumptions used in the estimation of value in use are as below:
As of December 31,
As of
June 30,
2021 2022 2023 2024
Jiangsu Ruilifeng CGU
R e v e n u e( a v e r a g eg r o w t hr a t e ) ........ 8 . 4 % 8 . 7 % 1 1 . 4 % 1 0 . 5 2 %
P r e - t a xd i s c o u n tr a t e ............... 1 2 . 6 % 1 1 . 3 % 1 0 . 5 % 9 . 5 9 %
Changzhou Liyuan CGU
R e v e n u e( a v e r a g eg r o w t hr a t e ) ........ 2 7 . 5 % ( 9 . 5 ) % ( 5 . 4 ) % ( 8 . 2 ) %
P r e - t a xd i s c o u n tr a t e ............... 1 1 . 5 % 1 2 . 2 % 1 2 . 0 % 1 2 . 2 %
Our Directors have determined the values assigned to each of the key assumptions as
follows:
. Average revenue growth rate over the five-year forecast period is based on past
performance and management’s expectation of market development; and
. Pre-tax discount rate that reflects current market assessments of the time value of
money and the risk specific to the CGUs.
Impact of possible changes in key assumptions
The recoverable amount of Jiangsu Ru ilifeng CGU was estimated to exceed its
carrying amount as of December 31, 2021 and 2023 and June 30, 2024 by approximately
RMB22,174,000, RMB21,667,000 and RMB17,401,000 respectively. The recoverable
amount of Jiangsu Ruilifeng CGU was estimated to be lower than its carrying amount as
of December 31, 2022 and impairment of RMB28,881,000 for Jiangsu Ruilifeng CGU was
recognised for the year ended December 31, 2022.
FINANCIAL INFORMATION
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The recoverable amount of Changzhou Liyuan CGU is estimated to exceed its carrying
amount as of December 31, 2021 and 2022 b y approximately RMB2,100,438,000 and
RMB433,859,000 respectively. The recoverable amount of Changzhou Liyuan CGU was
estimated to be lower than its carrying am ount as of December 31, 2023 and June 30, 2024
and impairment of RMB71,367,000 and RMB25,249,000 for Changzhou Liyuan CGU was
recognised for the year ended December 31, 20 23 and the six months ended June 30, 2024,
respectively.
Management have undertaken sensitivity a nalysis on the impairment test of goodwill.
The recoverable amount of each CGU would equal its carrying amount (net of impairment
loss) if each key assumption was to change as follows with all other variables held constant:
As of December 31,
As of
June 30,
2021 2022 2023 2024
Jiangsu Ruilifeng CGU
R e v e n u e( a v e r a g eg r o w t hr a t e ) ........ 7 . 8 % 8 . 7 % 1 1 . 1 % 9 . 8 %
P r e - t a xd i s c o u n tr a t e ............... 1 3 . 0 % 1 1 . 3 % 1 0 . 7 % 9 . 8 %
Changzhou Liyuan CGU
R e v e n u e( a v e r a g eg r o w t hr a t e ) ........ 1 4 . 8 % ( 1 1 . 2 ) % ( 5 . 4 ) % ( 8 . 2 ) %
P r e - t a xd i s c o u n tr a t e ............... 2 2 % 1 6 . 8 % 1 2 . 0 % 1 2 . 2 %
Our Directors believe that any reasonably possible changes in the key assumptions on
which recoverable amount is based would n o tc a u s e dt h ec a r r y i n ga m o u n to fC G Ut o
exceed its recoverable amount.
Trade and Other Payables
Our trade and other payables primarily co mprise payables to our suppliers for raw
materials. Our trade payables are non-intere st-bearing and are nor mally settled on terms
range from 30 to 60 days. Our bills payables a re guaranteed by banks in the PRC and have
maturities of six months to one year. The following table sets forth the breakdown of our
t r a d ea n do t h e rp a y a b l e sa so ft h ed a t e si n d i c a t e d :
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
T r a d ep a y a b l e s ............. 4 9 1 , 8 2 4 1 , 1 9 5 , 9 4 1 1 , 1 9 1 , 0 1 7 1 , 2 1 8 , 7 3 8
B i l l sp a y a b l e .............. 1 2 9 , 5 5 4 3 0 2 , 1 6 4 5 9 0 , 6 3 5 1 5 2 , 4 4 5
Other payables Note .......... 3 0 6 , 1 2 4 7 4 8 , 6 5 9 1 , 1 2 1 , 1 5 3 1 , 0 6 0 , 4 8 8
Total .................... 927,502 2,246,764 2,902,805 2,431,671
Notes: Other payables consist of accrued payroll, other tax payables, payables for equipment and
constructions, etc.
FINANCIAL INFORMATION
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The following table sets forth an aging analysis of our trade payables as of the dates
indicated, presented based on the invoice date:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
L e s st h a n1y e a r ............ 4 8 4 , 7 7 8 1 , 1 6 4 , 9 7 6 1 , 1 7 8 , 2 3 7 1 , 1 3 0 , 9 4 5
1t o2y e a r s ............... 6 , 0 2 1 2 7 , 3 9 2 6 , 1 1 3 8 1 , 6 0 2
2t o3y e a r s ............... 3 1 2 1 , 8 7 0 3 , 6 4 8 3 , 0 1 3
O v e r3y e a r s ............... 7 1 3 1 , 7 0 3 3 , 0 1 9 3 , 1 7 8
Total .................... 491,824 1,195,941 1,191,017 1,218,738
Our trade and other payables increased significantly by 142.2% from RMB927.5
million as of December 31, 2021 to RMB2,246.8 m illion as of December 31, 2022, primarily
due to the increase in our purchases of raw materials along with our rapid business growth
and the increase in market prices of raw materials. Our trade and other payables further
increased by 29.2% to RMB2,902.8 million a s of December 31, 2023, primarily due to the
increase in other payables, especially payables for equipment and constructions. Our trade
and other payables then decreased by 16. 2% to RMB2,431.7 million as of June 30, 2024,
primarily due to the settlement of part of our bills payable.
The Group’s trade payables due within 1 to 2 years increased from RMB6.1 million as
of December 31, 2023 to RMB81.6 million as o f June 30, 2024, primarily due to (i)
purchases of raw materials and spare parts in advance upon the commencement of
operation of our new production plants in line with our rapid expansion of designed
production capacity in 2022 and 2023, when these trade payables due within 1 to 2 years
were incurred, and (ii) the payment schedule adjustment for payables for the purpose of the
Group’s entire control of working capital. As of August 31, 2024, RMB29.7 million, or
36.4% of our trade payables due within 1 to 2 years as of June 30, 2024 had been
subsequently settled. Our Directors confirm that we had no material dispute with suppliers
over payment of these trade payables as of the Latest Practicable Date.
The following table sets forth our trade payable turnover days for the periods
indicated:
For the year ended December 31,
For the
six months
ended June 30,
2021 2022 2023 2024
Trade payable turnover days . . . 39.5 26.5 49.6 67.3
— LFP cathode materials . . . . . 57.2 25.7 52.8 77.9
— Automotive specialty
c h e m i c a l s .............. 3 1 . 9 3 2 . 8 3 4 . 9 4 2 . 7
Note: Trade payable turnover days are calculated based on the average of the beginning and ending balances
of trade payables for the year/period divided by cost of sales for the year and mu ltiplied by 365/180 days
(as the case may be) or 214 days for the calculat ion of turnover days for our LFP cathode material
business in 2021.
FINANCIAL INFORMATION
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Our trade payable turnover days decreased from 39.5 days in 2021 to 26.5 days in 2022,
primarily because principal raw materials of our LFP cathode materials, such as lithium
carbonate and iron phosphate, were in shor t supply in the year and suppliers generally
requested payment before delivery for the procurement of raw materials. Our trade payable
turnover days then increased to 49.6 days i n 2023, primarily because certain suppliers
accepted longer credit term for the procurement of raw materials of our LFP cathode
materials due to the rebalance of the supply and demand of raw materials. Our trade
payable turnover days then increased to 67.3 days in the first half of 2024, primarily due to
the extension of credit periods negotiated with our suppliers.
As of August 31, 2024, RMB704.9 million, or 57.8% of our trade payables as of June
30, 2024 had been subsequently settled.
Financial Assets at Fair Value through Other Comprehensive Income/Profit or Loss
(‘‘FVTOCI/FVTPL’’)
Our financial assets at FVTOCI/FVTPL co nsist of our investments in listed and
unlisted equity, unlisted funds and wealth m anagement products. As of December 31, 2021,
2022 and 2023, our financial assets at FV TOCI/FVTPL amounted to RMB92.9 million,
RMB123.2 million and RMB201.0 million, respect ively. The following table sets forth a
breakdown of our financial assets at FVTOCI/FVTPL as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Financial assets at FVTOCI
Unlisted equity investments,
a tf a i rv a l u e ............. 9 2 , 4 5 0 9 2 , 4 5 0 1 4 1 , 4 5 0 1 4 1 , 4 5 0
Current assets
Financial assets at FVTPL
Listed equity investments,
a tf a i rv a l u e ............. 4 3 1 7 3 8 5 2 2 2 4 7
Wealth management products . . — 30,000 — 800,750
Unlisted funds investment . . . . . — — 59,005 40,129
Total .................... 92,881 123,188 200,977 982,576
Our unlisted equity investments mainly in clude investments in Anhui Mingtian New
Energy Technology Co., Ltd. ( 安徽明天新能源科技有限公司)( ‘ ‘Anhui Mingtian ’’). As of
June 30, 2024, we hold 9.57% equity interest in Anhui Mingtian. The fair values of our
investments in Anhui Mingtian during the Track Record Period have been arrived at on the
basis of a valuation carried out by an indep endent qualified professional valuer using
market approach and adjusted recent transaction.
Our listed equity investments comprised s hares of a Shenzhen stock exchange listed
company. The fair values of the listed shares in the PRC were determined based on the
quoted bid price available on the Shenzhen Stock Exchange.
FINANCIAL INFORMATION
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Our unlisted fund investment represented the investments in a Hong Kong-listed
company through a private equity fund.
The wealth management products we purchas ed were issued by regulated commercial
banks in the PRC which were independent from us and were low-risk in nature. The wealth
management products were structured deposits with financial institutions with maturities
within one year. The returns of the structured deposits were typically made up of both
guaranteed minimum returns and variable returns tied to the performance of certain
underlying financial assets, such as gold spot price and currency exchange rates. The returns
of these investments were determined with reference to the performance of the expected
return rates stated in the contracts. The fai r values of the wealth management products we
purchased were determined by the spot rate quoted by the issuer of the financial products.
We typically disposed our investments in wealth management products near year end.
We have implemented a series of internal control policies setting forth overall
principles, assignment of responsibilities and ap proval procedures regarding investment in
wealth management products to ensure corporate fund safety. Pursuant to our internal
policies, we will only use idle cash to invest in wealth management products which will not
interfere with our normal operations and bus iness prospects. In general, we only permit
investments in low-risk and short-term wea lth management products issued by qualified
financial institutions. Our fund managem ent department manages our investments in
wealth management products. It is responsible for proposing, analyzing and evaluating
potential investment in wealth management products. Investment proposals are subject to
approvals by our chief financial officer and t he chairman of the Board, who have expertise
in business and financial management. Upon approvals, our fund management department
is responsible for purchasing the relevant wealth management products and reviewing the
performance of relevant wealth management products on a regular basis. We also actively
follow up with banks to ensure we receive our returns on a timely basis. The fund
management department is required to work closely with other departments of the Group,
such as office of the secretary to the Board and our finance department, to ensure the
compliance with disclosure requirements and the accuracy of bookkeeping regarding our
investments in wealth management products.
In the future, we may continue to purchase wealth management products or invest in
other types of financial assets in accordance with our internal policies to maximize our
capital utilization efficiency. Our investment s after the Listing will be subject to relevant
laws, regulations and rules, including Chapter 14 and other applicable rules under the
Listing Rules.
FINANCIAL INFORMATION
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Contract Liabilities
Our contract liabilities primarily comprise receipts in advance from customers. The
following table sets forth the breakdown of our contract liabilities as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Sales of automotive specialty
c h e m i c a l s ............... 3 2 , 6 0 2 2 3 , 0 4 1 1 2 , 4 3 9 2 4 , 6 0 6
Sales of LFP cathode materials . 27,533 401,305 8,758 4,256
O t h e r s ................... 5 1 1 , 3 9 4 7 4 3 1 , 2 6 5
Total .................... 60,186 425,740 21,940 30,127
As of December 31, 2021, 2022 and 2023 and Ju ne 30, 2024, our contract liabilities
were RMB60.2 million, RMB425.7 million, RMB21.9 million and RMB30.1 million. The
significant increase in our contract liabili ties as of December 31, 2022 as compared to that
as of December 31, 2021 was primarily attributable to advance receipts from a major
customer to order our products. Our contrac t liabilities decreased from RMB425.7 million
as of December 31, 2022 to RMB21.9 million as of December 31, 2023, primarily because
contract liabilities as of Decem ber 31, 2022 were su bsequently recognized as revenue in
2023. Our contract liabilities then increas ed to RMB30.1 million as of June 30, 2024,
primarily due to the increase in advance from customers for purchases of our automotive
specialty chemicals.
As of August 31, 2024, RMB22.8 million, or 75.6%, of our contract liabilities as of
June 30, 2024 had been settled as revenue subsequently.
INDEBTEDNESS
The following table sets forth a breakdown of our indebtedness as of the dates
indicated:
As of December 31, As of June 30,
As of
August 31,
2021 2022 2023 2024 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Bank and other borrowings . . . . 2,148,604 5,625,846 8,926,695 9,477,553 8,910,101
Lease liabilities . . . . . . . . . . . . 346,182 657,993 1,090,170 1,114,394 1,075,622
Total ................... 2,494,786 6,283,839 10,016,865 10,591,947 9,985,723
As of December 31, 2021, 2022 and 2023, June 30, 2024 and August 31, 2024, we did
not have any significant contingent liabilities. Our Directors confirmed that there had not
been any material change in our contingent lia bilities since August 31, 2024 and up to the
Latest Practicable Date.
FINANCIAL INFORMATION
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Save as disclosed above, we did not have any outstanding indebtedness or any loan
capital issued and outstanding or agreed to b e issued, bank overdrafts, loans or similar
indebtedness, liabilities under acceptances ( other than normal trade bills), acceptance
credits, debentures, mortgages, charges, or debt securities issued or outstanding, or
authorized or otherwise created but unissued, or other similar indebtedness, finance leases
or hire purchase commitments, guarantees or other contingent liabilities or any covenant in
connection therewith as of August 31, 2024, being our indebtedness statement date. Our
Directors confirm that, as of the Latest Practicable Date, there was no material change in
the Company’s indebtedness since August 31, 2024.
Bank and Other Borrowings
T h ef o l l o w i n gt a b l es e t sf o r t ht h ed e t a i l sof our borrowings as of the dates indicated:
As of December 31, As of June 30,
As of
August 31,
2021 2022 2023 2024 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Fixed-rate bank
borrowings
—S e c u r e d........ 1 , 2 1 4 , 9 4 7 3 , 1 4 3 , 9 1 8 5 , 5 5 1 , 4 7 0 6 , 0 5 9 , 6 9 2 6 , 0 3 3 , 4 0 5
—U n s e c u r e d...... 5 4 8 , 6 5 7 6 2 4 , 6 4 2 2 , 3 5 3 , 9 7 5 1 , 7 4 9 , 2 3 2 1 , 5 2 9 , 3 6 3
1,763,604 3,768,560 7,905,445 7,808,924 7,562,768
Endorsed bills . . . . . 40,000 1,512, 286 570,000 815,597 494,301
Other borrowings . . . 345,000
Note 345,000 Note 451,250 853,032 853,032
Total ............ 2,148,604 5,625,846 8,926,695 9,477,553 8,910,101
Note: The other borrowings are financial liabilities de signated as FVTPL and in the subsequent periods, the
repurchase price is based on higher of capital contribution plus 10% internal rate of return per annum
or the fair value of the equity interest of Changzhou Liyuan upon redemption. Any changes in fair value
of the financial liabilities at FVTP L are recognized as fair value gain or loss under ‘‘other income, gains
and losses’’ (as a line item in the profit or loss) . Fair value assessment has been carried out by an
independent professional valuer appointed by our Co mpany with fair value changes determined to be
immaterial for the years ended December 31, 2021 and 2022. As our management considered the fair
value changes of other borrowings were immaterial to our Group, such changes were therefore not
recognized in the respective consolidated financ ial statements for the years ended December 31, 2021
and 2022. As a result, there was no change in the carrying value of other borrowings as of December 31,
2021 and 2022.
As of December 31, 2021, 2022 and 2023, June 30, 2024 and August 31, 2024, we had
bank and other borrowings of RMB2,148.6 m illion, RMB5,625.8 million, RMB8,926.7
million, RMB9,477.6 million and RMB8,910.1 m illion, respectively. Our bank borrowing
had effective interest rates ranging from 2.85% to 4.60% per annum, 2.95% to 4.41% per
annum, 2.71% to 4.06% per annum and 2.65% to 4.06% per annum as of December 31,
2021, 2022 and 2023 and June 30, 2024, respectively. Our bank borrowings were mainly
denominated in RMB and primarily used to finance our increased capital expenditures and
working capital requirements driven by our business expansion during the Track Record
FINANCIAL INFORMATION
–4 4 0–


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Period. The continuous increase in our bank borrowing during the Track Record Period
was primarily due to the increased capital needs of our LFP cathode materials business for
the construction of production facilities. Fo r details on the construction of production
facilities of LFP cathode materials and furt her expansion plans, see ‘‘Business — Our
Businesses — LFP Cathode Materials — Production expansion plans.’’ We also used our
bank borrowings for operational purposes, such as purchases of raw materials. As of June
30, 2024, our bank borrowing s of RMB5,255.6 million were repayable within one year. We
believe our Group has sufficient financial resources to fulfil our short-term financial
obligations given that our current assets as of June 30, 2024 represented 47.7% of our total
assets as of the same date. In particular, our cash and cash equivalents, financial assets at
FVTPL and trade and other receivables, which were relatively high liquid, amounted to
RMB2,285.9 million, RMB841.1 million and RMB3 ,337.2 million, respectively, as of June
30, 2024.
Our bank borrowings had been secured by cer tain assets of the Group and the carrying
amounts of the respective assets amounted to RMB437.7 million, RMB2,305.0 million,
RMB1,132.6 million and RMB1,687.6 million a s of December 31, 2021, 2022 and 2023 and
June 30, 2024, respectively. Our bank borrowings were also pledged by 100% equity interest
of subsidiaries with a carrying amount of inve stments in subsidiaries of RMB844.4 million
as of December 31, 2021, 2022 and 2023 and June 30, 2024. See Note 42 to Part II of the
Accountants’ Report in Appendix IA to this prospectus for details.
As of December 31, 2021, 2022 and 2023, June 30, 2024 and August 31, 2024, bank
borrowings of RMB823.4 million, RMB1,294. 5 million, RMB1,713.6 million, RMB1,796.2
million and RMB2,075.8 million were guaranteed by Mr. Shi and/or Ms. Zhu Xianglan, our
executive Director and non-executive Di rector respectively and our Controlling
Shareholders (the ‘‘ Controlling Sharehol ders’ Guarantees ’’). Our Directors are of the view
that premature discharge of all outstanding Controlling Shareholders’ Guarantees before
the Listing would be impractical and unduly onerous to the Group and would not be in the
best interests of our Group and our Shareholders, considering that early discharge of the
Controlling Shareholders’ Guar antees would require renegotiation of the terms with the
relevant banks, and the renegotiation would be time-consuming and may affect our normal
operation. Therefore, the Controlling Shareho lders’ Guarantees will not be released before
Listing. For detailed analysis on the financial independence of our Group from our
Controlling Shareholders, see ‘‘Relatio nship with Our Controlling Shareholders —
Independence from Our Controlling Shareholders — Financial Independence.’’
As of December 31, 2021, 2022 and 2023, June 30, 2024 and August 31, 2024, our
endorsed bills amounted to RMB40.0 million, RMB1,512.3 million, RMB570.0 million,
RMB815.6 million and RMB494.3 million, respectively.
FINANCIAL INFORMATION
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As of December 31, 2021, 2022 and 2023, June 30, 2024 and August 31, 2024, our other
borrowings amounted to RMB345.0 million, RMB345.0 million, RMB451.3 million,
RMB853.0 million and RMB853.0 million, respect ively. Other borrowings derived from the
repurchase rights granted to certain new investors of Changzhou Liyuan in connection with
its capital increases in October 2021, February 2024 and May 2024. For details of the
capital increases and the repurchase rights, see ‘‘History and Development — Our Strategic
Cooperation — Establishment of Changzhou Liyuan in 2021 and Subsequent Capital
Increases.’’
We consider our bank borrowing agreements to contain standard terms, conditions
and covenants that are customary for commercial bank loans. A few of our bank borrowing
agreements consist of specific restrictions on financial ratios or dividend distribution of our
Company and certain subsidiaries. Typica lly, as of August 31, 2024, pursuant to the
relevant bank borrowing agreements, the liab ility-to-asset ratios o f a relevant borrower
should not exceed an agreed level (usually ranging from 65% to 100%) for outstanding
bank borrowings of nine members of the Group. As of August 31, 2024, eight members of
the Group undertook to remain profitable for some of their respective outstanding bank
borrowings. Certain bank borro wing agreements also had restrictions over the borrowers,
including 13 members of the Group as of August 31, 2024, on dividend distribution. As of
August 31, 2024, the aggregate outstanding b alance of these bank borrowings amounted to
RMB4,935.8 million. Despite these restrictive f inancial covenants and the loss-making and
financial position of the Company and/or relevant subsidiaries, we have been advised by
our PRC Legal Advisor, who has performed du e diligence work (including but not limited
to reviewing the relevant agreements, documents, information and confirmations provided
by our Company and/or relevant subsidiaries of our Company and/or parties to the relevant
agreements, and obtaining necessary written representations from our Company and/or
relevant subsidiaries), that, based on such d ue diligence work and analysis, the Company
and/or those aforementioned relevant subsi diaries were waived from fulfilling the above
financial covenants of relevant agreements during the Track Record Period and up to the
Latest Practicable Date.
Based on the aforementioned view of our PRC Legal Adviser, our Directors are of the
view that, we had not been in violation of any of the material covenants pursuant to the
respective loan agreements we entered into with the relevant banks during the Track Record
P e r i o da n du pt ot h eL a t e s tP r a c t i c a b l eD a t e .
During the Track Record Period and up to the Latest Practicable Date, the Group (i)
had not received any notices of default fro m any of the relevant banks regarding the
material covenants (including the abovementioned covenants) pursuant to the respective
loan agreements entered into with the relevant banks; (ii) had not incurred any damages or
penalties, nor had it experienced any disputes with the relevant banks regarding these
covenants or any other aspects of the loan agreements; or (iii) had not experienced any
difficulty in obtaining or default in payment of bank loans and other borrowings.
FINANCIAL INFORMATION
–4 4 2–


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The following table sets forth the maturity structure of our bank and other borrowings
as of August 31, 2024 :
As of August 31, 2024
Fix-rate bank
borrowings Endorse bills
Other
borrowings
(RMB in thousands, unaudited)
W i t h i n6m o n t h s ...................... 2 , 2 1 8 , 5 2 0 3 2 5 , 1 0 1 —
6t o1 2m o n t h s ....................... 2 , 3 1 0 , 3 7 4 1 6 9 , 2 0 0 —
1t o2y e a r s ......................... 1 , 1 5 4 , 2 7 9 — —
2t o3y e a r s ......................... 4 9 3 , 7 3 7 — 8 5 3 , 0 3 2
O v e r3y e a r s ......................... 1 , 3 8 5 , 8 5 8 — —
Total .............................. 7,562,768 494,301 853,032
As of August 31, 2024, our Group had banking facilities of RMB8,602.0 million, of
which RMB1,063.4 million was unutilized. Our Directors confirm that they are not aware of
any material restrictive covenant that will limit our ability to draw down on our unutilized
facilities during the Track Record Perio d and up to the Latest Practicable Date.
Lease Liabilities
During the Track Record Period, we leased v arious offices, warehouses and factories
for our operations. The following table set s forth our lease liabilities as of the dates
indicated:
As of December 31, As of June 30,
As of
August 31,
2021 2022 2023 2024 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
C u r r e n t................ 1 5 7 , 4 3 1 2 9 7 , 3 9 1 2 9 4 , 7 5 2 2 2 0 , 7 5 9 1 8 8 , 2 2 5
N o n - c u r r e n t ............. 1 8 8 , 7 5 1 3 6 0 , 6 0 2 7 9 5 , 4 1 8 8 9 3 , 6 3 5 8 8 7 , 3 9 7
Total .................. 346,182 657,993 1,090,170 1,114,394 1,075,622
Our lease liabilities amounted to RMB346. 2 million, RMB658.0 million, RMB1,090.2
million, RMB1,114.4 million and RMB1,075 .6 million as of December 31, 2021, 2022 and
2023, June 30, 2024 and August 31, 2024, respecti vely. The increase in our lease liabilities in
2022 and 2023 was primarily due to an incr ease in new leases entered into for our
production facilities. Our lease liabilities r emained relatively stable as of December 31,
2023, June 30, 2024 and August 31, 2024.
FINANCIAL INFORMATION
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RELATED PARTY TRANSACTION
We enter into transactions with our related parties from time to time during our
ordinary course of business and on terms comparable to the terms of transactions with
other entities that are not related parties. Du ring the Track Record Period, our transactions
with related parties consisted of sales of products and provision of services to related
parties, purchases from related parties and payment of other service fees and expenses to
related parties. For details of our related party transactions, see Note 39 to Part II of the
Accountants’ Report in Appendix IA to this prospectus. The following table sets forth our
balance with related parties as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Amounts due from related parties
— Trade and other receivables . . 150 320 45 1,076
Amounts due to related parties
— Trade and other payable . . . . 35 54,258 28,730 45,045
—C o n t r a c tl i a b i l i t i e s ........ 7 4 1 9 3 9 4 1 1 3 9 8
The balances with related parties and an associate are trade in nature, unsecured,
interest-free and repayable on demand. Our Dir ectors believe that these transactions were
conducted in the ordinary and usual course of business, and did not distort our results of
operations or make our historical results unreflective of our future performance.
CAPITAL EXPENDITURES
Our capital expenditures are primarily re lated to purchases of property, plant and
equipment and other intangible assets. The following table sets forth our capital
expenditures for the periods indicated:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Purchase of property, plant
a n de q u i p m e n t .......... 6 5 7 , 7 9 1 2 , 2 2 2 , 5 0 9 3 , 1 6 6 , 7 6 4 1 , 3 6 7 , 8 0 2 5 5 8 , 5 9 0
Purchase of other intangible
a s s e t s................ 8 , 3 1 5 1 1 , 2 3 8 4 3 , 1 7 1 3 8 , 1 3 9 3 , 8 8 9
Total .................. 666,106 2,233,747 3,209,935 1,405,941 562,479
Our capital expenditures amounted to RMB666.1 million, RMB2,233.7 million,
RMB3,209.9 million, RMB1,405.9 million a nd RMB562.5 million in 2021, 2022 and 2023
and for the six months ended June 30, 2023 and 20 24, respectively. The significant increase
in our capital expenditures in 2022 and 2023 was primarily due to the
construction/expansion of production fa cilities. We commenced preparation for the
Indonesia Plant in February 2023. By June 30, 2024, we had incurred capital
expenditures of approximately RMB602.6 million for the construction of the Indonesia
Plant. For details, see ‘‘Future Plans and Use of Proceeds — Use of Proceeds.’’
FINANCIAL INFORMATION
–4 4 4–


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For the year ending December 31, 2024, our ca pital expenditures are estimated to be
RMB939.1 million. We plan to finance such cap ital expenditures through bank loans and
the net proceeds from the Global Offering. Our ac tual capital expenditures may differ from
the amounts set forth above due to various facto rs, including our future cash flows, results
of operations and financial condition.
CAPITAL COMMITMENTS
Our capital commitments are related to capit al expenditures in respect of acquisition of
property and equipment and other intangible assets which had been contracted for but not
yet provided. As of December 31, 2021, 2022 and 2023 and June 30, 2024, our capital
commitments were RMB473.8 million, RM B2,749.5 million, RMB1,997.9 million and
RMB1,059.9 million, respectively.
KEY FINANCIAL RATIOS
The following table sets forth our key financial ratios as of the dates indicated:
For the year ended/As of December 31,
For the six
months ended/
As of June 30,
2021 2022 2023 2024
Return on equity (1) ( % ) ....... 1 7 . 2 1 8 . 4 ( 3 6 . 2 ) ( 6 . 5 )
Return on assets (2) ( % )....... 7 . 1 7 . 0 ( 8 . 8 ) ( 1 . 5 )
Current ratio (3) ( t i m e s ) ....... 1 . 5 1 . 3 0 . 9 0 . 9
Quick ratio (4) ( t i m e s ) ......... 1 . 1 0 . 9 0 . 7 0 . 7
Gearing ratio (5) ( % ) ......... 9 9 . 2 1 1 2 . 0 2 3 9 . 6 2 6 4 . 0
Notes:
(1) Return on equity is calculated base d on profit/(loss) for the year/peri od divided by the ending balance of
total equity of the year/period and multiplied by 100%.
(2) Return on assets is calculated bas ed on profit/(loss) for the year/per iod divided by the ending balance of
total assets of the year/period and multiplied by 100%.
(3) Current ratio is calculated based on current assets di vided by current liabilitie s as of the date indicated.
(4) Quick ratio is calculated based on current assets less inventories divided by current liabilities as of the date
indicated.
(5) Gearing ratio is calculated based on total debt, including total bank and other borrowings and lease
liabilities, divided by total equity as of the date indicated and multiplied by 100%.
Return on Equity
Our return on equity increased from 17.2% in 2021 to 18.4% in 2022, primarily due to
the growth of both total equity and profit for the year after our acquisitions of Tianjin
Beiterui Nano and Jiangsu Beiterui Nano. We recorded negative return on equity in 2023
and the first half of 2024 as we incurred losses for the respective periods.
FINANCIAL INFORMATION
–4 4 5–


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Return on Assets
Our return on assets remained relatively stable at 7.1% and 7.0% in 2021 and 2022,
respectively. We recorded negative return on assets in 2023 and the first half of 2024 as we
incurred losses for the respective periods.
Current Ratio and Quick Ratio
O u rc u r r e n tr a t i oa m o u n t e dt o1 . 5t i m e s ,1 . 3t i m e s ,0 . 9t i m e sa n d0 . 9t i m e sa so f
December 31, 2021, 2022 and 2023 and June 30 , 2024, respectively. Our quick ratio
amounted to 1.1 times, 0.9 times, 0.7 times and 0.7 times as of December 31, 2021, 2022 and
2023 and June 30, 2024, respectively. The decreases in our current ratio and quick ratio
were primarily due to the increase in short-term bank borrowings recorded as current
liabilities.
Gearing Ratio
Our gearing ratio amounted to 99.2%, 112.0%, 239.6% and 264.0% as of December
31, 2021, 2022 and 2023 and June 30, 2024, respectively. The increase in our gearing ratio
was primarily due to (i) the increase in our bank borrowing from 2021 to 2023 attributable
to working capital needs of our LFP cathode materials business and capital needs for the
construction/expansion of production facili ties and (ii) the increase in other borrowings at
FVTPL with reference to valuation carried out by an independent professional valuer.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISKS
We are exposed to financial risks including m arket risk (currency risk and interest rate
risk), credit risk and liquidity risk in the normal course of our business. For details of the
risks we are exposed to, see Note 37(b) to Part II of the Accountants’ Report in Appendix
IA to this prospectus.
DIVIDEND POLICY
On May 10, 2021, we paid a final dividend of RMB61.0 million in respect of the year
ended December 31, 2020. On September 30, 2022, we paid an interim dividend of
RMB105.1 million in respect of the six months ended June 30, 2022. We did not declare any
dividend for the year ended December 31, 2023 and the six months ended June 30, 2024.
Any declaration and payment, as well as th e amount of dividends, will be subject to
our Articles of Association and the relevan t PRC laws. We currently do not have any fixed
dividend pay-out ratio. No dividend shall be declared or payable except out of our profits
and reserves lawfully available for distributi on. According to relevant PRC laws, any future
net profit that we make will have to be first applied to make up for our historically
accumulated losses, after which we will be obl iged to allocate 10% of our net profit to our
statutory common reserve fund until such fund has reached more than 50% of our
registered capital. We will, therefore, only be able to declare dividends after: (i) all our
historically accumulated losses have been made up for; and (ii) we have allocated sufficient
net profit to our statutory common reserve fu nd as described above. Our ability to declare
FINANCIAL INFORMATION
–4 4 6–


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and pay dividends will also depend on the availability of dividends received from group
companies in the PRC and other jurisdictions . Distributions from our group companies
may be restricted if they incur losses or in acco rdance with any restrictive covenants in bank
borrowing or financing agreements that we or our subsidiaries may enter into in the future.
LISTING EXPENSES
Listing expenses to be borne by us are estimated to be approximately HK$55.0 million
or 9.6% of the gross proceeds of the Global Offering (including underwriting commission of
approximately HK$15.8 million, and non-underw riting related expenses of approximately
HK$39.2 million which consist of fees and expenses of legal advisors and the Reporting
Accountants of approximately HK$21.0 million and other fees and expenses of
approximately HK$18.2 million, assuming an Offer Price of HK$5.75 per H Share, being
the mid-point of the indicative Offer Price ra nge), assuming the Over-allotment Option is
not exercised. We incurred listing ex penses of RMB23.6 m illion (equivalent to
approximately HK$25.9 million) by June 30, 2024 and had prepaid listing expenses of
RMB2.9 million (equivalent to approximately HK$3.1 million) as of June 30, 2024
recognized in the consolidated statements of our Group. Subsequent to the Track Record
Period, we expect to further incur listing expenses of RMB23.6 million (equivalent to
approximately HK$26.0 million) prior to and upon completion of the Global Offering, of
which (i) RMB7.9 million (equivalent to app roximately HK$8.7 million) is expected to be
recognized as expenses in our consolidated statements of profit or loss and other
comprehensive income, and (ii) RMB15.7 million (equivalent to approximately HK$17.3
million) is expected to be accounted for as a de duction from equity upon Listing under the
relevant accounting standard.
DISTRIBUTABLE RESERVES
As of June 30, 2024, the Company had retained profits of RMB412.6 million, which
could be distributed subject to current articles of association of the Company and the PRC
Company Law. However, such retained profits were restricted from distribution pursuant
to certain covenants under bank borrowing agreements between the Company and relevant
b a n k st h a tr e q u e s t e dn od i v i d e n dd i s t r i b u t i o nw h e nt h eC o m p a n yr e c o r d e dn e tl o s s e s .
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
During the Track Record Period, we did not have any material off-balance sheet
arrangements or any variable interest in any unconsolidated entity that provides financing,
liquidity, financial risk or credit support fo r us. In addition, we have not entered into any
derivative contracts that are indexed to our equity interests and classified as owners’ equity.
As of the Latest Practicable Date, we had not entered into any off-balance sheet
transactions.
FINANCIAL INFORMATION
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
For details of our unaudited pro forma adjusted consolidated net tangible assets,
please refer to the section headed ‘‘Unaudited Pro Forma Financial Information’’ as set out
in Appendix II to this prospectus.
MATERIAL ADVERSE CHANGE
After due and careful consideration, our Directors confirm that, as of the date of this
prospectus and other than disclosed in ‘‘S ummary — Recent Developments and Adverse
Material Change’’, there has been no material adverse change in our financial or trading
position, indebtedness, mortgage, continge nt liabilities, guarantees or prospects of our
Group since June 30, 2024, being the end of the Track Record Period, and there is no event
since June 30, 2024 which would materially affect the information shown in the
Accountants’ Report, the contents of which are set out in Appendix IA to this prospectus.
DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors have confirmed that as of the Latest Practicable Date, there were no
circumstances which, had they been required to comply with Rules 13.13 to 13.19 of the
Listing Rules, would have given rise to a disclosure requirement under Rules 13.13 to 13.19
of the Listing Rules.
FINANCIAL INFORMATION OF TIAN JIN BEITERUI NANO AND JIANGSU
BEITERUI NANO
Set out below is certain pre-acquisition financial information of Tianjin Beiterui Nano
from January 1, 2021 to May 31, 2021 and Jiangsu Beiterui Nano from January 28, 2021
(date of incorporation) to May 31, 2021.
FINANCIAL INFORMATION
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Description of Statements of Profit or Loss and Other Comprehensive Income
The following table sets forth the statements of profit or loss and other comprehensive
income of Tianjin Beiterui Nano and Jiangsu Beiterui Nano for the periods indicated, which
is derived from the statements of profit or loss and other comprehensive income of Tianjin
Beiterui Nano and Jiangsu Beiterui Nano set out in Appendix IB and Appendix IC to this
prospectus, respectively:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
For the
five months
ended May 31,
2021
Period from
January 28,
2021 to May
31, 2021
RMB’000 RMB’000
R e v e n u e ...................................... 2 2 2 , 5 0 7 2 6 8 , 8 4 8
C o s to fs a l e s .................................. ( 1 6 5 , 8 2 4 ) ( 2 3 6 , 5 4 1 )
G r o s sp r o f i t ................................... 5 6 , 6 8 3 3 2 , 3 0 7
O t h e ri n c o m e ,g a i n sa n dl o s s e s ...................... 1 , 1 6 4 4 9 5
I m p a i r m e n tl o s s e so nf i n a n c i a la s s e t s ................. ( 2 , 6 1 2 ) ( 2 , 9 0 2 )
Selling and distribution expenses . ................... ( 5 6 ) ( 2 0 )
A d m i n i s t r a t i v ee x p e n s e s .......................... ( 2 , 3 9 3 ) ( 2 , 6 9 6 )
R e s e a r c ha n dd e v e l o p m e n te x p e n s e s.................. ( 1 6 , 6 0 4 ) ( 4 , 9 0 7 )
F i n a n c ec o s t s.................................. ( 6 1 6 ) ( 1 , 2 6 5 )
P r o f i tb e f o r et a x a t i o n............................ 3 5 , 5 6 6 2 1 , 0 1 2
I n c o m et a xc r e d i t / ( e x p e n s e s ) ....................... ( 2 , 4 7 8 ) ( 4 , 2 9 0 )
Profit and total comprehensive income for the period ....... 33,088 16,722
Revenue
Revenue of Tianjin Beiterui Nano and Jiang su Beiterui Nano was primarily generated
from sales of LFP cathode materials, which represents over 95% of their respective total
revenue for the corresponding period, with the rest mainly includes sales of packaging
materials and accessories. For the five months ended May 31, 2021, the revenue of Tianjin
Beiterui Nano amounted to RMB222.5 millio n. From January 28, 2021 to May 31, 2021,
the revenue of Jiangsu Beiterui Nano amounted to RMB268.8 million.
Cost of sales
Cost of sales of Tianjin Beiterui Nano and J iangsu Beiterui Nano incurred primarily
from sales of LFP cathode materials. For the five months ended May 31, 2021, the cost of
sales of Tianjin Beiterui Nano amounted to RMB165.8 million, representing 74.5% of its
revenue for the same period. From January 28, 2021 to May 31, 2021, the cost of sales of
Jiangsu Beiterui Nano amounted to RMB236.5 million, representing 88.0% of its revenue
for the same period.
FINANCIAL INFORMATION
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Other income, gains and losses
The following table sets forth a breakdown of other income, gains and losses of Tianjin
Beiterui Nano and Jiangsu Beiterui Nano for the periods indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
For the
five months
ended May 31,
2021
Period from
January 28,
2021 to May
31, 2021
RMB’000 RMB’000
G o v e r n m e n tg r a n t s .............................. 9 0 7 —
I n t e r e s ti n c o m eo nb a n kd e p o s i t s.................... 6 2
G a i no nd i s p o s a lo fp r o p e r t y ,p l a n ta n de q u i p m e n t ....... — —
O t h e r s ....................................... 2 5 1 4 9 3
Total ........................................ 1,164 495
Other income, gains and losses of Tianjin Beiterui Nano and Jiangsu Beiterui Nano
consist of government grants, interest income on bank deposits, gain on disposal of
property, plant and equipment and others. For the five months ended May 31, 2021, other
income, gains and losses of Tianjin Beit erui Nano amounted to RMB1.2 million. From
January 28, 2021 to May 31, 2021, other income, gains and losses of Jiangsu Beiterui Nano
amounted to RMB495,000.
Government grants represent operating subsidies and various industry-specific
subsidies granted by the government authorities to reward Tianjin Beiterui Nano’s effort
for technological innovation. There are n o unfulfilled conditions relating to such
government subsidies recognized. The government grants are primarily non-recurring in
nature.
Impairment losses on financial assets
Impairment losses on financial assets of Ti anjin Beiterui Nano and Jiangsu Beiterui
Nano mainly represent the impairment losses on their trade and other receivables calculated
based on the expected credit loss rates. For the five months ended May 31, 2021,
impairment losses on financial assets of Tianjin Beiterui Nano amounted to RMB2.6
million. From January 28, 2021 to May 31, 2021, i mpairment losses on financial assets of
Jiangsu Beiterui Nano amounted to RMB2.9 million.
Selling and distribution expenses
Selling and distribution expenses of Tianjin Beiterui Nano and Jiangsu Beiterui Nano
mainly consist of staff cost and benefit attrib utable to sales personnel of Tianjin Beiterui
Nano and Jiangsu Beiterui Nano. For the f ive months ended May 31, 2021, selling and
distribution expenses of Tianjin Beiterui Nano amounted to RMB56,000, representing
0.03% of its revenue for the same period. Fr om January 28, 2021 to May 31, 2021, selling
and distribution expenses of Jiangsu Beiterui Nano amounted to RMB20,000, representing
0.01% of its revenue for the same period.
FINANCIAL INFORMATION
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Administrative expenses
Administrative expenses of Tianjin Beite rui Nano and Jiangsu Beiterui Nano mainly
consist of staff cost and benefit, utility, consul ting service fees and rent, rates and building
management fees. For the five months ended May 31, 2021, administrative expenses of
Tianjin Beiterui Nano amounted to RMB2.4 million, representing 1.1% of its revenue for
the same period. From January 28, 2021 to May 31, 2021, administrative expenses of
Jiangsu Beiterui Nano amounted to RMB2.7 million, representing 1.0% of its revenue for
the same period. The following table sets forth a breakdown of the administrative expenses
of Tianjin Beiterui Nano and Jiangsu Beiterui Nano for the periods indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
For the
five months
ended May 31,
2021
Period from
January 28,
2021 to May
31, 2021
RMB’000 RMB’000
S t a f fc o s ta n db e n e f i t ............................ 2 , 0 4 8 1 , 2 9 5
Utility . ...................................... 7 2 7 1 6
C o n s u l t i n gs e r v i c ef e e s ........................... 9 9 3 6 0
R e n t ,r a t e sa n db u i l d i n gm a n a g e m e n tf e e s .............. 2 2 0 6
O t h e r s ....................................... 1 7 2 1 1 9
Total ........................................ 2,393 2,696
Research and development expenses
Research and development expenses of Tianjin Beiterui Nano and Jiangsu Beiterui
Nano mainly consist of direct materials and t esting fees, staff cost and depreciation and
amortization. For the five months ended May 31, 2021, research and development expenses
of Tianjin Beiterui Nano amounted to RMB16. 6 million, representing 7.5% of its revenue
for the same period. From January 28, 2021 to May 31, 2021, research and development
expenses of Jiangsu Beiterui Nano amounted to RMB4.9 million, representing 1.8% of its
revenue for the same period. The following table sets forth a breakdown of the research and
development expenses of Tianjin Beiterui Nano and Jiangsu Beiterui Nano for the periods
indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
For the
five months
ended May 31,
2021
Period from
January 28,
2021 to May
31, 2021
RMB’000 RMB’000
D i r e c tm a t e r i a l sa n dt e s t i n gf e e s ..................... 1 5 , 1 8 1 1 3 7
S t a f fc o s t ..................................... 1 , 1 1 2 1 , 9 6 8
D e p r e c i a t i o na n da m o r t i z a t i o n ...................... 2 0 1 9 4 2
O t h e r s ....................................... 1 1 0 1 , 8 6 0
Total ........................................ 16,604 4,907
FINANCIAL INFORMATION
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Finance costs
Finance costs of Tianjin Beiterui Nano and J iangsu Beiterui Nano mainly consist of
interest expenses on bank borrowings, other p ayables and lease liabilities. For the five
months ended May 31, 2021, finance costs of Tianjin Beiterui Nano amounted to
RMB616,000. From January 28, 2021 to May 31, 2021, finance costs of Jiangsu Beiterui
Nano amounted to RMB1.3 million. The followi ng table sets forth a breakdown of finance
costs of Tianjin Beiterui Nano and Jiangsu Beiterui Nano for the periods indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
For the
five months
ended May 31,
2021
Period from
January 28,
2021 to May
31, 2021
RMB’000 RMB’000
Interest expenses on:
—B a n kb o r r o w i n g s ............................. 1 9 5 —
—O t h e rp a y a b l e s ............................... — 8 3 6
— Lease liabilities . . . ........................... 4 2 1 4 2 9
Total ........................................ 616 1,265
Income tax credit/(expenses)
Under the EIT Law and the Implementation Regulation of the EIT Law, the tax rate is
25% unless subject to taxed at preferential rates.
Tianjin Beiterui Nano was accredited as a ‘‘High and New Technology Enterprise’’ in
2020, and therefore Tianjin Beiterui Nano was e ntitled to a preferential income tax rate of
15% for the five months ended May 31, 2021. This qualification is subject to review by the
relevant tax authority in the PRC for every three years.
Description of Statements of Cash Flows
The following table sets forth selected cash flow statement information of Tianjin
Beiterui Nano and Jiangsu Beiterui Nano for the periods indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
For the
five months
ended May 31,
2021
Period from
January 28,
2021 to May
31, 2021
RMB’000 RMB’000
N e tc a s hf r o m / ( u s e di n )o p e r a t i n ga c t i v i t i e s ............. 8 6 , 3 2 7 ( 6 3 , 4 3 7 )
N e tc a s hf r o m / ( u s e di n )i n v e s t i n ga c t i v i t i e s............. ( 1 2 , 8 5 3 ) ( 3 2 1 , 4 0 7 )
N e tc a s hf r o m / ( u s e di n )f i n a n c i n ga c t i v i t i e s ............. ( 6 4 , 6 1 7 ) 3 9 0 , 3 1 9
N e t( d e c r e a s e ) / i n c r e a s ei nc a s ha n dc a s he q u i v a l e n t s ....... 8 , 8 5 7 5 , 4 7 5
C a s ha n dc a s he q u i v a l e n t sa tb e g i n n i n go fp e r i o d ......... 1 0 , 1 9 1 —
Cash and cash equivalents at end of period .............. 19,048 5,475
FINANCIAL INFORMATION
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Net cash from operating activities of Tianjin Beiterui Nano amounted to RMB86.3
million for the five months ended May 31, 2021. Jiangsu Beiterui Nano recorded net cash
used in operating activities of RMB63.4 m illion from January 28, 2021 to May 31, 2021,
because it was then a newly established company and used more cash for production.
Net cash used in investing activities of Tianjin Beiterui Nano amounted to RMB12.9
million for the five months ended May 31, 2021. Net cash used in investing activities of
Jiangsu Beiterui Nano amounted to RMB32 1.4 million from January 28, 2021 to May 31,
2021.
Net cash used in financing activities of Tianjin Beiterui Nano amounted to RMB64.6
million for the five months ended May 31, 2021 . Net cash from financing activities of
Jiangsu Beiterui Nano amounted to RMB39 0.3 million from January 28, 2021 to May 31,
2021.
Working Capital
The following table sets forth the details of the current assets and current liabilities of
Tianjin Beiterui Nano and Jiangsu Beiterui Nano as of the dates indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
As of
May 31,
2021
As of
May 31,
2021
RMB’000 RMB’000
Current assets
I n v e n t o r i e s .................................... 8 5 , 9 3 0 1 0 3 , 2 5 6
T r a d ea n do t h e rr e c e i v a b l e s ........................ 3 9 8 , 7 8 4 2 6 0 , 3 8 8
C a s ha n dc a s he q u i v a l e n t s ......................... 1 9 , 0 4 8 5 , 4 7 5
Total current assets .............................. 503,762 369,119
Current liabilities
T r a d ea n do t h e rp a y a b l e s ......................... 2 8 5 , 5 3 7 3 6 0 , 8 9 6
T a xp a y a b l e ................................... 3 , 0 1 1 3 , 5 4 3
Lease liabilities. . . . . . ........................... 2 0 , 1 0 5 1 9 , 5 6 3
Contract liabilities . . . ........................... 5 1 5 1 , 3 4 7
D e f e r r e di n c o m e ................................ 5 5 6 —
Total current liabilities ........................... 3 0 9 , 7 2 4 3 8 5 , 3 4 9
Net current assets/(liabilities) ....................... 194,038 (16,230)
As of May 31, 2021, Tianjin Beiterui Nano recorded net current assets of RMB194.0
million. Jiangsu Beiterui Nano recorded ne t current liabilities of RMB16.2 million as of
May 31, 2021 as it was then a newly established company.
FINANCIAL INFORMATION
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Selected Key Items of Statement of Financial Positions
Inventories
Inventories of Tianjin Beiterui Nano an d Jiangsu Beiterui Nano consist of raw
materials such as lithium carbonate and iron phosphate, work in progress and finished
goods. The following table sets forth a breakdown of the inventories as of the dates
indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
As of
May 31,
2021
As of
May 31,
2021
RMB’000 RMB’000
R a wm a t e r i a l s ................................. 5 6 , 8 2 8 5 5 , 4 3 4
W o r ki np r o g r e s s ............................... 1 , 2 3 3 1 2 , 1 6 8
F i n i s h e dg o o d s ................................. 2 7 , 8 6 9 3 5 , 6 5 4
Total ........................................ 85,930 103,256
Tianjin Beiterui Nano recorded inventor ies of RMB85.9 million as of May 31, 2021.
Jiangsu Beiterui Nano recorded invent ories of RMB103.3 million as of May 31, 2021.
Trade and other receivables
The trading terms of Tianjin Beiterui Nano and Jiangsu Beiterui Nano with their
customers are mainly on credit. The following table sets forth the breakdown of trade and
other receivables of Tianjin Beiterui Nano and Jiangsu Beiterui Nano as of the dates
indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
As of
May 31,
2021
As of
May 31,
2021
RMB’000 RMB’000
Trade receivables . . . . ........................... 2 9 3 , 0 0 0 2 0 3 , 7 8 7
B i l l sr e c e i v a b l e s ................................ 9 7 , 2 0 8 2 0 , 8 5 8
O t h e rr e c e i v a b l e s ............................... 8 , 6 5 4 3 8 , 9 0 9
Total ........................................ 398,862 263,554
Trade and other receivables of Tianjin Beiterui Nano as of May 31, 2021 amounted to
RMB398.9 million. Trade and other receivabl es of Jiangsu Beiterui Nano as of May 31,
2021 amounted to RMB263.6 million.
FINANCIAL INFORMATION
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The following sets forth an aging analysis of trade receivables net of allowance for
expected credit losses presented based on revenue recognition date:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
As of
May 31,
2021
As of
May 31,
2021
RMB’000 RMB’000
W i t h i n1y e a r .................................. 2 9 3 , 0 0 0 2 0 3 , 7 8 7
1 – 2y e a r s..................................... — —
2 – 3y e a r s..................................... — —
3 – 4y e a r s..................................... — —
Total ........................................ 293,000 203,787
Property, plant and equipment
Property, plant and equipment of Tianjin Beiterui Nano and Jiangsu Beiterui Nano
consist of construction in progress, plant and machinery, motor vehic les, other equipment
and lease improvement. The following table sets forth a breakdown of the property, plant
and equipment as of the dates indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
As of
May 31,
2021
As of
May 31,
2021
RMB’000 RMB’000
C o n s t r u c t i o ni np r o g r e s s.......................... 6 6 1 3 4 , 9 8 2
P l a n ta n dm a c h i n e r y ............................. 6 2 , 2 9 1 2 7 0 , 4 2 5
M o t o rv e h i c l e s................................. 6 8 7 7 3 6
O t h e re q u i p m e n t ................................ 1 , 4 0 7 4 , 9 4 3
L e a s ei m p r o v e m e n t .............................. 7 , 8 4 7 3 , 5 7 9
Total ........................................ 72,893 314,665
Property, plant and equipment of Tianjin Beiterui Nano as of May 31, 2021 amounted
to RMB72.9 million. Property, plant and equipm ent of Jiangsu Beiterui Nano as of May 31,
2021 amounted to RMB314.7 million.
FINANCIAL INFORMATION
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Trade and other payables
The following table sets forth the breakdo wn of the trade and other payables as of the
dates indicated:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
As of
May 31,
2021
As of
May 31,
2021
RMB’000 RMB’000
T r a d ep a y a b l e s ................................. 2 2 4 , 4 5 3 2 6 7 , 5 3 7
B i l l sp a y a b l e s .................................. 4 8 , 0 0 5 —
O t h e rp a y a b l e s ................................. 1 3 , 0 7 9 9 3 , 3 5 9
Total ........................................ 285,537 360,896
Trade and other payables of Tianjin Beiterui Nano as of May 31, 2021 amounted to
RMB285.5 million. Trade and other payables o f Jiangsu Beiterui Nano as of May 31, 2021
amounted to RMB360.9 million.
The following table sets forth an aging analysis of trade payables as of the dates
indicated, presented based on the invoice date:
Tianjin
Beiterui Nano
Jiangsu
Beiterui Nano
As of
May 31,
2021
As of
May 31,
2021
RMB’000 RMB’000
W i t h i n1y e a r .................................. 2 2 4 , 4 5 3 2 6 7 , 5 3 7
FINANCIAL INFORMATION
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FUTURE PLANS
See the section headed ‘‘Business — Strategies’’ for a detailed description of our future
plans.
USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of
approximately HK$520.0 million, after deduc ting underwriting fees and commissions and
other estimated expenses paid and payable by us in relation to the Global Offering,
assuming an Offer Price of HK$5.75 per H Share, being the mid-point of the Offer Price
range from HK$4.50 to HK$7.00 per H Share, and that the Over-allotment Option is not
exercised.
We currently intend to use these net proceeds for the purposes and in the amounts set
forth below:
. approximately 40.0%, or HK$208.0 million, is expected to be used to pay partial
expenses for the phase II of the Indonesia Plant. The main expenses include funds
required for the construction of the plant and purchase and installation of major
production machineries and equipment.
In 2025, (a) approximately 20.0%, or HK$104.0 million (equivalent to
approximately RMB94.6 million) will be used for the construction of phase II
of the Indonesia Plant, and (b) appr oximately 20.0%, or HK$104.0 million
(equivalent to approximately RMB94. 6 million) will be used for purchasing and
installation of production equipment i ncluding sand mills, spray dryers and
stoves. The table below sets forth a breakdown and implementation plan of the
estimated amount of net proceeds for equipment procurement and installation
based on type and number of equipment required based on our estimation and the
estimated procurement cost:
Number of units
For the year ending
December 31
2025
RMB million
S a n dm i l l s...................... 2 4 6 0 . 7
S p r a yd r y e r s ..................... 1 1 5 . 3
O t h e r s ......................... 1 2 1 8 . 6
Total .......................... 94.6
The Indonesia Plant, including phase I and phase II, will cost an estimated total of
approximately RMB2,072.1 million (equ ivalent to approximately HK$2,277.2
million). Among such total investmen t amount, HK$208.0 million will be the net
proceeds from the Global Offering for phase II, and the remaining spendings for
both phase I and phase II will be funded by other sources, including our internal
resources, bank borrowings, as well as other potential external financing options.
For instance, please refer to ‘‘History and Development — Development after the
FUTURE PLANS AND USE OF PROCEEDS
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Track Record Period.’’ As of June 30, 2024, the actual investment made for our
Indonesia Plant amounted to RMB602.6 million, including (a) approximately
RMB82.2 million for land-related expense s including obtaining a rights on land
certificate, (b) approximately RMB517.9 million for construction, procurement
and installation of the plant and equipment, and (c) approximately RMB2.5
million of other pre-operating expenses.
We commenced preparation for the Indonesia Plant in February 2022 by setting
up PT LBM Energi Baru Indonesia through Changzhou Liyuan. Construction of
phase I has commenced and the major structure of stove plant, raw material
warehouses, hydrogen production station and sewage treatment facility have been
completed. The phase I of the Indonesia Plant is expected to commence operation
around the fourth quarter of 2024 with a designed production capacity of 30.0
thousand tons of LFP cathode materials per year. The Latest Practicable Date,
the phase I of the Indonesia Plant had completed construction. Phase II is
expected to commence construction in 2 025 with a designed production capacity
of 90.0 thousand tons of LFP cathode materials per year. We have obtained a
right on land certificate regarding the Indonesia Plant, covering both phase I and
phase II, and relevant land costs have been settled through our internal financial
resources (other than from the proceeds from this Global Offering). We do not
expect any material legal impediment to obtain all licenses, permits and regulatory
approvals required for the establishment and operation of the Indonesia Plant.
According to Frost & Sullivan, the sales volume of the global LFP cathode
material industry is expected to grow at a CAGR of 18.6% from 2024 to 2028
w h i c hi sh i g h e rt h a nt h e1 7 . 2 %i nm a i n l a n dC h i n a ,t h em a r k e ts h a r eo fL F P
cathode materials in terms of sales volume outside of mainland China is expected
to rise from 2.9% in 2024 to 7.3% in 2028. Such growth is mainly driven by many
LFP cathode material manufacturers and major lithium-ion battery
manufacturers expanding or having plans to expand their production to global
markets, aiming to attain early-mover advantages at the beginning of the
industry’s globalization, and major global NEV manufacturers increasingly
adopting LFP batteries considering the various advantages they present.
With the growing overseas demands of LFP cathode materials, Indonesia has been
identified as a favorable overseas dest ination due to its comprehensive NEV
industry value chain, investment-friendl y policies and favorable geographical
location. Indonesia has promulgated policies to promote the growth of NEV
industry value chain by reducing taxes and increasing the proportion of locally
produced NEV contents. For example, in the Presidential Regulation No.55/2019,
Indonesia has prioritized the domestic NEV industry and set local content
requirements for NEVs produced in Indonesia to reach 40% by 2023, 60% by
2029, and 80% by 2030. Further, in the Government Regulation No. 74/2021,
battery electric vehicle, a type of NEV, is exempted from sales tax on luxury
goods. In law No. 1/2022, title transfer and ownership fee and vehicle tax towards
NEVs will start exemption in 2025. Besides, according to Frost & Sullivan, the
domestic LFP battery annual production capacity only accounts for less than 5%
FUTURE PLANS AND USE OF PROCEEDS
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of the demand for NEV battery in Indonesia, and Indonesia has set out its target
to export 200,000 NEVs by 2025 and achieve 2.2 million electric vehicles on the
roads by 2030 representing c onsiderable growth potential, both domestically and
overseas, and attracting foreign investment on local LFP industry value chain.
Moreover, leading companies within the lithium-ion battery value chain have
developed detailed investment plans in Indo nesia, resulting in the establishment of
a comprehensive layout of the lithium-ion battery market value chain in the
country. Specifically, several leading glo bal lithium-ion battery manufacturers
and NEV manufacturers have announced plans to establish manufacturing
facilities in Indonesia, attracted by rap id market growth, the aforementioned
localization incentives, and proximi ty to raw material sources. These major
industry players are expected to invest b illions of dollars over the next few years
to set up integrated production capacit ies spanning from upstream mining and
raw material manufacturing to midstream battery material supply and
downstream lithium-ion battery manufacturing and recycling. Their ambitious
expansion strategies and projected capital investments also attest to the promising
market potential of Indonesia as a hub for the electric vehicle ecosystem and
lithium cathode material value chain.
In terms of lithium resources, similar to mainland China, Indonesia imports
lithium from Australia, the world’s larg est lithium producer, and the Indonesia
government has been exploring more in depth collaboration with Australia. For
example, in November 2023, Indonesia and Australia signed a memorandum of
understanding in Jakarta regarding their collaboration in the electric vehicle
industry combining their respective adva ntages in nickel and lithium reserves.
Moreover, Indonesia’s closer location t o Australia compared to mainland China
lowers the costs of transportation and provides advantages in efficient access to
Australian lithium resources. As a maritime hub connecting the PRC with other
countries, Indonesia delivers convenient connectivity and transportation for the
lithium battery value chain to overseas mark ets, reducing shipment costs, which is
also conducive to the formation of a comprehensive lithium-ion battery value
chain in Indonesia. As a result of the es tablishment and commencement of the
Indonesia Plant, we expect our revenue to grow as production capacity ramps up.
As far as cost structure is concerned, while we do not expect any material
difference between operating production facilities in mainland China and
Indonesia, for example, cost of raw materials is expected to remain the largest
portion of our cost of sales, there are several factors that we believe may provide
cost advantages for our Indonesian operations:
. International trade considerations: the global trade landscape for NEVs,
batteries and their components, includi ng cathode materials, is evolving. Our
Indonesian facility may benefit from m ore favorable trade terms, including
tariffs, in certain markets compared t o exports from the PRC, potentially
offering us enhanced flexibility in ser ving diverse international markets.
FUTURE PLANS AND USE OF PROCEEDS
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. Special Economic Zone Bene fits: the Indonesian facility is located in a special
economic zone, which is expected to provide us exemption from value-added
tax and customs duties for a certain period. This represents a potential cost
saving compared to exporting produc ts from the PRC, where such taxes and
duties would apply.
. Labor Costs: Indonesia offers competit ive labor costs, which is expected to
contribute positively to our overall manufacturing cost structure in the
Indonesian facility.
In view of this trend of globalization, we believe we are well positioned to capture
the business opportunities from growing overseas demand for LFP cathode
materials primarily on the basis that: (i) in terms of sales volume in 2023, we are
China’s and the world’s fourth largest LFP cathode material manufacturer, with a
global market share of 6.5%, while the thr ee largest manufacturers held market
shares of 30.5%, 12.9% and 10.5%, respectively, and (ii) our established
relationships and ongoing communications with our globally leading battery
manufacturer customers, some of which also have plans to expand to Indonesia.
In September 2023, we entered into a memorandum of understanding with LGES
regarding the joint cooperation of produ cing cathode materials in Indonesia. In
addition, in February 2024, we entered into a long-term supply agreement with
LGES, where LGES and its affiliates co m m i t t e dt op r o c u r e1 6 0 , 0 0 0t o n so fo u r
LFP cathode materials from 2024 to 2028. We believe this cooperative
relationship with LGES would generate positive impact on our business
operations, overseas expansion, financial results, reputation and brand image.
Through joint cooperation in Indonesia, we aim to leverage synergies in raw
material sourcing, technological expertise and market access to capitalize on rapid
growth opportunities overseas.
Our plan to expand to Indonesia and the international market is subject to various
risks and uncertainties including compliance with foreign laws and regulatory
requirements, competition from foreign players or failure to anticipate changes to
the competitive landscape in the international markets and difficulty in managing
relationships with foreign customers. For details, see ‘‘Risk Factors — Risks
Relating to our Industry and Business — O ur international strategy and ability to
conduct business in the international markets is subject to uncertainties and
risks.’’
. approximately 40.0%, or HK$208.0 million, is expected to be used to pay partial
expenses for new LMFP production lines at our Xiangyang Plant in Hubei
Province. The main expenses include funds required for the purchase and
installation of major production machineries and equipment and relevant
software.
FUTURE PLANS AND USE OF PROCEEDS
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In 2025, approximately HK$208.0 million (equivalent to approximately
RMB189.3 million) will be used for purchas ing and installation of production
equipment including sand mills, spray dr yers and stoves, and relevant software.
The table below sets forth a breakdown and implementation plan of the estimated
amount of net proceeds for equipment and software procurement and installation
based on type and number of equipment/software required based on our
estimation and the estimated procurement cost:
Number of units
For the year ending
December 31
2025
RMB million
S a n dm i l l s...................... 1 5 4 0 . 5
S p r a yd r y e r s ..................... 2 3 2 . 5
S t o v e s......................... 9 1 0 8 . 0
O t h e re q u i p m e n t .................. 8 8 . 3
Total .......................... 189.3
The LMFP production lines will cost an estimated total of approximately
RMB781.5 million (equivalent to approx imately HK$858.9 million), and are
scheduled to commence operation in 2026. As of June 30, 2024, the actual
investment made for our LMFP produc tion lines amounted to RMB16.0 million,
which were primarily used for the construction of our Xiangyang Plant and
purchasing equipment. The remaining s pendings, other than the net proceeds
from the Global Offering, will be funded by other sources, including our internal
resources and bank borrowings. The designed production capacity of the LMFP
production lines is expected to be 60.0 thousand tons of LMFP cathode materials
per year.
LMFP, such as our M series product, is an emerging upgraded sub-category of
LFP cathode materials made by adding manganese to the LFP composition. It is
currently considered a promising cathode material as it combines the high safety
feature of lithium iron phosphate with the higher energy density and power
density of lithium manganese phosphate. We believe there will be ample demand
for LMFP cathode materials considering such superior characteristics which are
ideal for NEV batteries. LMFP cathode mate rial shares similar crystal structure
with LFP cathode material and retains stable chemical properties and excellent
safety performance. The addition of manganese improves both the lithium-ion
diffusion rate and electronic conductivity, leading to enhanced battery
performance. LMFP batteries exhibit superior temperature resistance,
maintaining nearly 80% capacity retent ion at –20 degrees Celsius, compared to
60%–70% for LFP batteries. In terms of cost efficiency, as the charging voltage of
LMFP batteries could achieve 4.1V, as compared to 3.4V for LFP batteries, the
theoretical energy density of LMFP batteries can be increased by 15–20%, which
not only boosts performance but also reduces the cost per Wh, making LMFP
batteries more cost-effective. Compared to mainstream cathode materials, LMFP
surpasses NCM in safety performance and exceeds LFP in energy density. Despite
current technical challenges in using LMFP as the sole component in batteries,
FUTURE PLANS AND USE OF PROCEEDS
–4 6 1–


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leading manufacturers are already transitioning towards LMFP production. NEV
and ESS battery companies are also adap ting to this change by incorporating
LMFP into their products. In view of this trend which underscores LMFP’s
pivotal role in shaping the future of the lithium battery and NEV industries, Frost
& Sullivan estimates the sales volume of LMFP cathode materials in mainland
China is expected to reach 1,490.9 thousand tons by 2028. For further details, see
‘‘Industry Overview — Overview of LFP Cathode Material Industry — Market
Drivers and Trends of LFP Cathode Material Industry — New technology boost
potential market demand for LMFP cathode materials.’’
We believe we have ample technologica l and operational capabilities for
manufacturing LMFP cathode materials in large scale. The production of
LMFP cathode materials leverages the same solid-state method, processing
techniques and equipment as our proven large-scale LFP cathode material
business, which facilitates efficient trans fer of expertise and production scale-up
leveraging our experience in produci ng LFP cathode materials. With similar
crystal structure to that of traditional L FP materials, LMFP integrates seamlessly
into the current product landscape. T his compatibility ensures a smooth
transition for LFP cathode material manu facturers to adapt their production
processes to LMFP, leveraging their existing supplier relationships and customer
base. We started research and development on LMFP ca thode materials as early
as 2021 and have entered into a strategic partnership with a well-known
lithium-ion battery manufacturer in mainland China focusing on the joint
development of LMFP batteries in April 2022. As of June 30, 2024, we have a
team of 27 research and development members at our Shenzhen research and
development center dedicated to advancing our LMFP cathode material products
and relevant technologies and addressing the technological differences between
LFP cathode materials and LMFP cathode materials. Recently, our research and
development team has successfully change d the molecular shape of manganese ion
with our nano spherical technology to improve the electronic conductivity and
ionic conductivity of our M series products. This progress would improve the
power density of our M series products and homogenize different raw materials
further enhancing manufacturability of our M series products.
. approximately 10.0%, or HK$52.0 million, is expected to be used to partially
repay certain interest-bearing bank borrowings.
(i) Approximately 6.6%, or HK$34.3 million, is expected to be used to partially
repay RMB70.0 million of borrowings from Bank of Nanjing ( 南京銀行). As
of June 30, 2024, our borrowings from Bank of Nanjing bore an effective
interest rate of 2.88%, with maturities up to February 19, 2025. The bank
borrowings are primarily used for working capital purposes;
FUTURE PLANS AND USE OF PROCEEDS
–4 6 2–


--- page 473 ---
(ii) approximately 3.4%, or HK$17.7 milli on, is expected to be used to partially
repay RMB50.0 million of borrowings f rom Agricultural Bank of China ( 中
國農業銀行). As of June 30, 2024 our borrowings from Agricultural Bank of
China bore an effective interest rate of 2.8%, with maturities up to March 27,
2025. The bank borrowings are primarily used for procuring raw materials;
. approximately 10.0%, or HK$52.0 million, is expected to be used for our working
capital and other general corporate purposes.
The above allocation of the proceeds will be adjusted on a pro-rata basis in the event
that the Offer Price is fixed at a higher or lower level compared to the mid-point of the Offer
Price range stated in this prospectus.
If the Offer Price is fixed at HK$7.00 per H Share (being the high end of the Offer Price
range stated in this prospectus), we will receive additional net proceeds of approximately
HK$122.0 million, assuming the Over- allotment Option is not exercised.
If the Offer Price is fixed at HK$4.50 per H Share (being the low end of the Offer Price
range stated in this prospectus), the ne t proceeds we receive will be reduced by
approximately HK$122.0 million, assuming th e Over-allotment Option is not exercised.
In the event that the Over-allotment Optio n is exercised in full, the additional net
proceeds that we would receive would be H K$83.8 million assuming an Offer Price of
HK$5.75 per H Share, being the mid-point of the Offer Price range stated in this
prospectus, after deduction of underwriting fees and commissions and other estimated
expenses paid and payable by us in relation to the Global Offering. Additional net proceeds
received due to the exercise of any Over-a llotment Option will be used for the above
purposes accordingly on a pro-rata basis if the Over-allotment Option is exercised.
If the net proceeds of the Global Offering are not immediately applied to the above
purposes, or if we are unable to effect any part of our future development plans as intended,
and to the extent permitted by applicable law and regulations, we will deposit the net
proceeds into short-term demand deposits with licensed banks or other authorized financial
institutions as defined under the Securities and Futures Ordinance/the applicable laws in
the relevant jurisdiction for non-Hong Kong based deposits. In such event, we will comply
with the appropriate disclosure requirem ents under the Listing Rules and make an
appropriate announcement if there is any change to the above proposed use of proceeds.
FUTURE PLANS AND USE OF PROCEEDS
–4 6 3–


--- page 474 ---
THE CORNERSTONE PLACING
We have entered into cornerstone investment agreement (the ‘‘ Cornerstone Investment
Agreement ’’) with the cornerstone investor set out below (‘‘ Cornerstone Investor ’’), pursuant
to which the Cornerstone Investor agreed to, subject to certain conditions, subscribe, or
cause its designated entities to subscribe, at the Offer Price for 20,000,000 Offer Shares,
representing approximately 20.00% of the Offer Shares pursuant to the Global Offering and
3.01% of the total Shares in issue immediate ly upon completion of the Global Offering
(assuming that the Over-allotment Option is not exercised and without taking into account
any Shares which may be issued pursuant to the options granted under the 2023 Share
Option Scheme) (the ‘‘ Cornerstone Placing ’’).
We believe that the Cornerstone Placing dem onstrates our Cornerstone Investor’s
confidence in our Company and its business prospect, and that the Cornerstone Placing will
help to raise the profile of our Company. Our Company became acquainted with the
Cornerstone Investor through introduction by an Overall Coordinator in the Global
Offering.
The Cornerstone Placing will form part of the International Offering, and the
Cornerstone Investor and its close associates will not subscribe for any Offer Shares under
the Global Offering (other than pursuant to the Cornerstone Investment Agreement). The
Offer Shares to be subscribed by the Cornerstone Investor will rank pari passu in all respects
with the fully paid H Shares in issue following the Global Offering of the Company and will
be counted towards the public float of our Company under Rule 8.08 of the Listing Rules.
Immediately following the completion of the Global Offering, the Cornerstone Investor or
its close associates will not, by virtue of its cornerstone investment, has any Board
representation in our Company; and none of the Cornerstone Investor and its close
associates will become a substantial Shareholder of our Company. Other than a guaranteed
allocation of the Offer Shares at the final Offer Price, the Cornerstone Investor does not
have any preferential rights under the Cornerstone Investment Agreement, as compared
with other public Shareholders. There are no side arrangements or agreements between our
Company and the Cornerstone Investor or any benefit, direct or indirect, conferred on the
Cornerstone Investor by virtue of or in relation to the Listing, other than a guaranteed
allocation of the Offer Shares at the final Offer Price, following the principles as set out in
Chapter 4.15 of the Guide for New Listing Applicants.
To the best knowledge of our Company, the Cornerstone Investor is (i) not accustomed
to take instructions from our Company or any directors, supervisors, chief executive,
controlling shareholders, substantial shareho lders or existing shareholders of our Company
or any of its subsidiaries or their respective close associates in relation to the acquisition,
disposal, voting or other disposition of the Shares registered in its name or otherwise held
by it; (ii) not financed directly or indirectly by our Company or any directors, supervisors,
chief executive, controlling shareholders, substantial shareholders, existing shareholders of
our Company or any of its subsidiaries or their respective close associates; and (iii)
independent of our Group, our connected persons and their respective associates, and is not
an existing Shareholder or a close associate of our Group.
CORNERSTONE INVESTOR
–4 6 4–


--- page 475 ---
As confirmed by the Cornerstone Investor, its subscription under the Cornerstone
Placing would be financed by its own internal financial resources and it has sufficient funds
to settle its investment under the Cornerstone Placing. The Cornerstone Investor has
confirmed that all necessary approvals have been obtained with respect to the Cornerstone
Placing and that no specific approval from any stock exchange (if relevant) is required for
the Cornerstone Placing.
The Cornerstone Investor has agreed to pay for the Offer Shares that it has subscribed
before dealings in the Company’s H Shares commence on the Stock Exchange.
The total number of Offer Shares to be subscribed by the Cornerstone Investor may be
affected by reallocation in the event of over-subscription under the Hong Kong Public
Offering, as described in ‘‘Structure of the Global Offering — The Hong Kong Public
Offering — Reallocation’’ in this prospectus. Details of the allocations to the Cornerstone
Investor will be disclosed in the allotment results announcement to be issued by our
Company on or around Tuesday, October 29, 2024. If there is over-allocation in the
International Offering, the settlement of suc h over-allocation may be effected through
delayed delivery of the Offer Shares to be subscribed by the Cornerstone Investor under the
Cornerstone Placing. Where delayed deliver y takes place, the Cornerstone Investor shall
nevertheless pay and settle in full for the relevant Offer Shares that it subscribed before
dealings in the Offer Shares commence on the Stock Exchange. As such, there will not be
any deferred settlement in payment by the Cornerstone Investor. If there is no
over-allocation in the International Offering, delayed delivery will not take place. For
details of the Over-allotment Option, se e ‘‘Structure of the Global Offering —
Over-allotment Option’ ’ in this prospectus.
Set forth below certain details of the Cornerstone Placing:
Cornerstone Investor (1)
Investment
Amount (2)
Number of
Offer Shares
Approximate % of total number
of Offer Shares
Approximate % of total Shares
in issue immediately following
the completion of Global Offering
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is
exercised in full
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is
exercised in full
Based on the Offer Price of HK$4.50 (being the lo w-end of the indicative Offer Price range)
Harvest Oriental . . . . . . HK$90, 000,000 20,000,000 20.00% 17.39% 3.01% 2.94%
Based on the Offer Price of HK$5.75 (being the mi d point of the indicative Offer Price range)
Harvest Oriental . . . . . . HK$115, 000,000 20,000,000 20.00% 17.39% 3.01% 2.94%
Based on the Offer Price of HK$7.00 (being the hi gh-end of the indicative Offer Price range)
Harvest Oriental . . . . . . HK$140, 000,000 20,000,000 20.00% 17.39% 3.01% 2.94%
Notes:
1. As defined below.
CORNERSTONE INVESTOR
–4 6 5–


--- page 476 ---
2. Harvest Oriental has agreed to subscribe for 20,000, 000 Offer Shares and the investment amount shall be
calculated based on the Offer Price accordingly. Th e investment amount disclosed is for illustrative
purpose only and exclusive of brokerage, the SFC tra nsaction levy, the Stock Exchange trading fee and
the AFRC transaction levy.
THE CORNERSTONE INVESTOR
The following information about the Cornerstone Investor was provided to the
Company by the Cornerstone Investor in relation to the Cornerstone Placing.
Harvest Oriental
Harvest International Premium Value (Secondary Market) Fund SPC acting on behalf
of and for the account of Harvest Oriental SP (‘‘ Harvest Oriental ’’) is a fund established in
October 2024. Harvest International Premium Value (Secondary Market) Fund SPC is a
segregated portfolio company established in the Cayman Islands and is an Independent
Third Party. 91% of the management shares o f Harvest International Premium Value
(Secondary Market) Fund SPC are held by Harvest Global Investments Limited (‘‘ HGI’’)
and 9% of the management shares are held by Harvest Global Capital Investments Limited
(‘‘HGCI ’’). Incorporated in Hong Kong in 20 08, HGI is a wholly-owned subsidiary of
Harvest Fund Management Co., Ltd (‘‘ HFM’’). HFM is one of the first ten public fund
management companies approved to be established within China. HFM is owned as to 40%
by China CREDIT Trust Co., Ltd. ( 中誠信托有限公司), 30% by Lixin Investment Co., Ltd.
(立信投資有限責任公司) and 30% by DWS Investments Singapore Limited. HGCI, the fund
manager of Harvest Oriental, is a company incorporated in Hong Kong in 2011 and
licensed to carry out type 1 (dealing in securities ), type 4 (advising on securities) and type 9
(asset management) regulated activities under the SFO in Hong Kong by the SFC. HGCI is
principally engaged in asset management and investment advisory business. The
participating shareholder of Harvest Oriental is Fortuna Capital Management Limited
(‘‘Fortuna Capital ’’), and the ultimate beneficial owner of Fortuna Capital is Yang Dehui,
an Independent Third Party.
CLOSING CONDITIONS
The obligation of the Cornerstone Investor to subscribe for the Offer Shares under the
Cornerstone Investment Agreement is subject to, among other things, the following closing
conditions:
(a) the Hong Kong Underwriting Agreement and the International Underwriting
Agreement being entered into and having become effective and unconditional (in
accordance with their respective original terms or as subsequently waived or
varied by agreement of the parties there to) by no later than the time and date as
specified in the Hong Kong Underwriting Agreement and the International
Underwriting Agreement (as the case may be), and neither the Hong Kong
Underwriting Agreement nor the International Underwriting Agreement having
been terminated;
CORNERSTONE INVESTOR
–4 6 6–


--- page 477 ---
(b) the Offer Price having been agreed upon between our Company and the
Sponsor-OCs (for themselves and on behalf of the Underwriters);
(c) the Listing Committee having granted the approval for the listing of, and
permission to deal in, the H Shares (including the H Shares to be subscribed for by
the Cornerstone Investor) as well as other applicable waivers and approvals, and
such approval, permission or waiver having not been revoked prior to the
commencement of dealings in the H Shares on the Stock Exchange;
(d) no laws shall have been enacted or promulgated by any governmental authority
which prohibits the consummation of the transactions contemplated in the Global
Offering or in the Cornerstone Investmen t Agreement and there shall be no orders
or injunctions from a court of competent jurisdiction in effect precluding or
prohibiting consummation o f such transactions; and
(e) the respective acknowledgements, represe ntations, warranties, undertakings and
confirmations of the Cornerstone Investor under the Cornerstone Investment
Agreement are (as at the date of the Cornerstone Investment Agreement) and will
be (as of the Listing Date or, if applicable , the delayed delivery date) accurate and
true in all respects and not misleading and that there is no material breach of the
Cornerstone Investment Agreement on the part of the Cornerstone Investor.
RESTRICTIONS ON THE CORNERSTONE INVESTOR
The Cornerstone Investor has agreed that without the prior written consent of each of
the Company, the Joint Sponsors and the Sponsor-OCs, it will not, and will cause its
affiliates not to, whether directly or indirect ly, at any time during the period of six months
from (and inclusive of) the Listing Date (the ‘‘ Lock-up Period ’’), dispose of, in any way, any
of the Offer Shares or any interest in any company or entity holding such Offer Shares that
they have purchased pursuant to the Cornerst one Investment Agreement, save for certain
limited circumstances, such as transfers to any of its wholly-owned subsidiaries who will be
bound by the same obligations of the Cornerstone Investor, including the Lock-up Period
restriction.
CORNERSTONE INVESTOR
–4 6 7–


--- page 478 ---
HONG KONG UNDERWRITERS
Guotai Junan Securities (Hong Kong) Limited
Halcyon Securities Limited
ICBC International Securities Limited
BOCI Asia Limited
CCB International Capital Limited
ABCI Securities Company Limited
CMB International Capital Limited
TradeGo Markets Limited
Livermore Holdings Limited
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public Offering.
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on a
conditional basis. The International Offering is expected to be fully underwritten by the
International Underwriters.
The Global Offering comprises the Hong Kong Public Offering of initially 10,000,000
Hong Kong Offer Shares and the International Offering of initially 90,000,000
International Offer Shares, subject, in each c ase, to reallocation on the basis as described
in the section headed ‘‘Structure of the Global Offering’’ in this prospectus as well as to the
Over-allotment Option (in the case of the International Offering).
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, our Company is offering
initially 10,000,000 Hong Kong Offer Shares (subject to reallocation) for subscription by
way of the Hong Kong Public Offering on and subject to the terms and conditions of this
prospectus and the Hong Kong Underwriting Agreement at the Offer Price.
Subject to (i) the Listing Committee granting approval for the listing of, and
permission to deal, in the H Shares pursuant to the Global Offering (including the H Shares
to be issued by our Company pursuant to the Over-allotment Option) on the Main Board of
the Stock Exchange and such approval not having been withdrawn, revoked, withheld or
subject to qualifications; (ii) the International Underwriting Agreement having been
executed and delivered and becoming uncondi tional and not having been terminated in
accordance with its terms; and (iii) certain other conditions set forth in the Hong Kong
Underwriting Agreement, the Hong Kong Underwriters have severally and not jointly
agreed to apply or procure applications, on the terms and conditions of this prospectus, for
their respective proportions of the Hong Kong Offer Shares which are being offered but are
UNDERWRITING
–4 6 8–


--- page 479 ---
not taken up under the Hong Kong Public Offering. If, for any reason, the Offer Price is not
agreed between the Sponsor-OCs (on behalf of the Underwriters) and us, the Global
Offering will not proceed and will lapse.
Grounds for termination
The obligations of the Hong Kong Underwrite rs to subscribe or procure subscribers
for the Hong Kong Offer Shares under the Hong Kong Underwriting Agreement are subject
to termination, if at any time prior to 8 : 00 a.m. on the Listing Date:
(a) there develops, occurs, exists or comes into effect:
(i) any new law or any change or development involving a prospective change or
any event or circumstance or series of events or circumstances resulting or
likely to result in or representing a c hange or development involving a
prospective change in any existing law or in the interpretation or application
thereof by any court or other compet ent authority in or affecting Hong
Kong, the PRC, the United States, the United Kingdom, the European
Union (or any member thereof) or any other jurisdiction relevant to any
member of the Group or its business o perations (collectively, the ‘‘ Relevant
Jurisdictions ’ ’ ,a n de a c h ,a‘ ‘Relevant Jurisdiction ’’); or
(ii) any change, or any development involving a prospective change or
development (whether or not permanent), or any event or circumstance or
series of events or circumstances resulting or likely to result in a change or
development, or involving a prospective change or development, in any local,
national, regional or international finan cial, political, military, industrial,
legal, fiscal, economic, regulatory, credit, market or currency matters or
conditions or exchange management or any monetary or trading settlement
system (including a change in the stock and bond markets, money and
foreign exchange markets), in or affecting any of the Relevant Jurisdictions;
or
(iii) any moratorium, suspension or rest riction (including any imposition of or
requirement for any minimum or maximum price limit or price range) in or
on trading in securities generally on the Hong Kong Stock Exchange, the
London Stock Exchange, the Shanghai Stock Exchange, the Shenzhen Stock
Exchange, the New York Stock Exchange, or in the NASDAQ Global
Market; or
(iv) any general moratorium on commercial banking activities in any 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
Jurisdiction; or
UNDERWRITING
–4 6 9–


--- page 480 ---
(v) any change or development involving a prospective change in or affecting
taxation or exchange management, currency exchange rates or foreign
investment regulations (including a change in the system under which the
value of the Hong Kong currency is linked to the U.S. dollar, or a material
devaluation of the U.S. dollar, Hong Kong dollar or the Renminbi against
any foreign currencies), or the implementation of any exchange management,
in any of the Relevant Jurisdictions or affecting an investment in the Offer
Shares; or
(vi) any imposition of economic sanctions, or the withdrawal of trading
privileges, which existed on the date of the Hong Kong Underwriting
Agreement in whatever form, directly or indirectly, by, or for any Relevant
Jurisdiction applicable to the business operation of our Group; or
(vii) any valid demand by any creditor for repayment or payment of any
indebtedness of any member of our Group or in respect of which any member
of our Group is liable prior to its stated maturity; or
(viii) the outbreak or escalation of hostilities (whether or not war is or has been
declared) involving or affecting any of the Relevant Jurisdictions or the
declaration by any of the Relevant Jurisdictions of a national emergency or
war or any other national or international calamity or crisis; or
(ix) any event or circumstance, or series of events or circumstances (either
national or international), in the nature of force majeure in or affecting
directly or indirectly any of the Relevant Jurisdictions including, without
limiting the generality thereof, any act of God, act of government,
declaration of a national or international emergency or war, act of war,
outbreak or escalation of hostilities (whether or not war is declared),
calamity, economic sanction, strike, l abour dispute, crisis, riot, rebellion,
civil commotion, public disorder, epidemic (including Severe Acute
Respiratory Syndrome (SARS), swine or avian flu, Influenza A (H5N1),
H1N1, swine or avian influenza (H7N9), COVID-19 or such related/mutated
forms), pandemic, outbreak of infectious disease, lockdown, lockout or
severe or extended interruption in tra nsport, earthquake, act of terrorism
(whether or not respons ibility has been claimed), flooding, explosion,
volcanic eruption, ice-storm, tsunami or fire; or
(x) the issue or requirement to issue by our Company of any supplement or
amendment to this prospectus, the preliminary offering circular or final
offering circular in connection with the International Offering (or to any
other document used in connection with the contemplated offer, subscription
and sale of the Offer Shares) or the CSRC Filings (as defined in the Hong
Kong Underwriting Agreement) pu rsuant to the Companies (WUMP)
Ordinance or the Listing Rules or the CSRC Rules (as defined in the Hong
Kong Underwriting Agreement) or any requirement or request of the Hong
Kong Stock Exchange, the SFC and/or the CSRC without the prior written
UNDERWRITING
–4 7 0–


--- page 481 ---
consent of the Joint Sponsors and the Sponsor-OCs, in circumstances where
the matter to be disclosed could, in the opinion of the Joint Sponsors and the
Sponsor-OCs, materially and adv ersely affect the marketing and
implementation of the Global Offering; or
(xi) 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 misstatement in any of the Hong Kong Public Offering Documents
(as defined in the Hong Kong Underwriting Agreement) or the Hong Kong
Information Pack (as defined in the Hong Kong Underwriting Agreement) or
the CSRC Filings; or
(xii) any change, development or event involving a prospective change in, or
actual materialisation of, any of the ri sks set out in the section headed ‘‘Risk
Factors’’ in this prospectus; or
(xiii)an order or a petition is presented f or the winding up or liquidation of any
member of our Group or any member of our Group makes any composition
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 our Group or a
provisional liquidator, receiver or manager is appointed over all or part of
the assets or undertaking of any member of our Group or anything
analogous thereto occurs in respect of any member of our Group; or
(xiv) any contravention or breach by any member of our Group or any Director or
member of the senior management of our Company as named in this
prospectus of the Listing Rules, the Companies (WUMP) Ordinance, the
Companies Ordinance, the CSRC Ru les, the PRC Company Law or other
applicable laws; or
(xv) a prohibition on our Company for whatever reason from offering, allotting,
issuing or selling any of the Offer Share s (including any additional H Shares
that may be issued pursuant to the exe rcise of the Over-allotment Option)
pursuant to the terms of the Global Offering; or
(xvi) any non-compliance of this prospectus (or any other document 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
Companies (WUMP) Ordinance, the CSRC Rules or any other applicable
laws; or
(xvii) any litigation, claim or other legal or r egulatory proceeding being threatened
or instigated against (i) any member o f our Group; (ii) any of the Controlling
Shareholders; (iii) any Director; or (iv) any Supervisor; or
UNDERWRITING
–4 7 1–


--- page 482 ---
(xviii) any 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 our Group or any Director or any Supervisor or any
of the Controlling Shareholders; or
(xix) any of the chairman of the Board, the chief executive officer of our
Company, or any Director or any Supervisor vacating his or her office; or as
a result of such vacation, material loss or damage sustained by any member
of the Group (howsoever caused and whe ther or not subject of any insurance
or claim against any person); or
(xx) any of the chairman of the Board , the chief executive officer of our
Company, the general manager of our Company, or any Director or
Supervisor being charged with an indictable offence or prohibited by
operation of law or otherwise disqualified from taking part in the
management of a company; or
(xxi) a material breach by any member of our Group of the Listing Rules or
applicable laws,
which, individually or in the aggregate, in the sole and absolute opinion of the
Sponsor-OCs (for themselves and on behalf of the Hong Kong Underwriters) and
the Joint Sponsors:
(A) has or will or is likely to have a material adverse change, or any development
involving a prospective mat erial adverse change, in or affecting (i) the assets,
liabilities, business, general affairs, ma nagement, prospects, shareholders’
equity, profits, losses, results of operations, financial, operational or trading
position or condition, financial, operational or trading or otherwise,
performance of our Company and any other member of our Group taken
as a whole and (ii) the ability of our Company to perform its obligations
under the Underwriting Agreements and the Operative Documents (as
defined in the Hong Kong Underwriting Agreement), including the issuance
and sale of the Offer Shares (‘‘ Material Adverse Change ’’); or
(B) has or will have or is likely to have a material adverse effect on the success or
marketability of the Global Offering or the level of applications under the
Hong Kong Public Offering or the level of interest under the International
Offering; or
(C) makes or will or is likely to make i t inadvisable or inexpedient or
impracticable for any part of the Hong Kong Public Offering or the
International Offering to proceed as envisaged or to market the Global
Offering or to deliver the Offer Share so nt h et e r m sa n di nt h em a n n e ra s
contemplated by this prospectus, the formal notice, the preliminary offering
circular or final offering circular in connection with the International
Offering; or
UNDERWRITING
–4 7 2–


--- page 483 ---
(D) has or will have or is likely to have the effect of (i) making any part of the
Hong Kong Underwriting Agreement (in cluding underwriting) incapable or
impracticable of performance in accord ance 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
(b) there has come to the notice of the Joint Sponsors or the Sponsor-OCs (for
themselves and on behalf of t he Hong Kong Underwriters):
(i) that any statement contained in the any of the Offering Documents (as
defined in the Hong Kong Underwriting Agreement) (including the Hong
Kong Public Offering Documents, the CSRC Filings, the Operative
Documents (as defined in the Hong Kong Underwriting Agreement), the
preliminary offering circular and final offering circular in connection with
the International Offering and/or in any notices, announcements,
advertisements, communications, marketing or other documents issued or
used by or on behalf of our Company in connection with the Hong Kong
Public Offering (including any supplement or amendment thereto))
(collectively, the ‘‘ Offering Related Documents ’ ’ )w a s ,w h e ni tw a si s s u e d ,
or has become, untrue, incorrect or inaccurate in any material respect or
misleading, or that any forecast, estimate, expression of opinion, intention or
expectation expressed or contained in any of the Offering Related
Documents is not fair and honest and not made on reasonable grounds or,
where appropriate, not based on reasonable assumptions with reference to
the facts and circumstances then subsisting; or
(ii) that there is a breach of, or any matter, event or circumstance rendering or
which may render, any of the representa tions, warranties, agreements and
undertakings given by any of our Company, the executive Directors, our
Controlling Shareholders in the Hong Kong Underwriting Agreement, or the
International Underwriti ng Agreement, as applicable, untrue, incorrect,
incomplete in any material r espect or misleading; or
(iii) that there is a material breach of an y provision of, or any obligation imposed
upon our Company or the Warrantors (as defined in the Hong Kong
Underwriting Agreement) under the Ho ng Kong Underwriting Agreement or
the International Underwriting Agreement; or
UNDERWRITING
–4 7 3–


--- page 484 ---
(iv) there is an event, act or omission which gives or is likely to give rise to any
liability of any of our Company or any of the executive Directors and
Controlling Shareholders pursuant to the indemnities given by any of them
under the Hong Kong Underwriting Agreement or the International
Underwriting Agreement, as applicable; or
(v) that there is any Material Adverse Change, or any development involving a
prospective Material Adverse Change or development, in the assets,
liabilities, business, general affairs, ma nagement, prospects, shareholders’
equity, profits, losses, properties, results of operations, position, condition or
performance, financial, operational, trading or otherwise, of our Group; or
(vi) that a material portion of the orders in the bookbuilding process have been
withdrawn, terminated, cance lled or otherwise not fulfilled; or
(vii) that the investment commitments by any cornerstone investor(s) after signing
of the Cornerstone Investment Agreement(s) with such cornerstone
investor(s) have been withdrawn, terminated, cancelled or otherwise not
fulfilled; or
(viii) any of the experts specified in this prospectus (other than the Joint Sponsors)
has withdrawn its consent to being named in, or to the issue of, this
prospectus or any of the Hong Kong Public Offering Documents; or
(ix) that the approval by the Listing Committee of the listing of, and permission
to deal in, the H Shares (including any additional H Shares that may be
issued pursuant to the exercise of the Over-allotment Option) is refused, not
granted or qualified (other than by 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
(x) that our Company withdraws this prospectus (and/or any other document
issued or used in connection with the Global Offering) or the Global
Offering.
UNDERWRITING
–4 7 4–


--- page 485 ---
UNDERTAKINGS TO THE STOCK EXCHANGE PURSUANT TO THE LISTING
RULES
Undertakings by Our Company
In accordance with Rule 10.08 of the Listing Rules, we have undertaken to the Stock
Exchange that within six months from the date on which our H Shares first commence
dealing on the Hong Kong Stock Exchange, no further Shares or securities convertible into
equity securities of our Company (whether or not of a class already listed) may be issued or
sold or transferred out of treasury or form the subject of any agreement to such issue, or
sale or transfer out of treasury (whether or not such issue of shares or securities, or sale or
transfer of treasury shares will be complete d within six months from the Listing Date),
except for the Offer Shares to be issued pursuant to the Global Offering, any Shares which
may be issued pursuant to the exercise of the Ove r-allotment Option or the exercise of the
outstanding options granted under the 2023 Share Option Scheme or under the
circumstances prescribed by Rule 10.08 of the Listing Rules.
Undertakings by Our Cont rolling Shareholders
In accordance with Rule 10.07 of the Listin g Rules, our Controlling Shareholders have
undertaken to the Hong Kong Stock Exchange and to us that, except pursuant to the
Global Offering, they will not and will procure that the registered holder(s) (if any) of the
Shares in which any of the Controlling Share holders has a beneficial interest will not,
without the prior written consent of the Stock Exchange or unless otherwise in compliance
with the requirements of the Listing Rules:
(i) in the period commencing on the date by reference to which disclosure of their
shareholdings in our Company is made in this prospectus and ending on the date
which is six months from the date on which dealings in the H Shares commence on
the Stock Exchange, dispose of, or 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 our Cont rolling Shareholders are shown to be the
beneficial owners in the prospectus; or
(ii) in the period of six months commencin g on the date on which the period referred
to in paragraph (i) above expires, 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 (i) above to such extent that,
immediately following such disposal or upon the exercise or enforcement of such
options, rights, interests or encumbrances, the Controlling Shareholders as a
group of controlling shareholders woul d cease to be Controlling Shareholders.
UNDERWRITING
–4 7 5–


--- page 486 ---
Pursuant to Note 3 to Rule 10.07(2) of the Lis ting Rules, our Contro lling Shareholders
have further undertaken to the Stock Exchan ge and our Company that, within the period
commencing on the date of this prospectus and ending on the date which is 12 months from
the Listing Date, they will:
(a) when any of them pledge or charge any Shares or other securities of the Company
beneficially owned by them in favor of an au thorized 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) of the Listing Rules,
immediately inform our Company in writing of such pledge or charge together
with the number of Shares or other securities of the Company so pledged or
charged; and
(b) when any of them receive indications, either verbal or written, from the pledgee or
chargee of any Shares that any of the pledged or charged Shares or other securities
of the Company will be disposed of, immediately inform our Company of such
indications.
Our Company will also inform the Stock Ex change as soon as we have been informed
of matters referred in above by any of our C ontrolling Shareholders and disclose such
matters by way of announcement which is pub lished in accordance with Rule 2.07C of the
Listing Rules as soon as possible.
UNDERTAKINGS PURSUANT TO TH E HONG KONG UNDERWRITING
AGREEMENT
Undertakings by Our Company
Pursuant to the Hong Kong Underwriting Agreement, our Company has undertaken
to each of the Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners,
the Joint Lead Managers, the Hong Kong Underw riters, the Capital Market Intermediaries
and the Joint Sponsors that:
except as disclosed in this prospectus, including but not limited to, for the issue, offer
or sale of the Offer Shares pursuant to the Global Offering (including the issue of
Shares pursuant to the exercise of the Over-allotment Option), it will not, without the
prior written consent of the Joint Sponsors and the Sponsor-OCs (for themselves and
on behalf of the Hong Kong Underwriters) and unless in compliance with the
requirements of the Listing Rules, at any time during the period commencing on the
date of the Hong Kong Underwriting Agreement and ending on, and including, the
date that is six months after the Listing Date (the ‘‘ First Six-Month Period ’’):
(i) allot, issue, sell, accept subscription fo r, offer to allot, issue or sell, contract or
agree to allot, issue or sell, mortgage, charge, pledge, hypothecate, hedge, lend,
grant or sell any option, warrant, contract or right to subscribe for or purchase,
grant or purchase any option, warrant, contract or right to allot, issue or sell, or
otherwise transfer or dispose of or create an encumbrance over, or agree to
transfer or dispose of or create an encumbrance over, either directly or indirectly,
UNDERWRITING
–4 7 6–


--- page 487 ---
conditionally or unconditionally, any H Shares or any interest in any of the
foregoing (including any securities conver tible 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 interest in any of the foregoing) or deposit any H
Shares 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 subscription or ownership
(legal or beneficial) of any H Shares or any interest in any of the foregoing
(including any securities convertible in to or exchangeable or exercisable for, or
that represent the right to receive, or any warrants or other rights to purchase, any
Shares or any interest in any of the foregoing); or
(iii) enter into any transaction with the same economic effect as any transaction
specified in sub-paragraph (i) or (ii) above; or
(iv) offer or agree or contract to effect any transaction specified in sub-paragraph (i),
(ii) and (iii) above or publicly announce any intention to do so,
in each case, whether any of the transactions specified in sub-paragraph (i) to (iii)
above is to be settled by delivery of H Share in cash or otherwise (whether or not the
issue of such H Shares will be completed within the First Six-Month Period).
In the event that, 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 enters
into any of the transactions specified in sub- paragraph (i) or (ii) or (iii) above or offers or
agrees or contracts to, or publicly announces an intention to, enter into any such
transactions, our Company shall take all reasonable steps to ensure compliance with
applicable legal and regulatory requirements relating to the avoidance of creating a
disorderly or false market in the H Shares. Each of the Controlling Shareholders also
undertakes to each of the Joint Sponsors, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries and the Hong Kong Underwriters to procure our Company’s compliance
with the foregoing undertakings. As disclosed as above, the restrictions shall not apply to
issue of Shares pursuant to exercise of outstanding options under the 2023 Share Option
Scheme or any transfer of A Shares which are held as treasury shares pursuant to any share
scheme(s) of our Company.
UNDERWRITING
–4 7 7–


--- page 488 ---
Undertakings by Our Cont rolling Shareholders
Each of the Controlling Shareholders has undertaken to each of the Company, the
Joint Sponsors, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries and the Hong
Kong Underwriters that, without the prior written consent of the Joint Sponsors and the
Sponsor-OCs (for themselves and on behalf of the Hong Kong Underwriters) and unless in
compliance with the Listing Rules:
(a) during the First Six-Month Period, it will not and will procure that none of its
affiliates will:
(i) offer, pledge, charge, sell, offer, co ntract or agree to sell, pledge, assign,
mortgage, charge, hypothecate, lend, grant or sell (or agree to grant or sell)
any option, warrant, contract or right to subscribe for or purchase, grant or
purchase (or agree to grant or purchase) any option, warrant, contract or
right to sell, lend or otherwise transfer or dispose of, make any short sale, 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 Shares or other securities of
our Company or any interest therein (including any securities convertible
into or exchangeable for, or that re present the right to receive, or any
warrants or other rights to purchase, any Shares or other securities of our
Company), directly or indirectly he ld by it as of the date of the Hong Kong
Underwriting Agreement (the ‘‘ Locked-up Securities ’’);
(ii) enter into any swap, derivative o r other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership
of any Locked-up Securities;
(iii) enter into any transaction with the same economic effect as any transaction
set out in paragraphs (i) or (ii); or
(iv) publicly disclose that it will or may enter into any transaction set out in
paragraphs (i), (ii) or (iii),
whether any of the transaction set out in pa ragraphs (i), (ii) or (iii) is to be settled
by delivery of such capital or securities of our Company, in cash or otherwise
(whether or not the issue of such Shares or other shares or securities will be
completed within the First Six-Month Period);
(b) during the Second Six-Month Period, it will not enter into any transaction
described in paragraphs (a)(i), (a)(ii), o r (a)(iii) or offer, agree or contract to or
publicly announce any intention to enter int o any such transaction if, immediately
following such transaction, the Controlli ng Shareholders as a group of controlling
shareholders will cease to be a Controlling Shareholder;
UNDERWRITING
–4 7 8–


--- page 489 ---
(c) until the expiry of the Second Six-Month Period, in the event that it enters into
any such transactions specified in paragrap hs (a)(i), (a)(ii), or (a)(iii) or offers,
agrees or contracts to, or publicly announces an intention to enter into any such
transaction, it will notify the Joint Sponsors and the Sponsor-OCs and take all
reasonable steps to ensure that it will not create a disorderly or false market in the
securities of our Company; and
(d) at any time after the date of the Hong Kong Underwriting Agreement up to and
including the date falling 12 months after the Listing Date, it shall:
(i) if and when it pledges or charges any Shares or other securities of our
Company (or any interests therein) beneficially owned by it, immediately
inform our Company, the Joint Sponsors and the Sponsor-OCs in writing of
such pledge or charge together with th e number of Shares or other securities
(or interests therein) so pledged or charged; and
(ii) if and when it receives indications, e ither verbal or written, from any pledgee
or chargee that any of the pledged or charged Shares or other securities (or
interests therein) of our Company will be disposed of, immediately inform
our Company, the Joint Sponsors and the Sponsor-OCs in writing of such
indications.
The above undertakings shall not prevent t he Controlling Shareholders from using the
Locked-up Securities as a charge or a pledge in favour of an authorized institution (as
defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) for a bona fide
commercial loan.
For the avoidance of doubt, the lock-up under the above undertakings shall not apply
to the existing pledge of A Shares by the Con trolling Shareholders prior to Listing.
Our Company has agreed and undertaken that upon receiving such information in
writing from a Controlling Shareholder, we s hall, as soon as practicable and if required
pursuant to the Listing Rules, notify the Stock Exchange and make an announcement in
relation to such information in accordance wi th applicable requirements of the Listing
Rules.
Our Company has further agreed and undertaken to each of the Joint Sponsors, the
Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint
Lead Managers, the Capital Market Intermediaries and the Hong Kong Underwriters that
we will not, and each of the Controlling Shareho lders has further undertaken to each of the
Joint Sponsors, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries and the Hong
Kong Underwriters to procure that our Company will not, effect any purchase of Shares, or
agree to do so, which may reduce the holdings of Shares held by the public (as defined in
Rule 8.24 of the Listing Rules) below the minimum public float requirement specified in the
Listing Rules on or before the date falling six months after the Listing Date without first
having obtained the prior written consent of the Joint Sponsors and the Sponsor-OCs (for
themselves and on behalf of the Hong Kong Underwriters).
UNDERWRITING
–4 7 9–


--- page 490 ---
INTERNATIONAL OFFERING
International Underwriting Agreement
In connection with the International Offering, it is expected that our Company will
enter into the International Underwriting Agreement with Mr. Shi (as warranting director),
our Controlling Shareholders (as warranting shareholders), the Joint Sponsors, the Overall
Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Capital Market Intermediaries and the International Underwriters. Under
the International Underwriting Agreement, th e International Underwriters will, subject to
certain conditions set out therein, severally an d not jointly, agree to procure subscribers or
purchasers for, or to purchase, their respective proportions of the International Offer
Shares being offered under the International Offering.
Our Company is expected to grant to the International Underwriters the
Over-allotment Option, exercisable by the Sponsor-OCs on behalf of the International
Underwriters at any time within 30 days from t he last date for lodging applications under
the Hong Kong Public Offering, pursuant to which our Company may be required to issue
up to an additional 15,000,000 H Shares (representing 15% of the number of Offer Shares
initially being offered under the Global Off ering), at the Offer Price, to, among other
things, cover over-allocations in t he International Offering, if any.
It is expected that the International Underwriting Agreement may be terminated on
similar grounds as those in the Hong Kong Underwriting Agreement. Potential investors
should note that if the International Underwriting Agreement is not entered into, or is
terminated, the Global Offering will not proceed.
Our Company has agreed to indemnify the International Underwriters against certain
liabilities.
UNDERWRITING COMMISSIONS AND LISTING EXPENSES
An aggregate of the fees of up to 2.75% of gross proceeds to be raised from the
subscription tranche and the placing tranche (including proceeds from any H Shares issued
pursuant to the Over-allotment Option) of the Global Offering is payable by the Company
to all syndicate members participating in the Global Offering, among which the syndicate
members (i) will receive an underwriting commission which is equal to 2.25% of the
aggregate gross proceeds to be raised from the Global Offering (including proceeds from
any H Shares issued pursuant to the Over-allotment Option) (the ‘‘ Underwriting
Commission ’’), and (ii) may receive a discretionary incentive fee of up to 0.5% of the
aggregate gross proceeds to be raised from the Global Offering (including proceeds from
any H Shares issued pursuant to the Over-allotment Option) (the ‘‘ Incentive Fee ’’).
As of the date of this prospectus, the allocation of a portion of the Underwriting
Commission remains subject to the Company’s discretion. Accordingly, the unallocated
portion of the Underwriting Commission will be regarded as discretionary fees for the
purpose of the Listing Rules. The ratio of the fixed fee and discretionary fee (as classified
under and for the purpose of Rule 3A.34 of the Listing Rules) payable by the Company to
UNDERWRITING
–4 8 0–


--- page 491 ---
all syndicate members (based on an Offer Price of HK$5.75 per Share, being the mid-point
of the Offer Price range stated in this prospectus, and assuming the Incentive Fee will be
paid in full) is expected to be approximatel y 81.09 : 18.91 (before the Over-allotment
Option) and approximately 80.97 : 19.03 (after the Over-allotment Option). For any
unsubscribed Hong Kong Offer Shares realloca ted to the International Offering, we will
pay the underwriting commission for such Shares to the International Underwriters (but
not the Hong Kong Underwriters).
The aggregate amount of sponsor fee payable by our Company to the Joint Sponsors
are approximately HK$6.0 million.
The aggregate underwriting commissions and fees (including the incentive fees and
assuming full payment), together with the Sto ck Exchange listing fees, the SFC transaction
levy, the AFRC transaction levy, the Stock Exchange trading fee, sponsor fee, legal and
other professional fees, printing and other expenses relating to the Global Offering, are
estimated to be approximately HK$55.0 million in aggregate (based on an Offer Price of
HK$5.75 per Share, being the mid-point of th e Offer Price range stated in this prospectus
and assuming that the Over-allotment Option is not exercised and any shares to be issued
upon exercise of the options granted under the 2023 Share Option Scheme) and are to be
borne by us.
ACTIVITIES BY SYNDICATE MEMBERS
We describe below a variety of activities that each of the Underwriters of the Hong
Kong Public Offering and the International Offering, together referred to as ‘‘Syndicate
Members’’, may individually undertake, and which do not form part of the underwriting or
the stabilizing process. When engaging in any of these activities, it should be noted that the
Syndicate Members are subject to restrictions, including the following:
(a) under the agreement among the Syndica te Members, all of them (except for the
Stabilizing Manager or its designated aff iliate as the stabilizing manager) must
not, in connection with the distribution of the Offer Shares, effect any
transactions (including but not limited to issuing any option or other derivative
transactions relating to the Offer Shares), whether in the open market or
otherwise, with a view to stabilizing or m aintaining the market price of any of the
Offer Shares at levels other than those which might otherwise prevail in the open
market; and
(b) all of them must comply with all applicab le laws and regulations, including the
market misconduct provisions of the SFO, including the provisions prohibiting
insider dealing, false trading, price ri gging and stock market manipulation.
UNDERWRITING
–4 8 1–


--- page 492 ---
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 accounts 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 inv olve or relate to assets, securities and/or
instruments of 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 the H Shares, the activities of the Syndicate Members and their affiliates
could include acting as agent for buyers and sellers of the H Shares, entering into
transactions with those buyers and sellers in a principal capacity, including as a lender to
initial purchasers of the H Shares (which fin ancing may be secured by the H Shares) in the
Global Offering, proprietary trading in the H Shares, and entering into over the counter or
listed derivative transactions or listed or unliste d securities transactions (including issuing
securities such as derivative warrants listed on a stock exchange) which have as their
underlying assets, assets including the H Shares. Such transactions may be carried out as
bilateral agreements or trades with selected counterparties. Those activities may require
hedging activity by those entiti es involving, directly or indi rectly, the buying and selling of
the H Shares, which may have a negative impact on the trading price of the H Shares. All
such activities could occur in Hong Kong and e lsewhere in the world and may result in the
Syndicate Members and their affiliates holding long and/or short positions in the H Shares,
in baskets of securities or indices including the H Shares, in units of funds that may
purchase the H Shares, or in derivatives related to any of the foregoing.
In relation to issues by the Syndicate Member s 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 hedg ing activity in the H Shares in most cases.
Certain of the Syndicate Members or their r espective affiliates have provided from
time to time, and expect to provide in the futu re, investment banking and other services to
our Company and each of its affiliates for which such Syndicate Members or their
respective affiliates have received or will receive customary fees and commissions.
All of these activities may occur both during and after the end of the stabilizing period
described in the section headed ‘‘Structure of the Global Offering — Stabilization’’ in this
prospectus. These activities may affect the market price or value of the H Shares, the
liquidity or trading volume in the H Shares, an d the volatility of the H Shares’ share price,
and the extent to which this occurs from day to day cannot be estimated.
UNDERWRITING
–4 8 2–


--- page 493 ---
JOINT SPONSORS’ AND UNDERWRITERS’ INTEREST IN OUR GROUP
The Underwriters will receive an underwr iting commission. Particulars of these
underwriting commission and expenses are set out in the paragraph headed ‘‘Underwriting
Commissions and Listing Expenses’’ in this section above for further information.
Neither the Joint Sponsors nor any of their associates have accrued any material
benefit as a result of the successful outcome of the Global Offering. None of the directors
and employees of the Joint Sponsors have any directorship in our Company or any member
of our Group.
Except as disclosed in this prospectus and the obligations under the Hong Kong
Underwriting Agreement and the International Underwriting Agreement, none of the
Underwriters has any shareholding interest in any member of our Group or 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.
JOINT SPONSORS’ INDEPENDENCE
Halcyon Capital Limited satisfies the indepe ndence criteria applicable to sponsors as
set out in Rule 3A.07 of the Listing Rules.
Guotai Junan Capital Limited does not satisfy the independence criteria applicable to
sponsors as set out in Rule 3A.07 of the Listing Rules, since Guotai Junan Securities Co.,
Ltd, which is a controlling sha reholder of the indirect hold ing company of Guotai Junan
Capital Limited, has been providing continuous supervisory services to the Company,
which might reasonably give rise to a perception that the sponsor’s independence would be
affected and such relationship does not arise under the sponsor’s engagement to provide
sponsorship services. Guotai Junan Securities Co., Ltd also acts as pledgee of certain A
Shares of Mr. Shi.
UNDERWRITING
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--- page 494 ---
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:
(i) the Hong Kong Public Offering of 10,000,000 Offer Shares (subject to
reallocation) in Hong Kong as described in the paragraph headed ‘‘The Hong
Kong Public Offering’’ in this section below; and
(ii) the International Offering of 90,000,000 Offer Shares (subject to reallocation and
the Over-allotment Option as mention ed below) outside the United States in
offshore transactions in reliance on Reg ulation S, as described in the paragraph
headed ‘‘The International Offering’’ in this section below.
Furthermore, in connection with the Global Offering, it is expected that our Company
will grant the Over-allotment Option to the Inte rnational Underwriters, exercisable by the
Sponsor-OCs on behalf of the International U nderwriters, at any time within 30 days after
the last day for lodging applications under the Hong Kong Public Offering, pursuant to
w h i c ho u rC o m p a n ym a yb er e q u i r e dt oi s s u eu pt oa na d d i t i o n a l1 5 , 0 0 0 , 0 0 0HS h a r e s
(representing 15% of the number of Offer Share s initially being offered under the Global
Offering) at the Offer Price, to, among other things, cover over-allocations in the
International Offering, if any.
Investors may either:
(1) apply for the Hong Kong Offer Shares under the Hong Kong Public Offering; or
(2) apply for or indicate an interest for th e International Offer Shares under the
International Offering, but may not do both.
The 100,000,000 Offer Shares in the Global Offering will represent approximately
15.0% of our enlarged share capital immediately after the completion of the Global
Offering, without taking into account the exercise of the Over-allotment Option and any
Shares to be issued upon exercise of the options granted under the 2023 Share Option
Scheme. If the Over-allotment Option is exerc ised in full, the Offer Shares will represent
16.9% of our issued share capital immediately following the completion of the Global
Offering.
The number of Offer Shares to be offered under the Hong Kong Public Offering and
the International Offering may be subject to reallocation as described in the paragraph
headed ‘‘The Hong Kong Public Offering — Reallocation’’ in this section below.
References to applications , application or subscription monies or procedure for
applications relate solely to the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
–4 8 4–


--- page 495 ---
THE HONG KONG PUBLIC OFFERING
Number of Offer Shares Initially Offered
Our Company is initially offering 10,000, 000 Offer Shares for subscription by the
public in Hong Kong at the Offer Price, representing approximately 10% of the total
number of Offer Shares initially available under the Global Offering.
The Hong Kong Public Offering is open to members of the public in Hong Kong as
well as to institutional and professional investors. The Hong Kong Offer Shares will
represent approximately 1.5% of our Company’s enlarged share capital immediately after
completion of the Global Offering, withou t taking into account the exercise of the
Over-allotment Option and any shares to be issued upon exercise of the options granted
under the 2023 Share Option Scheme. Professional investors generally include brokers,
dealers, companies (including fund managers) whose ordinary business involves dealing in
shares and other securities and corporate enti ties which regularly invest in shares and other
securities.
Completion of the Hong Kong Public Offering is subject to the conditions as set out in
the paragraph headed ‘‘Conditions of the Global Offering’’ in this section below.
Allocation
Allocation of Hong Kong Offer Shares to investors under the Hong Kong Public
Offering will be based 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 applic ants. We may, if necessary, allocate the Hong
Kong Offer Shares on the basis 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 available under the
Hong Kong Public Offering is to be divided equally into two pools (after taking into
account any reallocation referred to below): Pool A and Pool B, both of which are available
on an equitable basis to successful applicants (with any odd board lots allocated to Pool A):
Pool A: the Offer Shares will be allocated o n an equitable basis to applicants who
have applied for the Offer Shares with an aggregate subscription price of
HK$5 million or less (excluding the brokerage fee, the SFC transaction levy,
the AFRC transaction levy and the Stock Exchange trading fee); and
Pool B: the Offer Shares will be allocated on an equitable basis to applicants who
have applied for Offer Shares with an aggregate subscription price of more
than HK$5 million (excluding the brokera ge fee, the SFC transaction levy,
the AFRC transaction levy and the Stock Exchange trading fee).
STRUCTURE OF THE GLOBAL OFFERING
–4 8 5–


--- page 496 ---
Investors should be aware that applications in Pool A and applications in Pool B may
receive different allocation ratios. If the Offer Shares in one (but not both) of the pools are
under-subscribed, the surplus Offer Shares wil l be transferred to the other pool to satisfy
demand in the pool and be allocated accordingly. For the purpose of this sub-section only,
the ‘‘subscription price ’’ for the Offer Shares means the price payable on application therefor
(without regard to the Offer Price as finally determined). 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 applic ations under the Hong Kong Public Offering
and any application for more than 5,000,000 Hong Kong Offer Shares will be rejected.
Reallocation
The allocation of Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation under the Listing Rules. In accordance with
the clawback requirements set forth in paragraph 4.2 of Practice Note 18 of the Listing
Rules and the Chapter 4.14 of the Guide for New Listing Applicants issued by the Stock
Exchange, if the Offer Shares under the International Offering are fully subscribed or
over-subscribed and the number of Offer Shares validly applied for under the Hong Kong
Public Offering represents (i) 15 times or more but less than 50 times, (ii) 50 times or more
but less than 100 times, and (iii) 100 times or more of the number of Hong Kong Offer
Shares initially available under the Hong Kong Public Offering, the Offer Shares will be
reallocated to the Hong Kong Public Offering from the International Offering. As a result
of such reallocation, the total number of Hong Kong Offer Shares will be increased to
30,000,000 Offer Shares (in the case of (i)), 40,000,000 Offer Shares (in the case of (ii)) and
50,000,000 Offer Shares (in the case of ( iii)), representing approximately 30%,
approximately 40% and approximately 50% of the Offer Shares initially available under
the Global Offering (before any exercise of the Over-allotment Option), respectively. In
each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will be
allocated between Pool A and Pool B in equal proportion and the number of Offer Shares
allocated to the International Offering will be correspondingly reduced in such manner as
the Sponsor-OCs deem appropriate.
If (i) the Offer Shares under the International Offering are fully subscribed or
over-subscribed, and if the number of Offer Shares validly applied for in the Hong Kong
Public Offering represents more than 100%, but less than 15 times, of the number of Hong
Kong Offer Shares initially available under the Hong Kong Public Offering; or (ii) the Offer
Shares under the International Offering are not fully subscribed, and if the number of Offer
Shares validly applied for in the Hong Kong Pu blic Offering represents more than 100% of
the number of Hong Kong Offer Shares initially available under the Hong Kong Public
Offering irrespective of the number of times of over-subscription, the Sponsor-OCs (for
themselves and on behalf of the Underwriters) ma y, at their discretion, reallocate the Offer
Shares initially allocated from the Internat ional Offering to the Hong Kong Public Offering
to satisfy valid applications under the Hong Kong Public Offering, provided that the total
number of Hong Kong Offer Shares available under the Hong Kong Public Offering
following such reallocation shall not be increased to more than 20,000,000 Offer Shares,
representing two times the number of Hong Kon g Offer Shares initially available under the
Hong Kong Public Offering and approximately 20% of the total number of Offer Shares
STRUCTURE OF THE GLOBAL OFFERING
–4 8 6–


--- page 497 ---
initially available under the Global Offering, a nd the final Offer Price shall be fixed at the
low end of the Offer Price range (that is, HK$4. 50 per Offer Share) stated in this prospectus
in accordance with the Chapter 4.14 of the Guide for New Listing Applicants issued by the
Stock Exchange.
Subject to the above, the Sponsor-OCs (for themselves and on behalf of the
Underwriters) shall have the discretion to rea llocate Offer Shares from the International
Offering to the Hong Kong Public Offering to satisfy valid applications under the Hong
Kong Public Offering, regardless of whether any reallocation pursuant to paragraph 4.2 of
Practice Note 18 of the Listing Rules is triggered.
Any such clawback and reallocation between the International Offering and the Hong
Kong Public Offering will be completed prior to any adjustment of the number of Offer
Shares pursuant to the exercise of t he Over-allotment Option, if any.
If the Hong Kong Public Offering is not fully subscribed for, the Sponsor-OCs have the
authority to reallocate all or any unsubscribed Hong Kong Offer Shares to the
International Offering in such proportions as the Sponsor-OCs deem appropriate.
Applications
Each applicant under the Hong Kong Public Offering will also be required to give an
undertaking and confirmation in the application submitted by him or her that he or she and
any person(s) for whose benefit he or she is making the application have not applied for or
taken up, or indicated an interest for, and will not apply for or take up, or indicate an
interest for, any 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 Offer Shares
under the International Offering.
The listing of the Offer Shares on the Stock Exchange is sponsored by the Joint
Sponsors. Applicants under the Hong Kong Public Offering are required to pay, on
application (subject to application channel ), the maximum price of HK$7.0 per Offer Share
in additional to any brokerage, SFC transaction levy, AFRC transaction levy and the Stock
Exchange trading fee payable on each Offer Share, amounting to a total of HK$3,535.30 for
one board lot of 500 Hong Kong Offer Shares. If the Offer Price, as finally determined in
the manner described in the paragraph headed ‘‘Pricing and Allocation’’ in this section
below, is less than the maximum price of HK$7.0 per Offer Share, appropriate refund
payments (including the brokerage, SFC tran saction levy, AFRC transaction levy and the
Stock Exchange trading fee attributable to the surplus application monies) will be made to
successful applicants, without interest. Further details are set out below in the section
headed ‘‘How to Apply for Hong Kong Offer Shares’’ in this prospectus.
STRUCTURE OF THE GLOBAL OFFERING
–4 8 7–


--- page 498 ---
THE INTERNATIONAL OFFERING
Number of Offer Shares Offered
The International Offering will consist of a n offering of initially 90,000,000 Offer
Shares being offered by our Company, representing approximately 90% of the total number
of Offer Shares initially available under the Global Offering (subject to reallocation and the
Over-allotment Option). The number of Offer Shares initially offered under the
International Offering subject to any rea llocation of Offer Shares between the
International Offering and the Hong Kong Public Offering, will represent approximately
13.5% of our Company’s enlarged share capita l immediately following the completion of
the Global Offering (assuming the Over-allotment Option is not exercised).
Allocation
The International Offering will include selective marketing of Offer Shares to
‘‘Qualified Institutional Buyers’’ in the Uni ted States and institutional and professional
investors and other investors anticipated to have a sizeable demand for such Offer Shares in
other jurisdictions outside the United States in reliance on Regulation S. Professional
investors generally include brokers, dealers, companies (including fund managers) whose
ordinary business involves dealing in shares and other securities and corporate entities
which regularly invest in shares and other securi ties. Prospective professional, institutional
and other 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
particular price. This process, known as ‘‘book-building’’, is expected to continue up to the
Price Determination Date.
Allocation of Offer Shares pursuant to the International Offering will be determined
by the Sponsor-OCs (for themselves and on behalf of the Underwriters) and will be based
on a number of factors, including the level and timing of demand, the total size of the
relevant investor’s invested assets or equity a ssets in the relevant sector and whether or not
it is expected that the relevant investor is likely to buy further Offer Shares, and/or hold or
sell its Offer Shares, after the listing of th e Offer Shares on the Stock Exchange. Such
allocation is intended to result in a distribut ion of the Offer Shares on a basis which would
lead to the establishment of a solid professional and institutional shareholder base to the
benefit of our Company and our Shareholders as a whole.
The Sponsor-OCs (for themselves 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 Sponsor-OCs so as to allow them to identify the relevant application
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
–4 8 8–


--- page 499 ---
Reallocation
The total number of Offer Shares to be issued pursuant to the International Offering
may change as a result of the clawback arrangement described in the paragraph headed
‘‘The Hong Kong Public Offering — Reallocation ’’ in this section above, the exercise of the
Over-allotment Option in whole or in part and/or any reallocation of unsubscribed Offer
Shares originally included in the Hong Kong Public Offering.
OVER-ALLOTMENT OPTION
In connection with the Global Offering, our Company is expected to grant an
Over-allotment Option to the In ternational Underwriters.
Pursuant to the Over-allotment Option, the International Underwriters have the right,
exercisable by the Sponsor-OCs on behalf of the International Underwriters at any time
from the Listing Date until 30 days after the last day for lodging applications under the
Hong Kong Public Offering, to require the Company to issue up to 15,000,000 additional H
Shares, representing not more than 15% of the total number of initial Offer Shares under
the Global Offering, at the Offer Price un der the International Offering to cover
over-allocation in the International Offering, if any.
If the Over-allotment Option is exercised in full, the additional Offer Shares to be
issued pursuant thereto will represent approximately 2.2% of our Company’s enlarged
share capital immediately following the completion of the Global Offering and the exercise
of the Over-allotment Option. If the Over-allo tment Option is exercised, an announcement
will be made.
STABILIZATION
Stabilization is a practice used by underw riters in some markets to facilitate the
distribution of securities. To stabilize, th e Underwriters may bid for, or purchase, the
securities in the secondary market, during a specified period of time, to retard and, if
possible, prevent, any decline in the market pr ice of the securities below the Offer Price.
Such transactions may be effected in all jurisdi ctions where it is permissible to do so, in each
case in compliance with all applicable laws and r egulatory requirements, including those of
Hong Kong. In Hong Kong and certain other juri sdictions, the price at which stabilization
is effected is not permitted to exceed the Offer Price.
In connection with the Global Offering, the Stabilizing Manager, or any person acting
for it, on behalf of the Underwriters, may over- allocate or effect transactions with a view to
stabilizing or supporting the market price of o ur H Shares at a level higher than that which
might otherwise prevail for a limited period after the Listing Date. However, there is no
obligation on the Stabilizing Manager, or any persons acting for it, to conduct any such
stabilizing action. Such stabilization action, if taken, will be conducted at the absolute
discretion of the Stabilizing Manager or any person acting for it, may be discontinued at
any time and is required to be brought to an end within 30 days of the last day for the
STRUCTURE OF THE GLOBAL OFFERING
–4 8 9–


--- page 500 ---
lodging applications under the Hong Kong Publ ic Offering. Stabilization action permitted
in Hong Kong pursuant to the Securities and F utures (Price Stabilizing) Rules of the SFO
includes (i) over-allocating for the purpose of preventing or minimizing any reduction in the
market price of our H Shares, (ii) selling or agr eeing to sell our H Shares so as to establish a
short position in them for the purpose of preventing or minimizing any reduction in the
market price of our H Shares, (iii) purchasi ng or agreeing to purchase our Offer Shares
p u r s u a n tt ot h eO v e r - a l l o t m e n tO p t i o ni no r d e rto close out any position established under
paragraph (i) or (ii) above, (iv) purchasing or agreeing to purchase any of our Offer Shares
for the sole purpose of preventing or minimizing any reduction in the market price of our H
Shares, (v) selling or agreeing to sell any Offer Shares in order to liquidate any position
established as a result of those purchases, and (vi) offering or attempting to do anything as
described in paragraph (ii), (iii), (iv) or (v).
Specifically, prospective applicants for and investors in the Offer Shares should note
that:
. the Stabilizing Manager or any person a cting for it may, in connection with the
stabilizing action, maintain a long position in the H Shares;
. there is no certainty as to the extent to which and the time period for which the
Stabilizing Manager or any person acting f or it will maintain such a long position;
. liquidation of any such long position b y the Stabilizing Manager or any person
acting for it and selling in the open market, may have an adverse impact on the
market price of the H Shares;
. no stabilizing action can be taken to support the price of the H Shares for longer
than the stabilizing period which will begin on the Listing Date and is expected to
expire on Sunday, November 24, 2024, being the 30th day after the last day for
lodging applications under the Hong Kong Public Offering. After this date, when
no further action may be taken to support the price of the H Shares, demand for
the H Shares, and therefore the price of the H Shares, could fall;
. the price of any H Shares cannot be assured to stay at or above the Offer Price by
the taking of any stabilizing action; and
. stabilizing bids or transactions effected in the course of the stabilizing action may
be made at any price at or below the Offer Price, which means that stabilizing bids
may be made or transactions effected at a price below the price paid by applicants
for, or investors in, the Offer Shares.
Our Company will ensure or procure that an announcement in compliance with the
Securities and Futures (Price Stabilizing) Rules of the SFO (Chapter 571W of the Laws of
Hong Kong) will be made within seven days of the expiration of the stabilization period.
STRUCTURE OF THE GLOBAL OFFERING
–4 9 0–


--- page 501 ---
Over-allocation
Following any over-allocation of Shares in connection with the Global Offering, the
Stabilizing Manager or any person acting for it may cover such over-allocation by (among
other methods) exercising the Over-allotment Option in full or in part, by using Shares
purchased by the Stabilizing Manager or any person acting for it in the secondary market at
prices that do not exceed the Offer Price as de tailed below or a combination of these means.
OFFER SIZE
The allocation and the total number of Offe r Shares under the Global Offering will be
determined in the following manner:
. The allocation of Offer Shares between the International Offering and the Hong
Kong Public Offering will be subject to a reallocation adjustment depending on
the number of Offer Shares validly applied for under the Hong Kong Public
Offering. Please refer to the paragraph headed ‘‘The Hong Kong Public Offering
— Reallocation’’ in this section above for details.
. The number of Offer Shares to be made available under the International Offering
may be further increased if the Over-allo tment Option is exercised. The maximum
number of additional International Offer Shares to be offered pursuant to the
exercise of the Over-allotment Option will represent approximately 15% of the
number of Offer Shares being offered under the Global Offering. Please refer to
the paragraph headed ‘‘Over-allotment Option’’ in this section above for details.
The table below sets out a summary of the total number of Hong Kong Offer Shares
and International Offer Shares being offered in the Global Offering under different
scenarios, depending on (a) whether a reallo cation pursuant to the clawback arrangement
described in the paragraph headed ‘‘The Hong Kong Public Offering — Reallocation’’ in
this section above occurs and (b) whether the Over-allotment Option i s exercised at all or
exercised in full.
No clawback
reallocation
30% clawback
reallocation
40% clawback
reallocation
50% clawback
reallocation
Total number of Offer
Shares before
t h ee x e r c i s eo ft h e
Over-allotment Option . .
10,000,000
Hong Kong
Offer Shares
90,000,000
International
Offer Shares
30,000,000
Hong Kong
Offer Shares
70,000,000
International
Offer Shares
40,000,000
Hong Kong
Offer Shares
60,000,000
International
Offer Shares
50,000,000
Hong Kong
Offer Shares
50,000,000
International
Offer Shares
Total number of Offer
Shares following the
exercise in full of the
Over-allotment Option . .
10,000,000
Hong Kong
Offer Shares
105,000,000
International
Offer Shares
30,000,000
Hong Kong
Offer Shares
85,000,000
International
Offer Shares
40,000,000
Hong Kong
Offer Shares
75,000,000
International
Offer Shares
50,000,000
Hong Kong
Offer Shares
65,000,000
International
Offer Shares
STRUCTURE OF THE GLOBAL OFFERING
–4 9 1–


--- page 502 ---
PRICING AND ALLOCATION
The Offer Price is expected to be fixed by a greement between us and the Sponsor-OCs
(for themselves and on behalf of the Underwriters) on the Price Determination Date, when
market demand for the Offer Shares will be determined. The Price Determination Date is
expected to be on or before Monday, October 28, 2024, and in any event, no later than
12 : 00 noon on Monday, October 28, 2024. Prospective investors should be aware that the
Offer Price to be determined on the Price Determination Date may be, but is not expected to
be, lower than the Offer Price range stated in this prospectus.
The Offer Price will not be more than HK$7.0 per Offer Share and is expected to be not
less than HK$4.50 per Offer Share, unless oth erwise announced as further explained below.
If you apply for the Offer Shares under the Hong Kong Public Offering, you are required to
pay, on application (subject to application c hannel), the maximum Offer Price of HK$7.0
per Offer Share, plus 1.0% brokerage fee, 0.0027% SFC transaction levy, 0.00015% AFRC
transaction levy and 0.00565% Stock Exchange trading fee, amounting to a total of
HK$3,535.30 for one board lot of 500 Hong Kong Offer Shares.
If the Offer Price, as finally determined in the manner described below, is lower than
HK$7.0, we will refund the respective differe nce, including the brokerage fee, the Stock
Exchange trading fee, the SFC transaction levy and AFRC transaction levy attributable to
the surplus application monies. We will not pay interest on any refunded amounts. Please
refer to the section headed ‘‘How to Apply for Hong Kong Offer Shares’’ in this prospectus.
The International Underwriters will be soliciting from prospective investors
indications of interest in acquiring Offer Share s 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 p rocess, 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 Sponsor-OCs (for themselves and on behalf of the Underwriters) may, where
considered appropriate, based on the level of interest expressed by prospective investors
during the book-building process, and with the prior consent of our Company, reduce the
number of Offer Shares and/or the indicative Offer Price range below that stated in this
prospectus prior to the morning of the last day for lodging applications under the Hong
Kong Public Offering. In such s ituation, our Company will, as so on as practicable following
the decision to make such reduction and in any event not later than the morning of the last
day for lodging applications under the Hong Kong Public Offering, post a notice on the
website of the Stock Exchange (
www.hkexnews.hk ) and the website of our Company
(www.lopal.com.cn ) (the contents of the website do not form a part of this prospectus). Our
Company will also, as soon as practicable following the decision to make such change, issue
a supplemental prospectus updating investors of the change in the number of Offer Shares
being offered under the Global Offering and/or the Offer Price. The Global Offering must
first be canceled and subsequently relaunched on FINI pursuant to the supplemental
prospectus.
STRUCTURE OF THE GLOBAL OFFERING
–4 9 2–


--- page 503 ---
Upon issue of such a notice, the revised number of Offer Shares and/or Offer Price
range will be final and conclusive and the Offer Price, if agreed upon by us and the
Sponsor-OCs (for themselves and on behalf of the Underwriters), will be fixed within such
revised Offer Price range. Before submitting applications for the Hong Kong Offer Shares,
applicants should have regard to the possib ility that any announcement of a reduction in
the number of Offer Shares and/or the Offer Price range may not be made until the last day
for lodging applications under the Hong Kong Public Offering. Such notice will also
confirm or revise, as appropriate, the working capital statement, the Global Offering
statistics as currently set out in this prospectus, and any other financial information which
may change as a result of such reduction. In the absence of any such notice so published, the
Offer Price, if agreed upon with our Company and the Sponsor-OCs (for themselves and on
behalf of the Underwriters) will under no circumstances be set outside the Offer Price range
stated in this prospectus.
If you have already submitted an application for the Hong Kong Offer Shares before
the last day for lodging applications under the Hong Kong Public Offering, you will not be
a l l o w e dt os u b s e q u e n t l ywithdraw your application.
The Offer Price, an indication of the level of interest in the International Offering, the
basis of allotment of Offer Shares available under the Hong Kong Public Offering and the
results of allocations in the Hong Kong Public Offering, are expected to be made available
in a variety of channels in the manner descr ibed in the section headed ‘‘How to Apply for
Hong Kong Offer Shares — B. Publication of Results’’ in this prospectus.
UNDERWRITING AGREEMENT
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms of the Hong Kong Underwriting Agreement and is subject to our Company
and the Sponsor-OCs (for themselves and on behalf of the Hong Kong Underwriters)
agreeing on the Offer Price.
We expect to enter into the International Underwriting Agreement relating to the
International Offering on the Price Determin ation Date. The underwriting arrangements
under the Hong Kong Underwriting Agreement and the International Underwriting
Agreement are summarized in the section hea ded ‘‘Underwriting’’ in this prospectus.
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Offer Shares is conditional on, among others:
(i) the Listing Committee granting approval for the listing of, and permission to deal
in, the H Shares in issue and to be issued pursuant to the Global Offering
(including any Shares which may be issued by us pursuant to the exercise of the
Over-allotment Option) on the Main Board of the Stock Exchange and such
approval not subsequently having been withdrawn or revoked prior to the
commencement of dealings in the H Shares on the Hong Kong Stock Exchange;
(ii) the Offer Price being duly determined;
STRUCTURE OF THE GLOBAL OFFERING
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--- page 504 ---
(iii) the execution and delivery of the Inte rnational Underwriting Agreement on or
around the Price Determination Date; and
(iv) the obligations of the Hong Kong Underwriters under the Hong Kong
Underwriting Agreement and the obligations of the International Underwriters
under the International Underwriting Agreement becoming 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 Hong Kong Underwriting
Agreement and/or the International Underwr iting Agreement, as the case may be (unless
and to the extent such conditions are validly waived on or before such dates and times) and
in any event not later than 30 days after the date of this prospectus.
If, for any reason, the Offer Price is not agreed between our Company and the
Sponsor-OCs (for themselves and on behalf of the Underwriters) by 12 : 00 noon on Monday,
October 28, 2024 the Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, each other offering becoming
unconditional and not having been terminate d in accordance with its respective terms.
If the above conditions are not fulfilled or waived prior to the times and dates
specified, the Global Offering will lapse a nd 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 (
www.hkexnews.hk ) and on the website
of our Company ( www.lopal.com.cn ) on the next day following such lapse. In such situation,
all application monies will be returned, without i nterest, on the terms set forth in the section
headed ‘‘How to Apply for Hong Kong Offer Shares — D. Despatch/Collection of Share
Certificates and Refund of Application Monies’’ in this prospectus. In the meantime, all
application monies will be held in separate bank account(s) with the receiving banks or
other bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the
Laws of Hong Kong).
APPLICATION FOR LISTIN G ON THE STOCK EXCHANGE
We have applied to the Listing Committee of 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 additional Shares which may be issued pursuant to the exercise of
the Over-allotment Option).
Save for our A Shares which are listed on the Shanghai Stock Exchange, no part of our
equity or debt securities 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.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 505 ---
HS H A R E SW I L LB EE L I G I B L EF O RC C A S S
All necessary arrangements have been made to enable the H Shares to be admitted into
CCASS. If the Stock Exchange grants the listing of, and permission to deal in, our H Shares
and our Company complies 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 Lis ting Date or any other date HKSCC chooses.
Settlement of transactions between particip ants of the 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 the
HKSCC Operational Procedures in effect from time to time.
DEALING ARRANGEMENTS
Assuming that the Hong Kong Public Offering becomes unconditional at or before
8 : 00 a.m. in Hong Kong on Wednesday, Octobe r 30, 2024, it is expected that dealings in
our H Shares on the Stock Exchange will commence at 9 : 00 a.m. on Wednesday, October
30, 2024.
Our H Shares will be traded in board lots of 500 H Shares each and the stock code of
t h eHS h a r e si s2 4 6 5 .
STRUCTURE OF THE GLOBAL OFFERING
–4 9 5–


--- page 506 ---
IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering and below are the procedures for application.
This prospectus is available at the website of the Hong Kong Stock Exchange at
www.hkexnews.hk under the ‘‘HKEXnews > Ne w Listings > New Listing Information’’
section, and our website at www.lopal.com.cn.
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:
. a r e1 8y e a r so fa g eo ro l d e r ;a n d
. h a v eaH o n gK o n ga d d r e s s(for the White Form eIPO service only) .
Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer
Shares if you or the person(s) for whose benefit you are applying for:
. are an existing Shareholder or close associates; or
. are a Director or any of his/her close associates.
2. Application Channels
The Hong Kong Public Offering period will begin at 9 : 00 a.m. on Tuesday, October
22, 2024 and end at 12 : 00 noon on Friday, October 25, 2024 (Hong Kong time).
HOW TO APPLY FOR HONG KONG OFFER SHARES
–4 9 6–


--- page 507 ---
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 Tuesday,
October 22, 2024 to 11 : 30
a.m. on Friday, October
25, 2024, Hong Kong time.
The latest time for
completing full payment of
application monies will be
12 : 00 noon on Friday,
October 25, 2024, Hong
Kong time.
HKSCC EIPO
channel .......
Your broker or
custodian who is a
HKSCC Participant
will submit an
electronic
application
instruction 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
i nt h en a m eo fH K S C C
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
m a yv a r yb y 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 p eriod to apply for Hong Kong Offer Shares.
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 a r eg i v e n ,y o us h a l lb ed e e m e d
to have declared that only one set of electronic application instructions has been given
for your benefit. If you are an agent for another person, you shall be deemed to have
declared that you have only given one set of electronic application instructions for the
benefit of the person for whom you are an agent and that you are duly authorized to
give those instructions as an agent.
For the avoidance of doubt, giving an application instruction under the White
Form eIPO service more than once and obtaining different application reference
numbers without effecting full payment in re spect of a particular reference number will
not constitute an actual application.
HOW TO APPLY FOR HONG KONG OFFER SHARES
–4 9 7–


--- page 508 ---
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 seve rally) 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.
3 . I n f o r m a t i o nR e q u i r e dt oA p p l y
You must provide the following in formation with your application:
For Individual/Joint Applicants For Corporate Applicants
. Full name(s)
2 a ss h o w no ny o u r
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 a ss h o w no ny o u r
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
HOW TO APPLY FOR HONG KONG OFFER SHARES
–4 9 8–


--- page 509 ---
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 requi rements as described in Note 2 below. In particular,
where you cannot provide a HKID number, you m ust 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 b e 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 Hong Kong Offer
Shares. Similarly for corporate applicants, a LEI num ber must be used if an entity has a LEI certificate.
3. If the applicant is a trustee, the client identification data (‘‘ CID’’) of the trustee, as set out above, will be
required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID of
the asset management company or the individual f und, 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 4
1 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 jurisdicti on, 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) th e principal business of that company is dealing in
securities; and (ii) you exercise statutory control ove r that company, then the application will be treated as
being for your benefit and you should provide the re quired information in your application as stated
above.
‘‘Unlisted company’’ means a company with no equity securities listed on the Hong Kong 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 specifi ed amount in a distribution of either profits or
capital).
1 Subject to change, if the Company’s Articles of Inc orporation and applicable company law prescribe a
lower cap.
HOW TO APPLY FOR HONG KONG OFFER SHARES
–4 9 9–


--- page 510 ---
For those applying through HKSCC EIPO channel, and making an application
under a power of attorney, we and the Sponsor-OCs, as our agents, have discretion to
consider whether to accept it on any conditio ns we think fit, including evidence of the
attorney’s authority.
Failing to provide any required information may result in your application being
rejected.
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size :5 0 0 H S h a r e s
Permitted number of
Hong Kong Offer
Shares for application
and amount payable
on application/
successful allotment
: Hong Kong Offer Shares are available for
application in specified board lot sizes only. Please
refer to the amount payable associated with each
specified board lot size in the table below.
The maximum Offer Price is HK$7.0 per 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 final Offer Price, brokerage
of 1.0%, SFC transaction levy of 0.0027%, the
Stock Exchange trading fee of 0.00565% and the
AFRC transaction levy of 0.00015% 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 Shares you have
selected. You must pay the respective maximum
amount payable on application in full upon
application for Hong Kong Offer Shares.
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 0–


--- page 511 ---
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
H K $H K $H K $H K $
500 3,535.30 7,000 49,494.16 50,000 353,529.76 700,000 4,949,416.50
1,000 7,070.60 8,000 56,564.75 60,000 424,235.70 800,000 5,656,476.00
1,500 10,605.89 9,000 63,635.35 70,000 494,941.66 900,000 6,363,535.50
2,000 14,141.19 10,000 70,705.96 80,000 565,647.60 1,000,000 7,070,595.00
2,500 17,676.49 15,000 106,058.93 90,000 636,353.56 2,000,000 14,141,190.00
3,000 21,211.79 20,000 141,411.90 100,000 707,059.50 3,000,000 21,211,785.00
3,500 24,747.08 25,000 176,764.88 200,000 1,414,119.00 4,000,000 28,282,380.00
4,000 28,282.38 30,000 212,117.86 300,000 2,121,178.50 5,000,000
(1) 35,352,975.00
4,500 31,817.68 35,000 247,470.83 400,000 2,828,238.00
5,000 35,352.98 40,000 282,823.80 500,000 3,535,297.50
6,000 42,423.56 45,000 318,176.78 600,000 4,242,357.00
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is 50% of the Hong Kong Offer
Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and
AFRC transaction levy. If your application is su ccessful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee
and AFRC transaction levy will be paid to the Stock Exchange (in the case of the SFC transaction levy,
collected by the Stock Exchange on behalf of the SFC; and in the case of the AFRC transaction levy,
collected by the Stock Exchange on behalf of the AFRC).
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.
Multiple applications ma de 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 for a ny 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 authorise us
and/or the Sponsor-OCs, as our agents, 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
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 1–


--- page 512 ---
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
e n t e r e di n t ow i t hy o u rbroker 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 restr ictions on offers and sales of shares set
out in this prospectus and they do not apply to you, or the person(s) for
whose benefit you have made the application;
(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;
(vi) agree that 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 Hong Kong Stock
Exchange, the SFC and any other statutory regulatory or governmental
bodies or otherwise as required by laws, rules or regulations, for the purposes
under the paragraph headed ‘‘— G. Personal Data — 3. Purposes and 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, H KSCC 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
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 2–


--- page 513 ---
Share Registrar by way of publication of the results at the time and in the
m a n n e ra ss p e c i f i e di nt h ep a r a g r a p hheaded ‘‘— 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) Ordin ance, the Articles of Association and
laws of any place outside Hong Kong that apply to your application and that
neither we nor the Relevant Persons will breach any law inside and/or outside
Hong Kong as a result of the acceptance of your offer to purchase, or any
action arising from your rights a nd 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 the Company, any of the
directors, chief executives, substa ntial Shareholder(s) or existing
shareholder(s) of the Company or any of its subsidiaries or any of their
respective close associates; and (b) you are not accustomed or will not be
accustomed to taking instructions from the Company, any of the directors,
chief executives, substantial shareholde r(s) or existing shareholder(s) of the
C o m p a n yo ra n yo fi t ss u b s i d i a r i e so ra n yo ft h e i rr e s p e c t i v ec l o s ea s s o c i a t e s
in relation to the acquisition, dispo sal, voting or other disposition of the
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 Sponsor-OCs 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;
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 3–


--- page 514 ---
(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 H Share Registrar 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 (2) you have due authority to give electronic
application instructions on behalf of that other person as its agent.
B. PUBLICATION OF RESULTS
Results of Allocation
You can check whether you are successf ully allocated any Hong Kong Offer
Shares through:
Platform Date/Time
Applying through White Form eIPO service or HKSCC EIPO channel:
W e b s i t e.... T h ed e s i g n a t e dr e s u l t so fa l l o c a t i o na t
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment )w i t ha
‘‘search by ID’’ function.
24 hours, from 11 : 00 p.m. on
Tuesday October 29, 2024 to
12 : 00 midnight on Monday,
November 4, 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 Hong Kong Stock Exchange’s website at
www.hkexnews.hk and our website at
www.lopal.com.cn which will provide links to
the above mentioned websites of the H Share
Registrar.
No later than 11 : 00 p.m. on
Tuesday, October 29, 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., on Wednesday,
October 30, 2024, Thursday,
October 31, 2024, Friday,
November 1, 2024 and
Monday, November 4, 2024
(Hong Kong time)
For those applying through HKSCC EIPO channel, you may also check with your broker or
custodian from 6 : 00 p.m. on Monday, October 28, 2024 (Hong Kong time).
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 4–


--- page 515 ---
HKSCC Participants can log into FINI and review the allotment result from 6 : 00
p.m. on Monday, October 28, 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 results of the fin al Offer Price, the level of indications
of interest in the International Offering, the level of applications in the Hong Kong
Public Offering and the basis of allocations of Hong Kong Offer Shares on the Hong
Kong Stock Exchange’s website at
www.hkexnews.hk and our website at
www.lopal.com.cn by no later than 11 : 00 p.m. on Tuesday, October 29, 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 m ade by HKSCC Nominees on your behalf
may be revoked pursuant to Section 44A ( 6 )o ft h eC o m p a n i e s( W i n d i n gU pa n d
Miscellaneous Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Sponsor-OCs, the H Share Registrar and their respective agents and
nominees have full discretion to reject or a ccept any application, or to accept only part
of any application, without giving any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Hong Kong Stock
Exchange does not grant permission to list 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 Hong Kong Stock Exchange
notifies us of that longer period within three weeks of the closing date of the
application lists.
4. If:
. you make multiple applications or suspected multiple applications. You may
refer to the paragraph headed ‘‘— A. Applications for Hong Kong Offer
Shares — 5. Multiple Applications Pr ohibited’’ in this section on what
constitutes multiple applications;
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 5–


--- page 516 ---
. your application instr uction 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 Sponsor-OCs 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 Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold suffici ent application funds on deposit with their
Designated Bank before balloting. After balloting of Hong Kong Offer Shares, the
Receiving Bank(s) 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. I nt h ee x t r e m ee v e n to fm o n e y
settlement failure by a HKSCC Participant ( or its designated bank), who is acting on
your behalf in settling payment for your allotted shares, HKSCC will contact the
defaulting HKSCC Participant and its designated bank to determine the cause of
failure and request such defaulting HKSCC Participant to rectify or procure to rectify
the failure.
However, if it is determined that such se ttlement obligation cannot be met, the
affected Hong Kong Offer Shares will be rea llocated 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. DESPATCH/COLLECTION OF SHA RE CERTIFICATES AND REFUND OF
APPLICATION MONIES
You will receive one 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).
No temporary document of title will be issued in respect of the H Shares. No receipt
will be issued for sums paid on application.
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 6–


--- page 517 ---
H Share certificates will only become va lid evidence of title at 8 : 00 a.m. on
Wednesday, October 30, 2024 (Hong Kong time), provided that the Global Offering has
become unconditional and the right of term ination described in the section headed
‘‘Underwriting’’ has not been exercised. Investors who trade H Shares prior to the receipt of
H Share certificates or the H Share certificates becoming valid evidence of title do so
entirely at their own risk.
The right is reserved to retain any H Share cer tificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
The following sets out the re levant procedures and time:
White Form eIPO service HKSCC EIPO channel
Despatch/collection of H Share certificate 2
For physical share
certificates of
1,000,000 or more
Offer Shares issued
under your own
name ..........
Collection in person at Shops
1712–1716, 17th Floor,
Hopewell Centre, 183 Queen’s
Road East, Wan Chai, Hong
Kong
Time: from 9 : 00 a.m. to 1 : 00 p.m.
on Wednesday, October 30, 2024
(Hong Kong time)
If you are an individual, you must
not authorise any other person
to collect for you. If you are a
corporate applicant, your
authorised representative must
bear a letter of authorization
from your corporation stamped
with your corporation’s chop.
Both individuals and authorised
representatives must produce, at
the time of collection, evidence
of identity acceptable to the H
Share Registrar.
Note: If you do not collect your
H Share certificate(s)
personally within the time
above, it/they will be sent
to the address specified in
your application
instructions by ordinary
post at your own risk
H Share certificate(s) will be issued
i nt h en a m eo fH K S C C
Nominees, deposited into
CCASS and credited to your
designated HKSCC Participant’s
stock account
No action by you is required
2 Except in the event of Bad Weather Signals (as defined below) in force in Hong Kong in the morning on
the business day before the Listing Date rendering it im possible 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 share cer tificates in accordance with the contingency
arrangements as agreed between them. You may refer to ‘‘— E. Bad Weather Arrangements’’ in this
section.
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 7–


--- page 518 ---
White Form eIPO service HKSCC EIPO channel
For physical share
certificates of less
than 1,000,000 Offer
Shares issued under
your own name ...
Your H Share certificate(s) will be
sent to the address specified in
your application instructions by
ordinary post at your own risk
Time: Tuesday, October 29, 2024
Refund mechanism for surplus application monies paid by you
Date ............ W e d n e s d a y ,O c t o b e r3 0 ,2 0 2 4 S u b j e c tt ot h ea r r a n g e m e n t
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
despatched to the address as
specified in your application
instructions by ordinary post at
your own risk
E. BAD WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Friday, October 25, 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 Friday,
October 25, 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.
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 8–


--- page 519 ---
Prospective investors should be aware that a postponement of the opening/closing of
the application lists may result in a delay in the listing date. Should there be any changes to
the dates mentioned in the section headed ‘‘Expected Timetable’’ in this prospectus, an
announcement will be made and published on the Hong Kong Stock Exchange’s website at
www.hkexnews.hk and our website at www.lopal.com.cn of the revised timetable.
If a Bad Weather Signal is hoisted on Tuesday, October 29, 2024, the H Share
Registrar will make appropriate arrangements for the delivery of the share certificates to
the CCASS Depository’s service counter so that they would be available for trading on
Wednesday, October 30, 2024.
If a Bad Weather Signal is hoisted on Tuesday, October 29, 2024 :
. for physical share certificates of less than 1,000,000 Offer Shares issued under
your own name, despatch will be made by ordinary post when the post office
re-opens after the Bad Weather Signal is lowered or cancelled (e.g. in the
afternoon of Tuesday, October 29, 2024 or on Wednesday, October 30, 2024).
If a Bad Weather Signal is hoisted on Wednesday, October 30, 2024 :
. for physical share certificates of 1,000, 000 or more Offer Shares issued under your
own name, you may pick them up from the H Share Registrar’s office after the
Bad Weather Signal is lowered or cancelled (e.g. in the afternoon of Wednesday,
October 30, 2024 or on Thursday, October 31, 2024).
Prospective investors should be aware that if they choose to receive physical share
certificates issued in their own name, there may be a delay in receiving the share certificates.
F. ADMISSION OF THE H SHARES INTO CCASS
If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the
H Shares on the Hong Kong 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 wi th 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 t o 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 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 arrangem ents may affect your rights and interests.
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 0 9–


--- page 520 ---
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal
data collected and held by the Company, the H Share Registrar, the Receiving Bank(s)
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 inform ation. 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 S tatement informs the applicant for, and
holder of, Hong Kong Offer Shares, of the policies and practices of the 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).
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 the 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 the 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 despatch of H
Share certificate(s) to which you are entitled.
It is important that applicants for and holders of Hong Kong Offer Shares
inform the 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 applicab le, 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 an d regulations in Hong Kong and
elsewhere;
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 1 0–


--- page 521 ---
. 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 regi ster of members of the 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.;
. distributing communications from the Company and its subsidiaries;
. compiling statistical informatio n and profiles of the holder of the H
Shares;
. disclosing relevant information to fa cilitate claims on entitlements; and
. any other incidental or associated purposes relating to the above and/or to
enable the 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 the Company and the H Share Registrar relating to the
applicants for and holders of Hong Kong Offer Shares will be kept confidential but
the 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:
. the Company’s appointed agents such as financial advisers, receiving
bank(s) and overseas principal share registrar;
. HKSCC or HKSCC Nominees, who will use the personal data and may
transfer the personal data to the H Share Registrar, in each case for the
purposes of providing its services or fa cilities 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-p arty service providers who offer
administrative, telecommunication s, computer, payment or other services
to the Company or the H Share Registrar in connection with their
respective business operation;
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 1 1–


--- page 522 ---
. the Hong Kong Stock Exchange, the SFC and any other statutory
regulatory or governmental bodies or otherwise as required by laws, rules
or regulations, including for the purpose of the Hong Kong Stock
Exchange’s administration of the Hong Kong 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.
5. Retention of Personal Data
The 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 fulfil
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 the 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. The 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 the Company and the H Share Registrar, at their registered
address disclosed in the section headed ‘‘C orporate Information’’ in this prospectus
or as notified from time to time, for the atte ntion of the joint company secretary, or
the H Share Registrar for the attention of the privacy compliance officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
–5 1 2–


--- page 523 ---
The following is the text of a report set out on pages IA-1 to IA-116, prepared for
inclusion in this document, received from the independent reporting accountants of the
Company, Moore CPA Limited, Certified Public Accountants, Hong Kong.
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF JIANGSU LOPAL TECH. CO., LTD., GUOTAI JUNAN CAPITAL
LIMITED AND HALCYON CAPITAL LIMITED
Introduction
We report on the historical financial inform ation of Jiangsu Lopal Tech. Co., Ltd. (the
‘‘Company ’’) and its subsidiaries (together, the ‘‘ Group ’’) set out on pages IA-4 to IA-116,
which comprises the consolidat ed statements of profit or loss and other comprehensive
income, consolidated statements of changes in equity and consolidated statements of cash
flows of the Group for each of the years ended 31 December 2021, 2022 and 2023 and the six
months ended 30 June 2024 (the ‘‘ Track Record Period ’’), the consolidated statements of
financial position of the Group as at 31 December 2021, 2022 and 2023 and 30 June 2024,
the statements of financial position of the Company as at 31 December 2021, 2022 and 2023
and 30 June 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-116 fo rms an integral part of this report, which has
been prepared for inclusion in the documen t of the Company dated 22 October 2024 (the
‘‘Document ’’) 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 H istorical 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 to the Historical F inancial 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 mate rial 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 (‘‘ HKSIR 200 ’’)
‘‘Accountants’ Reports on Historical Financial Information in Investment Circulars’’
issued by the Hong Kong Institute of Certified Public Accountants (‘‘ HKICPA ’’). This
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1–


--- page 524 ---
standard requires that we comply with ethical standards and plan and perform our work to
obtain reasonable assurance about whether t he Historical Financial Information is free
from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountants’ judgment, including the assessment of risks of material misstatement
of the Historical Financial In formation, whether due to fraud or error. In making those risk
assessments, the reporting accountants consi der 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 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 estimate s 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 consolidated financial position of the Group
as at 31 December 2021, 2022 and 2023 and 30 Jun e 2024 and the financial position of the
Company as at 31 December 2021, 2022 and 2023 and 30 June 2024 and of the consolidated
financial performance and consolidated cash flows of the Group for the Track Record
Period in accordance with the basis of prep aration set out in Note 2 to the Historical
Financial Information.
Review of stub period comparative financial information
We have reviewed the stub period comparative financial information of the Group
which comprises the consolidated statement of profit or loss and other comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash
flows of the Group for the six months ended 30 June 2023 and other explanatory
information (the ‘‘ Stub Period Comparative Financial Information ’’). The directors of the
Company are responsible for the preparation and presentation of the Stub Period
Comparative Financial Information in accord ance with the basis of preparation set out
in Note 2 to the Historical Financial Information. Our responsibility is to express a
conclusion on the Stub Period 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 Informat ion 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 awar e of all significant matters that might be
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 2–


--- page 525 ---
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 Stub Period
Comparative Financial Information, for the purposes of the accountant’s report, is not
prepared, in all material respects, in accordance with the basis of preparation set out in
Note 2 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 13 to the Historical Financial Information which contains
information about the dividends paid by th e Company in respect of the Track Record
Period.
Yours faithfully,
Moore CPA Limited
Certified Public Accountants
Pak Chi Yan
Practising Certificate Number: P06923
Hong Kong, 22 October 2024
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 3–


--- page 526 ---
I. HISTORICAL FINANCIAL INFORMATION
Preparation of the Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part
of this accountants’ report.
The consolidated financial statements of the Group for the Track Record Period,
on which the Historical Financial Information is based, have been prepared in
accordance with IFRS Accounting Standards (‘‘ IFRSs ’’) issued by International
Accounting Standards Board (the ‘‘ IASB ’’) and were audited by Moore CPA Limited
in accordance with Hong Kong Standards on Auditing 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
–I A - 4–


--- page 527 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
Year ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue . . . . . . . . . . . . . . . . . 6 4,053,505 14,071,643 8,729,479 3,814,204 3,568,612
Cost of sales . . . . . . . . . . . . . . (2,973,747) (11,638,338) (8,786,960) (4,055,637) (3,224,638)
Gross profit/(loss) . . . . . . . . . . 1,079, 758 2,433,305 (57,481) (241,433) 343,974
Other income, gains and losses. . 7 37,316 95,335 92,288 72,711 134,067
(Impairment losses)/reversal of
impairment loss on financial
assets . . . . . . . . . . . . . . . . . (23,134) (70,362) (18,966) 36,334 30,458
Selling and distribution expenses (172,759) (176,859) (196,537) (105,676) (80,664)
Administrative expenses . . . . . . (156,470) (319,796) (868,973) (350,699) (262,110)
Research and development
expenses . . . . . . . . . . . . . . . (207,953) (615,549) (485,724) (265,631) (203,587)
Share of results of associates . . . (279) 16,956 (23,583) (2,657) (11,877)
Finance costs . . . . . . . . . . . . . 8 (49,757) (202,143) (261,377) (108,457) (130,395)
Listing expenses. . . . . . . . . . . . — — (10,216) (7,030) (13,395)
Profit/(loss) before taxation . . . . 506,722 1,160,887 (1,830,569) (972,538) (193,529)
Income tax (expense)/credit . . . . 10 (73,304) (130,941) 316,368 161,051 (66,691)
Profit/(loss) for the year/period . . 433,418 1,029,946 (1,514,201) (811,487) (260,220)
OTHER COMPREHENSIVE
INCOME/(EXPENSE)
Item that may be reclassified
subsequently to profit or loss:
Exchange differences arising on
translation of foreign
o p e r a t i o n s .............. 5 1 9 0 1 3 3 ( 8 0 ) ( 1 , 0 8 3 )
Change in the fair value on
hedging instruments designated
as cash flow hedges . . . . . . . — — (2,025) — (837)
Other comprehensive income/
(expense) for the year/period . . 5 190 (1,892) (80) (1,920)
TOTAL COMPREHENSIVE
INCOME/(EXPENSE)
FOR THE YEAR/PERIOD . . 433,423 1,030,136 (1,516,093) (811,567) (262,140)
PROFIT/(LOSS) FOR THE
YEAR/PERIOD
ATTRIBUTABLE TO:
Owners of the Company . . . . . . 351,103 752,897 (1,233,291) (654,008) (217,820)
Non-controlling interests . . . . . . 82,315 277,049 (280,910) (157,479) (42,400)
433,418 1,029,946 (1,514,201) (811,487) (260,220)
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5–


--- page 528 ---
Year ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
TOTAL COMPREHENSIVE
INCOME/(EXPENSE) FOR
THE YEAR/PERIOD
ATTRIBUTABLE TO:
Owners of the Company . . . . . . 351,108 753,087 (1,234,799) (654,073) (219,218)
Non-controlling interests . . . . . . 82,315 277,049 (281,294) (157,494) (42,922)
433,423 1,030,136 (1,516,093) (811,567) (262,140)
EARNINGS/(LOSS) PER
SHARE ............... 1 4
B a s i c( R M B ) .............. 0 . 7 3 1 . 4 3 ( 2 . 1 9 ) ( 1 . 1 6 ) ( 0 . 3 9 )
D i l u t e d( R M B ) ............ 0 . 7 3 1 . 4 2 ( 2 . 1 9 ) ( 1 . 1 6 ) ( 0 . 3 9 )
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6–


--- page 529 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 31 December
As at
30 June
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Property, plant and equipment . . . . . . . . . . . . 15 1,606,051 3,535,014 6,359,929 6,806,366
Right-of-use assets . . . . . . . . . . . . . . . . . . . . 16 268,886 573,875 1,286,193 1,255,843
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . 17 390,074 362,599 289,826 264,577
Other intangible assets . . . . . . . . . . . . . . . . . 18 39,924 45,047 68,217 58,955
Interests in associates . . . . . . . . . . . . . . . . . . 19 62,721 119,677 74,490 62,613
Financial assets at fair value through other
comprehensive income . . . . . . . . . . . . . . . . 21 92,450 92,450 141,450 141,450
Deferred tax assets . . . . . . . . . . . . . . . . . . . . 31 20,244 62,296 392,691 355,187
Trade and other receivables . . . . . . . . . . . . . . 23 106,640 630,010 226,733 64,927
Total non-current assets . . . . . . . . . . . . . . . . 2,586,990 5,420,968 8,839,529 9,009,918
CURRENT ASSETS
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 22 1,100,586 3,007,275 1,610,238 1,647,787
Trade and other receivables . . . . . . . . . . . . . . 23 1,556,172 4,195,192 3,395,047 3,337,159
T a xr e c o v e r a b l e ...................... 8 , 2 7 9 6 , 8 1 8 1 4 , 2 1 4 1 5 , 6 5 3
Financial assets at fair value through
p r o f i to rl o s s ...................... 2 1 4 3 1 3 0 , 7 3 8 5 9 , 5 2 7 8 4 1 , 1 2 6
Derivative financial instruments . . . . . . . . . . . 24 — — 950 56
Pledged bank deposits. . . . . . . . . . . . . . . . . . 25 19,499 500,308 350,726 87,612
Cash and cash equivalents . . . . . . . . . . . . . . . 25 833,133 1,529,373 2,958,603 2,285,939
Total current assets . . . . . . . . . . . . . . . . . . . 3,518,100 9,269,704 8,389,305 8,215,332
CURRENT LIABILITIES
Trade and other payables . . . . . . . . . . . . . . . 26 927,502 2,246,764 2,902,805 2,431,671
T a xp a y a b l e ........................ 5 9 , 1 1 7 8 2 , 5 0 9 4 , 9 3 4 1 8 , 4 3 6
Bank and other borrowings . . . . . . . . . . . . . . 28 1,075,631 4,039,370 6,405,976 6,071,229
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . 29 157,431 297,391 294,752 220,759
Derivative financial instruments . . . . . . . . . . . 24 — — 4,062 3,434
Contract liabilities . . . . . . . . . . . . . . . . . . . . 27 60,186 425,740 21,940 30,127
D e f e r r e di n c o m e ..................... 3 0 5 , 2 9 1 9 , 3 3 7 1 0 , 2 9 8 1 4 , 3 4 6
Total current liabilities . . . . . . . . . . . . . . . . . 2,285,158 7,101,111 9,644,767 8,790,002
NET CURRENT ASSETS/(LIABILITIES) . . . . 1,232,942 2,168,593 (1,255,462) (574,670)
TOTAL ASSETS LESS CURRENT
LIABILITIES . . . . . . . . . . . . . . . . . . . . . 3,819,932 7,589,561 7,584,067 8,435,248
NON-CURRENT LIABILITIES
Deferred tax liabilities . . . . . . . . . . . . . . . . . 31 10,055 8,522 8,826 10,077
Bank and other borrowings . . . . . . . . . . . . . . 28 1,072,973 1,586,476 2,520,719 3,406,324
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . 29 188,751 360,602 795,418 893,635
Deferred income . . . . . . . . . . . . . . . . . . . . . 30 32,890 24,497 78,038 112,835
Total non-current liabilities . . . . . . . . . . . . . . 1,304,669 1,980,097 3,403,001 4,422,871
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . 2,515,263 5,609,464 4,181,066 4,012,377
EQUITY
Share capital . . . . . . . . . . . . . . . . . . . . . . . . 32 482,091 565,079 565,079 565,079
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1,512,037 4,157,561 2,887,288 2,472,608
Total equity attributable to owners of the
Company . . . . . . . . . . . . . . . . . . . . . . . . 1,994,128 4,722,640 3,452,367 3,037,687
Non-controlling interests . . . . . . . . . . . . . . . . 521,135 886,824 728,699 974,690
Total equity . . . . . . . . . . . . . . . . . . . . . . . . 2,515,263 5,609,464 4,181,066 4,012,377
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7–


--- page 530 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
As at 31 December
As at
30 June
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Property, plant and equipment . . . . . . . . . . . . 15 138,981 157,741 109,926 109,788
Right-of-use assets . . . . . . . . . . . . . . . . . . . . 16 18,571 45,495 44,464 43,949
Other intangible assets . . . . . . . . . . . . . . . . . 18 12,032 13,165 10,714 11,902
Investments in subsidiaries . . . . . . . . . . . . . . 20 1,372,178 3,174,821 3,645,810 3,936,449
Financial assets at fair value through other
comprehensive income . . . . . . . . . . . . . . . . 21 80,000 80,000 129,000 129,000
Deferred tax assets . . . . . . . . . . . . . . . . . . . . 31 3,345 6,285 6,260 8,871
Trade and other receivables . . . . . . . . . . . . . . 23 4,807 — 4,838 3,972
Total non-current assets . . . . . . . . . . . . . . . . 1,629,914 3,477,507 3,951,012 4,243,931
CURRENT ASSETS
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 22 171,224 126,460 20,103 16,458
Trade and other receivables . . . . . . . . . . . . . . 23 1,083,838 1,587,406 1,301,551 808,361
T a xr e c o v e r a b l e ...................... 5 , 0 0 8 3 , 1 4 9 — —
Financial assets at fair value through
p r o f i to rl o s s ...................... 2 1 4 3 1 3 0 , 7 3 8 5 9 , 5 2 7 3 8 0 , 7 7 6
Pledged bank deposits. . . . . . . . . . . . . . . . . . 25 3,092 9,855 228 229
Cash and cash equivalents . . . . . . . . . . . . . . . 25 280,872 454,911 1,715,079 1,364,893
Total current assets . . . . . . . . . . . . . . . . . . . 1,544,465 2,212,519 3,096,488 2,570,717
CURRENT LIABILITIES
Trade and other payables . . . . . . . . . . . . . . . 26 163,191 312,315 58,284 201,933
Bank and other borrowings . . . . . . . . . . . . . . 28 905,251 1,207,296 3,040,536 2,699,951
Contract liabilities . . . . . . . . . . . . . . . . . . . . 27 10,903 10,253 576 839
D e f e r r e di n c o m e ..................... 3 0 9 5 1 1 , 5 7 1 1 , 5 7 1 1 , 5 7 1
Total current liabilities . . . . . . . . . . . . . . . . . 1,080,296 1,531,435 3,100,967 2,904,294
NET CURRENT ASSETS/(LIABILITIES) . . . . 464,169 681,084 (4,479) (333,577)
TOTAL ASSETS LESS CURRENT
LIABILITIES . . . . . . . . . . . . . . . . . . . . . 2,094,083 4,158,591 3,946,533 3,910,354
NON-CURRENT LIABILITIES
Bank and other borrowings . . . . . . . . . . . . . . 28 294,000 173,000 — —
D e f e r r e di n c o m e ..................... 3 0 2 , 6 0 6 2 , 5 7 1 9 9 9 2 1 3
Total non-current liabilities . . . . . . . . . . . . . . 296,606 175,571 999 213
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1,797,477 3,983,020 3,945,534 3,910,141
EQUITY
Share capital . . . . . . . . . . . . . . . . . . . . . . . . 32 482,091 565,079 565,079 565,079
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1,315,386 3,417,941 3,380,455 3,345,062
Total equity . . . . . . . . . . . . . . . . . . . . . . . . 1,797,477 3,983,020 3,945,534 3,910,141
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8–


--- page 531 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the parent
Share
capital
Capital
reserve
Treasury
share
Translation
reserve
Share based
payment
reserve
Hedging
reserve
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 32) (Note 33) (Note 33) (Note 33) (Note 36) (Note 33)
At 1 January 2021 . .......... 344,368 933,085 (7,892) (39) 7,892 — 57,615 589,069 1,924,098 191,158 2,115,256
Profit and total comprehensive income
f o rt h ey e a r ............. — —————— 3 5 1 , 1 0 3 3 5 1 , 1 0 3 8 2 , 3 1 5 4 3 3 , 4 1 8
Exchange differences arising on
t r a n s l a t i o n o f f o r e i g n o p e r a t i o n s ——— 5———— 5— 5
Total comprehensive income
f o rt h ey e a r ............. — — — 5 — — — 3 5 1 , 1 0 3 3 5 1 , 1 0 8 8 2 , 3 1 5 4 3 3 , 4 2 3
A p p r o p r i a t i o n t o s t a t u t o r y r e s e r v e . . —————— 1 0 , 4 8 1 ( 1 0 , 4 8 1 ) ———
D i v i d e n d sp a i d( N o t e1 3 )....... — —————— ( 6 0 , 9 5 0 ) ( 6 0 , 9 5 0 ) — ( 6 0 , 9 5 0 )
Dividends paid to the non-controlling
interests (‘‘ NCI ’ ’ ) o f s u b s i d i a r i e s . ————————— ( 1 1 , 7 6 8 ) ( 1 1 , 7 6 8 )
Appropriation to maintenance and
p r o d u c t i o nf u n d s .......... — ————— 1 , 5 4 4 ( 1 , 5 4 4 ) ———
Utilisation of maintenance and
p r o d u c t i o nf u n d s .......... — ————— ( 1 , 2 8 0 ) 1 , 2 8 0———
Repurchase of shares (Note 32(a)) . . (17) (73) 90 — (95) — — 95 — — —
Convert capital reserve to share
c a p i t a l( N o t e3 2 ( b ) )........ 137,740 (137,740) —————————
Restricted stock circulation
( N o t e3 6 ) .............. — 7 , 7 9 7 7 , 8 0 2 — ( 7 , 7 9 7 ) — — — 7 , 8 0 2 — 7 , 8 0 2
Increase in NCI as a result of
a c q u i s i t i o n o f s u b s i d i a r i e s . . . . . ————————— 3 1 , 5 0 0 3 1 , 5 0 0
Deemed disposal of subsidiaries
without loss of control
( N o t e4 1 ( a ) ) ............. — 117,070 —————— 1 1 7 , 0 7 0 2 2 7 , 9 3 0 3 4 5 , 0 0 0
Recognition of financial liability
arising from put option held by
N C I( N o t e2 8 ( b ) ) ......... — ( 345,000) —————— ( 3 4 5 , 0 0 0 ) — ( 3 4 5 , 0 0 0 )
At 31 December 2021 ......... 482,091 575,139 — (34) — — 68,360 868,572 1,994,128 521,135 2,515,263
At 1 January 2022 . .......... 482,091 575,139 — (34) — — 68,360 868,572 1,994,128 521,135 2,515,263
Profit and total comprehensive income
f o rt h ey e a r ............. — —————— 7 5 2 , 8 9 7 7 5 2 , 8 9 7 2 7 7 , 0 4 9 1 , 0 2 9 , 9 4 6
Exchange differences arising on
t r a n s l a t i o n o f f o r e i g n o p e r a t i o n s ——— 1 9 0———— 1 9 0— 1 9 0
Total comprehensive income
f o rt h ey e a r ............. — — — 1 9 0 — — — 7 5 2 , 8 9 7 7 5 3 , 0 8 7 2 7 7 , 0 4 9 1 , 0 3 0 , 1 3 6
A p p r o p r i a t i o n t o s t a t u t o r y r e s e r v e . . —————— 1 2 , 2 7 0 ( 1 2 , 2 7 0 ) ———
D i v i d e n d sp a i d( N o t e1 3 )....... — —————— ( 1 0 5 , 1 0 5 ) ( 1 0 5 , 1 0 5 ) — ( 1 0 5 , 1 0 5 )
Dividends paid to the NCI of
s u b s i d i a r i e s ............. — ———————— ( 2 4 , 1 9 2 ) ( 2 4 , 1 9 2 )
Appropriation to maintenance and
p r o d u c t i o nf u n d s .......... — ————— 9 5 9 ( 9 5 9 ) ———
Utilisation of maintenance and
p r o d u c t i o nf u n d s .......... — ————— ( 9 8 5 ) 9 8 5———
Issue of shares (Note 32(c)) ...... 8 2 , 9 8 8 2 , 092,544 —————— 2 , 1 7 5 , 5 3 2— 2 , 1 7 5 , 5 3 2
Recognition of equity-settled
share-based payments
( N o t e3 6 ) .............. — — — — 4 , 4 3 2 — — — 4 , 4 3 2 — 4 , 4 3 2
R e p u r c h a s e o f s h a r e s ( N o t e 3 2 ( d ) ) . . —— ( 1 1 , 9 9 8 ) ————— ( 1 1 , 9 9 8 ) — ( 1 1 , 9 9 8 )
Increase in NCI as result of
acquisition of additional interest
in subsidiary without change in
c o n t r o l( N o t e4 1 ( b ) ) ........ — ( 8 7 , 4 3 6 ) —————— ( 8 7 , 4 3 6 ) 8 7 , 4 3 6—
Acquisition of subsidiary
( N o t e3 5 ( b ) ) ............. — ———————— 2 5 , 3 9 6 2 5 , 3 9 6
At 31 December 2022 ......... 565,079 2,580,247 (11,998) 156 4,432 — 80,604 1,504,120 4,722,640 886,824 5,609,464
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9–


--- page 532 ---
Attributable to owners of the parent
Share
capital
Capital
reserve
Treasury
share
Translation
reserve
Share based
payment
reserve
Hedging
reserve
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 32) (Note 33) (Note 33) (Note 33) (Note 36) (Note 33)
At 1 January 2023 . .......... 565,079 2,580,247 (11,998) 156 4,432 — 80,604 1,504,120 4,722,640 886,824 5,609,464
Loss and total comprehensive expense
f o rt h ey e a r ............. — —————— ( 1 , 2 3 3 , 2 9 1 ) ( 1 , 2 3 3 , 2 9 1 ) ( 2 8 0 , 9 1 0 ) ( 1 , 5 1 4 , 2 0 1 )
Change in fair value on hedging
instruments designated as cash
f l o wh e d g e s............. — ———— ( 1 , 6 1 2 ) —— ( 1 , 6 1 2 ) ( 4 1 3 ) ( 2 , 0 2 5 )
Exchange differences arising on
t r a n s l a t i o n o f f o r e i g n o p e r a t i o n s ——— 1 0 4———— 1 0 42 9 1 3 3
Total comprehensive expense
f o rt h ey e a r ............. — — — 1 0 4 — ( 1 , 6 1 2 ) — ( 1 , 2 3 3 , 2 9 1 ) ( 1 , 2 3 4 , 7 9 9 ) ( 2 8 1 , 2 9 4 ) ( 1 , 5 1 6 , 0 9 3 )
Dividends paid to the NCI of
s u b s i d i a r i e s ............. — ———————— ( 5 , 7 1 2 ) ( 5 , 7 1 2 )
Appropriation to maintenance and
p r o d u c t i o nf u n d s .......... — ————— 9 5 4 ( 9 5 4 ) ———
Utilisation of maintenance and
p r o d u c t i o nf u n d s .......... — ————— ( 9 2 2 ) 9 2 2———
Recognition of equity-settled
share-based payments (Note 36) . — — — — 2,682 — — — 2,682 — 2,682
Transfer upon lapsed of share option — — — — (4,432) — — 4,432 — — —
R e p u r c h a s e o f s h a r e s ( N o t e 3 2 ( e ) ) . . —— ( 3 8 , 2 7 5 ) ————— ( 3 8 , 2 7 5 ) — ( 3 8 , 2 7 5 )
C o n t r i b u t i o nf r o mN C I ........ — ———————— 1 2 9 , 0 0 0 1 2 9 , 0 0 0
Deemed partial disposal of interest in
subsidiaries without losing control
( N o t e4 1 ( a ) ) ............. — 1 1 9 —————— 1 1 9 ( 1 1 9 ) —
At 31 December 2023 ......... 565,079 2,580,366 (50,273) 260 2,682 (1,612) 80,636 275,229 3,452,367 728,699 4,181,066
At 1 January 2024 . .......... 565,079 2,580,366 (50,273) 260 2,682 (1,612) 80,636 275,229 3,452,367 728,699 4,181,066
Loss and total comprehensive expense
f o rt h ep e r i o d ............ — —————— ( 2 1 7 , 8 2 0 ) ( 2 1 7 , 8 2 0 ) ( 4 2 , 4 0 0 ) ( 2 6 0 , 2 2 0 )
Change in fair value on hedging
instruments designated as cash
f l o wh e d g e s............. — ———— ( 6 1 0 ) —— ( 6 1 0 ) ( 2 2 7 ) ( 8 3 7 )
Exchange differences arising on
t r a n s l a t i o n o f f o r e i g n o p e r a t i o n s ——— ( 7 8 8 ) ———— ( 7 8 8 ) ( 2 9 5 ) ( 1 , 0 8 3 )
Total comprehensive expense for the
p e r i o d ................ — — — ( 7 8 8 ) — ( 6 1 0 ) — ( 2 1 7 , 8 2 0 ) ( 2 1 9 , 2 1 8 ) ( 4 2 , 9 2 2 ) ( 2 6 2 , 1 4 0 )
Dividends paid to the NCI of
s u b s i d i a r i e s ............. — ———————— ( 4 , 2 7 3 ) ( 4 , 2 7 3 )
Appropriation to maintenance and
p r o d u c t i o nf u n d s .......... — ————— 4 , 0 2 4 ( 4 , 0 2 4 ) ———
Utilisation of maintenance and
p r o d u c t i o nf u n d s .......... — ————— ( 2 , 0 0 7 ) 2 , 0 0 7———
Recognition of equity-settled
share-based payments (Note 36) . — — — — 4,664 — — — 4,664 — 4,664
Deemed partial disposal of interest in
subsidiaries without losing control
( N o t e4 1 ( a ) ) ............. — 185,301 —————— 1 8 5 , 3 0 1 2 0 0 , 1 2 6 3 8 5 , 4 2 7
Recognition of financial liability
arising from put option held by
N C I( N o t e2 8 ( c ) ) .......... — ( 385,427) —————— ( 3 8 5 , 4 2 7 ) — ( 3 8 5 , 4 2 7 )
C o n t r i b u t i o nf r o mN C I ........ — ———————— 9 3 , 0 6 0 9 3 , 0 6 0
At 30 June 2024. . . .......... 565,079 2,380,240 (50,273) (528) 7,346 (2,222) 82,653 55,392 3,037,687 974,690 4,012,377
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0–


--- page 533 ---
Attributable to owners of the parent
Share
capital
Capital
reserve
Treasury
share
Translation
reserve
Share based
payment
reserve
Hedging
reserve
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 32) (Note 33) (Note 33) (Note 33) (Note 36) (Note 33)
At 1 January 2023 (Unaudited) . . . . 565,079 2,580,247 (11,998) 156 4,432 — 80,604 1,504,120 4,722,640 886,824 5,609,464
Loss and total comprehensive expense
f o rt h ep e r i o d ............ — —————— ( 6 5 4 , 0 0 8 ) ( 6 5 4 , 0 0 8 ) ( 1 5 7 , 4 7 9 ) ( 8 1 1 , 4 8 7 )
Exchange differences arising on
t r a n s l a t i o n o f f o r e i g n o p e r a t i o n s ——— ( 6 5 ) ———— ( 6 5 ) ( 1 5 ) ( 8 0 )
Total comprehensive expense
f o rt h ep e r i o d ............ — — — ( 6 5 ) — — — ( 6 5 4 , 0 0 8 ) ( 6 5 4 , 0 7 3 ) ( 1 5 7 , 4 9 4 ) ( 8 1 1 , 5 6 7 )
Dividends paid to the NCI of
s u b s i d i a r i e s ............. — ———————— ( 5 , 7 1 2 ) ( 5 , 7 1 2 )
Appropriation to maintenance and
p r o d u c t i o nf u n d s .......... — ————— 4 9 6 ( 4 9 6 ) ———
Utilisation of maintenance and
p r o d u c t i o nf u n d s .......... — ————— ( 3 8 4 ) 3 8 4———
Recognition of equity-settled
share-based payments
( N o t e3 6 ) .............. — — — — 1 2 , 9 0 7 — — — 1 2 , 9 0 7 — 1 2 , 9 0 7
Repurchase of shares
( N o t e3 2 ( e ) ) ............. — — ( 3 8 , 2 7 5 ) ————— ( 3 8 , 2 7 5 ) — ( 3 8 , 2 7 5 )
C o n t r i b u t i o nf r o mN C I ........ — ———————— 8 4 , 0 0 0 8 4 , 0 0 0
At 30 June 2023. . . .......... 565,079 2,580,247 (50,273) 91 17,339 — 80,716 850,000 4,043,199 807,618 4,850,817
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 1–


--- page 534 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Profit/(loss) before taxation . . . . 506,722 1,160,887 (1,830,569) (972,538) (193,529)
Adjustments for:
Finance costs . . . . . . . . . . . . . 8 49,757 202,143 261,377 108,457 130,395
Interest income . . . . . . . . . . . . 7 (3,897) (14,956) (31,335) (12,286) (12,273)
Share of results of associates . . . 279 (16,956) 23,583 2,657 11,877
Depreciation of property, plant
and equipment . . . . . . . . . . . 15 90,965 226,939 369,683 158,978 248,725
Depreciation of right-of-use
assets . . . . . . . . . . . . . . . . . 16 18,523 57,404 63,337 40,773 42,959
Amortisation of other intangible
assets . . . . . . . . . . . . . . . . . 18 4,114 6,115 20,001 6,630 13,151
Impairment losses on inventories 9 2,226 72,567 554,547 222,327 69,494
Impairment losses/(reversal of
impairment losses) on trade
receivables. . . . . . . . . . . . . . 9 18,578 68,498 4,188 (38,463) (31,787)
Impairment losses/(reversal of
impairment losses) on other
receivables. . . . . . . . . . . . . . 9 3,700 2,116 15,028 2,450 (725)
Impairment losses/(reversal of
impairment losses) on bills
receivables. . . . . . . . . . . . . . 9 856 (252) (250) (321) 2,054
Impairment losses on goodwill . . 9 — 28,881 72,773 1,406 25,249
Share based payment recognised . 36 — 4,432 2,682 12,907 4,664
Loss from disposal of property,
plant and equipment . . . . . . . 7 2,096 273 948 1,172 388
(Gain)/loss from changes in fair
value of financial assets at
FVTPL . . . . . . . . . . . . . . . . 7 (8,389) (16,288) (46,900) (15,357) 5,539
Loss from changes in fair value of
financial liabilities at FVTPL . 7 — — 106,250 24,884 16,355
Gain on early termination of
l e a s e s................. 7 — ( 1 4 , 0 7 8 ) — — ( 1 , 8 2 3 )
Gain on disposal of investment in
an associate. . . . . . . . . . . . . 7 — — (16,583) (16,583) —
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 2–


--- page 535 ---
Year ended 31 December
Six months ended
30 June
Note 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Operating cash flows before
movements in working
capital . . . . . . . . . . . . . . . . 685,530 1,767,725 (431,240) (472,907) 330,713
(Increase)/decrease in
inventories . . . . . . . . . . . . . (592,352) (1,979,256) 843,115 (167,134) (107,344)
(Increase)/decrease in trade and
other receivables . . . . . . . . . (141,110) (2,468,239) 787,813 408,787 240,350
(Decrease)/increase in trade and
other payables . . . . . . . . . . . (752,305) 604,779 656,043 (10,141) (423,208)
Increase/(decrease) in contract
liabilities . . . . . . . . . . . . . . . 29,465 365,554 (403,800) (165,165) 8,187
(Decrease)/increase in deferred
income . . . . . . . . . . . . . . . . (5,167) (4,347) 54,502 47,717 38,845
Cash (used in)/generated from
operations . . . . . . . . . . . . . . (775,939) (1,713,784) 1,506,433 (358,843) 87,543
Income tax paid. . . . . . . . . . . . (47,908) (149,673) (98,203) (80,844) (16,143)
Net cash (used in)/from operating
activities . . . . . . . . . . . . . . . (823,847) (1,863,457) 1,408,230 (439,687) 71,400
CASH FLOWS FROM
INVESTING ACTIVITIES
Interest received . . . . . . . . . . . 3,897 14,956 31,335 12,286 12,273
Proceeds from disposal of
property, plant and
equipment . . . . . . . . . . . . . . 19,031 12,886 380,213 947 1,056
Proceeds from disposal of
financial assets at fair value
through profit or loss
(‘‘FVTPL ’’) . . . . . . . . . . . . . 2,115,075 5,194,374 11,721,211 5,247,020 4,826,862
Purchase of property, plant and
equipment . . . . . . . . . . . . . . (657,791) (2,222,509) (3,166,764) (1,367,802) (558,590)
Purchase of other intangible
assets . . . . . . . . . . . . . . . . . (8,315) (11,238) (43,171) (38,139) (3,889)
Net cash (outflow)/inflow from
acquisition of subsidiaries . . . 35 (206,477) 144,650 — — —
Purchase of financial assets at fair
value through other
comprehensive income . . . . . . (12,450) — (49,000) — —
Purchase of financial assets at
FVTPL . . . . . . . . . . . . . . . . (2,014,667) (5,208,393) (11,703,100) (6,764,621) (5,614,000)
(Placement)/withdrawal of
pledged bank deposits . . . . . . (13,733) (480,809) 149,582 (147,672) 263,114
Purchase of interests in associates (63,000) (40,000) — — —
Withdrawal of bank deposit with
original maturity over three
m o n t h s . . . . . . . . . . . . . . . . 1 0 , 0 0 0————
Proceeds from disposal of
interests in an associate . . . . . — — 38,186 38,186 —
N e tc a s hu s e di ni n v e s t i n g
activities . . . . . . . . . . . . . . . (828,430) (2,596,083) (2,641,508) (3,019,795) (1,073,174)
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 3–


--- page 536 ---
Year ended 31 December
Six months ended
30 June
Note 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
CASH FLOWS FROM
FINANCING ACTIVITIES
Interest paid . . . . . . . . . . . . . . (41,215) (118,617) (219,083) (102,390) (113,603)
Addition of bank borrowings . . . 1,960,214 5,463,370 9,892,724 7,222,226 3,624,174
Repayment of bank borrowings . (585,600) (1,988,502) (6,701,306) (3,278,496) (3,474,481)
Repayment of lease liabilities . . . (13,571) (235,758) (407,711) (161,136) (180,111)
Dividend paid . . . . . . . . . . . . . 13 (60,950) (105,105) — — —
Dividend paid to non-controlling
interests of subsidiaries . . . . . (11,768) (24,192) (5,712) (5,712) (4,273)
Repurchase of shares . . . . . . . . 32 (90) (11,998) (38,275) (38,275) —
Deemed disposal of subsidiaries
without loss of control . . . . . 41(a) 345,000 — — — 385,427
Issuance of shares . . . . . . . . . . 32 — 2,175,532 — — —
Contribution from
non-controlling interest . . . . . — — 129,000 84,000 93,060
Net cash from financing
activities . . . . . . . . . . . . . . . 1,592,020 5,154,730 2,649,637 3,720,217 330,193
NET (DECREASE)/INCREASE
IN CASH AND CASH
EQUIVALENTS . . . . . . . . . (60,257) 695,190 1,416,359 260,735 (671,581)
Cash and cash equivalents at
beginning of the year/period. . 893,531 833,133 1,529,373 1,529,373 2,958,603
Effect of foreign exchange rate
changes, net . . . . . . . . . . . . (141) 1,050 12,871 2,570 (1,083)
CASH AND CASH
EQUIVALENTS AT END
OF THE YEAR/PERIOD,
REPRESENTING BANK
BALANCES AND CASH . . . . 25 833,133 1,529,373 2,958,603 1,792,678 2,285,939
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 4–


--- page 537 ---
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. GENERAL INFORMATION
Jiangsu Lopal Technology Co., Ltd. (the ‘‘ Company ’’) is a joint stock company with limited liability
established in the People’s Republic of China (hereafter, the ‘‘ PRC’’) on 11 March 2003. With the approval of
the China Securities Regulatory Commission, the Com pany completed its initial public offering and the
Company’s shares were listed on the Shanghai Stock Exchange (stock code: 603906.SH) on 10 April 2017. The
registered address of the office of the Company is 6 Hengtong Avenue, Nanjing Economic and Technological
Development Zone, Nanjing, Jiangsu Province.
The Company and its subsidiaries (collectively referred to as the ‘‘ Group ’’) are principally engaged in
research, development and manufactu ring of lithium iron phosphate (‘‘ LFP’’) cathode materials and
environmental protection chemicals for vehicle.
The Historical Financial Information is presented in RMB, which is also the functional currency of the
Company.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 5–


--- page 538 ---
During the Track Record Period and as at the date of this report, the Company had direct and indirect
interests in its subsidiaries, all of wh ich are private limited liability compa nies, the particulars of which are set
out below:
Equity/beneficial interest held by the Group as at
Name of entities
Place and
date of
incorporation/
establishment
Nominal value of
registered share
capital
Nominal value of
paid-up share
capital
31 December
2021
31 December
2022
31 December
2023 30 June 2023 30 June 2024
At date of
this report Principal activities Notes
%%%%%%
Directly held by the
Company
常州鋰源新能源科技
有限公司 Changzhou
Liyuan New Energy
Technology Co., Ltd.
(‘‘Changzhou Liyuan ’’)* .
PRC/12 May 2021 RMB720,741,131 RMB626,241,131 88.00 79.60 79.60 79.60 72.87 72.87 Technology research and
development, technology
transfer and sales of
electronic special materials
(a)
湖北綠瓜生物科技有限公司
Hubei Green Melon
Biotechnology
C o . ,L t d . *........
PRC/16 April 2021 RMB100,000,000 RMB56,000,000 100.00 100.00 100.00 100.00 100.00 100.00 Research and development
(‘‘R&D ’’), production and
sales of disinfection and
other products
(b)
江蘇綠瓜生物科技股份
有限公司 Jiangsu Green
Melon Biotechnology
C o . ,L t d . *........
PRC/22 July 2020 RMB10,000,000 RMB3,000,000 100.00 — — — — — R&D, production and sales
of disinfection and other
products
(c)
江蘇鋰源電池材料有限公司
Jiangsu Lithium Source
Battery Materials
C o . ,L t d . *........
PRC/14 August
2020
RMB100,000,000 RMB100,000,000 100.00 — — — — — R&D, production and sales
of battery materials
(d)
江
蘇鉑源催化科技有限公司
（曾用名：江蘇龍蟠氫能源
科技有限公司、江蘇鉑坦氫
能源科技有限公司）
Jiangsu Platinum Source
Catalytic Technology
Co., Ltd. (Formerly
known as Jiangsu
Longpan Hydrogen
Energy Technology
Co., Ltd. and Jiangsu
GPTFC System
C o . ,L t d . ) * ........
PRC/26 May 2020 RMB100,000,000 RMB42,600,000 100.00 100.00 100.00 100.00 100.00 100.00 R&D of emerging energy
technologies;
manufacturing, sales,
research and development
of special electronic
materials; sales of new
catalytic materials and
additives; manufacturing
and sales of special
chemical products
(excluding hazardous
chemicals)
(e)
江蘇龍蟠新材料科技
有限公司 Jiangsu
Longpan New Material
Technology Co., Ltd.* .
PRC/4 January
2023
RMB100,000,000 RMB100,000,000 — — 100.00 100.00 100.00 100.00 R&D, production and sales
of environmentally
friendly chemicals for
vehicles
(f)
江蘇瑞利豐新能源科技
有限公司 Jiangsu
Ruilifeng New Energy
Technology Co., Ltd.
(‘‘Jiangsu Ruilifeng ’’)* . .
PRC/17 September
2009
RMB20,000,000 RMB20,000,000 70.00 70.00 70.00 70.00 70.00 70.00 Project investment, trade (g)
江蘇三金鋰
電科技有限公司
（曾用名：龍蟠
科技（張家港）有限公司)
Jiangsu Sanjin Lithium
Technology Co., Ltd.
(Formerly known as
Longpan Technology
(Zhangjiagang)
C o . ,L t d . ) * ........
PRC/13 June 2018 RMB300,000,000 RMB224,900,000 100.00 100.00 100.00 100.00 100.00 100.00 R&D, production and sales
of electronic special
materials
(h)
江蘇天藍智能裝備有限公司
Jiangsu Tianlan
Intelligent Equipment
C o . ,L t d . *........
PRC/20 April 2020 RMB20,000,000 RMB20,000,000 — — 100.00 100.00 100.00 100.00 R&D, production and sales
of filling equipment and
other intelligent equipment
(i)
江蘇可蘭素環保科技
有限公司 Kelas
Environmental Protection
Technology Co., Ltd.* .
PRC/20 August
2009
RMB435,531,144 RMB435,531,144 100.00 100.00 100.00 100.00 100.00 100.00 Production and sales of urea
for vehicles, urea filling
equipment, etc.
(j)
LBM NEW ENERGY
(AP) PTE. LTD. . . . .
Singapore/28
September 2018
USD54,164,463 USD54,164,463 100.00 100.00 — — — — Provision of marketing and
finance support within the
Group
(k)
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 6–


--- page 539 ---
Equity/beneficial interest held by the Group as at
Name of entities
Place and
date of
incorporation/
establishment
Nominal value of
registered share
capital
Nominal value of
paid-up share
capital
31 December
2021
31 December
2022
31 December
2023 30 June 2023 30 June 2024
At date of
this report Principal activities Notes
%%%%%%
龍蟠科技（香港）有限公司
Longpan Technology
(Hong Kong) Co., Ltd.*
Hong Kong
(‘‘HK ’’) /29 Ap ril
2013
HKD5,000,000 HKD5,000,000 — — — — — — Sales of lubricating oil,
antifreeze, brake fluid,
and car maintenance
products
(l)
江蘇龍蟠綠色能源有限公司
（曾用名：龍蟠科技研發
（江蘇）有限公司）Jiangsu
Lopal Green Energy Co.,
Ltd. (Formerly known as
Longpan Technology
Research and
Development (Jiangsu)
C o . ,L t d . ) ........
PRC/23 September
2022
RMB20,000,000 RMB14,000,000 — 100.00 100.00 100.00 100.00 100.00 Forward-looking new
material research and
development, production
and sales
(m)
龍蟠潤滑新材料（天津）
有限公司LOPAL
Lubrication New
Material (Tianjin)
C o . ,L t d . *........
PRC/27 March
2013
RMB265,000,000 RMB240,000,000 100.00 100.00 100.00 100.00 100.00 100.00 Production and sales of
lubricating oil, antifreeze,
and urea for vehicles
(n)
Lopal Mining (Hong Kong)
C o . ,L i m i t e d .......
HK/30 January
2023
HKD1,000,000 HKD1,000,000 — — 100.00 100.00 100.00 100.00 Mining, production and sales
of mineral resources
(o)
南京精工新材料有限公司
Nanjing Seiko New
Material Co., Ltd.* . . .
PRC/19 August
2009
RMB40,000,000 RMB40,000,000 100.00 100.00 100.00 100.00 100.00 100.00 Research, production, and
sales of plastic packaging
materials, etc.
(p)
南京尚易環保科技有限公司
Nanjing Shangyi
Environmental Protection
Technology Co., Ltd.* .
PRC/13 May 2013 RMB300,000,000 RMB210,000,000 100.00 100.00 100.00 100.00 100.00 100.00 Production and sales of
automobile maintenance
products and
environmental protection
materials
(q)
南京微蟻數據科技有限公司
Nanjing Weiyi Data
Technology Co., Ltd.* .
PRC/16 April 2015 RMB3,000,000 RMB3,000,000 100.00 — — — — — Sales of auto repair services,
auto parts and supplies,
etc.
(r)
宜春龍蟠時代鋰業科技有限公
司（曾用名：宜豐時代新能
源材料有限公司）
Yifeng Times New
Energy Materials Co.,
Ltd. (‘‘Lopal Times
’’)* .
PRC/2 March 2022 RMB1,000,000,000 RMB460,666,700 — 70.00 66.35 70.00 70.00 70.00 R&D, production and sales
of lithium carbonate
(s)
Indirectly held by the
Company
貝特瑞（天津）納米材料製造
有限公司 Beiterui
(Tianjin) Nano Material
Manufacturing Co., Ltd.*
PRC/28 December
2015
RMB100,000,000 RMB100,000,000 88.00 79.60 79.60 79.60 72.87 72.87 R&D, production and sales
of battery materials
(t)
紅芯（天津）環保科技有限公司
Hongxin (Tianjin)
Environmental Protection
Technology Co., Ltd.* .
PRC/6 June 2021 RMB10,000,000 Nil 100.00 — — — — — Manufacture and sale of
special chemical products
(excluding hazardous
chemicals); processing,
manufacture and sale of
lubricating oil (excluding
hazardous chemicals)
(u)
湖北可蘭素環保科技有限公司
Hubei Kelansu
Environmental Protection
Technology Co., Ltd.* .
PRC/7 May 2022 RMB100,000,000 RMB96,000,000 — 100.00 100.00 100.00 100.00 100.00 Production and sales of urea
for vehicles, urea filling
equipment, etc.;
manufacturing and sales
of plastic products;
manufacturing of plastic
packaging boxes and
containers
(v)
湖北鋰源新能源科技有限公司
Hubei Liyuan New
Energy Technology
C o . ,L t d . *........
PRC/2 December
2021
RMB160,000,000 RMB160,000,000 88.00 79.60 79.60 79.60 72.87 72.87 R&D, production and sales
of battery materials
(w)
江蘇貝特瑞納米科技有限公
司
Jiangsu BTR NANO
Technology Co., Ltd.* .
PRC/28 January
2021
RMB300,000,000 RMB300,000,000 88.00 79.60 79.60 79.60 72.87 72.87 R&D, production and sales
of battery materials
(x)
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 7–


--- page 540 ---
Equity/beneficial interest held by the Group as at
Name of entities
Place and
date of
incorporation/
establishment
Nominal value of
registered share
capital
Nominal value of
paid-up share
capital
31 December
2021
31 December
2022
31 December
2023 30 June 2023 30 June 2024
At date of
this report Principal activities Notes
%%%%%%
江蘇綠瓜生物科技股份
有限公司 Jiangsu Green
Melon Biotechnology
C o . ,L t d . *........
PRC/22 July 2020 RMB10,000,000 RMB3,000,000 — 100.00 100.00 100.00 100.00 100.00 R&D, production and sales
of disinfection and other
products
(c)
江蘇天藍智能裝備有限公司
Jiangsu Tianlan
Intelligent Equipment
C o . ,L t d . *........
PRC/20 April 2020 RMB20,000,000 RMB20,000,000 100.00 100.00 — — — — R&D, production and sales
of filling equipment and
other intelligent equipment
(i)
LBM NEW ENERGY
(AP) PTE. LTD. . . . .
Singapore/28
September 2018
USD54,164,463 USD54,164,463 — — 79.60 79.60 72.87 72.87 Provision of marketing and
finance support within the
Group
(k)
鋰源（深圳）科學研究有限公司
Liyuan (Shenzhen)
Scientific Research
C o . ,L t d . *........
PRC/26 November
2021
RMB50,000,000 RMB29,600,000 88.00 79.60 79.60 79.60 72.87 72.87 R&D of special electronic
materials
(y)
南京鋰源納米科技有限公司
Nanjing Liyuan
Nanotechnology
C o . ,L t d . *........
PRC/14 September
2022
RMB100,000,000 RMB11,500,000 — 79.60 79.60 69.17 72.87 72.87 R&D, production and sales
of battery materials
(z)
山東可蘭素環保科技有限公司
（曾用名：菏澤可蘭素
環保科技有限公司）
Shandong Kelansu
Environmental Protection
Technology Co., Ltd.
(Formerly known as Heze
Kelansu Environmental
Protection Technology
C o . ,L t d . ) * ........
PRC/30 December
2020
RMB100,000,000 RMB100,000,000 100.00 100.00 100.00 100.00 100.00 100.00 Production and sales of urea
for vehicles
(aa)
山東鋰源科技有限公司
Shandong Liyuan
Technology Co., Ltd.* .
PRC/10 September
2021
RMB160,000,000 RMB160,000,000 88.00 79.60 79.60 79.60 72.87 72.87 R&D, production and sales
of battery materials
(bb)
四川可蘭素環保科技有限公司
Sichuan Kelansu
Environmental Protection
Technology Co., Ltd.* .
PRC/16 December
2020
RMB100,000,000 RMB100,000,000 100.00 100.00 100.00 100.00 100.00 100.00 Production and sales of urea
for vehicles, urea filling
equipment, etc.
(cc)
四川鋰源新材料有限公司
Sichuan Liyuan New
Material Co., Ltd.* . . .
PRC/21 October
2020
RMB500,000,000 RMB500,000,000 88.00 79.60 79.60 79.60 72.87 72.87 R&D, production and sales
of battery materials
(dd)
張家港迪克
汽車化學品
有限公司 Zhangjiagang
TEEC Automotive
Chemicals Co., Ltd.* . .
PRC/20 May 1996 USD30,000,000 USD30,000,000 39.91 39.91 39.91 39.91 39.91 39.91 Antifreeze, brake fluid
production, research and
development and sales
(ee)
PT. LBM ENERGI BARU
I N D O N E S I A .......
Indonesia/22
February 2023
IDR
300,000,000,000
IDR
300,000,000,000
— — 79.60 79.60 72.87 72.87 R&D, production and sales
of battery materials
(ff)
LBM NEW ENERGY
SINGAPORE PTE. LTD.
Singapore/8
February 2023
USD7,000 USD7,000 — — 79.60 79.60 72.87 72.87 Investment holding company (gg)* The English names of these subsidiaries registered in the PRC represent the translated names of these
companies as no English names have been registered.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 8–


--- page 541 ---
Notes:
(a) The entity was established on 12 May 2021. The sta tutory financial statements for the year ended 31
December 2021 and 2022 and for the year ended 31 December 2023 prepared in accordance with PRC
accounting principles and regulations were audi ted by Jonten Certified Public Accountants (Limited
Liability Partnership), a certifi ed public accounting firm registere d in the PRC and Gongzheng Tianye
Certified Public Accountants (Limited Liability Partnership ), a certified public accounting firm registered
in the PRC, respectively.
(b) The entity was established on 16 April 2021. No st atutory financial statements for the year ended 31
December 2021, 2022 and 2023 was available as there was no requirements to issue audited accounts by
the local authorities.
(c) The entity transferred to indirectly held by the Company from 27 June 2022. No statutory financial
statements for the year ended 31 December 2021, 2022 and 2023 were available as there was no
requirements to issue audited accounts by the local authorities.
(d) The entity was deregistered on 12 April 2022. No statutory financial statements for the year ended 31
December 2021 and 2022 was available as there was no re quirements to issue audited accounts by the local
authorities.
(e) No statutory financial statements for the year ended 31 December 2021, 2022 and 2023 was available as
there was no requirements to issue audi ted accounts by the local authorities.
(f) The entity was established on 4 January 2023. The statutory financial statements for the year ended 31
December 2023 prepared in accordance with PRC account ing principles and regulations were audited by
Gongzheng Tianye Certified Public Accountants (L imited Liability Partner ship), a certified public
accounting firm registered in the PRC.
(g) The statutory financial statements for the year ended 31 December 2021 and 2022 prepared in accordance
with PRC accounting principles and regulations we re audited by Jonten Certified Public Accountants
(Limited Liability Partnership), a certified public ac counting firm registered in the PRC. The statutory
financial statements for the year ended 31 Decembe r 2023 prepared in accordance with PRC accounting
principles and regulations were audited by Gongzhen g Tianye Certified Public Accountants (Limited
Liability Partnership), a certified publ ic accounting firm registered in the PRC.
(h) The statutory financial statement for the year e nded 31 December 2021 prepared in accordance with PRC
accounting principles and regul ations was audited by Jonten Certified Public Accountants (Limited
Liability Partnership), a certifi ed public accounting firm registered in the PRC. The statutory financial
statements for the year ended 31 December 2023 prep ared in accordance with PRC accounting principles
and regulations were audited by Gongzheng Tianye C ertified Public Accountan ts (Limited Liability
Partnership), a certified public acco unting firm registered in the PRC.
(i) The entity transferred to directly held by the Company from 4 May 2023. The statutory financial
statements for the year ended 31 December 2021 an d 2022 prepared in accordance with PRC accounting
principles and regulations were audited by Jonten Certified Public Accountan ts (Limited Liability
Partnership), a certified public acc ounting firm registered in the PRC. The statutory financial statements
for the year ended 31 December 2023 prepared in accordance with PRC accounting principles and
regulations were audited by Gongzheng Tianye Ce rtified Public Accountan ts (Limited Liability
Partnership), a certified public acco unting firm registered in the PRC.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 9–


--- page 542 ---
(j) The statutory financial statements for the year ended 31 December 2021 and 2022 prepared in accordance
with PRC accounting principles and regulations we re audited by Jonten Certified Public Accountants
(Limited Liability Partnership), a certified public ac counting firm registered in the PRC. The statutory
financial statements for the year ended 31 Decembe r 2023 prepared in accordance with PRC accounting
principles and regulations were audited by Gongzhen g Tianye Certified Public Accountants (Limited
Liability Partnership), a certified publ ic accounting firm registered in the PRC.
(k) The entity transferred to indirectly held by th e Company from 9 March 2023. The statutory financial
statements for the year ended 31 December 2021, 2022 and 2023 prepared in accordance with Singapore
accounting principles and regulations were audite d by Jasmine Chua & Associates Public Accountants and
Chartered Accountants, a cer tified public accounting firm registered in Singapore.
(l) The entity was deregistered on 6 August 2021. No statutory financial statements for the year ended 31
December 2021 were available as there was no requirements to issue audited accounts by the local
authorities.
(m) The entity was established on 23 September 2022. No st atutory financial statement for the year ended 31
December 2022 and 2023 was available as there was no re quirements to issue audited accounts by the local
authorities.
(n) The statutory financial statements for the year ended 31 December 2021 and 2022 prepared in accordance
with PRC accounting principles and regulations we re audited by Jonten Certified Public Accountants
(Limited Liability Partnership), a certified public ac counting firm registered in the PRC. The statutory
financial statements for the year ended 31 Decembe r 2023 prepared in accordance with PRC accounting
principles and regulations were audited by Gongzhen g Tianye Certified Public Accountants (Limited
Liability Partnership), a certified publ ic accounting firm registered in the PRC.
(o) The entity was established on 30 January 2023.
(p) The statutory financial statements for the year ended 31 December 2021 and 2022 prepared in accordance
with PRC accounting principles and regulations we re audited by Jonten Certified Public Accountants
(Limited Liability Partnership), a certified public ac counting firm registered in the PRC. The statutory
financial statements for the year ended 31 Decembe r 2023 prepared in accordance with PRC accounting
principles and regulations were audited by Gongzhen g Tianye Certified Public Accountants (Limited
Liability Partnership), a certified publ ic accounting firm registered in the PRC.
(q) No statutory financial statements for the year ended 31 December 2021 and 2022 were available as there
was no requirements to issue audited accounts by the loca l authorities. The statutory financial statements
for the year ended 31 December 2023 prepared in accordance with PRC accounting principles and
regulations were audited by Gongzheng Tianye Ce rtified Public Accountan ts (Limited Liability
Partnership), a certified public acco unting firm registered in the PRC.
(r) The entity was deregistered on 24 June 2022. No statutory financial statements for the year ended 31
December 2021 and 2022 were available as there was no requirements to issue audited accounts by the
local authorities.
(s) The entity was established on 2 March 2022. No stat utory financial statements for the year ended 31
December 2022 were available as there was no requirements to issue audited accounts by the local
authorities. The statutory financial statements for the year ended 31 December 2023 prepared in
accordance with PRC accounting principles and regu lations were audited by Gongzheng Tianye Certified
Public Accountants (Limited Liability Partnership ), a certified public accounting firm registered in the
PRC.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 2 0–


--- page 543 ---
(t) The statutory financial statements for the year ended 31 December 2021 and 2022 prepared in accordance
with PRC accounting principles and regulations we re audited by Jonten Certified Public Accountants
(Limited Liability Partnership), a certified public ac counting firm registered in the PRC. The statutory
financial statements for the year ended 31 Decembe r 2023 prepared in accordance with PRC accounting
principles and regulations were audited by Gongzhen g Tianye Certified Public Accountants (Limited
Liability Partnership), a certified publ ic accounting firm registered in the PRC.
(u) The entity was established on 6 June 2021, and was de registered on 23 May 2022. No statutory financial
statements for the year ended 31 December 2021, 2022 and 2023 were available as there was no
requirements to issue audited accounts by the local authorities.
(v) The entity was established on 7 May 2022. The statutory financial statement for the year ended 31
December 2022 prepared in accordance with PRC accounting principles and regulations was audited by
Jonten Certified Public Accountants (Limited Liabil ity Partnership), a certified public accounting firm
registered in the PRC. The statutory financial stat ements for the year ended 31 December 2023 prepared in
accordance with PRC accounting principles and regu lations were audited by Gongzheng Tianye Certified
Public Accountants (Limited Liability Partnership ), a certified public accounting firm registered in the
PRC.
(w) The entity was established on 2 December 2021. The statutory financial statement for the year ended 31
December 2022 prepared in accordance with PRC accounting principles and regulations was audited by
Jonten Certified Public Accountants (Limited Liabil ity Partnership), a certified public accounting firm
registered in the PRC. The statutory financial stat ements for the year ended 31 December 2023 prepared in
accordance with PRC accounting principles and regu lations were audited by Gongzheng Tianye Certified
Public Accountants (Limited Liability Partnership ), a certified public accounting firm registered in the
PRC.
(x) The entity was established on 28 January 2021. The statutory financial statements for the year ended 31
December 2021 and 2022 prepared in accordance wi th PRC accounting principles and regulations were
audited by Jonten Certified Public Accountants (Limited Liability P artnership), a certified public
accounting firm registered in the P RC. The statutory financial statem ents for the year ended 31 December
2023 prepared in accordance with PRC accounting pri nciples and regulations were audited by Gongzheng
Tianye Certified Public Accountants (Limited Liabili ty Partnership), a certif ied public accounting firm
registered in the PRC.
(y) The entity was established on 26 November 2021. The statutory financial statement for the year ended 31
December 2022 prepared in accordance with PRC accounting principles and regulations was audited by
Jonten Certified Public Accountants (Limited Liabil ity Partnership), a certified public accounting firm
registered in the PRC. The statutory financial stat ements for the year ended 31 December 2023 prepared in
accordance with PRC accounting principles and regu lations were audited by Gongzheng Tianye Certified
Public Accountants (Limited Liability Partnership ), a certified public accounting firm registered in the
PRC.
(z) The entity was established on 14 September 2022. No st atutory financial statement for the year ended 31
December 2022 was available as there was no requi rements to issue audited accounts by the local
authorities.
(aa) The statutory financial statements for the year ended 31 December 2021 and 2022 prepared in accordance
with PRC accounting principles and regulations we re audited by Jonten Certified Public Accountants
(Limited Liability Partnership), a certified public ac counting firm registered in the PRC. The statutory
financial statements for the year ended 31 Decembe r 2023 prepared in accordance with PRC accounting
principles and regulations were audited by Gongzhen g Tianye Certified Public Accountants (Limited
Liability Partnership), a certified publ ic accounting firm registered in the PRC.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 2 1–


--- page 544 ---
(bb) The entity was established on 10 September 2021. Th e statutory financial statement for the year ended 31
December 2022 prepared in accordance with PRC accounting principles and regulations was audited by
Jonten Certified Public Accountants (Limited Liabil ity Partnership), a certified public accounting firm
registered in the PRC. The statutory financial stat ements for the year ended 31 December 2023 prepared in
accordance with PRC accounting principles and regu lations were audited by Gongzheng Tianye Certified
Public Accountants (Limited Liability Partnership ), a certified public accounting firm registered in the
PRC.
(cc) The statutory financial statements for the year ended 31 December 2021 and 2022 prepared in accordance
with PRC accounting principles and regulations we re audited by Jonten Certified Public Accountants
(Limited Liability Partnership), a certified public ac counting firm registered in the PRC. The statutory
financial statements for the year ended 31 Decembe r 2023 prepared in accordance with PRC accounting
principles and regulations were audited by Gongzhen g Tianye Certified Public Accountants (Limited
Liability Partnership), a certified publ ic accounting firm registered in the PRC.
(dd) The statutory financial statements for the year ended 31 December 2021 and 2022 prepared in accordance
with PRC accounting principles and regulations we re audited by Jonten Certified Public Accountants
(Limited Liability Partnership), a certified public ac counting firm registered in the PRC. The statutory
financial statements for the year ended 31 Decembe r 2023 prepared in accordance with PRC accounting
principles and regulations were audited by Gongzhen g Tianye Certified Public Accountants (Limited
Liability Partnership), a certified publ ic accounting firm registered in the PRC.
(ee) The statutory financial statements for the yea r ended 31 December 2021 prepared in accordance with PRC
accounting principles and regulations were audi ted by Jonten Certified Public Accountants (Limited
Liability Partnership), a certifi ed public accounting firm registered in the PRC. The statutory financial
statements for the year ended 31 December 2023 prep ared in accordance with PRC accounting principles
and regulations were audited by Gongzheng Tianye C ertified Public Accountan ts (Limited Liability
Partnership), a certified public acco unting firm registered in the PRC.
The Group holds 70% of Jiangsu Ruilifeng whi ch holds 57% of Zhangjiagang TEEC Automotive
Chemicals Co., Ltd.
(ff) The entity was established on 23 February 2023. The statutory financial statements for the year ended 31
December 2023 prepared in accordance with PRC account ing principles and regulations were audited by
Gongzheng Tianye Certified Public Accountants (L imited Liability Partner ship), a certified public
accounting firm registered in the PRC.
(gg) The entity was established on 8 February 2023. The s tatutory financial statements for the period (date of
incorporation) to 31 December 2023 prepared in acco rdance with Singapore accounting principles and
regulations were audited by Jasmine Chua & Associa tes Public Accountants and Chartered Accountants,
a certified public accounting firm registered in the Singapore.
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2. BASIS OF PREPARATION OF HISTORICAL FINANCIAL INFORMATION
The Historical Financial Information has been prep ared in accordance with IFRSs, which comprise all
standards and interpretations approved by the IASB. Al l IFRSs effective for the accounting period commencing
from 1 January 2024, together with the relevant transit ional provisions, have been early adopted by the Group
in the preparation of the Historical Financial Information throughout the Track Record Period.
The statutory financial statements of the Company for the year ended 31 December 2021 and 2022 were
prepared in accordance with relevant accounting princ iples and financial regulations applicable to the
enterprises in the PRC and were audited by Jonten C ertified Public Accountants (Limited Liability
Partnership), certified public account ants registered in the PRC. The stat utory financial statements of the
Company for the year ended 31 December 2023 was prepared in accordance with relevant accounting principles
and financial regulations applicable to the enterprises in the PRC and were audited by Gongzheng Tianye
Certified Public Accountants (Special General Partnership), certified publ ic accountants registered in the PRC.
G o i n gc o n c e r na s s u m p t i o n
During the six months ended 30 June 2024, the Group reported a net loss of approximately RMB260
million (year ended 31 December 2023 : RMB1,514 million). As at 30 June 2024, the Group’s current
liabilities exceeded its current assets by approx imately RMB575 million (31 December 2023 : RMB1,255
million).
In view of these circumstances, the management of the Group have given careful consideration to
the future liquidity and performance of the Group and its available sources of financial resources to
continue as a going concern. In order to improve th e Group’s liquidity and cash flows to sustain the
Group as a going concern, the Group has implemented, o r is in the process of implementing, the following
key plans and measures: (i) The Group has been actively negotiating with a number of banks and financial
institutions for renewal, extension and replacement o f bank loans; (ii) The Group continues to take active
measures to control administrative costs including streamlining the workflows of different business
operations; (iii) The Group continues to take active a ctions to improve the working capital situation
including monitoring the collection of receivables clo sely and take immediate actions for any outstanding
receivables and negotiation with suppliers to extend c redit terms; and (iv) The Group will consider other
financing arrangements with a vi ew to improving the Group’s liquidity and financial position. The
management of the Group have reviewed the Group’s cash flow projections which cover a period of not
less than twelve months from the end of the repor ting period. The management of the Group are of the
opinion that after taking into account the above plans , the Group has sufficient financial resources to
continue as a going concern for the foreseeable fut ure. Therefore, the management of the Group are
satisfied that it is appropriate to prepare the Historic al Financial Information on a going concern basis.
3. ADOPTION OF NEW AND AMENDMENTS TO IFRSS
For the purpose of preparing and presenting the Hist orical Financial Information for the Track Record
Period, the Group has consistently adopted the account ing policies which includes all the International
Accounting Standards (‘‘ IASs ’’), the IFRSs, amendments to IFRSs and the related interpretations issued by the
IASB, which are effective for the Group’s financial year beginning on 1 January 2024, throughout the Track
Record Period.
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New and amendments to IFRSs in issue but not yet effective
At the date of this report, the following new and amendments to IFRS Accounting Standards have
been issued which are not yet effective:
IFRS 18 Presentation and Disclosures in Financial Statements 4
IFRS 19 Subsidiaries without Public Accountability: Disclosures
— Basis for Conclusions 4
Amendments to IFRS 9 and
IFRS 7
Amendments to the classification and measurement of Financial
Instruments 3
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture 2
Amendments to IAS 21 Lack of Exchangeability 1
Amendments to IFRSs Annual Improvements to IFRS Accounting Standards Volume 11 3
1 Effective for annual periods be ginning on or after 1 January 2025
2 Effective for annual periods beginni ng on or after a date to be determined
3 Effective for annual periods be ginning on or after 1 January 2026
4 Effective for annual periods be ginning on or after 1 January 2027
The directors of the Company anticipate that th e application of all amendments to IFRSs will have
no material impact on the Historical Financi al Information in the foreseeable future.
4. MATERIAL ACCOUNTING POLICY INFORMATION
The Historical Financial Information has been prep ared in accordance with the following accounting
policies which comply with IFRSs issued by the IASB. I n addition, the Historical Financial Information
includes applicable disclosures required by the Rules Gov erning the Listing of Securities of The Stock Exchange
of Hong Kong Limited (‘‘ Listing Rules ’’) and by the Hong Kong Companies Ordinance.
The Historical Financial Information has been prep ared on the historical cost basis except for certain
financial instruments that are measured at fair value s at the end of each reporting period, as explained in the
accounting policies set out below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell a n asset or paid to transfer a liability in an orderly
transaction between market participants at the measure ment date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability,
the Group takes into account the characteristics of the ass et or liability if market par ticipants would take those
characteristics into account when pricing the asset o r liability at the measurement date. Fair value for
measurement and/or disclosure purposes in the Historica l Financial Information is determined on such a basis,
except for share-based payment transactions that ar e within the scope of IFRS 2 ‘‘Share-based Payment’’,
leasing transactions that are accounted for in accord ance with IFRS 16, and measurements that have some
similarities to fair value but are not fair value, such as ne t realisable value in IAS 2 ‘‘Inventories’’ or value in use
in IAS 36 ‘‘Impairment of Assets’’ (‘‘IAS 36 ’’).
In addition, for financial reporting purposes, fair val ue measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value me asurements are observable and the significance of the
inputs to the fair value measurement in its e ntirety, which are described as follows:
. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date;
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. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for
the asset or liability, either directly or indirectly; and
. Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
4.1. Basis of consolidation
The Historical Financial Information incorporat es the financial statements of the Company and
entities controlled by the Company and its subsid iaries. Control is achieved when the Company:
. has power over the investee;
. is exposed, or has rights, to variable returns from its involvement with the investee; and
. has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an in vestee if facts and circumstances indicate that
there are changes to one or more of the three elements of control listed above.
When the Group has less than a majority of the vot ing rights of an investee, it has power over the
investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities
of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether
or not the Group’s voting rights in an investee a re sufficient to give it power, including:
. the size of the Group’s holding of voting rights re lative to the size and dispersion of holdings
of the other vote holders;
. potential voting rights held by the Group, other vote holders or other parties;
. rights arising from other contractual arrangements; and
. any additional facts and circumstances that indicate that the Group has, or does not have, the
current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at prev ious shareholders’ meetings.
Consolidation of a subsidiary begins when the Gr oup obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary. Speci fically, income and expenses of a subsidiary acquired
or disposed of during the year are included in the c onsolidated statement of profit or loss and other
comprehensive income from the date the Group gains control until the date when the Group ceases to
control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the
Company and to the non-controlling interests. Total co mprehensive income of subsidiaries is attributed to
the owners of the Company and to the non-controlling int erests even if this results in the non-controlling
interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies in line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, incom e, expenses and cash flows relating to transactions
between members of the Group are elim inated in full on consolidation.
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Non-controlling interests in subsidiaries are pre sented separately from th e Group’s equity therein,
which represent present ownership interests entitli ng their holders to a proportionate share of net assets of
the relevant subsidiaries upon liquidation.
Changes in the Group’s interests in existing subsidiaries
Changes in the Group’s interests in subsidiaries that do not result in the Group losing control
over the subsidiaries are accounted for as equity tr ansactions. The carryi ng amounts of the Group’s
relevant components of equity and the non-controllin g interests are adjusted to reflect the changes
in their relative interests in the subsidiaries, incl uding re-attribution of relevant reserves between the
Group and the non-controlling interests accordin g to the Group’s and the proportionate interests of
non-controlling interests.
Any difference between the amount by which the non-controlling interests are adjusted, and
the fair value of the consideration paid or received i s recognised directly in equity and attributed to
owners of the Company.
When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and
non-controlling interests (if any) are derecognised . A gain or loss is recognis ed in profit or loss and
is calculated as the difference between (i) the aggregate of the fair value of the consideration received
and the fair value of any retained interest and (ii) th e carrying amount of the ass ets, and liabilities of
the subsidiary attributable to the owners of th e Company. All amounts previously recognised in
other comprehensive income in relation to that subsidiary are accounted for as if the Group had
directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss
or transferred to another category of equity as sp ecified/permitted by applicable IFRSs). The fair
value of any investment retained in the former subsidiary at the date when control is lost is regarded
as the fair value on initial recognition for s ubsequent accounting under IFRS 9 ‘‘Financial
Instruments’’ (‘‘IFRS 9 ’’) or, when applicable, the cost on initial recognition of an investment in an
associate or a joint venture.
4.2. Investments in associates
An associate is an entity over which the Group has sig nificant influence. Sign ificant influence is the
power to participate in the financial and operating policy decisions of the investee but is not control or
joint control over those policies.
The results and assets and liabilities of associates are incorporated in the Historical Financial
Information using the equity method of accounting. Th e financial statements of associates used for equity
accounting purposes are prepared using uniform a ccounting policies as those of the Group for like
transactions and events in similar circumstances. U nder the equity method, an investment in an associate
or is initially recognised in the consolidated statemen t of financial position at cost and adjusted thereafter
to recognise the Group’s share of the profit or loss a nd other comprehensive income of the associate.
Changes in net assets of the associate other than pro fit or loss and other comprehensive income are not
accounted for unless such changes resulted in changes in ownership interest held by the Group. When the
Group’s share of losses of an associate exceeds the Gr oup’s interest in that associate (which includes any
long-term interests that, in substance, form part of the Group’s net investment in the associate), the
Group discontinues recognising its sh are of further losses. Additional losses are recognised only to the
extent that the Group has incurred legal or construc tive obligations or made payments on behalf of the
associate.
An investment in an associate is accounted for usi ng the equity method from the date on which the
investee becomes an associate. On acquisition of th e investment in an associate, any excess of the cost of
the investment over the Group’s share of the net fair va lue of the identifiable assets and liabilities of the
investee is recognised as goodwill, which is include d within the carrying amount of the investment. Any
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excess of the Group’s share of the net fair value of the iden tifiable assets and liabilities over the cost of the
investment, after reassessment, is recognised imme diately in profit or loss in the period in which the
investment is acquired.
The Group assesses whether there is an objective evidence that the interest in an associate may be
impaired. When any objective evidence exists, the entire carrying amount of the investment (including
goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable
amount (higher of value in use and fair value les s costs of disposal) wit h its carrying amount.
Any impairment loss recognised is not allocated to a ny asset, including goodwill, that forms part of
the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance
with IAS 36 to the extent that the recoverable am ount of the investment subsequently increases.
When the Group ceases to have significant influ ence over an associate, it is accounted for as a
disposal of the entire interest in the investee with a resulting gain or loss b eing recognised in profit or loss.
When the Group retains an interest in the former asso ciate and the retained interest is a financial asset
within the scope of IFRS 9, the Group measures the ret ained interest at fair value at that date and the fair
value is regarded as its fair value on initial recogniti on. The difference between the carrying amount of the
associate and the fair value of any retained inter est and any proceeds from disposing of the relevant
interest in the associate is included in the determinat ion of the gain or loss on disposal of the associate. In
addition, the Group accounts for all amounts previous ly recognised in other comprehensive income in
relation to that associate on the same basis as would b e required if that associate had directly disposed of
the related assets or liabilities. Therefore, if a gai n or loss previously recognised in other comprehensive
income by that associate would be reclassified to pr ofit or loss on the disposal of the related assets or
liabilities, the Group reclassifies the gain or los s from equity to profit or lo ss (as a reclassification
adjustment) upon disposal/partial di sposal of the relevant associate.
The Group continues to use the equity method when an investment in an associate becomes an
investment in a joint venture or an investment in a jo int venture becomes an investment in an associate.
There is no remeasurement to fair value upon such changes in ownership interests.
When the Group reduces its ownership interest in an associate but the Group continues to use the
equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had
previously been recognised in other c omprehensive income relating to th at reduction in ownership interest
if that gain or loss would be reclassified to profit or los s on the disposal of the related assets or liabilities.
When a group entity transacts with an associate of t he Group, profits and losses resulting from the
transactions with the associate are recognised in the c onsolidated financial statements only to the extent of
interests in the associate that are not related to the Group.
4.3. Revenue from contracts with customers
The Group recognises revenue when (or as) a performan ce obligation is satisfied, i.e. when ‘‘control’’
of the goods or services underlying the particular per formance obligation is transferred to the customer.
A performance obligation represents a good or service (or a bundle of goods or services) that is
distinct or a series of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over time by reference to the progress
towards complete satisfaction of t he relevant performance obligation if one of the following criteria is
met:
. the customer simultaneously receives and c onsumes the benefits provided by the Group’s
performance as the Group performs;
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. the Group’s performance creates or enhances an asset that the customer controls as the Group
performs; or
. the Group’s performance does not create an asse t with an alternative use to the Group and the
Group has an enforceable right to paymen t for performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct
good or service.
A contract asset represents the Group’s right to cons ideration in exchange for goods or services that
the Group has transferred to a customer that is not ye t unconditional. It is assessed for impairment in
accordance with IFRS 9. In contrast, a receivab le represents the Group’s unconditional right to
consideration, i.e. only the passage of time is requi red before payment of that consideration is due.
A contract liability represents the Group’s obligat ion to transfer goods or services to a customer for
which the Group has received consideration (or an am ount of consideration is due) from the customer.
A contract asset and a contract liability relat ing to the same contract are accounted for and
presented on a net basis.
Revenue from sales of goods
The Group sells lithium iron phosphate cathode ma terials, automotive specialty chemicals and
other goods directly to customers in accordance wi th the contracts entered with the customers. The
Group also recognises revenue from the sales of hy drogen and cleansing products to the customers
when control of the products has transferred to t he customer, being at the point the goods are
delivered to the customers. Control is passed whe n the products have been accepted by the customer.
The normal credit term is within 90 days effectiv e from the date when the goods are accepted by the
customers. When the customer pays in advance for the orders, the transaction price received by the
Group is recognised as a contract liability until the goods have b een delivered to the customer.
For contracts entered into with customers on p rocessing aluminium carbonate, the relevant
aluminium carbonate specified in the contracts a re based on customer’s specifications with no
alternative use. Taking into consideration of the relevant contract terms, the legal environment and
relevant legal precedent, the Group concluded that the Group does not have an enforceable right to
payment prior to transfer of the relevant alu minium carbonate to customers. Revenue from
processing of aluminium carbonate is therefore r ecognised at a point in time when the completed
product is transferred to customers, being at the poi nt that the customer obtains the control of the
completed product and the Group has present right to payment and collection of the consideration
is probable.
Principal versus agent
When another party is involved in providin g goods or services to a customer, the Group
determines whether the nature of its promise is a performance obligation to provide the specified
goods or services itself (i.e. the Group is a princ ipal) or to arrange for those goods or services to be
provided by the other party (i.e. the Group is an agent).
The Group is a principal if it controls the specified good or service before that good or service
is transferred to a customer.
The Group is an agent if its performance obligation is to arrange for the provision of the
specified good or service by another party. In th is case, the Group does not control the specified
good or service provided by another party before th at good or service is transferred to the customer.
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When the Group acts as an agent, it recognises revenue in the amount of any fee or commission to
which it expects to be entitled in exchange for arranging for the specified goods or services to be
provided by the other party.
4.4. Leases
Definition of a lease
A contract is, or contains, a lease if the contract c onveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
For contracts entered into or modified on or afte r the date of initial application or arising from
business combinations, the Group assesses whether a c ontract is or contains a lease based on the definition
under IFRS 16 at inception, modification date or acqui sition date, as appropriate. Such contract will not
be reassessed unless the terms and conditions of the contract are subsequently changed.
The Group as a lessee
Allocation of consideration to components of a contract
For a contract that contains a lease component and one or more additional lease or non-lease
components, the Group allocates the considerat ion in the contract to each lease component on the
basis of the relative stand-alone price of the leas e component and the aggregate stand-alone price of
the non-lease components.
Non-lease components are separated from lea se component and are accounted for by applying
other applicable standards.
Short-term leases and leases of low-value assets
The Group applies the short-term lease reco gnition exemption to leases e.g. motor
vehicles/staff quarter that have a lease term of 12 months or less from the commencement date
and do not contain a purchase option. It also a pplies the recognition exemption for lease of
low-value assets. Lease payments on short-term leases and leases of low-value assets are recognised
as expense on a straight-line basis or anot her systematic basis over the lease term.
Right-of-use assets
The cost of right-of-use asset includes:
. the amount of the initial measurement of the lease liability;
. any lease payments made at or before the commencement date, less any lease incentives
received;
. any initial direct costs incurred by the Group; and
. an estimate of costs to be incurred by the Group in dismantling and removing the
underlying assets, restoring the site on whi ch it is located or restoring the underlying
asset to the condition required by t he terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any reme asurement of lease liabilities.
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Right-of-use assets in which the Group is re asonably certain to obtain ownership of the
underlying leased assets at the end of the lease te rm are depreciated from commencement date to the
end of the useful life. Otherwise, right-of-use ass ets are depreciated on a straight-line basis over the
shorter of its estimated useful life and the lease term.
When the Group obtains ownership of the underlyi ng leased assets at the end of the lease term,
upon exercising purchase options, the cost of the r elevant right-of-use assets and the related
accumulated depreciation and impairment loss ar e transferred to property, plant and equipment.
The Group presents right-of-use assets as a separ ate line item on the consolidated statement of
financial position.
Refundable rental deposits
Refundable rental deposits paid are account ed under IFRS 9 and initially measured at fair
value. Adjustments to fair value at initial recog nition are considered as additional lease payments
and included in the cost of right-of-use assets.
Lease liabilities
At the commencement date of a lease, the Group re cognises and measures the lease liability at
the present value of lease payments that are unpaid at that date. In calculating the present value of
lease payments, the Group uses the incremental borrowing rate at the lease commencement date if
the interest rate implicit in the le ase is not readily determinable.
The lease payments include:
. fixed payments (including in-substance fix ed payments) less any lease incentives
receivable;
. variable lease payments that depend on an i ndex or a rate, initially measured using the
index or rate as at the commencement date;
. amounts expected to be payable by the Gr oup under residual value guarantees;
. the exercise price of a purchase option if the Group is reasonably certain to exercise the
option; and
. payments of penalties for terminating a lease, if the lease term reflects the Group
exercising an option to terminate the lease.
After the commencement date, lease liabilities are adjusted by interest accretion and lease
payments.
The Group remeasures lease liabilities (and makes a corresponding adjustment to the related
right-of-use assets) whenever:
. the lease term has changed or there is a change in the assessment of exercise of a
purchase option, in which case the related lea se liability is remeasured by discounting
the revised lease payments using a revised discount rate at the date of reassessment.
. the lease payments change due to changes in market rental rates following a market rent
review, in which cases the related lease liabil ity is remeasured by discounting the revised
lease payments using the initial discount rate.
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The Group presents lease liabilities as a separ ate line item on the consolidated statement of
financial position.
Lease modifications
The Group accounts for a lease modification as a separate lease if:
. the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
. the consideration for the leases increases by an amount commensurate with the
stand-alone price for the increase in scope and any appropriate adjustments to that
stand-alone price to reflect the circu mstances of the particular contract.
For a lease modification that is not accounted for as a separate lease, the Group remeasures
the lease liability, less any lease incentives recei vable, based on the lease term of the modified lease
by discounting the revised lease payments using a revised discount rate at the effective date of the
modification.
The Group accounts for the remeasurement of lease liabilities by making corresponding
adjustments to the relevant right-of-use asset. When the modified contract contains a lease
component and one or more additional lease or non-lease components, the Group allocates the
consideration in the modified contract to each lease component on the basis of the relative
stand-alone price of the lease component and the aggregate stand-alone price of the non-lease
components.
Changes in the basis for determining the future lease payments as a result of interest rate benchmark
reform
For changes in the basis for determining the fut ure lease payments as a result of interest rate
benchmark reform, the Group applies the practica l expedient to remeasure the lease liabilities by
discounting the revised lease payments using the unchanged discount rate and makes a
corresponding adjustment to the related right-of -use assets. A lease modification is required by
interest rate benchmark reform if, and only if, both of these conditions are met:
. the modification is necessary as a direct conse quence of interest rate benchmark reform;
and
. the new basis for determining the lease payments is economically equivalent to the
previous basis (i.e. the basis immedi ately preceding the modification).
The Group as a lessor
Rental income from operating leases is recognis ed in profit or loss on a straight-line basis over
the term of the relevant lease. Initial direct costs i ncurred in negotiating and arranging an operating
lease are added to the carrying amount of the leased asset and recognised as an expense on a
straight-line basis over the lease term.
4.5. Foreign currencies
In preparing the financial statements of each indi vidual group entity, transactions in currencies
other than the functional currency of that entity (fo reign currencies) are recognised at the rates of
exchanges prevailing on the dates of the transactions . At the end of the reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items that are measured in terms of historical c ost in a foreign currency are not retranslated.
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Exchange differences arising on the settlement of monetary items, and on the retranslation of
monetary items, are recognised in profit o r loss in the period in which they arise.
For the purposes of presenting the cons olidated financial statements, the assets and liabilities of the
Group’s operations are translated into the presentati on currency of the Group (i.e. RMB) using exchange
rates prevailing at the end of each reporting period. Income and expenses items are translated at the
average exchange rates for the period, unless exchange r ates fluctuate significa ntly during that period, in
which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accu mulated in equity under the heading of translation
reserve (attributed to non-contro lling interests as appropriate).
4.6. Borrowing costs
All borrowing costs not directly attributable to the acquisition, construction or production of
qualifying assets are recognised in profit or loss in the period in which they are incurred.
4.7. Government grants
Government grants are not recognised until ther e is reasonable assurance that the Group will
comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which
the Group recognises as expenses the related cost s for which the grants are intended to compensate.
Specifically, government grants whose primary condi tion is that the Group should purchase, construct or
otherwise acquire non-current assets are recognised as deferred income in the consolidated statement of
financial position and transferred to profit or loss o n a systematic and rational basis over the useful lives
of the related assets.
Government grants related to income that are receivable as compensation for expenses or losses
already incurred or for the purpose of giving imme diate financial support to the Group with no future
related costs are recognised in profit or loss in the p eriod in which they become receivable. Such grants are
presented under ‘‘other income, gains and losses’’.
Where the grant relates to an asset, the fair val ue is credited to a deferred income account and is
released to the profit or loss over the expected useful life of the relevant asset by equal annual instalments.
4.8. Employee benefits
Pension obligation
In accordance with the rules and regulati ons in the PRC, the PRC based employees of the
Group participate in various define d contribution retirement benefi t plans organised by the relevant
municipal and provincial go vernments in the PRC under which the Group and the PRC based
employees are required to make monthly contributi ons to these plans calculated as a percentage of
the employees’ salaries. The municipal and pr ovincial governments undertake to assume the
retirement benefit obligations of all existing and future retired PRC based employees’ payable under
the plans described above. Other than the m onthly contributions, the Group has no further
obligation for the payment of retirement and other post-retirement benefits of its employees. The
assets of these plans are held separately from t hose of the Group in independently administered
funds managed by the PRC government.
The Group’s contributions to the aforesaid de fined contribution retirement schemes are
expensed as incurred.
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Housing funds, medical insurances and other social insurances
Employees of the Group in the PRC are e ntitled to participate in various
government-supervised housing funds, medical insurances and other social insurance plan. The
Group contributes on a monthly basis to these funds ba sed on certain percentages of the salaries of
the employees, subject to certain ceiling. The Group’ s liability in respect of these funds is limited to
the contributions payable in each year. Contributi ons to the housing funds, medical insurances and
other social insurances are expensed as incurred.
4.9. Share-based payment arrangements
Equity-settled share-based payment transactions
Shares/Share options granted to employees
Equity-settled share-based payments to empl oyees are measured at the fair value of the equity
instruments at the grant date.
The fair value of the equity-settled share-base d payments determined at the grant date without
taking into consideration all non-market vesting c onditions is expensed on a straight-line basis over
the vesting period, based on the Group’s estimate o f equity instruments that will eventually vest,
with a corresponding increase in equity (share-bas ed payments reserve). At the end of each reporting
period, the Group revises its estimate of the numbe r of equity instruments expected to vest based on
assessment of all relevant non-market vesting condi tions. The impact of the revision of the original
estimates, if any, is recognised in profit or loss su ch that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the sha re-based payments reserve. For shares/share
options that vest immediately at the date of grant, th e fair value of the shares/share options granted
is expensed immediately to profit or loss.
When share options are exercised, the amount pr eviously recognised in share-based payments
reserve will be transferred to capital reserve. Whe n the share options are forfeited after the vesting
date or are still not exercised at the expiry date, t he amount previously recognised in share-based
payments reserve will be transferred to retained profits.
When shares granted are vested, the amount previously recognised in share-based payments
reserve will be transferred to capital reserve.
4.10. Taxation
Income tax expense represents the sum of current and deferred income tax expense.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit
before taxation because of income or expense that ar e taxable or deductible in other years and items that
are never taxable or deductible. The G roup’s liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differ ences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liab ilities are generally recognised for all taxable
temporary differences. Deferred tax assets are g enerally recognised for all deductible temporary
differences to the extent that it is probable that t axable profits will be available against which those
deductible temporary differences can be utilised. Such d eferred tax assets and liabilities are not recognised
if the temporary difference arises from the initial recognition (other than in a business combination) of
assets and liabilities in a transact ion that affects neither the taxable profit nor the accounting profit and at
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the time of the transaction does not give rise to equa l taxable and deductible temporary differences. In
addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial
recognition of goodwill.
Deferred tax liabilities are recognised for taxable te mporary differences associated with investments
in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable t hat the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such
investments and interests are only recognised to the ext ent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
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 profits will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have
been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and a ssets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle
the carrying amount of its a ssets and liabilities.
For the purposes of measuring deferred tax for lea sing transactions in which the Group recognises
t h er i g h t - o f - u s ea s s e t sa n dt h er e l a t e dl e a s el i a b ilities, the Group first determines whether the tax
deductions are attributable to the right-o f-use assets or the lease liabilities.
For leasing transactions in which the tax deducti ons are attributable to the lease liabilities, the
Group applies IAS 12 ‘‘Income Taxes’’ requirements to the lease liabilities and the related assets
separately. The Group recognises a deferred tax asset r elated to lease liabilities to the extent that it is
probable that taxable profit will be available against w hich the deductible temporary difference can be
utilised and a deferred tax liability fo r all taxable temporary differences.
Deferred tax assets and liabilities are offset when the re is a legally enforceable right to set off current
tax assets against current tax liabilities and when t hey relate to income taxes levied to the same taxable
entity by the same taxation authority.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax
are also recognised in other comprehensive income or di rectly in equity, respectively. Where current tax or
deferred tax arises from the initial accounting for a business combination, the tax effect is included in the
accounting for the business combination.
4.11. Business combinations
Optional concentration test
The Group can elect to apply an optional concentr ation test, on a transac tion-by-transaction
basis, that permits a simplified assessment of whether an acquired set of activities and assets is not a
business. The concentration test is met if substa ntially all of the fair value of the gross assets
acquired is concentrated in a single identifiable a sset or group of similar identifiable assets. The
gross assets under assessment exclude cash and cas h equivalents, deferred tax assets, and goodwill
resulting from the effects of deferred tax liabil ities. If the concentration test is met, the set of
activities and assets is determined not to be a business and no further assessment is needed.
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Business combinations
A business is an integrated set of activities and assets which includes an input and a
substantive process that togethe r significantly contribute to th e ability to create outputs. The
acquired processes are considered substantive if the y are critical to the abili ty to continue producing
outputs, including an organised workforce with th e necessary skills, knowledge, or experience to
perform the related processes or they significant ly contribute to the abil ity to continue producing
outputs and are considered unique or scarce or cannot be replaced without significant cost, effort, or
delay in the ability to continue producing outputs.
Acquisitions of businesses are accounted for us ing the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calc ulated as the sum of the
acquisition-date fair values of the assets transfe rred by the Group, liabilities incurred 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. Acquisition-related cos ts are generally recognised in profit or loss as
incurred.
For business combinations in which the acquisition date is on or after 1 January 2022, the
identifiable assets acquired an d liabilities assumed must meet th e definitions of an asset and a
liability in the Conceptual Framework for Financi al Reporting issued by International Accounting
Standards Board in March 2018 (the ‘‘ Conceptual Framework ’’) except for transactions and events
within the scope of IAS 37 or IFRIC 21, in which t he Group applies IAS 37 or IFRIC 21 instead of
the Conceptual Framework to identify the liabi lities it has assumed in a business combination.
Contingent assets are not recognised.
At the acquisition date, the identifiable as sets acquired and the liabilities assumed are
recognised at their fair value, except that:
. deferred tax assets or liabilities, and asset s or liabilities related to employee benefit
arrangements are recognised and measured in accordance with IAS 12 Income Taxes and
IAS 19 Employee Benefits respectively;
. liabilities or equity instruments related to share-based payment arrangements of the
acquiree or share-based payment arrangements of the Group entered into to replace
share-based payment arrangements of the acquiree are measured in accordance with
IFRS 2 at the acquisition date (see the accounting policy below);
. assets (or disposal groups) that are classifi ed as held for sale in accordance with IFRS 5
Non-current Assets Held for Sale and Di scontinued Operations are measured in
accordance with that standard; and
. lease liabilities are recognised and measure d at the present value of the remaining lease
payments (as defined in IFRS 16) as if the acquired leases were new leases at the
acquisition date. Right-of-use assets are recognised and measured at the same amount as
the relevant lease liabilities, adjusted to reflect favourable or unfavourable terms of the
lease when compared with market terms.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree, an d the fair value of the acquirer’s previously held
equity interest in the acquiree (if any) over the net amount of the identifiable assets acquired and the
liabilities assumed as at acquisition date. If, afte r re-assessment, the net amount of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held
interest in the acquiree (if any), the excess is reco gnised immediately in profit or loss as a bargain
purchase gain.
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Non-controlling interests that are present owne rship interests and entitle their holders to a
proportionate share of the relevant subsidiary’s ne t assets in the event of liquidation are initially
measured at the non-controlling interests’ pr oportionate share of the recognised amounts of the
acquiree’s identifiable net assets or at fair value.
When the consideration transferred by the Group in a business combination includes a
contingent consideration arrangement, the c ontingent consideration is measured at its
acquisition-date fair value and in cluded as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively. Measurement period adjustments are adjustments
that arise from additional information obtained d uring the ‘‘measurement period’’ (which cannot
exceed one year from the acquisition date) about facts and circumstances that existed at the
acquisition date.
The subsequent accounting for the continge nt consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified.
Contingent consideration that is c lassified as equity is not remeasur ed at subsequent reporting dates
and its subsequent settlement is accounted for wit hin equity. Contingent consideration that is
classified as an asset or a liability is remeasured t o fair value at subsequent reporting dates, with the
corresponding gain or loss being recognised in profit or loss.
When a business combination is achieved in stag es, the Group’s previously held equity interest
in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group
obtains control), and the resulting gain or loss, if any, is recognised in profit or loss or other
comprehensive income, as appropriate. Amounts ari sing from interests in the acquiree prior to the
acquisition date that have previously been recogn ised in other comprehensive income and measured
under HKFRS 9 would be accounted for on the same basis as would be required if the Group had
disposed directly of the previously held equity interest.
If the initial accounting for a business combination is incomplete by the end of the reporting
period in which the combination occurs, the Group reports provisional amounts for the items for
which the accounting is incomplete. Those provisi onal amounts are adjusted retrospectively during
the measurement period (see above), and additional a ssets or liabilities are recognised, to reflect new
information obtained about facts and circumstance s that existed at the acquisition date that, if
known, would have affected the amounts recognised at that date.
4.12. Goodwill
Goodwill arising on an acquisiti on of a business is carried at cost as established at the date of
acquisition of the business (see the accounting polic y above) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is a llocated to each of the Group’s cash-generating
units (or group of cash-generating units) that is expected to benefit from the synergies of the combination,
which represent the lowest level at which the goodwill is monitored for internal management purposes and
not larger than an operating segment.
A cash-generating unit (or group of cash-generatin g units) to which goodwill has been allocated is
tested for impairment annually or more frequently when there is indication that the unit may be impaired.
For goodwill arising on an acquisition in a reporti ng period, the cash-generating unit (or group of
cash-generating units) to w hich goodwill has been allocated is teste d for impairment before the end of that
reporting period. If the recoverable amount is less than its carrying amount, the impairment loss is
allocated first to reduce the carrying amount of any g oodwill and then to the other assets on a pro-rata
basis based on the carrying amount of each asset i n the unit (or group of cash-generating units).
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4.13. Property, plant and equipment
Property, plant and equipment are tangible asset s that are held for use in the production or supply
of goods or services, or for administrative purposes o ther than assets under construction as described
below. Property, plant and equipment are stated in the c onsolidated statement of financial position at cost
less subsequent accumulated depreciation and s ubsequent accumulated impairment losses, if any.
Assets in the course of construction for production, supply or administrative purposes are carried at
cost, less any recognised impairment loss. Costs incl ude any costs directly attributable to bringing the
asset to the location and condition necessary for it t o be capable of operating in the manner intended by
management, including costs of testing whether t he related assets in functioning properly and, for
qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy.
Depreciation of these assets, on the same basis as other property assets, commences when the assets are
ready for their intended use.
When the Group makes payments for ownership in terests of properties which includes both
leasehold land and building elements, the entire cons ideration is allocated between the leasehold land and
the building elements in proportion to the relative f air values at initial recognition. To the extent the
allocation of the relevant payments can be made re liably, interest in leasehold land is presented as
‘‘right-of-use assets’’ in the consolidated statemen t of financial position. When the consideration cannot
be allocated reliably between non-lease buildin g element and undivided interest in the underlying
leasehold land, the entire properties are cl assified as property, plant and equipment.
Depreciation is recognised so as to write off the co st of assets other than construction in progress
less their residual values over their estimated usefu l lives, using the straigh t-line method, as follows:
B u i l d i n g s.................................................. 2 0y e a r s
P l a n ta n dm a c h i n e r y .......................................... 5–10 years
M o t o rv e h i c l e s.............................................. 5–10 years
O t h e re q u i p m e n t ............................................. 5y e a r s
L e a s e h o l di m p r o v e m e n t s....................................... 5–10 years
The estimated useful lives, residual values and de preciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property and equipment is derecogn ised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property and equipment i s determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in profit or loss.
4.14. Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at costs less
accumulated amortisation and any accumulated imp airment losses. Amortisation for intangible
assets with finite useful lives is recognised on a strai ght-line basis over their estimated useful lives.
The estimated useful life and amortisation method are reviewed at the end of each reporting period,
with the effect of any changes in estimate being a ccounted for on a prospective basis. Intangible
assets with indefinite us eful lives that are acquired separately a re carried at cost less any subsequent
accumulated impairment losses.
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An intangible asset is derecognised on dispos al, or when no future economic benefits are
expected from use or disposal. Gains and losses ari sing from derecognition of an intangible asset,
measured as the difference between the net dis posal proceeds and the carrying amount of the asset,
are recognised in profit or loss when the asset is derecognised.
Internally-generated intangible asset s — research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is
incurred.
4.15. Impairment on property, plant and equipment, ri ght-of-use assets and int angible assets other than
goodwill
At the end of the reporting period, the Group revi ews the carrying amounts of its property, plant
and equipment, right-of-use assets and intangible asse ts with finite useful lives to determine whether there
is any indication that these assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the relevant asset is estimate d in order to determine the extent of the impairment
loss (if any).
The recoverable amount of property, plant and equipm ent, right-of-use assets and intangible assets
are estimated individuall y. When it is not possible to estimate the recoverable amount individually, the
Group estimates the recoverable amount of the cas h-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment , corporate assets are allocated to the relevant
cash-generating unit when a reasonable and consistent basis of allocation can be es tablished, or otherwise
they are allocated to the smallest group of cash gene rating units for which a rea sonable and consistent
allocation basis can be establishe d. The recoverable amount is determined for the cash-generating unit or
group of cash-generating units to which the corpor ate asset belongs, and is compared with the carrying
amount of the relevant cash-generating unit or group of cash-generating units.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are dis counted 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
(or a cash-generating unit) for which the estim ates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-ge nerating unit) is estima ted to be less than its
carrying amount, the carrying amount of the asset (or a ca sh-generating unit) is reduced to its recoverable
amount. For corporate assets or portion of corpor ate assets which cannot be allocated on a reasonable
and consistent basis to a cash-generating unit, th e Group compares the carrying amount of a group of
cash-generating units, i ncluding the carrying amounts of the cor porate assets or por tion of corporate
assets allocated to that group of cash-generatin g units, with the recoverable amount of the group of
cash-generating units. In allocatin g the impairment loss, the impairmen t loss is allocated first to reduce
the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based
on the carrying amount of each asset in the unit or t he group of cash-generat ing units. The carrying
amount of an asset is not reduced below the highest of i ts fair value less costs of disposal (if measurable),
its value in use (if determinable) and zero. The am ount of the impairment loss that would otherwise have
been allocated to the asset is allocated pro r ata to the other assets of the unit or the group of
cash-generating units. An impairment loss i s recognised immediately in profit or loss.
Where an impairment loss subsequently reve rses, the carrying amount of the asset (or
cash-generating unit or a group of cash-generating units) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss bee n recognised for the asset (or a cash-generating
unit or a group of cash-generating units) in prior ye ars. A reversal of an impairment loss is recognised
immediately in profit or loss.
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4.16. Cash and cash equivalents
Cash and cash equivalents presented on the consolid ated statement of financial position include:
(a) cash, which comprises of cash on hand and demand deposits, excluding bank balances that are
subject to regulatory restrictions that result in such balances no longer meeting the definition
of cash; and
(b) cash equivalents, which comprises of short-te rm (generally with original maturity of three
months or less), highly liquid investments th at are readily convertible to a known amount of
cash and which are subject to an insignificant r isk of changes in value. Cash equivalents are
held for the purpose of meeting short-term cash commitments rather than for investment or
other purposes.
For the purposes of the consolidated statement of c ash flows, cash and cash equivalents consist of
cash and cash equivalents as defined above and form an integral part of the Group’s cash management.
4.17. Inventories
Inventories are stated at the lower of cost and n et realisable value. Costs of inventories are
determined on a weighted average method. Net realisabl e value represents the estimated selling price for
inventories less all estimated costs of comp letion and costs necessary to make the sale.
4.18. Provisions
Provisions are recognised when the Group has a pres ent obligation (legal or constructive) as a result
of a past event, it is probable that the Group will be required to settle that obl igation, and a reliable
estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best est imate of the consideration required to settle the
present obligation at the end of the reporting peri od, taking into account the risks and uncertainties
surrounding the obligation. When a p rovision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the prese nt value of those cash flows (where the effect of the
time value of money is material).
Warranties
Provisions for the expected cost of assuran ce-type warranty obligations under the relevant
contracts with customers for sales of automotive specialty chemicals and LFP cathode materials are
recognised at the date of sale of the relevant pr oducts, at the directors’ best estimate of the
expenditure required to settle the Group’s obligation.
4.19. Financial instruments
Financial assets and financial liabilities are re cognised when a group entity becomes a party to the
contractual provisions of the instr ument. All regular way purchases or sales of financial assets are
recognised and derecognised on a tra de date basis. Regular way purchases or sales are purchases or sales
of financial assets that require delivery of assets within the time frame established by regulation or
convention in the market place.
Financial assets and financial liabilities are initial ly measured at fair value except for trade and bills
receivables and contract assets arising from contract s with customers which are initially measured in
accordance with IFRS 15 ‘‘Revenue from Contracts with Customers’’ (‘‘ IFRS 15 ’’). Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
APPENDIX IA ACCOUNTANTS’ REPORT
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financial assets at FVTPL are added to or deducted fro m the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs dir ectly attributable to the acquisition
of financial assets at FVTPL are recogn ised immediately in profit or loss.
The effective interest method is a method of calcul ating the amortised cost of a financial asset or
financial liability and of allocating interest incom e and interest expense over the relevant period. The
effective interest rate is the rate that exactly dis counts estimated future cash receipts and payments
(including all fees and points paid o r received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) th rough the expected life of the financial asset or
financial liability, or, where appropriate, a shor ter period, to the net carrying amount on initial
recognition.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following condi tions are subsequently measured at amortised
cost:
. the financial asset is held within a bus iness model whose objective is to collect
contractual cash flows; and
. the contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Financial assets that meet the following condi tions are subsequently measured at fair value
through other comprehensive income:
. the financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling; and
. the contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
All other financial assets are subsequent ly measured at FVTPL, except that at initial
recognition of a financial asset the Group may irr evocably elect to present subsequent changes in
fair value of an equity investment in other comprehen sive income if that equity investment is neither
held for trading nor contingent consideration r ecognised by an acquirer i n a business combination
to which IFRS 3 Business Combinations applies.
A financial asset is held for trading if:
. it has been acquired principally for the purpose of selling in the near term; or
. on initial recognition it is a part of a portfolio of identified financial instruments that the
Group manages together and has a recent actua l pattern of short-term profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.
Amortised cost and interest income
Interest income is recognised using the effectiv e interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying th e effective interest rate
to the gross carrying amount of a financial asset, except for financial assets that have subsequently
become credit-impaired. For financial assets th at have subsequently become credit-impaired,
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interest income is recognised by applying the eff ective interest rate to the amortised cost of the
financial asset from the next reporting period. If t he credit risk on the credit-impaired financial
instrument improves so that the financial asset is no longer credit-impaired, interest income is
recognised by applying the effective interest rate t o the gross carrying amount of the financial asset
from the beginning of the reporting period follow ing the determination that the asset is no longer
credit-impaired.
Equity instruments designated as at fair val ue through other comprehensive income (‘‘ FVTOCI ’’)
Investments in equity instruments at FVTOCI a re subsequently measured at fair value with
gains and losses arising from changes in fair value recognised in other comprehensive income and
a c c u m u l a t e di nt h eF V T O C Ir e s e r v e ;a n da r en o tsubject to impairment assessment. The cumulative
gain or loss will not be reclassified to profit or loss on disposal of the equity investments, and will be
transferred to retained profits/will continue to be held in the FVTOCI reserve.
Dividends from these investments in equity inst ruments are recognised in profit or loss when
the Group’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of the investment. Dividends are included in the ‘‘other income, gains
and losses’’ line item in profit or loss.
Financial assets at FVTPL
Financial assets that do not meet the criteria f or being measured at amortised cost or FVTOCI
or designated as FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with
any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or
loss excludes any dividend or interest earned on the financial asset and is included in the ‘‘other
income, gains and losses’’ line item.
Impairment of financial assets
The Group performs impairment assessment under expected credit loss (‘‘ ECL’’) model on
financial assets (including trade and other receiva bles, pledged bank deposits and bank balances and
cash) which are subject to impairment assess ment under IFRS 9. The amount of ECL is updated at
each reporting date to reflect changes in c redit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the
expected life of the relevant instrum ent. In contrast, 12-month ECL (‘‘ 12m ECL ’’) represents the
portion of lifetime ECL that is expected to result f rom default events that are possible within 12
months after the reporting date. Assessments ar e done based on the Group’s historical credit loss
experience, adjusted for factors that are specifi c to the debtors, general economic conditions and an
assessment of both the current conditions at the r eporting date as well as the forecast of future
conditions.
The Group always recognises lifetime EC L for trade receivables and bills receivables.
For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless
there has been a significant increase in credit risk since initial recognition, in which case the Group
recognises lifetime ECL. The assessment of whe ther lifetime ECL should be recognised is based on
significant increases in the likelihood or risk of a default occurring since initial recognition.
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Significant increase in credit risk
In assessing whether the credit risk has increase d significantly since ini tial recognition, the
Group compares the risk of a default occurring on th e financial instrument as at the reporting date
with the risk of a default occurring on the financia l instrument as at the date of initial recognition.
In making this assessment, the Group considers bot h quantitative and qualitative information that
is reasonable and supportable, including historical experience and forward-looking information that
is available without undue cost or effort.
In particular, the following information is ta ken into account when assessing whether credit
risk has increased significantly:
. an actual or expected significant deteriorati on in the financial instrument’s external (if
available) or internal credit rating;
. significant deterioration in external market indicators of credit risk, e.g. a significant
increase in the credit spread, the credit default swap prices for the debtor;
. existing or forecast adverse changes in bus iness, financial or economic conditions that
are expected to cause a significant decrease in the debtor’s ability to meet its debt
obligations;
. an actual or expected significant deteriora tion in the operating results of the debtor;
. an actual or expected significant adverse change in the regulatory, economic, or
technological environment of the debtor th at results in a significant decrease in the
debtor’s ability to meet its debt obligations.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk
has increased significantly since initial recognition when contractual payments are more than 30
days past due, unless the Group has reasonable a nd supportable information that demonstrates
otherwise.
The Group regularly monitors the effectiveness o f the criteria used to identify whether there
has been a significant increase in credit risk and revises them as appropriate to ensure that the
criteria are capable of identifying significant in crease in credit risk before the amount become past
due.
Definition of default
For internal credit risk management, the Gr oup considers an event of default occurs when
information developed internally or obtained f rom external sources indicates that the debtor is
unlikely to pay its creditors, including the Group, i n full (without taking into account any collaterals
held by the Group).
Irrespective of the above, the Group considers t hat default has occurred when a financial asset
is more than 1 year past due unless the Group ha s reasonable and supportable information to
demonstrate that a more lagging defa ult criterion is more appropriate.
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Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on
the estimated future cash flows of that financial a sset have occurred. Evidence that a financial asset
is credit-impaired includes observab le data about the following events:
(a) significant financ ial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the
borrower’s financial difficul ty, having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider; or
(d) it is becoming probable that the borrowe r will enter bankruptcy or other financial
reorganisation.
Write-off policy
The Group writes off a financial asset when there is information indicating that the
counterparty is in severe financial difficulty a nd there is no realistic prospect of recovery, for
example, when the counterparty has been placed u nder liquidation or has entered into bankruptcy
proceedings. Financial assets written off may sti ll be subject to enforcement activities under the
Group’s recovery procedures, taking into account legal advice where appropriate. A write-off
constitutes a derecognition event. Any subse quent recoveries are recognised in profit or loss.
Measurement and recognition of ECL
The measurement of ECL is a function of the proba bility of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on historical data and forward-looking
information. Estimation of ECL reflects an unb iased and probability-weighted amount that is
determined with the respective risks of default o ccurring as the weights. The Group uses a practical
expedient in estimating ECL on trade and bills r eceivables and contract assets using a provision
matrix taking into consideration historical cre dit loss experience, adjusted for forward looking
information that is available without undue cost or effort.
Generally, the ECL is the difference between a ll contractual cash flows that are due to the
Group in accordance with the contract and the cash flows that the Group expects to receive,
discounted at the effective interest rat e determined at initial recognition.
Lifetime ECL for certain trade and bills recei vables and contract assets are considered on a
collective basis taking into consideration past due information and relevant credit information such
as forward looking macroeconomic information.
For collective assessment, the Group takes int o consideration the following characteristics
when formulating the grouping:
. past-due status;
. nature, size and industry of debtors; and
. external credit ratings where available.
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--- page 566 ---
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics.
The Group measures ECL for the remaining trad e and bills receivables and contract assets on
an individual basis.
Interest income is calculated based on the gross carrying amount of the financial asset unless
the financial asset is credit-impaired, in which ca se interest income is calculated based on amortised
cost of the financial asset.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments
by adjusting their carrying amount, with the excepti on of trade and bills receivables, contract assets
and other receivables where the corresponding adju stment is recognised through a loss allowance
account.
Foreign exchange gains and losses
The carrying amount of financial assets that are denominated in a foreign currency is
determined in that foreign currency and transl ated at the spot rate at the end of each reporting
period. Specifically:
. For financial assets measured at amortised cost that are not part of a designated hedging
relationship, exchange differences are recognised in profit or loss in the ‘‘Other income,
gains and losses’’ line item as part of the net foreign exchange gains/(losses);
. For financial assets measured at FVTPL that are not part of a designated hedging
relationship, exchange differences are recognised in profit or loss in the ‘‘Other income,
gains and losses’’ line item as part of the gains/(losses) from changes in fair value of
financial assets at FVTPL.
Derecognition of financial assets
The Group derecognises a financial asset only w hen the contractual rights to the cash flows
from the asset expire, or when it transfers the fin ancial asset and substantially all the risks and
rewards of ownership of the asset to another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the
asset’s carrying amount and the sum of the consideration received and receivable is recognised in
profit or loss.
On derecognition of an investment in equity inst rument which the Group has elected on initial
recognition to measure at FVTOCI, the cumulati ve gain or loss previously accumulated in the
FVTOCI reserve is not reclassified to profit or l o s s ,b u ti st r a n s f e r r e dt or e t a i n e dp r o f i t s .
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabi lities or as equity in
accordance with the substance of the contractual a rrangements and the definitions of a financial
liability and an equity instrument.
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Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity inst ruments issued by the Company are recognised at the
proceeds received, net of direct issue costs.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTP L when the financial lia bility is designated as
FVTPL.
A financial liability is classified as held for trading if:
. it has been acquired principally for the purpose of repurchasing it in the near term; or
. on initial recognition it is a part of a portfolio of identified financial instruments that the
Group manages together and has a recent actua l pattern of short-term profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a f inancial liability held for trad ing or contingent consideration
of an acquirer in a business combination may be des ignated as at FVTPL upon initial recognition if:
. such designation eliminates or significan tly reduces a measurement or recognition
inconsistency that would otherwise arise; or
. the financial liability forms part of a group of financial assets or financial liabilities or
both, which is managed and its performance is evaluated on a fair value basis, in
accordance with the Group’s documented ris k management or investment strategy, and
information about the grouping is prov ided internally on that basis; or
. it forms part of a contract containing one or more embedded derivatives, and IFRS 9
permits the entire combined contract to be designated as at FVTPL.
For financial liabilities that are designat ed as at FVTPL, the amount of changes in the fair
value of the financial liability that is attributab le to changes in the credit risk of that liability is
recognised in other comprehensive income, unles s the recognition of the effects of changes in the
liability’s credit risk in other comprehensive income would create or enlarge an accounting
mismatch in profit or loss. For financial liabilitie s that contain embedded derivatives, the changes in
fair value of the embedded derivatives are excl uded in determining the amount to be presented in
other comprehensive income. Changes in fair value a ttributable to a financial liability’s credit risk
that are recognised in other comprehensive income ar e not subsequently reclassified to profit or loss;
instead, they are transferred to re tained profits/others upon derecogn ition of the financial liability.
Financial liabilities at amortised cost
Financial liabilities includi ng bank borrowings, trade and bills payables and other payables
and accruals are subsequently measured at amorti sed cost, using the effective interest method.
Foreign exchange gains and losses
For financial liabilities that are denominat ed in a foreign currency and are measured at
amortised cost at the end of each reporting peri od, the foreign exchange gains and losses are
determined based on the amortised cost of the inst ruments. These foreign exchange gains and losses
are recognised in the ‘‘Other income, gains and losses’’ line item in profit or loss as part of net
APPENDIX IA ACCOUNTANTS’ REPORT
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--- page 568 ---
foreign exchange gains/(losses) for financial li abilities that are not part of a designated hedging
relationship. For those which are designated as a he dging instrument for a hedge of foreign currency
risk, foreign exchange gains and losses are r ecognised in other comprehensive income and
accumulated in a separa te component of equity.
Capital contribution from investors with put option
Shares of subsidiary held by non-controlling interests under terms whereby the Group is or
may be obliged to repurchase the shares and does not have the unconditional right to avoid
delivering cash or another financial asset are recognised as financial liabilities and accounted for in
accordance with the accounting policies for financ ial liabilities as disclo sed in note 28(b) and note
28(c).
Derecognition of financial liabilities
The Group derecognises financia l liabilities when, and only whe n, the Group’s obligations are
discharged, cancelled or have expired. The differe nce between the carrying amount of the financial
liability derecognised and the consideration p aid and payable is recognised in profit or loss.
Changes in the basis for determining the contractual cash flows as a result of interest rate benchmark
reform
For changes in the basis for determining the contractual cash flows of a financial asset or
financial liability to which the amortised cost m easurement applies as a result of interest rate
benchmark reform, the Group applies the practical expedient to account for these changes by
updating the effective interest rate, such change in e ffective interest rate nor mally has no significant
effect on the carrying amount of the relevant financial asset or financial liability.
A change in the basis for determining the contra ctual cash flows is required by interest rate
benchmark reform if and only if, both these conditions are met:
. the change is necessary as a direct consequenc e of interest rate benchmark reform; and
. the new basis for determining the contract ual cash flows is economically equivalent to
the previous basis (i.e. the basis immediately preceding the change).
Derivative financial instruments
Derivatives are initially recognised at fair value at the date when derivative contracts are
entered into and are subsequently remeasured to th eir fair value at the end of the reporting period.
The resulting gain or loss is recognised in profit or loss. Unless the derivative is designated and
effective as a hedging instrument, in which event the timing of the recognition in profit or loss
depends on the mature of hedge relationship.
A derivative is presented as a non-current asse t or a non-current liability if the remaining
maturity of the instrument is more than 12 months and it is not due to be realised or settled within
12 months. Other derivatives are presented a s current assets or current liabilities.
Generally, multiple embedded derivatives in a s ingle instrument that are separated from the
host contracts are treated as a single compound embe dded derivative unless t hose derivat ives relate
to different risk exposures and are readil y separable and independent of each other.
Hedge accounting
The Group designates certain derivatives as hedging instruments for cash flow hedges.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 4 6–


--- page 569 ---
At the inception of the hedging relationship t he Group documents the relationship between
the hedging instrument and the hedged item, al ong with its risk management objectives and its
strategy for undertaking various hedge transacti ons. Furthermore, at the inception of the hedge and
on an ongoing basis, the Group documents whether t he hedging instrument is highly effective in
o f f s e t t i n gc h a n g e si nf a i rv a l u e so rc a s hf l o w so fthe hedged item attributable to the hedged risk.
For the purpose of determining whether a for ecast transaction (or a component thereof) is
highly probable, the Group assumes that the interest rate benchmark on which the hedged cash
flows (contractually or non-cont ractually specified) are based is not altered as a result of interest
rate benchmark reform.
Assessment of hedging relationship and effectiveness
For hedge effectiveness assessment, the Group considers whether the hedging instrument is
effective in offsetting changes in fair values or cash flows of the hedged item attributable to the
hedged risk, which is when the hedging relationshi ps meet all of the following hedge effectiveness
requirements:
. there is an economic relationship between the hedged item and the hedging instrument;
. the effect of credit risk does not dominate t he value changes that result from that
economic relationship; and
. the hedge ratio of the hedging relationship is the same as that resulting from the quantity
of the hedged item that the Group actually hedges and the quantity of the hedging
instrument that the entity actually uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the
hedge ratio but the risk management objective for th at designated hedging relationship remains the
same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so
that it meets the qualifying criteria again.
In assessing the economic relationship between the hedged item and the hedging instrument,
the Group assumes that the interest rate benchmark on which the hedged cash flows and/or the
hedged risk (contractually or non-contractually sp ecified) are based, or the interest rate benchmark
on which the cash flows of the hedging instrument are based, is not altered as a result of interest rate
benchmark reform.
Cash flow hedges
The effective portion of changes in the fair valu e of derivatives and other qualifying hedging
instruments that are designated and qualify as cash flow hedges is recognised in other
comprehensive income and accumulated under t he heading of hedging reserve, limited to the
cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss
relating to the ineffective portion is recognised i mmediately in profit or loss, and is included in the
‘‘other income, gains and losses, net’’ line item.
When a hedged item in a cash flow hedge is amended to reflect the changes that are required
by the interest rate benchmark reform, the amount accumulated in the cash flow hedge reserve is
deemed to be based on the alternative benchmark rate on which the hedged future cash flows are
determined.
Amounts previously recognised in other compreh ensive income and accumulated in equity are
reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same
line as the recognised hedged item. However, when t he hedged forecast transaction results in the
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 4 7–


--- page 570 ---
recognition of a non-financial asset or a non-financ ial liability, the gain s and losses previously
recognised in other comprehensive income and accumulated in equity are removed from equity and
included in the initial measurement of the cost of t he non-financial asset or non- financial liability.
This transfer does not affect other comprehensive income. Furthermore, if the Group expects that
some or all of the loss accumulated in the hedging r eserve will not be recovered in the future, that
amount is immediately recla ssified to profit or loss.
Discontinuation of hedge accounting
The Group discontinues hedge accounting prosp ectively only when the he dging relationship
(or a part thereof) ceases to meet the qualifying cr iteria (after rebalancing, if applicable). This
includes instances when the hedging instrument expires or is sold, terminated or exercised.
Discontinuing hedge accounting can either affect a h edging relationship in its entirety or only a part
of it (in which case hedge accounting continues for the remainder of the hedging relationship).
For cash flow hedge, any gain or loss recognised in other comprehensive income and
accumulated in equity at that time remains in equity and is recognised when the forecast
transactions are ultimately recognised in profit or loss. When a forecast transaction is no longer
expected to occur, the gain or loss accumulated in e quity is recognised immediately in profit or loss.
4.20. Related parties
A person or a close member of that person’s family is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of key management personnel of the Group or the Group’s parent. Or
An entity is related to the Group if any of the following conditions apply:
(i) The entity and the Group are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of t he other entity (or an associate or joint venture
of a member of a group of which the other entity is a member).
(iii) Both entities 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 pla n for the benefit of the employees of the Group or
an entity related to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significa nt influence over the entity or is a member of key
management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management
personnel services to the reporting entity or to the parent of the reporting entity.
APPENDIX IA ACCOUNTANTS’ REPORT
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--- page 571 ---
Close members of the family of a person are t hose family members who may be expected to
influence, or be influenced by, that person in their dealings with the entity.
4.21. Segment reporting
Operating segments are reported in a manner consiste nt with the internal reporting provided to the
chief operating decision-maker (‘‘ CODM ’’). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, h as been identified as the c hief executive officer and
directors of the Company that makes strategic decisions.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the Group’s Historical Finan cial Information requires management to make
judgments, estimates and assumpti ons that affect the application of pol icies and reported amounts of assets,
liabilities income and expenses. The es timates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonabl e under the circumstances, the results of which form the
basis of making the judgements about carrying values of as sets and liabilities that ar e not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are revie wed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estim ate is revised if the revision affects only that period, or
in the period of the revision and future periods if th e revision affects both current and future periods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period that may have a significant risk of causing a material
adjustment to the carrying amounts of assets and l iabilities within the next financial year.
Estimated impairment of property, plant and equipm ent, right-of-use assets and other intangible assets
Property, plant and equipm ent, right-of-use assets and other intangible assets are stated at costs less
accumulated depreciation/amortisation and impai rment, if any. In determining whether an asset is
impaired, the Group has to exercise judgment and make e stimation, particularly in assessing: (1) whether
an event has occurred or any indicator that may affect the asset value; (2) whether the carrying value of an
asset can be supported by the recoverable amount, in the case of value in use, the net present value of
future cash flows which are estimated based upon the continued use of the asset; and (3) the appropriate
key assumptions to be applied in estimating the reco verable amounts including cash flow projections and
an appropriate discount rate. The Group is also re quired to test for impairment of capitalised
development costs assets not available for use on an a nnual basis. When it is not possible to estimate the
recoverable amount of an individual asset (including right-of-use assets), the Group estimates the
recoverable amount of the cash gen erating unit to which the assets b elong, including allocation of
corporate assets when a reasonable and consistent basis of allocation can be established, otherwise
recoverable amount is determined at the smallest gro up of cash generating units , for which the relevant
corporate assets have been allocated. Changing th e assumptions and estimates, including the discount
rates or the growth rate in the cash flow projections , could materially affect the recoverable amounts.
Detail of the carrying amounts of p roperty, plant and equipment, right-of-use assets and other
intangible assets subject to impairment assessments a nd impairment losses that have been recognised are
disclosed in notes 15, 16 and 18, respectively.
APPENDIX IA ACCOUNTANTS’ REPORT
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--- page 572 ---
Provision of ECL for trade and other receivables
Trade receivables with credit-impaired are asse ssed for ECL individually. In addition, the Group
uses practical expedient in estima ting ECL in trade receivables which a re not assessed individually using a
provision matrix. The provision rates are based on agi ng of debtors as groupings of various debtors taking
into consideration the Group’s historical default s rates and forward-looking information that is
reasonable and supportable available without undue costs or effort. At every reporting date, the
historical observed default rates are reassessed a nd changes in the forward- looking information are
considered. As at 31 December 2021, 2022 and 2023 and as at 30 June 2024, the carrying amount of trade
and other receivables are RMB1,662,812, 000, RMB4,825,202,000, MB3,621,780,000 and
RMB3,402,086,000, respectively. Du ring the years ended 31 December 2021, 2022 and 2023 and the six
months ended 30 June 2024, net impairment losses on trade and other receivables of RMB23,134,000,
RMB70,362,000, RMB18,966,000 and reversal of impairment loss of RMB30,458,000 in aggregate were
recognised, respectively.
Deferred tax assets
As at 31 December 2021, 2022 and 2023 and 30 June 2024, deferred tax assets of RMB20,244,000,
RMB62,296,000, RMB392,691,000 and RMB355,187,000, respectively, in relation to deductible
temporary differences for certain operating subs idiaries have been recognised in the consolidated
statement of financial position. As at 31 December 2021, 2022 and 2023 and 30 June 2024, no deferred tax
asset has been recognised on the tax losses of RMB10,422,000, RMB54,991, 000, RMB154,354,000 and
RMB552,304,000, respectively due to the unpredictabi lity of future profit stream s. The realisability of the
deferred tax asset mainly depends on whether suffici ent future profits or taxable temporary differences
will be available in the future. In cases where the actual future taxable profits generated are less or more
than expected, or change in facts and circumstances which result in revision of future taxable profits
estimation, a material reversal or further recognit ion of deferred tax assets may arise, which would be
recognised in profit or loss for the period in which s uch a reversal or further recognition takes place.
Fair value measurement of financial instruments
As at 31 December 2021, 2022 and 2023 and 30 June 2024, the Group’s unlisted equity investments
classified as financial assets at FVT OCI amounting to RMB 92,450,000, RMB92,450,000,
RMB141,450,000 and RMB141,450,000, respectivel y, and unlisted fund at FVTPL amounting to
RMBNil, RMBNil, RMB59,005,000 and RMB40,129, 000, respectively, the Group’s listed equity
investments classified as current financial ass ets at FVTPL amounting to R MB431,000, RMB738,000,
RMB522,000 and RMB247,000, respectively, the Group’s investments in wealth management products
classified as financial assets at FVTPL amount ing to RMBNil, RMB30,000,000, RMBNil and
RMB800,750,000, respectively, the Group’s der ivative assets amounting to RMBNil, RMBNil,
RMB950,000 and RMB56,000, res pectively, and the Group’s deriv ative liabilities amounting to
RMBNil, RMBNil, RMB4,062,000 and RMB3,434,000, re spectively are measured at fair value with fair
value being determined based on significant unobser vable inputs using valuation techniques. Judgment
and estimation are required in establishing the rele vant valuation techniques and the relevant inputs
thereof. Changes in assumptions relating to these fac tors could result in material adjustments to the fair
value of these instruments. See Note 37(d) for further disclosures.
Inventories
Net realisable value of inventories is the estimate d selling price in the ordinary course of business,
less estimated costs of completion and selling expenses. These estimates are based on the current market
condition and the historical experi ence of distributing and selling pr oducts of similar nature. It could
change significantly as a result of competitor actions in response to severe industry cycles or other changes
in market condition. The Group will reassess the estim ations at each statement of financial position date.
As at 31 December 2021, 2022 and 2023 and 30 June 2024, carrying amount of inventories are
RMB1,100,586,000, RMB3,007,275,000, RMB1,610, 238,000 and RMB1,647,787,000 respectively.
APPENDIX IA ACCOUNTANTS’ REPORT
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--- page 573 ---
Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the
cash-generating uni ts to which goodwill has been allocated, which is the higher of the value in use and fair
value less costs of disposal. The val ue-in-use calculation requires the Group to estimate the future cash
flows expected to arise from the cash -generating unit and a suitable d iscount rate in order to calculate
present value. Where the actual future cash flows are less than expected, a material impairment
loss/further impairment loss may arise. As at 31 December 2021, 2022 and 2023 and 30 June 2024, the
carrying amount of goodwill is approximately RMB39 0,074,000, RMB362,599,000, RMB289,826,000 and
RMB264,577,000. Details of the recoverable amount calculation are disclosed in Note 17.
6. REVENUE AND SEGMENT INFORMATION
(a) Revenue
Revenue represents the aggregate of the net amoun ts received and receivable from customers during
the Track Record Period. There is no seasonality an d cyclicality of the operations of the Group. The
performance obligation in the c ontracts has an original expect ed duration of one year or less.
Revenue during the Track Record Period are as follows:
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue from contracts with customers
under IFRS 15
Sales of LFP cathode materials
— Without procurement of lithium
carbonate and raw materials from
customers . . . . . . . . . . . . . . . . . 1,876,842 12,084,887 6,186,681 2,673,665 1,696,977
— With procurement of lithium
carbonate and raw materials from
customers . . . . . . . . . . . . . . . . . — 156,986 566,947 177,858 778,603
1,876,842 12,241,873 6,753,628 2,851,523 2,475,580
Sales of automotive specialty chemicals . 2,118,725 1,762,814 1,903,212 938,057 970,147
Processing income from lithium
c a r b o n a t e................... — — — — 4 2 , 6 8 5
O t h e r s....................... 5 7 , 9 3 8 6 6 , 9 5 6 7 2 , 6 3 9 2 4 , 6 2 4 8 0 , 2 0 0
Total revenue . . . . . . . . . . . . . . . . . . 4,053,505 14,071,643 8,729,479 3,814,204 3,568,612
Timing of revenue recognition within the
scope of IFRS 15
At a point in time . . . . . . . . . . . . . . . 4,053,505 14,071,643 8,729,479 3,814,204 3,568,612
APPENDIX IA ACCOUNTANTS’ REPORT
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--- page 574 ---
The major customers which contributed more tha n 10% of the total revenue for the years ended 31
December 2021, 2022 and 2023 and the six months ended 30 June 2023 and 2024 are listed as below:
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Customer A (Note (a)) . . . . . . . . . . . . 1,160,415 7,486,860 2,648,020 1,045,520 1,114,401
Customer B (Note (b)) . . . . . . . . . . . . N/A 1,991,882 1,545,614 474,845 525,290
C u s t o m e rC( N o t e( c ) ) ............ N / A N / A N / A N / A 3 8 3 , 7 9 2
Notes:
(a) The revenue contributed by Customer A is from LFP cathode materials and processing income from
lithium carbonate.
(b) The revenue contributed by Customer B is from LFP ca thode materials. The percentage of contribution is
not applicable for Customer B as it contributed less than 10% of the total revenue for the year ended 31
December 2021.
(c) The revenue contributed by Customer C is from LFP ca thode materials. The percentage of contribution is
not applicable for Customer C as it contributed less than 10% of the total revenue for the years ended 31
December 2021, 2022 and 2023 and the six months ended 30 June 2023.
(d) The following table includes revenue expected to be recognized in the future related to performance
obligations that are unsatisfied or partia lly unsatisfied at the reporting date.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
W i t h i no n ey e a r..................... 1 9 , 7 0 7 3 0 , 5 0 6 4 2 , 0 5 7 168,759
O v e ro n ey e a r ....................... — 2 1 3 , 0 0 0 1 9 8 , 8 0 0 5 , 743,900
19,707 243,506 240,857 5,912,659
(b) Segment information
The CODM review the Group’s internal reporting in order to assess per formance and allocate
resources. Management determined the operating segments based on these reports.
The CODM assesses the performance based on th e nature of the Group’s businesses which are
principally located in the PRC, and c omprises (i) Sales of automotive sp ecialty chemicals business and (ii)
sales of lithium iron phosphate cathode material business.
Segment results represent the gain generated by e ach segment without allocation of other income,
gain or losses, share of result of as sociates, listing expenses and income tax expense. This is the measure
reported to the CODM for the purposes of resources all ocation and assessment of segment performance.
Segment assets include all assets, other than unallocated corporate a ssets. Segment liabilities include
all liabilities, other than unall ocated corporate liabilities.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5 2–


--- page 575 ---
(c) Segment result
Information regarding the Group’s re portable segments is presented below:
Year ended 31 December 2021
Sales of
automotive
specialty
chemicals
business
Sales of
lithium iron
phosphate
cathode
material
business
Other
business Eliminations Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Segment revenue from external cust omers 2,156,942 1,896,040 523 — 4,053,505
R e c o g n i s e da tap o i n ti nt i m e ...... 2 , 1 5 6 , 9 4 2 1 , 896,040 523 — 4,053,505
R e c o g n i s e do v e rt i m e ........... — — — — —
I n t e r - s e g m e n ts a l e s............. 1 8 , 1 6 9 1 3 9 2 , 2 5 9 ( 2 0 , 5 6 7 ) —
T o t a ls e g m e n tr e v e n u e ............. 2 , 1 7 5 , 1 1 1 1 , 896,179 2,782 (20,567) 4,053,505
S e g m e n tp r o f i t / ( l o s s ) .............. 2 1 9 , 4 9 2 300,162 (212) — 519,442
O t h e ri n c o m e ,g a i n sa n dl o s s e s ....... 3 7 , 3 1 6
S h a r eo fr e s u l to fa s s o c i a t e s ......... ( 2 7 9 )
F i n a n c ec o s t s................... ( 4 9 , 7 5 7 )
P r o f i tb e f o r ei n c o m et a x ........... 506,722
I n c o m et a xe x p e n s e ............... ( 7 3 , 3 0 4 )
P r o f i tf o rt h ey e a r ................ 433,418
Year ended 31 December 2022
Sales of
automotive
specialty
chemicals
business
Sales of
lithium iron
phosphate
cathode
material
business
Other
business Eliminations Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Segment revenue from external custom ers 1,824,203 12,245,318 2,122 — 14,071,643
R e c o g n i s e da tap o i n ti nt i m e ...... 1 , 8 2 4 , 2 0 3 1 2 , 245,318 2,122 — 14,071,643
R e c o g n i s e do v e rt i m e ........... — — — — —
I n t e r - s e g m e n ts a l e s............. 2 9 6 , 2 8 3 7 0 5 4 , 0 2 6 ( 3 0 1 , 0 1 4 ) —
T o t a ls e g m e n tr e v e n u e ............. 2 , 1 2 0 , 4 8 6 1 2 , 246,023 6,148 (301,014) 14,071,643
S e g m e n tp r o f i t / ( l o s s ) .............. 2 5 , 5 2 3 1 , 236,634 (11,418) — 1,250,739
O t h e ri n c o m e ,g a i n sa n dl o s s e s ....... 9 5 , 3 3 5
S h a r eo fr e s u l to fa s s o c i a t e s ......... 1 6 , 9 5 6
F i n a n c ec o s t s................... ( 202,143)
P r o f i tb e f o r ei n c o m et a x ........... 1 , 160,887
I n c o m et a xe x p e n s e ............... ( 130,941)
P r o f i tf o rt h ey e a r ................ 1 , 029,946
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5 3–


--- page 576 ---
Year ended 31 December 2023
Sales of
automotive
specialty
chemicals
business
Sales of
lithium iron
phosphate
cathode
material
business
Other
business Eliminations Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Segment revenue from external custom ers 2,004,852 6,705,747 18,880 — 8,729,479
R e c o g n i s e da tap o i n ti nt i m e ...... 2 , 0 0 4 , 8 5 2 6 , 705,747 18,880 — 8,729,479
R e c o g n i s e do v e rt i m e ........... — — — — —
I n t e r - s e g m e n ts a l e s............. 1 7 9 , 3 4 4 4 4 , 3 0 4 — ( 2 2 3 , 6 4 8 ) —
T o t a ls e g m e n tr e v e n u e ............. 2 , 1 8 4 , 1 9 6 6 , 750,051 18,880 (223,648) 8,729,479
S e g m e n tp r o f i t / ( l o s s ) .............. 5 0 , 1 6 3 ( 1 , 655,248) (22,596) — (1,627,681)
O t h e ri n c o m e ,g a i n sa n dl o s s e s ....... 9 2 , 2 8 8
S h a r eo fr e s u l to fa s s o c i a t e s ......... ( 2 3 , 5 8 3 )
F i n a n c ec o s t s................... ( 261,377)
L i s t i n ge x p e n s e s................. ( 1 0 , 2 1 6 )
L o s sb e f o r ei n c o m et a x............ ( 1 , 830,569)
I n c o m et a xc r e d i t................ 316,368
L o s sf o rt h ey e a r ................ ( 1 , 514,201)
Six months ended 30 June 2023
Sales of
automotive
specialty
chemicals
business
Sales of
lithium iron
phosphate
cathode
material
business
Other
business Eliminations Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Segment revenue from external cust omers 950,620 2,858,690 4,894 — 3,814,204
R e c o g n i s e da tap o i n ti nt i m e ...... 9 5 0 , 6 2 0 2 , 858,690 4,894 — 3,814,204
R e c o g n i s e do v e rt i m e ........... — — — — —
I n t e r - s e g m e n ts a l e s............. 6 2 , 9 1 7 1 1 6 8 , 7 3 1 ( 7 1 , 7 6 4 ) —
T o t a ls e g m e n tr e v e n u e ............. 1 , 0 1 3 , 5 3 7 2 , 858,806 13,625 (71,764) 3,814,204
S e g m e n tp r o f i t / ( l o s s ) .............. 3 5 , 4 8 2 ( 954,812) (7,775) — (927,105)
O t h e ri n c o m e ,g a i n sa n dl o s s e s ....... 7 2 , 7 1 1
S h a r eo fr e s u l to fa s s o c i a t e s ......... ( 2 , 6 5 7 )
F i n a n c ec o s t s................... ( 108,457)
L i s t i n ge x p e n s e s................. ( 7 , 0 3 0 )
L o s sb e f o r ei n c o m et a x............ ( 972,538)
I n c o m et a xc r e d i t................ 161,051
L o s sf o rt h ep e r i o d ............... ( 811,487)
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5 4–


--- page 577 ---
Six months ended 30 June 2024
Sales of
automotive
specialty
chemicals
business
Sales of
lithium iron
phosphate
cathode
material
business
Processing
for lithium
carbonate
and raw
materials
Other
business Eliminations Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Segment revenue from
external customers. . . . 990,595 2,516,515 57,782 3,720 — 3,568,612
Recognised at a point
i nt i m e ........... 9 9 0 , 5 9 5 2 , 5 1 6 , 5 1 5 5 7 , 7 8 2 3 , 7 2 0 — 3 , 568,612
Recognised over time . . — — — — — —
Inter-segment sales . . . . 22,327 667 332,809 6,843 (362,646) —
Total segment revenue. . . 1,012,922 2,517,182 390,591 10,563 (362,646) 3,568,612
Segment profit/(loss) . . . . 91,780 (2 92,211) 41,922 (13,420) — (171,929)
Other income, gains and
l o s s e s ............. 134,067
Share of result of associates (11,877)
F i n a n c ec o s t s......... (130,395)
L i s t i n ge x p e n s e s....... (13,395)
Loss before income tax . . (193,529)
I n c o m et a xe x p e n s e ..... (66,691)
L o s sf o rt h ep e r i o d ..... (260,220)
7. OTHER INCOME, GAINS AND LOSSES
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest income on bank deposit . . . . . . 3,897 14,956 31,335 12,286 12,273
Government grants* . . . . . . . . . . . . . . 22,687 47,145 86,517 52,688 106,093
Loss on disposal of property, plant and
e q u i p m e n t ................... ( 2 , 0 9 6 ) ( 2 7 3 ) ( 9 4 8 ) ( 1 , 1 7 2 ) ( 3 8 8 )
Gain on early termination of leases. . . . — 14,078 — — 1,823
Gain on disposal of interests in an
a s s o c i a t e .................... — — 1 6 , 5 8 3 1 6 , 5 8 3 —
Gain/(loss) from changes in fair value of
financial assets at FVTPL . . . . . . . . 8,389 16,288 46,900 15,357 (5,539)
Loss from changes in fair value of other
borrowings at FVTPL . . . . . . . . . . . — — (106,250) (24,884) (16,355)
(Loss)/gain from changes in fair value of
d e r i v a t i v e s ................... — — ( 8 7 6 ) — 3 0 , 3 1 9
O t h e r s....................... 4 , 4 3 9 3 , 1 4 1 1 9 , 0 2 7 1 , 8 5 3 5 , 8 4 1
37,316 95,335 92,288 72,711 134,067
* Included in the amount are government grants r eceived by the Group amounting to RMB15,702,000,
RMB34,815,000, RMB75,518,000, RMB41,924,000 and RMB97,203,000 for the years ended 31 December
2021, 2022 and 2023 and the six months ended 30 June 2023 and 2024 respectively, representing tax refunds,
operating subsidies and various industry-specific subsidies granted by the government authorities to reward the
Group’s effort for technological innovation. There are no unfulfilled conditions relating to such government
grants recognised.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5 5–


--- page 578 ---
8. FINANCE COSTS
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest expenses on:
— bank borrowings . . . . . . . . . . . . 42,592 118,406 191,345 90,122 97,044
— lease liabilities . . . . . . . . . . . . . . 3,644 21,316 50,761 12,102 23,549
— discounted bills . . . . . . . . . . . . . 3,521 62,421 19,271 6,233 9,802
49,757 202,143 261,377 108,457 130,395
9. PROFIT/(LOSS) BEFORE TAXATION
Profit/(loss) before taxation has been carried at after charging/(crediting):
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Auditor’s remuneration
—a u d i ts e r v i c e s .............. 7 8 5 9 0 5 9 0 5 7 0 0 —
—n o n - a u d i ts e r v i c e s ........... 1 0 0 1 0 5 1 0 0 1 0 0 —
885 1,010 1,005 800 —
Cost of inventories sold . . . . . . . . . . . 2,668,143 10,849,363 7,636,770 4,035,697 3,076,308
Depreciation of property, plant and
equipment (Note 15) . . . . . . . . . . . . 90,965 226,939 369,683 158,978 248,725
Depreciation of right-of-use assets
(Note 16) . . . . . . . . . . . . . . . . . . . 18,523 57,404 63,337 40,773 42,959
Amortisation of other intangible assets
(Note 18) . . . . . . . . . . . . . . . . . . . 4,114 6,115 20,001 6,630 13,151
Impairment loss on goodwill (Note 17) . — 28,881 72,773 1,406 25,249
Impairment losses/(reversal of
impairment losses) on inventories
(Note 22) . . . . . . . . . . . . . . . . . . . 2,226 72,567 554,547 222,327 69,494
Impairment losses/(reversal of
impairment losses) on trade receivables
(Note 37(b)) . . . . . . . . . . . . . . . . . 18,578 68,498 4,188 (38,463) (31,787)
Impairment losses/(reversal of
impairment losses) on other
receivables (Note 37(b)). . . . . . . . . . 3,700 2,116 15,028 2,450 (725)
Impairment losses/(reversal of
impairment losses) on bills receivable
( N o t e3 7 ( b ) ) ................. 8 5 6 ( 2 5 2 ) ( 2 5 0 ) ( 3 2 1 ) 2 , 0 5 4
Staff cost (including directors’, chief
executives’, and supervisors’
remuneration):
Wages, salaries and bonuses . . . . . . . . 218,390 342,618 443,710 208,717 246,203
Retirement benefit expense . . . . . . . . . 18,407 29,446 42,472 20,067 26,982
Equity-settled share-based payment
( N o t e3 6 ) ................... — 4 , 4 3 2 2 , 6 8 2 1 2 , 9 0 7 4 , 6 6 4
Social security costs, housing benefits
and other employee benefits . . . . . . . 19,584 29,616 41,686 19,557 26,028
256,381 406,112 530,550 261,248 303,877
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5 6–


--- page 579 ---
10. INCOME TAX EXPENSE/(CREDIT)
(a) Taxation in the consolidated statement of profit or loss
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
PRC Enterprise Income Tax
Current tax . . . . . . . . . . . . . . . . . . 83,694 174,526 12,757 4,912 27,930
Under provision in prior years . . . . . 49 — 475 223 276
83,743 174,526 13,232 5,135 28,206
Deferred taxation (Note 31). . . . . . . . . (10,439) (43,585) (329,600) (166,186) 38,485
73,304 130,941 (316,368) (161,051) 66,691
The group companies are subject to income tax on an entity basis on profit arising in or derived
from the jurisdictions in which members of the Group are domiciled and operate.
Under the Law of the PRC on Enterprise Income Tax (the ‘‘ EIT Law ’’) and Implementation
Regulation of the EIT Law, the tax rate of the PRC subs idiaries is 25% unless subject to tax exemption set
out below.
The Company was accredited as a ‘‘High and New Technology Enterprise’’ in 2020 which was
subsequently renewed in 2023, and therefore the Compa ny was entitled to a preferential income tax rate of
15%, 15%, 15%, 15% and 15% for the years ended 31 December 2021, 2022 and 2023 and the six months
ended 30 June 2023 and 2024 respectively. This quali fication is subject to review by the relevant tax
authority in the PRC for every three years.
Nanjing Seiko New Material Co., Ltd. was accred ited as a ‘‘High and New Technology Enterprise’’
in 2018 which was subsequently renewed in 2022, and the refore the company was entitled to a preferential
income tax rate of 15%, 15%, 15%, 15% and 15% for the years ended 31 December 2021, 2022 and 2023
and the six months ended 30 June 2023 and 2024 respectiv ely. This qualification is subject to review by the
relevant tax authority in the PRC for every three years.
Kelas Environmental Protection Technology C o., Ltd. was accredited as a ‘‘High and New
Technology Enterprise’’ in 2020 whi ch was subsequently renewed in 2023, and therefore the company was
entitled to a preferential income tax rate of 15%, 15%, 15%, 15% and 15% for the years ended 31
December 2021, 2022 and 2023 and the six months ended 30 June 2023 and 2024 respectively. This
qualification is subject to review by the relevan t tax authority in the PRC for every three years.
LOPAL Lubrication New Material (Tianjin) C o., Ltd. was accredited as a ‘‘High and New
Technology Enterprise’’ in 2019 whi ch was subsequently renewed in 2022, and therefore the company was
entitled to a preferential income tax rate of 15%, 15%, 15%, 15% and 15% for the years ended 31
December 2021, 2022 and 2023 and the six months ended 30 June 2023 and 2024. This qualification is
subject to review by the relevant tax authority in the PRC for every three years.
Zhangjiagang TEEC Automotive Chemicals Co., Ltd. was accredited as a ‘‘High and New
Technology Enterprise’’ in 2020 whi ch was subsequently renewed in 2023, and therefore the company was
entitled to a preferential income tax rate of 15%, 15%, 15%, 15%, and 15% for the years ended 31
December 2021, 2022 and 2023 and the six months ended 30 June 2023 and 2024 respectively. This
qualification is subject to review by the relevan t tax authority in the PRC for every three years.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5 7–


--- page 580 ---
Jiangsu Tianlan Intelligent Equipment Co., Ltd . was accredited as a ‘‘High and New Technology
Enterprise’’ in 2022, and therefore the company was entitled to a preferential income tax rate of 15%,
15%, 15% and 15% for the years ended 31 December 2022 and 2023 and the six months ended 30 June
2023 and 2024, respectively. This qualification is s ubject to review by the relevant tax authority in the
PRC for every three years.
Beiterui (Tianjin) Nano Material Manufacturi ng Co., Ltd. was accredited as a ‘‘High and New
Technology Enterprise’’ in 2020 whi ch was subsequently renewed in 2023, and therefore the company was
entitled to a preferential income tax rate of 15%, 15%, 15%, 15% and 15% for the years ended 31
December 2021, 2022 and 2023 and the six months ended 30 June 2023 and 2024 respectively. This
qualification is subject to review by the relevan t tax authority in the PRC for every three years.
Jiangsu BTR NANO Technology Co., Ltd. was accredited as a ‘‘High and New Technology
Enterprise’’ in 2022, and therefore the company was entitled to a preferential income tax rate of 15%,
15%, 15% and 15% for the year ended 31 December 2022 and 2023 and the six months ended 30 June 2023
and 2024, respectively. This quali fication is subject to review by the relevant tax authority in the PRC for
every three years.
Jiangsu Tianlan Intelligent Equipment Co., L td. was qualified as ‘‘Small and Micro-Sized
Enterprises’ (‘‘SME’’)’’ for 2021 and 2022. For the first RMB1 million of annual taxable income is
eligible for 75%, 87.5% and 87.5% reduction, respecti vely, at the applicable income tax rate of 20%, and
the income between RMB1 million and RMB3 millio n is eligible for 50% reduction at the applicable
income tax rate of 20%. Jiangsu Tianlan Intelligent Equipment Co., Ltd. was accredited as a ‘‘High and
New Technology Enterprise’’ in 2023, and therefore th e company was entitled to a preferential income tax
rate of 15% for the year ended 31 December 2023 and the six months ended 30 June 2023 and 2024,
respectively. This qualification is subject to review by the relevant tax authority in the PRC for every three
years.
Nanjing Weiyi Data Technology Co., Ltd. was qual ified as ‘‘Small and Micro-Sized Enterprises’
(‘‘SME’’)’’ for 2021 and which were subsequently rene wed in 2022. For the first RMB1 million of annual
taxable income is eligible for 87.5% and 87.5% reduction, respectively, at the applicable income tax rate
of 20%, and the income between RMB1 million and RM B3 million is eligible for 50% reduction at the
applicable income tax rate of 20%.
Sichuan Liyuan New Material Co., Ltd. was accredited as a ‘‘catalogue of encouraged industries in
the western region’’ in 2021, and therefore the compa ny was entitled to a preferential income tax rate of
15%, 15%, 15%, 15% and 15% for the years ended 31 December 2021, 2022 and 2023 and the six months
ended 30 June 2023 and 2024 respectively. This quali fication is subject to review by the relevant tax
authority in the PRC.
Taxable income of the subsidiaries in Singapore a re subject to corporate income tax at the rate of
17%, 17%, 17%, 17% and 17% of taxable income for the year ended 31 December 2021, 2022 and 2023
and the six months ended 30 June 2023 and 2024.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5 8–


--- page 581 ---
The income tax expense/(credit) for the years ended 31 December 2021, 2022 and 2023 and the six
months ended 30 June 2023 and 2024 can be reconciled to the profit/(loss) before taxation per the
consolidated statements of profit or loss an d other comprehensive income as follows:
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Profit/(loss) before taxation . . . . . . . . . 506,722 1,160,887 (1,830,569) (972,538) (193,529)
Tax at the domestic income tax rate of
the Company . . . . . . . . . . . . . . . . . 76,008 174,133 (274,586) (145,881) (29,029)
Effects of different tax rates applicable to
different subsidiaries of the Group . . 34,898 47,508 (59,112) (4,250) (3,392)
Under-provision of taxation in prior
y e a r s ...................... 4 9 — 4 7 5 2 2 3 2 7 6
Tax effect of income that is not taxable
for tax purposes . . . . . . . . . . . . . . . (1,010) (5,365) (2,922) (1,497) (1,417)
Tax effect of expenses that are not
deductible for tax purposes . . . . . . . 4,277 12,918 56,230 10,181 25,900
Tax effect of temporary difference not
r e c o g n i s e d ................... ( 3 6 3 ) 4 , 4 5 9 9 , 4 6 1 1 , 2 5 4 9 8 , 0 2 6
Tax effect of additional tax deduction for
eligible research and development
expenses . . . . . . . . . . . . . . . . . . . . (40,555) (102,712) (45,914) (21,081) (23,673)
Income tax expense/(credit) for the year/
period . . . . . . . . . . . . . . . . . . . . . 73,304 130,941 (316,368) (161,051) 66,691
(b) Tax effects relating to each component of other comprehensive income
Before
taxation
Taxation
credited/
(charged)
Net of
taxation
RMB’000 RMB’000 RMB’000
For the year ended 31 December 2023
Change in the fair value on hedging instruments
d e s i g n a t e da sc a s hf l o wh e d g e s................. ( 2 , 5 1 6 ) 4 9 1 ( 2 , 0 2 5 )
For the six months ended 30 June 2024
Change in the fair value on hedging instruments
d e s i g n a t e da sc a s hf l o wh e d g e s................. ( 5 6 7 ) ( 2 7 0 ) ( 8 3 7 )
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 5 9–


--- page 582 ---
11. DIRECTORS’, CHIEF EXECUTIVE’ S AND SUPERVISORS’ EMOLUMENTS
Mr. Shi Junfeng (‘‘Mr. Shi’’)is the chief executive of the Company and his emolument disclosed below
included those for services rendered by him as the chief executive of the Company and other group entities.
Details of the emoluments paid or payable to the in dividuals who were appointed as the directors and
chief executive of the Company, and supervisors of the group companies (including emoluments for services as
employees/directors of the group entities prior to beco ming the directors of the Company), during the Track
Record Period, disclosed pursuant to the applicable Li sting Rules and Hong Kong Companies Ordinance, are as
follows:
Year ended 31 December 2021 Fee
Salaries,
allowances
and benefits
in kind
Retirement
benefit
scheme
contributions
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
compensation Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
S h iJ u n f e n g.................. — 1 , 1 0 0 3 8 4 5 — 1 , 1 8 3
L uZ h e n y a ................... — 1 , 1 1 0 3 8 4 5 — 1 , 1 9 3
Q i nJ i a n.................... — 9 9 0 3 8 4 5 — 1 , 0 7 3
S h e nZ h i y o n g ................. — 8 5 6 3 8 4 5 — 9 3 9
Z h a n gR e n z h i( N o t e( a ) ) .......... — — — — — —
S u b - t o t a l .................... — 4 , 0 5 6 1 5 2 1 8 0 — 4 , 3 8 8
Non-executive directors
Z h uX i a n g l a n ................. — — — — — —
Independent non-executive directors
Hu Xiaoming (Note (b)) . . . . . . . . . . 75 — — — — 75
Y eX i n ..................... 1 0 0 — — — — 1 0 0
L iQ i n g w e n.................. 1 0 0 — — — — 1 0 0
S u b - t o t a l .................... 2 7 5 — — — — 2 7 5
Supervisors
H uR e n j i e( N o t e( d ) )............ — 2 3 9 3 3 3 8 — 3 1 0
X u eJ i e ..................... — 5 8 0 3 8 4 5 — 6 6 3
Meng Guangsheng (Note (c)) . . . . . . . — 191 34 37 — 262
Z h o uL i n ................... — 3 4 8 3 8 4 4 — 4 3 0
S u b - t o t a l .................... — 1 , 3 5 8 1 4 3 1 6 4 — 1 , 6 6 5
T o t a l...................... 2 7 5 5 , 4 1 4 2 9 5 3 4 4 — 6 , 3 2 8
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 0–


--- page 583 ---
Year ended 31 December 2022 Fee
Salaries,
allowances
and benefits
in kind
Retirement
benefit
scheme
contributions
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
compensation Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
S h iJ u n f e n g.................. — 8 6 2 2 1 6 9 — 9 5 2
L uZ h e n y a ................... — 8 0 4 2 1 6 9 2 9 4 1 , 1 8 8
Q i nJ i a n.................... — 5 9 2 2 1 6 9 1 8 3 8 6 5
Shen Zhiyong . . . . . . . . . . . . . . . . . — 669 21 69 1,111 1,870
Z h a n gR e n z h i( N o t e( a ) ) .......... — — — — — —
S u b - t o t a l .................... — 2 , 9 2 7 8 4 2 7 6 1 , 5 8 8 4 , 8 7 5
Non-executive directors
Z h uX i a n g l a n ................. — — — — — —
Independent non-executive directors
Hu Xiaoming (Note (b)) . . . . . . . . . . — — — — — —
Y eX i n ..................... 1 0 0 — — — — 1 0 0
L iQ i n g w e n.................. 1 0 0 — — — — 1 0 0
Geng Chengxuan (Note (e)) . . . . . . . . 100 — — — — 100
S u b - t o t a l .................... 3 0 0 — — — — 3 0 0
Supervisors
H uR e n j i e( N o t e( d ) )............ — 2 1 8 1 9 5 0 — 2 8 7
X u eJ i e ..................... — 5 4 5 2 1 6 9 — 6 3 5
Z h o uL i n ................... — 3 1 4 2 1 6 9 — 4 0 4
S u b - t o t a l .................... — 1 , 0 7 7 6 1 1 8 8 — 1 , 3 2 6
Total . . . . . . . . . . . . . . . . . . . . . . 300 4,004 145 464 1,588 6,501
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 1–


--- page 584 ---
Year ended 31 December 2023 Fee
Salaries,
allowances
and benefits
in kind
Retirement
benefit
scheme
contributions
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
compensation Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
S h iJ u n f e n g.................. — 6 7 6 4 6 4 6 — 7 6 8
L uZ h e n y a ................... — 5 9 1 4 6 4 6 8 5 7 6 8
Q i nJ i a n.................... — 5 9 9 4 6 4 8 8 1 7 7 4
S h e nZ h i y o n g ................. — 4 7 9 4 6 4 6 2 2 0 7 9 1
Zhang Yi (Note (f)) . . . . . . . . . . . . . — 548 46 46 175 815
S u b - t o t a l .................... — 2 , 8 9 3 2 3 0 2 3 2 5 6 1 3 , 9 1 6
Non-executive directors
Z h uX i a n g l a n ................. — — — — — —
Independent non-executive directors
Y eX i n ..................... 1 0 0 — — — — 1 0 0
L iQ i n g w e n.................. 1 0 0 — — — — 1 0 0
Geng Chengxuan (Note (e)) . . . . . . . . 100 — — — — 100
S u b - t o t a l .................... 3 0 0 — — — — 3 0 0
Supervisors
H uR e n j i e( N o t e( d ) )............ — 1 9 4 3 5 2 9 — 2 5 8
X u eJ i e ..................... — 4 8 4 4 6 4 9 — 5 7 9
Z h o uL i n ................... — 2 7 1 4 6 4 6 — 3 6 3
S u b - t o t a l .................... — 9 4 9 1 2 7 1 2 4 — 1 , 2 0 0
T o t a l...................... 3 0 0 3 , 8 4 2 3 5 7 3 5 6 5 6 1 5 , 4 1 6
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 2–


--- page 585 ---
Six months ended 30 June 2023
(Unaudited) Fee
Salaries,
allowances
and benefits
in kind
Retirement
benefit
scheme
contributions
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
compensation Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
S h iJ u n f e n g.................. — 3 4 6 3 6 1 0 — 3 9 2
L uZ h e n y a ................... — 3 0 2 3 6 1 0 3 3 3 8 1
Q i nJ i a n.................... — 2 5 4 3 7 1 0 3 2 3 3 3
S h e nZ h i y o n g ................. — 2 4 5 3 6 1 0 2 5 3 5 4 4
Zhang Yi (Note (f)) . . . . . . . . . . . . . — 280 36 10 31 357
S u b - t o t a l .................... — 1 , 4 2 7 1 8 1 5 0 3 4 9 2 , 0 0 7
Non-executive directors
Z h uX i a n g l a n ................. — — — — — —
Independent non-executive directors
Y eX i n ..................... 5 0 — — — — 5 0
L iQ i n g w e n.................. 5 0 — — — — 5 0
Geng Chengxuan (Note (e)) . . . . . . . . 50 — — — — 50
S u b - t o t a l .................... 1 5 0 — — — — 1 5 0
Supervisors
H uR e n j i e( N o t e( d ) )............ — 9 9 2 9 4 — 1 3 2
X u eJ i e ..................... — 2 3 5 3 6 1 0 — 2 8 1
Z h o uL i n ................... — 1 3 7 3 6 1 0 — 1 8 3
S u b - t o t a l .................... — 4 7 1 1 0 1 2 4 — 5 9 6
T o t a l...................... 1 5 0 1 , 8 9 8 2 8 2 7 4 3 4 9 2 , 7 5 3
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 3–


--- page 586 ---
Six months ended 30 June 2024 Fee
Salaries,
allowances
and benefits
in kind
Retirement
benefit
scheme
contributions
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
compensation Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
S h iJ u n f e n g.................. — 5 0 7 2 3 2 4 — 5 5 4
L uZ h e n y a ................... — 5 8 8 2 3 2 4 1 5 5 7 9 0
Q i nJ i a n.................... — 4 6 3 2 3 2 4 1 4 7 6 5 7
S h e nZ h i y o n g ................. — 5 1 7 2 3 2 4 4 0 1 9 6 5
Zhang Yi (Note (f)) . . . . . . . . . . . . . — 698 23 24 319 1,064
S u b - t o t a l .................... — 2 , 7 7 3 1 1 5 1 2 0 1 , 0 2 2 4 , 0 3 0
Non-executive directors
Z h uX i a n g l a n ................. — — — — — —
Independent non-executive directors
Y eX i n ..................... 5 0 — — — — 5 0
L iQ i n g w e n.................. 5 0 — — — — 5 0
Geng Chengxuan (Note (e)) . . . . . . . . 50 — — — — 50
S u b - t o t a l .................... 1 5 0 — — — — 1 5 0
Supervisors
H uR e n j i e( N o t e( d ) )............ — 8 6 1 8 1 4 — 1 1 8
X u eJ i e ..................... — 3 3 2 2 3 2 5 — 3 8 0
Z h o uL i n ................... — 2 0 0 2 3 2 4 — 2 4 7
S u b - t o t a l .................... — 6 1 8 6 4 6 3 — 7 4 5
Total . . . . . . . . . . . . . . . . . . . . . . 150 3,391 179 183 1,022 4,925
Notes:
(a) Ms. Zhang Renzhi resigned as executive director of the Company with effect from 4 August 2022.
(b) Mr. Hu Xiaoming resigned as independent non-ex ecutive director of the Company with effect from 27
September 2021.
(c) Mr. Meng Guangsheng was appointed as supervisor of the Company with effect from 26 March 2020 and
resigned on 27 September 2021.
(d) Mr. Hu Renjie was appointed as supervisor of th e Company with effect from 27 September 2021 and
resigned on 15 July 2024.
(e) Ms. Geng Chengxuan was appointed as independent non-executive director of the Company with effect
from 27 September 2021.
(f) Mr. Zhang Yi was appointed as executive director of the Company with effect from 13 September 2022.
The executive directors’ and chief executive’s em oluments shown above were paid for their services in
connection with the management of the affairs of th e Company and the Group during the Track Record Period.
The independent non-executive directors’ emolumen ts shown above were mainly for their services as
directors of the Company during the Track Record Period.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 4–


--- page 587 ---
During the Track Record Period, there was no arrang ement under which a director or the chief executive
waived or agreed to waive any emolument, and no emolu ments were paid by the Group to any of the directors of
the Company as an inducement to join or upon joining the Group or as compensation for loss of office.
12. FIVE HIGHEST PAID EMPLOYEES
The individuals whose emoluments were the top 5 highest in the Group for the years ended 31 December
2021, 2022 and 2023 and the six months ended 30 June 2023 and 2024 respectively include nil, one, nil, nil and
three directors of the Company whose emoluments are reflected in the analysis shown in ‘‘DIRECTORS’,
CHIEF EXECUTIVE’S AND SUPERVISORS’ EMOLUMENTS’’ above. The emoluments paid to the
remaining five, four, five, five and two individuals wi th the highest emoluments in the Group for each of the
years ended 31 December 2021, 2022 and 2023 and the six months ended 30 June 2023 and 2024 respectively, are
as follows:
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Wages, salaries and bonuses . . . . . . . . 12,094 8,496 4,176 1,755 1,106
R e t i r e m e n tb e n e f i te x p e n s e ......... 1 3 2 1 5 6 1 9 5 9 0 4 6
Social security costs, housing benefits
and other employee benefits . . . . . . . 66 167 226 22 41
S h a r e - b a s e dc o m p e n s a t i o n .......... — — 3 8 4 9 6 4 6
12,292 8,819 4,981 1,876 1,839
The number of the highest paid employees (includi ng the directors) of the Company whose remuneration
fell within the following bands is as follows:
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
(Unaudited)
Nil to HKD1,000,000 . . . . . . . . . . . . . — — — 5 2
HKD1,000,001 to HKD1,500,000 . . . . . — — 5 — 3
HKD1,500,001 to HKD2,000,000 . . . . . 3 — — — —
HKD2,000,001 to HKD2,500,000 . . . . . 1 4 — — —
HKD2,500,001 to HKD3,000,000 . . . . . — — — — —
HKD3,000,001 to HKD3,500,000 . . . . . — — — — —
HKD3,500,001 to HKD4,000,000 . . . . . — 1 — — —
HKD4,000,001 to HKD4,500,000 . . . . . — — — — —
HKD4,500,001 to HKD5,000,000 . . . . . — — — — —
HKD5,000,001 to HKD5,500,000 . . . . . — — — — —
HKD6,000,001 to HKD6,500,000 . . . . . 1 — — — —
During the Track Record Period, no highest paid emp loyees waived or agreed to waive any remuneration
and no remuneration was paid by the Group to any of the fi ve highest paid employees as an inducement to join
or upon joining the Group or as compensation for loss of office.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 5–


--- page 588 ---
13. DIVIDENDS
On 10 May 2021, the payment of a final dividend of RMB60,950,000 was paid by the Company in respect
of the year ended 31 December 2020. On 30 September 2022, the payment of an interim dividend of
RMB105,105,000 was paid by the Company in respect of the period ended 30 June 2022. No dividend was
declared by the Company in respect of the year ended 31 December 2023 and the six months ended 30 June 2024.
14. EARNINGS/(LOSS) PER SHARE
The calculation of the basic and diluted earnings/(l oss) per share attributable to owners of the Company
for the Track Record Period is based on the following data:
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Earnings/(loss)
Profit/(loss) for the year/period
attributable to owners of the Company
for the purpose of basic and diluted
earnings/(loss) per share . . . . . . . . . 351,103 752,897 (1,233,291) (654,008) (217,820)
’000 ’000 ’000 ’000 ’000
Number of shares
Weighted average number of ordinary
shares for the purpose of basic
earnings/(loss) per share . . . . . . . . . 481,639 527,320 563,387 565,079 562,997
Effect of dilutive potential ordinary
shares:
S h a r eo p t i o n s .................. 2 , 0 9 9 1 , 4 3 0 — — —
Weighted average number of ordinary
shares for the purpose of diluted
earnings/(loss) per share . . . . . . . . . 483,738 528,750 563,387 565,079 562,997
The weighted average number of ordinary shares outstanding during the year ended 31 December 2021
have been adjusted for the effect of capitalisation of capital reserve and the new shares were issued to the
shareholders on 25 March 2021 and as if the capitalisation happened on 1 January 2021.
The computation of diluted loss per share for the year ended 31 December 2023 and the six months ended
30 June 2023 and 2024 does not assume the exercise of the Company’s share option since their assumed
execution would result in a decrease in loss per share.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 6–


--- page 589 ---
15. PROPERTY, PLANT AND EQUIPMENT
The Group
Construction
in progress Buildings
Plant and
machinery
Motor
vehicles
Other
equipment
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST
A t1J a n u a r y2 0 2 1 ................... 5 7 , 4 9 7 4 0 9 , 8 4 0 2 3 7 , 0 4 2 1 4 , 3 9 5 7 3 , 0 6 4 3 9 , 4 9 0 8 3 1 , 3 2 8
A d d i t i o n s ........................ 6 2 3 , 9 2 5 3 , 6 0 8 7 8 , 0 1 7 2 , 2 6 8 2 3 , 9 7 0 2 9 , 1 4 5 7 6 0 , 9 3 3
T r a n s f e rf r o mc o n s t r u c t i o n si np r o g r e s s..... ( 1 8 3 , 4 8 4 ) 3 7 , 5 7 3 1 4 0 , 7 3 0 — 3 , 9 3 4 1 , 2 4 7 —
Acquired on acquisition of subsidiaries
( N o t e3 5 ( a ) ) ..................... 3 5 , 6 4 3 — 3 4 9 , 2 6 3 1 , 5 5 9 6 , 9 7 3 7 , 8 4 8 4 0 1 , 2 8 6
D i s p o s a l s ......................... — ( 3 2 0 ) ( 7 , 8 1 6 ) ( 1 , 9 9 9 ) ( 2 , 9 7 3 ) ( 1 5 , 8 6 0 ) ( 2 8 , 9 6 8 )
At 31 December 2021 and 1 January 2022 . . . 533,581 450,701 797,236 16,223 104,968 61,870 1,964,579
A d d i t i o n s ........................ 1 , 7 4 8 , 8 8 5 1 2 , 2 7 9 1 9 2 , 9 5 4 3 , 5 0 8 4 2 , 0 6 5 1 0 4 , 5 7 6 2 , 1 0 4 , 2 6 7
T r a n s f e rf r o mc o n s t r u c t i o n si np r o g r e s s..... ( 9 1 7 , 5 5 7 ) 4 0 , 6 6 7 8 3 6 , 6 1 7 — 2 4 , 1 6 8 1 6 , 1 0 5 —
Acquired on acquisition of a subsidiary
( N o t e3 5 ( b ) ) ..................... — — 6 4 , 2 8 9 3 2 9 1 7 6 — 6 4 , 7 9 4
D i s p o s a l s ......................... — — ( 1 2 , 7 8 7 ) ( 1 , 4 2 3 ) ( 6 , 3 3 6 ) ( 3 2 ) ( 2 0 , 5 7 8 )
At 31 December 2022 and 1 January 2023 . . . 1,364,909 503,647 1,878,309 18,637 165,041 182,519 4,113,062
A d d i t i o n s ........................ 2 , 7 8 8 , 4 8 3 5 , 2 1 6 2 5 9 , 5 2 2 3 , 7 5 5 3 7 , 3 7 9 1 0 3 , 3 2 8 3 , 1 9 7 , 6 8 3
T r a n s f e rf r o mc o n s t r u c t i o n si np r o g r e s s..... ( 1 , 5 7 7 , 6 6 3 ) 2 2 1 , 7 5 9 1 , 3 2 2 , 7 4 1 6 , 1 7 2 1 7 , 2 0 3 9 , 7 8 8 —
D i s p o s a l s ......................... — — ( 4 , 1 1 7 ) ( 7 1 9 ) ( 5 6 7 ) ( 3 0 9 ) ( 5 , 7 1 2 )
At 31 December 2023 and 1 January 2024 . . . 2,575,729 730,622 3,456,455 27,845 219,056 295,326 7,305,033
A d d i t i o n s ........................ 6 1 5 , 8 4 3 3 8 , 3 0 3 — 2 , 0 9 0 1 3 , 5 4 3 2 6 , 8 2 7 6 9 6 , 6 0 6
T r a n s f e rf r o mc o n s t r u c t i o n si np r o g r e s s..... ( 1 , 1 5 0 , 8 6 8 ) 3 8 2 , 1 5 6 7 5 3 , 4 4 1 1 , 1 2 7 1 3 , 5 9 8 5 4 6 —
D i s p o s a l s ......................... — — ( 3 , 3 6 7 ) ( 3 2 8 ) ( 1 , 0 3 5 ) — ( 4 , 7 3 0 )
A t3 0J u n e2 0 2 4.................... 2 , 0 4 0 , 7 0 4 1 , 1 5 1 , 0 8 1 4 , 2 0 6 , 5 2 9 3 0 , 7 3 4 2 4 5 , 1 6 2 3 2 2 , 6 9 9 7 , 9 9 6 , 9 0 9
ACCUMULATED DEPRECIATION
A t1J a n u a r y2 0 2 1 ................... — 9 1 , 5 5 6 1 1 3 , 6 5 7 7 , 7 6 9 4 4 , 2 4 6 1 8 , 1 7 6 2 7 5 , 4 0 4
D e p r e c i a t i o np r o v i d e df o rt h ey e a r........ — 1 9 , 9 7 0 4 8 , 1 8 1 1 , 7 6 6 1 2 , 1 3 8 8 , 9 1 0 9 0 , 9 6 5
E l i m i n a t e do nd i s p o s a l s ............... — — ( 3 , 7 1 1 ) ( 1 , 2 6 4 ) ( 2 , 4 5 2 ) ( 4 1 4 ) ( 7 , 8 4 1 )
At 31 December 2021 and 1 January 2022 . . . — 111,526 158,127 8,271 53,932 26,672 358,528
D e p r e c i a t i o np r o v i d e df o rt h ey e a r........ — 3 1 , 7 3 1 1 3 2 , 6 9 9 2 , 4 4 6 2 0 , 0 0 1 4 0 , 0 6 2 2 2 6 , 9 3 9
E l i m i n a t e do nd i s p o s a l s ............... — — ( 3 , 5 9 3 ) ( 1 , 3 6 6 ) ( 2 , 4 3 9 ) ( 2 1 ) ( 7 , 4 1 9 )
At 31 December 2022 and 1 January 2023 . . . — 143,257 287,233 9,351 71,494 66,713 578,048
D e p r e c i a t i o np r o v i d e df o rt h ey e a r........ — 2 0 , 7 3 9 2 3 9 , 9 7 1 3 , 7 6 6 2 8 , 8 0 0 7 6 , 4 0 7 3 6 9 , 6 8 3
E l i m i n a t e do nd i s p o s a l s ............... — — ( 1 , 3 6 9 ) ( 6 7 6 ) ( 5 5 5 ) ( 2 7 ) ( 2 , 6 2 7 )
At 31 December 2023 and 1 January 2024 . . . — 163,996 525,835 12,441 99,739 143,093 945,104
D e p r e c i a t i o np r o v i d e df o rt h ep e r i o d ....... — 1 8 , 7 7 9 1 7 6 , 3 6 6 1 , 8 6 7 1 6 , 8 5 2 3 4 , 8 6 1 2 4 8 , 7 2 5
E l i m i n a t e do nd i s p o s a l s ............... — — ( 2 , 1 5 8 ) ( 2 0 5 ) ( 9 2 3 ) — ( 3 , 2 8 6 )
A t3 0J u n e2 0 2 4.................... — 1 8 2 , 7 7 5 7 0 0 , 0 4 3 1 4 , 1 0 3 1 1 5 , 6 6 8 1 7 7 , 9 5 4 1 , 1 9 0 , 5 4 3
CARRYING AMOUNT
A t3 1D e c e m b e r2 0 2 1 ................. 5 3 3 , 5 8 1 3 3 9 , 1 7 5 6 3 9 , 1 0 9 7 , 9 5 2 5 1 , 0 3 6 3 5 , 1 9 8 1 , 6 0 6 , 0 5 1
A t3 1D e c e m b e r2 0 2 2 ................. 1 , 3 6 4 , 9 0 9 3 6 0 , 3 9 0 1 , 5 9 1 , 0 7 6 9 , 2 8 6 9 3 , 5 4 7 1 1 5 , 8 0 6 3 , 5 3 5 , 0 1 4
A t3 1D e c e m b e r2 0 2 3 ................. 2 , 5 7 5 , 7 2 9 5 6 6 , 6 2 6 2 , 9 3 0 , 6 2 0 1 5 , 4 0 4 1 1 9 , 3 1 7 1 5 2 , 2 3 3 6 , 3 5 9 , 9 2 9
A t3 0J u n e2 0 2 4.................... 2 , 0 4 0 , 7 0 4 9 6 8 , 3 0 6 3 , 5 0 6 , 4 8 6 1 6 , 6 3 1 1 2 9 , 4 9 4 1 4 4 , 7 4 5 6 , 8 0 6 , 3 6 6
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 7–


--- page 590 ---
The Company
Construction
in progress Buildings
Plant and
machinery
Motor
vehicles
Other
equipment
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST
A t1J a n u a r y2 0 2 1 ................... 6 , 9 6 2 1 0 2 , 4 8 1 8 8 , 5 4 9 9 , 8 9 0 2 9 , 2 3 7 1 3 , 3 3 3 2 5 0 , 4 5 2
A d d i t i o n s ........................ 9 , 4 6 3 1 9 5 3 , 4 3 8 — 3 , 6 6 4 1 0 4 1 6 , 8 6 4
T r a n s f e rf r o mc o n s t r u c t i o ni np r o g r e s s ...... ( 2 , 1 8 5 ) — — — 1 , 3 7 8 8 0 7 —
D i s p o s a l s ......................... — ( 3 2 0 ) ( 1 3 3 ) ( 7 8 1 ) ( 7 1 9 ) — ( 1 , 9 5 3 )
At 31 December 2021 and 1 January 2022 . . . 14,240 102,356 91,854 9,109 33,560 14,244 265,363
A d d i t i o n s ........................ 3 3 , 2 9 2 2 1 3 1 , 3 3 1 3 1 5 1 , 5 2 0 1 , 1 5 7 3 7 , 8 2 8
T r a n s f e rf r o mc o n s t r u c t i o n si np r o g r e s s..... ( 3 , 4 5 3 ) — 2 , 5 3 1 — 1 6 0 7 6 2 —
D i s p o s a l s ......................... — — ( 2 9 0 ) — ( 3 7 1 ) — ( 6 6 1 )
At 31 December 2022 and 1 January 2023 . . . 44,079 102,569 95,426 9,424 34,869 16,163 302,530
A d d i t i o n s ........................ 1 4 5 1 5 6 3 2 6 6 4 7 1 , 9 2 1 6 , 7 6 6 9 , 9 6 1
T r a n s f e rf r o mc o n s t r u c t i o n si np r o g r e s s..... ( 7 4 2 ) — 5 9 0 — — 1 5 2 —
D i s p o s a l s ......................... — — ( 9 6 , 3 4 2 ) ( 1 , 9 5 9 ) ( 2 3 , 2 4 5 ) ( 1 0 , 2 9 1 ) ( 1 3 1 , 8 3 7 )
At 31 December 2023 and 1 January 2024 . . . 43,482 102,725 — 8,112 13,545 12,790 180,654
A d d i t i o n s ........................ 2 1 7 — 4 , 7 8 5 3 2 8 5 , 3 3 3 2 , 9 6 0 1 3 , 6 2 3
T r a n s f e rf r o mc o n s t r u c t i o n si np r o g r e s s..... ( 9 3 ) — 9 3 ————
D i s p o s a l s ......................... — — — ( 2 1 7 ) ( 4 , 4 2 8 ) ( 3 , 3 8 5 ) ( 8 , 0 3 0 )
A t3 0J u n e2 0 2 4.................... 4 3 , 6 0 6 1 0 2 , 7 2 5 4 , 8 7 8 8 , 2 2 3 1 4 , 4 5 0 1 2 , 3 6 5 1 8 6 , 2 4 7
ACCUMULATED DEPRECIATION
A t1J a n u a r y2 0 2 1 ................... — 3 1 , 6 3 1 5 0 , 6 1 0 4 , 5 6 0 1 6 , 1 5 8 5 , 0 5 1 1 0 8 , 0 1 0
D e p r e c i a t i o np r o v i d e df o rt h ey e a r........ — 5 , 0 2 0 7 , 5 3 4 8 3 2 3 , 8 3 8 2 , 0 0 9 1 9 , 2 3 3
E l i m i n a t e do nd i s p o s a l s ............... — — ( 1 0 6 ) ( 9 8 ) ( 6 5 7 ) — ( 8 6 1 )
At 31 December 2021 and 1 January 2022 . . . — 36,651 58,038 5,294 19,339 7,060 126,382
D e p r e c i a t i o np r o v i d e df o rt h ey e a r........ — 5 , 0 3 1 6 , 8 3 9 8 0 4 4 , 0 1 7 2 , 3 3 8 1 9 , 0 2 9
E l i m i n a t e do nd i s p o s a l s ............... — — ( 2 6 9 ) — ( 3 5 3 ) — ( 6 2 2 )
At 31 December 2022 and 1 January 2023 . . . — 41,682 64,608 6,098 23,003 9,398 144,789
D e p r e c i a t i o np r o v i d e df o rt h ey e a r........ — 5 , 0 2 7 2 , 0 4 7 1 , 1 1 6 2 , 3 0 6 4 , 7 8 2 1 5 , 2 7 8
E l i m i n a t e do nd i s p o s a l s ............... — — ( 6 6 , 6 5 5 ) ( 1 , 2 1 8 ) ( 1 5 , 4 2 6 ) ( 6 , 0 4 0 ) ( 8 9 , 3 3 9 )
At 31 December 2023 and 1 January 2024 . . . — 46,709 — 5,996 9,883 8,140 70,728
D e p r e c i a t i o np r o v i d e df o rt h ep e r i o d ....... — 2 , 5 0 8 2 , 8 5 0 4 7 4 3 , 9 4 7 1 , 6 0 0 1 1 , 3 7 9
E l i m i n a t e do nd i s p o s a l s ............... — — — ( 2 0 3 ) ( 3 , 1 4 5 ) ( 2 , 3 0 0 ) ( 5 , 6 4 8 )
A t3 0J u n e2 0 2 4.................... — 4 9 , 2 1 7 2 , 8 5 0 6 , 2 6 7 1 0 , 6 8 5 7 , 4 4 0 7 6 , 4 5 9
CARRYING AMOUNT
A t3 1D e c e m b e r2 0 2 1 ................. 1 4 , 2 4 0 6 5 , 7 0 5 3 3 , 8 1 6 3 , 8 1 5 1 4 , 2 2 1 7 , 1 8 4 1 3 8 , 9 8 1
A t3 1D e c e m b e r2 0 2 2 ................. 4 4 , 0 7 9 6 0 , 8 8 7 3 0 , 8 1 8 3 , 3 2 6 1 1 , 8 6 6 6 , 7 6 5 1 5 7 , 7 4 1
A t3 1D e c e m b e r2 0 2 3 ................. 4 3 , 4 8 2 5 6 , 0 1 6 — 2 , 1 1 6 3 , 6 6 2 4 , 6 5 0 1 0 9 , 9 2 6
A t3 0J u n e2 0 2 4.................... 4 3 , 6 0 6 5 3 , 5 0 8 2 , 0 2 8 1 , 9 5 6 3 , 7 6 5 4 , 9 2 5 1 0 9 , 7 8 8
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 8–


--- page 591 ---
16. RIGHT-OF-USE ASSETS
The Group
Leasehold
lands
Leasehold
properties Total
RMB’000 RMB’000 RMB’000
CARRYING AMOUNT
A t1J a n u a r y2 0 2 1 ........................... 2 2 6 , 7 2 0 — 226,720
A c q u i r e do na c q u i s i t i o no fs u b s i d i a r i e s( N o t e3 5 ( a ) ) .... — 6 0 , 6 8 9 6 0 , 6 8 9
D e p r e c i a t i o nc h a r g e .......................... ( 5 , 2 3 2 ) ( 1 3 , 2 9 1 ) ( 1 8 , 5 2 3 )
At 31 December 2021 and 1 January 2022 ........... 2 2 1 , 4 8 8 4 7 , 3 9 8 268,886
A d d i t i o n s .................................. 7 9 , 3 0 7 317,105 396,412
E a r l yt e r m i n a t i o no fl e a s e...................... ( 8 , 0 7 4 ) ( 2 5 , 9 4 5 ) ( 3 4 , 0 1 9 )
D e p r e c i a t i o nc h a r g e .......................... ( 5 , 5 7 4 ) ( 5 1 , 8 3 0 ) ( 5 7 , 4 0 4 )
At 31 December 2022 and 1 January 2023 ........... 2 8 7 , 1 4 7 286,728 573,875
A d d i t i o n s .................................. 8 6 , 5 2 9 688,954 775,483
L e a s em o d i f i c a t i o n........................... — 1 7 2 1 7 2
D e p r e c i a t i o nc h a r g e .......................... ( 8 , 0 3 1 ) ( 5 5 , 3 0 6 ) ( 6 3 , 3 3 7 )
At 31 December 2023 and 1 January 2024 ........... 3 6 5 , 6 4 5 920,548 1,286,193
A d d i t i o n s .................................. — 1 8 , 4 3 3 1 8 , 4 3 3
E a r l yt e r m i n a t i o no fl e a s e...................... — ( 5 , 8 2 4 ) ( 5 , 8 2 4 )
D e p r e c i a t i o nc h a r g e .......................... ( 5 , 2 3 9 ) ( 3 7 , 7 2 0 ) ( 4 2 , 9 5 9 )
A t3 0J u n e2 0 2 4............................. 3 6 0 , 4 0 6 895,437 1,255,843
During the Track Record Period, the Group leases va rious offices, warehouses and factories for its
operations. Lease terms are negotiat ed on an individual basis and contain a wide range of different terms and
conditions. In determining the lease term and assessin g the length of the non-cancellable period, the Group
applies the definition of a contract and determine s the period for which the contract is enforceable.
The Company
Leasehold
lands
RMB’000
CARRYING AMOUNT
A t1J a n u a r y2 0 2 1 .................................................... 1 9 , 0 6 6
D e p r e c i a t i o nc h a r g e ................................................... ( 4 9 5 )
At 31 December 2021 and 1 January 2022 .................................... 1 8 , 5 7 1
A d d i t i o n s ........................................................... 3 5 , 6 9 0
D i s p o s a l s ........................................................... ( 8 , 0 7 4 )
D e p r e c i a t i o nc h a r g e ................................................... ( 6 9 2 )
At 31 December 2022 and 1 January 2023 .................................... 4 5 , 4 9 5
D e p r e c i a t i o nc h a r g e ................................................... ( 1 , 0 3 1 )
At 31 December 2023 and 1 January 2024 .................................... 4 4 , 4 6 4
D e p r e c i a t i o nc h a r g e ................................................... ( 5 1 5 )
A t3 0J u n e2 0 2 4...................................................... 4 3 , 9 4 9
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 6 9–


--- page 592 ---
17. GOODWILL
The Group
RMB’000
COST
A t1J a n u a r y2 0 2 1 .................................................... 206,960
A r i s i n go na c q u i s i t i o no fs u b s i d i a r i e s( N o t e3 5 ( a ) ) .............................. 183,347
At 31 December 2021 and 1 January 2022 .................................... 390,307
A r i s i n go na c q u i s i t i o no fs u b s i d i a r y........................................ 1 , 4 0 6
At 31 December 2022, 1 January 2023, 31 December 2023,
1 January 2024 and 30 June 2024 ........................................ 391,713
IMPAIRMENT
At 1 January 2021, 31 December 2021 and 1 January 2022 ........................ 2 3 3
I m p a i r m e n tl o s sr e c o g n i s e df o rt h ey e a r ..................................... 2 8 , 8 8 1
At 31 December 2022 and 1 January 2023 .................................... 2 9 , 1 1 4
I m p a i r m e n tl o s sr e c o g n i s e df o rt h ey e a r ..................................... 7 2 , 7 7 3
At 31 December 2023 and 1 January 2024 .................................... 101,887
I m p a i r m e n tl o s sr e c o g n i s e df o rt h ep e r i o d .................................... 2 5 , 2 4 9
A t3 0J u n e2 0 2 4...................................................... 127,136
CARRYING VALUES
At 31 December 2021 . . ................................................ 390,074
At 31 December 2022 . . ................................................ 362,599
At 31 December 2023 . . ................................................ 289,826
A t3 0J u n e2 0 2 4...................................................... 264,577
Goodwill is allocated to the Group’s cash-generating units (‘‘ CGUs ’’) as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Jiangsu Ruilifeng and its subsidiaries
(‘‘Jiangsu Ruilifeng CGU ’ ’ ) ................ 206,727 177,846 177,846 177,846
Changzhou Liyuan and its subsidiaries
(‘‘Changzhou Liyuan CGU ’ ’ )( N o t e3 5 ( a ) ) ...... 183,347 183,347 111,980 86,731
L o p a lT i m e s( N o t e3 5 ( b ) ) .................. — 1 , 4 0 6 — —
390,074 362,599 289,826 264,577
The recoverable amounts of the CGUs are determined b ased on value-in-use calculations based on cash
flow forecasts derived from the most recent financial budg ets and estimated future cash flows covering a 5-year
period and with the beyond budgeted period using zero g rowth rate approved by the directors of the Company.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 0–


--- page 593 ---
The key assumptions used in the estimation of value in use are as below:
As at 31 December
As at
30 June
2021 2022 2023 2024
Jiangsu Ruilifeng CGU
R e v e n u e( a v e r a g eg r o w t hr a t e ) ........ 8 . 4 % 8 . 7 % 1 1 . 4 % 1 0 . 5 2 %
Pre-tax discount rate . . . ............ 1 2 . 6 % 1 1 . 3 % 1 0 . 5 % 9 . 5 9 %
Changzhou Liyuan CGU
R e v e n u e( a v e r a g eg r o w t hr a t e ) ........ 2 7 . 5 % ( 9 . 5 % ) ( 5 . 4 % ) ( 8 . 2 % )
Pre-tax discount rate . . . ............ 1 1 . 5 % 1 2 . 2 % 1 2 . 0 % 1 2 . 2 %
Average procurement price of
lithium carbonate . . . ............
RMB92,900/
ton
RMB258,600/
ton
RMB93,800/
ton
RMB82,100/
ton
The directors of the Company have determined the v alues assigned to each of the key assumptions as
follows:
. Average revenue growth rate over the five-year forecast period is based on past performance and
management’s expectation of market development;
. Pre-tax discount rate that reflects current market assessments of the time value of money and the
risk specific to the CGUs; and
. Average procurement price of lithium carbonate is based on management’s expectation of price
trends of lithium carbonate.
Impact of possible changes in key assumptions
The recoverable amount of Jiangsu Ruilifeng CGU wa s estimated to exceed its carrying amount as at 31
December 2021 and 2023 and 30 June 2024 by approximately RMB22,174,000, RMB21,667,000 and
RMB17,401,000 respectively. The recoverable amount o f Jiangsu Ruilifeng CGU was estimated to be lower
than its carrying amount as at 31 December 2022 and impairment of RMB28,881,000 for Jiangsu Ruilifeng
CGU was recognised for the year ended 31 December 2022.
The recoverable amount of Changzhou Liyuan CGU is estimated to exceed its carrying amount at 31
December 2021 and 2022 by approximately RMB2,100, 438,000 and RMB433,859,000 respectively. The
recoverable amount of Changzhou Liyuan CGU was estimated to be lower than its carrying amount as at 31
December 2023 and 30 June 2024 and impairment o f RMB71,367,000 and RMB25,249,000 for Changzhou
Liyuan CGU was recognised for the year ended 31 December 2023 and the six months ended 30 June 2024,
respectively.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 1–


--- page 594 ---
Management have undertaken sensitivity analysis o n the impairment test of goodwill. The recoverable
amount of each CGU would equal its carrying amount (net of impairment loss) if each key assumption was to
change as follows with all other variables held constant:
As at 31 December
As at
30 June
2021 2022 2023 2024
Jiangsu Ruilifeng CGU
R e v e n u e( a v e r a g eg r o w t hr a t e ) ........ 7 . 8 % 8 . 7 % 1 1 . 1 % 9 . 8 %
Pre-tax discount rate . . . ............ 1 3 . 0 % 1 1 . 3 % 1 0 . 7 % 9 . 8 %
Changzhou Liyuan CGU
R e v e n u e( a v e r a g eg r o w t hr a t e ) ........ 1 4 . 8 % ( 1 1 . 2 % ) ( 5 . 4 % ) ( 8 . 2 % )
Pre-tax discount rate . . . ............ 2 2 % 1 6 . 8 % 1 2 . 0 % 1 2 . 2 %
Average procurement price of
lithium carbonate . . . ............
RMB95,000/
ton
RMB266,000/
ton
RMB93,800/
ton
RMB82,100/
ton
The directors of the Company believe that any reasonably possible changes in the key assumptions on
which recoverable amount is based would not caused the carrying amount of CGU to exceed its recoverable
amount.
18. OTHER INTANGIBLE ASSETS
The Group
Software Patent Others Total
RMB’000 RMB’000 RMB’000 RMB’000
COST
A t1J a n u a r y2 0 2 1 ......................... 1 6 , 5 7 2 1 , 2 0 7 1 9 2 1 7 , 9 7 1
A d d i t i o n s ................................ 7 , 9 6 8 2 5 0 9 7 8 , 3 1 5
Acquired on acquisition of a subsidiary (Note 35(a)) . — 27,900 — 27,900
At 31 December 2021 and 1 January 2022 ......... 2 4 , 5 4 0 2 9 , 3 5 7 2 8 9 5 4 , 1 8 6
A d d i t i o n s ................................ 1 1 , 1 2 3 5 5 6 0 1 1 , 2 3 8
At 31 December 2022 and 1 January 2023 ......... 3 5 , 6 6 3 2 9 , 4 1 2 3 4 9 6 5 , 4 2 4
A d d i t i o n s ................................ 1 1 , 0 7 4 3 2 , 0 1 6 8 1 4 3 , 1 7 1
At 31 December 2023 and 1 January 2024 ......... 4 6 , 7 3 7 6 1 , 4 2 8 4 3 0 108,595
A d d i t i o n s ................................ 3 , 8 0 8 — 8 1 3 , 8 8 9
A t3 0J u n e2 0 2 4........................... 5 0 , 5 4 5 6 1 , 4 2 8 5 1 1 112,484
ACCUMULATED AMORTISATION
A t1J a n u a r y2 0 2 1 ......................... 8 , 7 4 9 1 , 2 0 7 1 9 2 1 0 , 1 4 8
C h a r g ef o rt h ey e a r ......................... 3 , 2 0 3 8 1 4 9 7 4 , 1 1 4
At 31 December 2021 and 1 January 2022 ......... 1 1 , 9 5 2 2 , 0 2 1 2 8 9 1 4 , 2 6 2
C h a r g ef o rt h ey e a r ......................... 4 , 5 9 8 1 , 4 5 7 6 0 6 , 1 1 5
At 31 December 2022 and 1 January 2023 ......... 1 6 , 5 5 0 3 , 4 7 8 3 4 9 2 0 , 3 7 7
C h a r g ef o rt h ey e a r ......................... 7 , 1 2 0 1 2 , 8 0 0 8 1 2 0 , 0 0 1
At 31 December 2023 and 1 January 2024 ......... 2 3 , 6 7 0 1 6 , 2 7 8 4 3 0 4 0 , 3 7 8
C h a r g ef o rt h ep e r i o d....................... 3 , 7 9 1 9 , 2 7 9 8 1 1 3 , 1 5 1
A t3 0J u n e2 0 2 4........................... 2 7 , 4 6 1 2 5 , 5 5 7 5 1 1 5 3 , 5 2 9
CARRYING AMOUNT
At 31 December 2021 . . ..................... 1 2 , 5 8 8 2 7 , 3 3 6 — 3 9 , 9 2 4
At 31 December 2022 . . ..................... 1 9 , 1 1 3 2 5 , 9 3 4 — 4 5 , 0 4 7
At 31 December 2023 . . ..................... 2 3 , 0 6 7 4 5 , 1 5 0 — 6 8 , 2 1 7
A t3 0J u n e2 0 2 4........................... 2 3 , 0 8 4 3 5 , 8 7 1 — 5 8 , 9 5 5
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 2–


--- page 595 ---
The Group tests other intangible assets annually f or impairment, or more frequently, if there are
indications that other intangi ble assets might be impaired.
The above intangible assets have finite useful lives. Suc h intangible assets are amor t i s e do nas t r a i g h t - l i n e
basis over the following periods:
C o m p u t e rs o f t w a r e....... 5y e a r s
P a t e n t................ 3 0y e a r s
The Company
Software
RMB’000
COST
A t1J a n u a r y2 0 2 1 .................................................... 1 5 , 3 6 2
A d d i t i o n s ........................................................... 7 , 7 2 4
At 31 December 2021 and 1 January 2022 .................................... 2 3 , 0 8 6
A d d i t i o n s ........................................................... 5 , 1 6 6
At 31 December 2022 and 1 January 2023 .................................... 2 8 , 2 5 2
A d d i t i o n s ........................................................... 1 , 8 3 2
At 31 December 2023 and 1 January 2024 .................................... 3 0 , 0 8 4
A d d i t i o n s ........................................................... 3 , 3 0 1
A t3 0J u n e2 0 2 4...................................................... 3 3 , 3 8 5
ACCUMULATED AMORTISATION
A t1J a n u a r y2 0 2 1 .................................................... 8 , 0 5 7
C h a r g ef o rt h ey e a r .................................................... 2 , 9 9 7
At 31 December 2021 and 1 January 2022 .................................... 1 1 , 0 5 4
C h a r g ef o rt h ey e a r .................................................... 4 , 0 3 3
At 31 December 2022 and 1 January 2023 .................................... 1 5 , 0 8 7
C h a r g ef o rt h ey e a r .................................................... 4 , 2 8 3
At 31 December 2023 and 1 January 2024 .................................... 1 9 , 3 7 0
C h a r g ef o rt h ep e r i o d.................................................. 2 , 1 1 3
A t3 0J u n e2 0 2 4...................................................... 2 1 , 4 8 3
CARRYING AMOUNT
At 31 December 2021 . . ................................................ 1 2 , 0 3 2
At 31 December 2022 . . ................................................ 1 3 , 1 6 5
At 31 December 2023 . . ................................................ 1 0 , 7 1 4
A t3 0J u n e2 0 2 4...................................................... 1 1 , 9 0 2
The computer software has finite useful lives. Such int angible asset is amortised on a straight-line basis
over 5 years.
19. INTERESTS IN ASSOCIATES
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
C o s to fu n l i s t e di n v e s t m e n t................. 6 3 , 0 0 0 1 0 3 , 0 0 0 8 0 , 0 0 0 8 0 , 0 0 0
Share of post-acquisition (loss)/profits and other
c o m p r e h e n s i v e( e x p e n s e ) / i n c o m e ............ ( 2 7 9 ) 1 6 , 6 7 7 ( 5 , 5 1 0 ) ( 1 7 , 3 8 7 )
62,721 119,677 74,490 62,613
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 3–


--- page 596 ---
Details of the Group’s associates at 31 December 2021, 2022 and 2023 and 30 June 2024 are as follows:
Name
Place of
establishment
and operation
Registered/paid up
capital
Percentage of ownership interest
attributable to the Group
Principal activities Notes
31 December 30 June
2021 2022 2023 2024
四川省盈達鋰電新材料有限公司
Sichuan Yingda Lithium
N e wM a t e r i a lC o . ,L t d . ...
PRC RMB185,690,000/
RMB101,460,000
22.67% 20.27% — — Manufacturing, sales, research
and development of
electronic special materials;
new material technology
promotion services; battery
sales.
(a)
湖北豐鋰新能源科技有限公司
H u b e iF e n g l iN e wE n e r g y
T e c h n o l o g yC o . ,L t d . .....
PRC RMB200,000,000 25% 40% 40% 40% Technical service,
development, consultation,
exchange, transfer, and
promotion; manufacturing,
sales, and research and
d e v e l o p m e n to fe l e c t r o n i c
special materials; research
and development of new
material technology; sales
of special chemical
products.
(b)
Notes:
(a) On 26 March 2021, 四川鋰源新材料有限公司 (‘‘Sichuan Liyuan ’’), a wholly-owned subsidiary of the Group
and other four independent third parties ente red into an agreement for the establishment of 四川省盈達鋰
電新材料有限公司 (‘‘Sichuan Yingda ’’), a company established in the PR C with limited liability, for the
purpose of manufacturing, sales, research and devel opment of electronic special materials. Sichuan
Liyuan contributed RMB23,000,000 to the registered capital of Sichuan Yingda. Upon the completion of
the capital contribution, the Group holds 22.67% equity interest in Sichuan Yingda. Pursuant to Articles
of Association of Sichuan Yinda, the Group has rig ht to appoint one out of the seven directors in the
board of directors, which is responsible for relevan t activities of Sichuan Yinda. Accordingly, the
directors of the Company consider that the Group ha s significant influence in Sichuan Yinda. In this
regard, the investment is accounted for as an associate of the Group.
On 21 February 2023, Sichuan Liyuan entered in to an agreement with an independent third party.
Pursuant to the agreement, Sichuan Liyuan agreed to sale and the independent third party agreed to
purchase equity interest representing RMB23, 000,000 paid-up capital of Sichuan Yingda at a
consideration of RMB38,186,000. A gain on disposal of interest in an associate of RMB16,583,000 was
recognised in profit or loss for the year ended 31 December 2023.
(b) On 17 August 2021, Changzhou Liyuan, a subsidiary of the Group and an independent third party entered
into an agreement for the establishment of Hubei Fen gli, a company established in the PRC with limited
liability, for the purpose of investment cooperati on agreement on iron phosphate project. Changzhou
Liyuan committed to contribute RMB80,000,000 to the r egistered capital of Hubei Fengli. Upon the
completion of the capital contribution, Changzhou Li yuan holds 40.00% equity interest in Hubei Fengli.
The shareholders exercise their voting rights i n the shareholders meeting which is the highest
decision-making body of Hubei Fengli in proportion to their paid-up capital contributions. In this
regard, the investment is accounted for as an associate of the Group. As at 31 December 2021, Changzhou
Liyuan has contributed RMB40,000,000 to Hubei Fengl i, therefore Changzhou Liyuan shares 25% of the
net assets of Hubei Fengli, which is equivalent to its p roportion of capital contribution as at 31 December
2021. During the year ended 31 December 2022, Ch angzhou Liyuan has contributed RMB40,000,000 to
Hubei Fengli, resulting in increase of the share of net assets of Hubei Fengli to 40%.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 4–


--- page 597 ---
Summarised financial information of material associates
Summarised financial information in respect of each of the Group’s material associates is set out
below. The summarised financial information below represents amounts shown in the associate’s financial
statements prepared in accordance with IFRSs.
The associates are accounted for using the equity me thod in the Historical Financial Information.
Sichuan Yingda Lithium New Material Co., Ltd.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
C u r r e n ta s s e t s .......................... 9 5 , 9 2 2 8 7 , 8 8 2 N / A N / A
N o n - c u r r e n ta s s e t s ....................... 1 4 , 3 9 2 5 7 , 4 6 7 N / A N / A
C u r r e n tl i a b i l i t i e s........................ 1 0 , 1 0 0 3 9 , 2 5 9 N / A N / A
N o n - c u r r e n tl i a b i l i t i e s ..................... — — N / A N / A
N e ta s s e t s ............................. 100,214 106,090 N/A N/A
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
R e v e n u e ............................... — 5 , 9 8 2 1 , 7 6 7 N / A
Loss and total comprehensive expense for the year/
p e r i o db e f o r et h ed a t eo fd i s p o s a l ........... ( 1 , 2 4 6 ) ( 6 , 1 2 4 ) ( 1 , 1 2 0 ) N / A
Reconciliation of the above summarised financial in formation to the carrying amount of the interest in the
associate recognised in the Historical Financial Information:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
N e ta s s e t s ............................. 100,214 106,090 N/A N/A
Proportion of the Group’s ownership interest .... 2 2 . 6 7 % 2 0 . 2 7 % N / A N / A
The Group’s share of net assets .............. 2 2 , 7 9 8 2 1 , 8 3 1 N / A N / A
Hubei Fengli New Energy Technology Co., Ltd.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
C u r r e n ta s s e t s .......................... 8 9 , 6 8 3 1 9 4 , 9 1 6 1 5 7 , 1 5 5 160,406
N o n - c u r r e n ta s s e t s ....................... 102,363 421,405 388,151 373,579
C u r r e n tl i a b i l i t i e s........................ 3 2 , 5 0 2 1 7 2 , 0 4 0 2 0 0 , 7 7 1 261,526
N o n - c u r r e n tl i a b i l i t i e s ..................... — 2 0 0 , 0 0 0 1 5 6 , 2 6 1 116,261
N e ta s s e t s ............................. 159,544 244,281 188,274 156,198
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 5–


--- page 598 ---
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
R e v e n u e ............................... — 2 9 2 , 2 9 5 2 6 6 , 5 8 9 144,832
(Loss)/profit and total comprehensive (expense)/
i n c o m ef o rt h ey e a r..................... ( 4 5 6 ) 4 4 , 7 3 7 ( 5 8 , 3 9 0 ) ( 3 3 , 3 2 0 )
Reconciliation of the above summarised financial in formation to the carrying amount of the interest in the
associate recognised in the Historical Financial Information:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
N e ta s s e t s ............................. 159,544 244,281 188,274 156,198
Proportion of the Group’s ownership interest .... 2 5 % 4 0 % 4 0 % 4 0 %
The Group’s share of net assets .............. 3 9 , 9 2 3 9 7 , 8 4 6 7 4 , 4 9 0 6 2 , 6 1 3
20. INTERESTS IN SUBSIDIARIES
The Company
(a) Interests in subsidiaries
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
U n l i s t e ds h a r e s ,a tc o s t.................... 1 , 372,178 3,174,821 3,645,810 3,936,449
The Company tested its investments in subsidiaries fo r impairment by comparing the recoverable amounts
with the carrying amounts. In determining the recovera ble amount of the investments in the subsidiaries, the
Company estimates its shares of present value of estima ted future cash flows expected to generate from the
operations of the subsidiaries. The Company tested its in vestments in subsidiaries for impairment annually or
more frequently if events or changes in circumstances i ndicated that they might be impaired. During the Track
Record Period, the estimated recoverable amounts of t he investments in subsidiaries were greater than the
carrying values and therefore no impairment was recorded.
(b) Amounts due from subsidiaries
As at 31 December 2021, 2022 and 2023 and 30 June 2024, the amounts due from subsidiaries are
non-interest bearing, unsecured and are repayable on demand.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 6–


--- page 599 ---
21. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME/PROFIT
OR LOSS
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Financial assets at FVTOCI
Unlisted equity investments, at fair val ue (Note (a)) 92,450 92,450 141,450 141,450
Current assets
Financial assets at FVTPL
Listed equity investments, at fair value (Note (b)) . 431 738 522 247
Wealth management products (Note (c)) . ....... — 3 0 , 0 0 0 — 800,750
Unlisted funds investment (Note (d)) . . . ....... — — 5 9 , 0 0 5 4 0 , 1 2 9
431 30,738 59,527 841,126
The Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Financial assets at FVTOCI
Unlisted equity investments, at fair val ue (Note (a)) 80,000 80,000 129,000 129,000
Current assets
Financial assets at FVTPL
Listed equity investments, at fair value (Note (b)) . 431 738 522 247
Wealth management products (Note (c)) . ....... — 3 0 , 0 0 0 — 340,400
Unlisted funds investment (Note (d)) . . . ....... — — 5 9 , 0 0 5 4 0 , 1 2 9
431 30,738 59,527 380,776
Notes:
(a) The unlisted equity investments in PRC mainly include 安徽明天新能源科技有限公司 (‘‘Anhui Mingtian ’’).
On 18 October 2019, the Company and other nine independent third parties enter into a subscription
agreement for the purpose of acquisition 10% equity interest of Anhui Mingtian by the Group. The Group
contributed RMB80,000,000 to Anhui Mingtian as a s hareholder. Upon the completion of the capital
contribution, the Group holds 10% equity interest in Anhui Mingtian. In this regard, the investment in
Anhui Mingtian is accounted for as a financial asset at fair value through profit or loss of the Group.
During the year ended 31 December 2022, Anhui Mingtian completed a capital contribution agreement
with an independent third party, the sharehol dings held by the Group is diluted to 9.78%.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 7–


--- page 600 ---
(b) As at 31 December 2021, 2022 and 2023 and 30 June 2024, the fair values of the listed shares in the PRC
were determined based on the quoted bid price available on the Shenzhen Stock Exchange.
(c) The wealth management product was issued by bank s in the PRC and were low-risk in nature. The wealth
management products are structured fixed deposits wit h financial institutions with maturities within one
year. The principal of the structured fixed deposit s will be invested in debt instruments or derivative
markets. The Group received variable return depe nding on the return of the derivative. The returns of
these investments were determined by reference to the performance of the expected return rates stated in
the contracts.
22. INVENTORIES
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
R a wm a t e r i a l s .......................... 724,821 1,512,299 350,738 466,575
W o r ki np r o g r e s s ........................ 5 0 , 4 5 7 3 7 , 3 8 5 8 2 , 0 1 0 8 8 , 4 2 5
Finished goods .......................... 325,308 1,457,591 1,177,490 1,092,787
1,100,586 3,007,275 1,610,238 1,647,787
The provision for impairment loss recognised of inventories of RMB2,226,000, RMB72,567,000,
RMB554,547,000 and RMB69,494,000 are recognised for the years ended 31 December 2021, 2022 and 2023
and the six months ended 30 June 2024, respectively.
The Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
R a wm a t e r i a l sa n dc o n s u m a b l e s .............. 114,204 70,231 1,023 2,434
W o r ki np r o g r e s s ........................ 6 , 6 2 4 4 , 4 9 1 — —
Finished goods .......................... 5 0 , 3 9 6 5 1 , 7 3 8 1 9 , 0 8 0 1 4 , 0 2 4
171,224 126,460 20,103 16,458
The provision for impairment loss recognis ed of inventories of RMB2,951,000, RMB1,762,000,
RMB320,000 and RMB122,000 are recognised for the years ended 31 December 2021, 2022 and 2023 and the
six months ended 30 June 2024, respectively.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 8–


--- page 601 ---
23. TRADE AND OTHER RECEIVABLES
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
T r a d er e c e i v a b l e s ........................ 857,997 2,121,005 2,174,914 1,549,571
B i l l sr e c e i v a b l e.......................... 347,197 1,038,690 479,122 1,036,244
Other receivables ........................ 457,618 1,665,507 967,744 816,271
1,662,812 4,825,202 3,621,780 3,402,086
Analysis for reporting purposes:
N o n - c u r r e n tp o r t i o n.................... 106,640 630,010 226,733 64,927
C u r r e n tp o r t i o n ....................... 1 , 556,172 4,195,192 3,395,047 3,337,159
1,662,812 4,825,202 3,621,780 3,402,086
The Group’s trading terms with its customers are ma inly on credit. The credit period is generally
from one month to three months. The Group seeks t o maintain strict control over its outstanding
receivables to minimise credit risk. Overdue balan ces are reviewed regularly by senior management. The
Group does not hold any collateral or other credit enha ncements over its trade receivable balances. The
balances of trade receivables are non-interest-bearing.
The following is an aged analysis of trade receivables net of allowance for expected credit losses
presented based on revenue recognition date.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
W i t h i n1y e a r ........................... 852,309 2,113,004 2,161,710 1,528,935
1y e a rt o2y e a r s ......................... 1 , 9 2 0 7 , 6 2 7 1 2 , 2 4 4 1 9 , 7 3 4
2y e a r st o3y e a r s........................ 2 , 6 0 8 3 0 8 7 2 0 6 8 0
3y e a r st o4y e a r s........................ 1 , 1 5 9 6 2 1 8 2 1 5 9
4y e a r st o5y e a r s........................ 1 4 5 8 6 3
857,997 2,121,005 2,174,914 1,549,571
All bills receivables received by the Group are w ith a maturity period of less than one year.
The Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
T r a d er e c e i v a b l e s ........................ 123,270 309,851 293,176 165,703
B i l l sr e c e i v a b l e.......................... 9 0 , 1 1 7 3 8 , 6 6 0 1 5 1 , 6 5 6 6 4 , 5 8 3
Other receivables ........................ 875,258 1,238,895 861,557 582,047
1,088,645 1,587,406 1,306,389 812,333
Analysis for reporting purposes:
N o n - c u r r e n tp o r t i o n.................... 4 , 8 0 7 — 4 , 8 3 8 3 , 9 7 2
C u r r e n tp o r t i o n ....................... 1 , 083,838 1,587,406 1,301,551 808,361
1,088,645 1,587,406 1,306,389 812,333
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 7 9–


--- page 602 ---
The Company’s trading terms with its customers ar e mainly on credit. The credit period is generally
from one month to three months. The Company seeks to maintain strict control over its outstanding
receivables to minimise credit risk. Overdue balan ces are reviewed regularly by senior management. The
Company does not hold any collateral or other credit enhancements over its trade receivable balances. The
balances of trade receivables are non-interest-bearing.
The following is an aged analysis of trade receivabl es net of allowance for expected credit losses of
the Company presented based on revenue recognition date.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
W i t h i n1y e a r ........................... 119,789 307,979 291,271 164,281
1y e a rt o2y e a r s ......................... 5 0 1 1 , 8 4 2 1 , 6 1 9 1 , 2 9 8
2y e a r st o3y e a r s........................ 2 , 2 6 3 — 2 6 3 1 1 3
3y e a r st o4y e a r s........................ 7 1 7 2 8 — —
4y e a r st o5y e a r s........................ — 2 2 3 1 1
123,270 309,851 293,176 165,703
All bills receivable received by the Company are with a maturity period of less than one year.
Details of impairment assessment of trade and o ther receivables of the Group and the Company are
set out in Note 37(b).
24. DERIVATIVE FINANCIAL INSTRUMENTS
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Derivative financial assets
Held for trading derivatives that are designated
in hedge accounting relationship:
—F u t u r ec o n t r a c t s ..................... — — 9 5 0 5 6
Derivative financial liabilities
Held for trading derivatives that are designated
in hedge accounting relationship:
—F u t u r ec o n t r a c t s ..................... — — 4 , 0 6 2 3 , 4 3 4
Note: The derivative financial assets and liabilities are a rising from the future contract of lithium carbonate.
The above derivative instruments ar e marked-to-market (Shanghai Met als Market) in each measurement
period and any unrealised change in fair value is recorded as a component of the profit or loss and the
associated fair value carrying amount on the statement of financial position is adjusted by the change.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 0–


--- page 603 ---
25. BANK BALANCES AND CASH AND REST RICTED AND PLEDGED BANK DEPOSITS
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Bank balances and cash
C a s ho nh a n d ........................... 2 6 8 2 9 8 2 6 9 1 7 0
C a s ha tb a n k s .......................... 832,865 1,529,075 2,958,334 2,285,769
833,133 1,529,373 2,958,603 2,285,939
P l e d g e db a n kd e p o s i t s ..................... 1 9 , 4 9 9 5 0 0 , 3 0 8 3 5 0 , 7 2 6 8 7 , 6 1 2
852,632 2,029,681 3,309,329 2,373,551
Cash at banks earns interest at floating r ates based on daily bank deposit rates.
Pledged bank deposits carry fixed interest rate ranged from 0.03% to 2.03%, 0.03% to 2.60%,
0.05% to 2.75% and 0.15% to 1.8% as at 31 December 2021, 2022 and 2023 and 30 June 2024 respectively.
Pledged bank deposits represent deposits pledged to financial institutions to secure banking facilities
granted to the Group and futures contracts. Pled ged bank deposits amounting to RMB13,511,000,
RMB489,264,000, RMB337,129,000 and RMB78,493,000 as at 31 December 2021, 2022 and 2023 and 30
June 2024 respectively, have been pledged to secure bill s payables and are therefore classified as current
assets. Pledged bank deposits amounting t o RMB5,988,000, RMB11,044, 000, RMB13,597,000 and
RMB9,119,000 have been pledged to secure futures cont racts for raw materials with contract amounting
to RMB45,793,000, RMB79,661,000, RMB41,996,000 a nd RMB47,603,000 as at 31 December 2021, 2022
and 2023 and 30 June 2024 respectively, and all the fut ures contracts will be maturity within 12 months,
therefore classified as current assets.
The Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Bank balances and cash
C a s ho nh a n d ........................... 1 1 8 3 2 5 6
C a s ha tb a n k s .......................... 280,754 454,879 1,715,074 1,364,887
280,872 454,911 1,715,079 1,364,893
P l e d g e db a n kd e p o s i t s ..................... 3 , 0 9 2 9 , 8 5 5 2 2 8 2 2 9
283,964 464,766 1,715,307 1,365,122
Cash at banks earns interest at floating r ates based on daily bank deposit rates.
Pledged bank deposits carry fixed interest rate ranged from 0.03% to 2.03%, 0.03% to 2.60%,
0.05% to 2.75% and 1.8% to 1.8% as at 31 December 2021, 2022, and 2023 and 30 June 2024 respectively.
Pledged bank deposits represent deposits pledged to financial institutions to secure banking facilities
granted to the Group and futures contracts. Pled ged bank deposits amount ing to RMB1,600,000,
RMB4,556,000, RMB288,000 and RMB229,000 as at 31 December 2021, 2022 and 2023 and 30 June 2024
respectively, have been pledged to secure bills payabl es and are therefore classified as current assets.
Pledged bank deposits amounting to RMB1,492, 000, RMB5,299,000, RMBNil and RMBNil have been
pledged to secure futures contracts for raw mater ials with contract amounting to RMB10,581,000,
RMB35,263,000, RMBNil and RMBNil as at 31 December 2021, 2022 and 2023 and 30 June 2024
respectively, and all the futures contracts will be matur ity within 12 months, therefore classified as current
assets.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 1–


--- page 604 ---
The conversion of the RMB denominated balances maintained in the PRC into foreign currencies is
subject to the rules and regulations of foreign exc hange control promulgated by the PRC government.
Details of impairment assessment of bank balances and restricted and pledged bank deposits of the
Group and the Company are set out in Note 37(b).
26. TRADE AND OTHER PAYABLES
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
T r a d ep a y a b l e s .......................... 491,824 1,195,941 1,191,017 1,218,738
B i l l sp a y a b l e ........................... 129,554 302,164 590,635 152,445
Other payables .......................... 306,124 748,659 1,121,153 1,060,488
927,502 2,246,764 2,902,805 2,431,671
The following is an aged analysis of trade payables as at 31 December 2021, 2022, 2023 and 30 June
2024, presented based on the invoice date.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
L e s st h a n1y e a r ......................... 484,778 1,164,976 1,178,237 1,130,945
1y e a rt o2y e a r s ......................... 6 , 0 2 1 2 7 , 3 9 2 6 , 1 1 3 8 1 , 6 0 2
2y e a r st o3y e a r s........................ 3 1 2 1 , 8 7 0 3 , 6 4 8 3 , 0 1 3
O v e r3y e a r s ............................ 7 1 3 1 , 7 0 3 3 , 0 1 9 3 , 1 7 8
491,824 1,195,941 1,191,017 1,218,738
The trade payables are non-interest-bearing and a re normally settled on terms range from 30 to 60
days.
The bills payable are guaranteed by banks in the PRC and have maturities of 6 months to 1 year.
The Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
T r a d ep a y a b l e s .......................... 3 4 , 1 7 5 4 8 , 8 9 5 3 8 , 6 9 6 6 8 , 7 7 4
Other payables .......................... 129,016 263,420 19,588 133,159
163,191 312,315 58,284 201,933
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 2–


--- page 605 ---
The following is an aged analysis of trade payables as at 31 December 2021, 2022, 2023 and 30 June
2024, presented based on the invoice date.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
L e s st h a n1y e a r ......................... 3 3 , 6 8 0 4 8 , 6 5 7 3 6 , 8 8 0 6 2 , 5 6 7
1y e a rt o2y e a r s ......................... 3 9 3 7 7 1 , 3 0 2 4 , 0 3 6
2y e a r st o3y e a r s........................ 6 0 1 0 4 2 0 9 8 0 4
O v e r3y e a r s ............................ 4 2 5 7 3 0 5 1 , 3 6 7
34,175 48,895 38,696 68,774
The trade payables are non-interest-bearing and a re normally settled on terms range from 30 to 60
days.
The bills payable are guaranteed by banks in the PRC and have maturities of 6 months to 1 year.
27. CONTRACT LIABILITIES
The Group
The Group recognised the following re venue-related contract liabilities:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
S a l e so fa u t o m o t i v es p e c i a l t yc h e m i c a l s ......... 3 2 , 6 0 2 2 3 , 0 4 1 1 2 , 4 3 9 2 4 , 6 0 6
Sales of LFP cathode materials .............. 2 7 , 5 3 3 4 0 1 , 3 0 5 8 , 7 5 8 4 , 2 5 6
O t h e r s ................................ 5 1 1 , 3 9 4 7 4 3 1 , 2 6 5
60,186 425,740 21,940 30,127
The Group receives certain amount of the contract values as receipt in advances upon receiving the
purchase orders from customers. The receipt in advanc e results in contract liabilities being recognised
until the customer obtains control of the goods.
As at 1 January 2021, contract liabil ities amounted to RMB30,721,000. T he contract liabilities as at
1 January 2021, 2022 and 2023 and 1 January 2024 were fully recognised as revenue during the year ended
31 December 2021, 2022 and 2023 and the six months ended 30 June 2024, respectively.
The Company
The Company recognised the following re venue-related contract liabilities:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
S a l e so fa u t o m o t i v es p e c i a l t yc h e m i c a l s ......... 1 0 , 9 0 3 1 0 , 2 5 3 5 7 6 8 3 9
The Company receives certain amount of the contract values as receipt in advances upon receiving
the purchase orders from customers. The receipt in advan ce results in contract liabilities being recognised
until the customer obtains control of the goods.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 3–


--- page 606 ---
As at 1 January 2021, contract liabilities amounted to RMB9,387,000. The contra ct liabilities as at 1
January 2021, 2022 and 2023 and 1 January 2024 were fully recognised as revenue during the year ended
31 December 2021, 2022 and 2023 and the six months ended 30 June 2024, respectively.
28. BANK AND OTHER BORROWINGS
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Fixed-rate bank borrowings (Note (a))
S e c u r e d............................. 1 , 214,947 3,143,918 5,551,470 6,059,692
U n s e c u r e d........................... 548,657 624,642 2,353,975 1,749,232
1,763,604 3,768,560 7,905,445 7,808,924
E n d o r s e db i l l s .......................... 4 0 , 0 0 0 1 , 5 1 2 , 2 8 6 5 7 0 , 0 0 0 815,597
O t h e rb o r r o w i n g( N o t e s( b )a n d( c ) ) ........... 345,000 345,000 451,250 853,032
2,148,604 5,625,846 8,926,695 9,477,553
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
The carrying amounts of the above bank borrowings
are repayable (based on scheduled repayment
dates set out in the loan agreements):
W i t h i no n ey e a r....................... 1 , 035,631 2,527,084 5,835,976 5,255,632
Within a period of more than one year but not
exceeding two years ................... 322,984 375,921 459,733 1,433,133
Within a period of more than two years but not
exceeding five years ................... 404,989 865,555 1,609,736 1,120,159
1,763,604 3,768,560 7,905,445 7,808,924
The carrying amounts of the above endorsed bills are
repayable within one year ................ 4 0 , 0 0 0 1 , 5 1 2 , 2 8 6 5 7 0 , 0 0 0 815,597
The carrying amounts of the above other borrowing
is repayable within a period of more than two
years but not exceeding five years ........... 345,000 345,000 451,250 853,032
2,148,604 5,625,846 8,926,695 9,477,553
Less: amounts due within one year shown under
c u r r e n tl i a b i l i t i e s................... ( 1 , 075,631) (4,039,370) (6,405,976) (6,071,229)
Amounts shown under non- current liabilities ..... 1 , 072,973 1,586,476 2,520,719 3,406,324
Notes:
(a) The ranges of effective interest rates (which are a lso equal to contracted interest rates) on the Group’s
bank borrowings are 2.85% to 4.60% per annum, 2.95% to 4.41% per annum, 2.71% to 4.06% per annum
and 2.65% to 3.98% per annum as at 31 December 2021, 2022 and 2023 and 30 June 2024 respectively.
Bank borrowings of the Group of RMB270,000 ,000, RMB519,541,000, RMB488,642,000 and
RMB795,428,000 as at 31 December 2021, 2022 and 2023 and 30 June 2024 are guaranteed by Mr. Shi
respectively.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 4–


--- page 607 ---
Bank borrowings of the Group of RMB553,400, 000, RMB775,000,000, RMB1,225,000,000 and
RMB1,000,749,000 as at 31 December 2021, 2022 and 2023 and 30 June 2024 are guaranteed by Mr.
S h ia n dM s .Z h uX i a n g l a n( ‘ ‘Mrs. Shi ’’), the spouse of Mr. Shi respectively.
(b) In October 2021, Changzhou Liyuan entered into a capital contribution agreement with 2 independent
third parties (the ‘‘ Investors A ’’), the Investors A agreed to contri bute RMB345 million and obtained 20%
equity interests of Changzhou Liyuan. As part of t he terms of the capital contribution agreement, the
Investors A could request Changzhou Liyuan to repur chase all of the equity interest of Changzhou Liyuan
acquired by the Investors A upon the occurrence or non-occurrence of certain specified events, including
failure by the Company to make an announcement on t he spin-off and qualified listing of Changzhou
Liyuan within four years after the completion dat e of the Capital Contribution, or if Changzhou Liyuan
fails to complete a qualified listin g within five years after the completion date. The repurchase price is
based on higher of capital contribution plus 10% inte rnal rate of return per annum or the fair value of the
equity interest of Changzhou Liyuan upon redemption.
The capital contribution is initial ly recognised as a financial liability at fair value, whereby the Group
recognised a debit of approximately RMB345,000,00 0 to equity. The fair value at initial recognition of the
financial liability at completion date of the capital contribution was measured based on the present value
contractually determined stream of future cash f lows with reference to valuation carried out by an
independent professional valuer not connected with the Group using the Binomial model.
(c) In February 2024 and May 2024, Changzhou Liyuan en tered into capital contribution agreements with 2
independent third parties (the ‘‘ Investors B ’’), the Investors B agreed to contribute RMB100,000,000 and
RMB285,427,000 and obtained 1.93% and 5.50% equity interests of Changzhou Liyuan, respectively. As
part of the terms of the capital contribution agreeme nt, the Investors B could request Changzhou Liyuan
to repurchase all of the equity interest of Changzhou Liyuan acquired by the Investors B upon the
occurrence or non-occurrence of certain specified events, including failure by the Company to make an
announcement on the spin-off and qualified listing of Changzhou Liyuan within four years after the
completion date of the Capital Cont ribution, or if Changzhou Liyuan fail s to complete a qualified listing
within five years after the completion date. The repur chase price is based on higher of capital contribution
plus 8% internal rate of return per annum or the fair value of the equity interest of Changzhou Liyuan
upon redemption.
The capital contribution is initial ly recognised as a financial liability at fair value, whereby the Group
recognised a debit of approximately RMB100,000,000 and RMB285,427,000 to equity, respectively. The
fair value at initial recognition of the financial liabi lity at completion date of the capital contribution was
measured based on the present value contractually det ermined stream of future cash flows with reference
to valuation carried out by an independent professi onal valuer not connected with the Group using the
Binomial model.
The Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Fixed-rate bank borrowings
S e c u r e d............................. 650,594 805,707 1,048,529 1,000,758
U n s e c u r e d........................... 548,657 574,589 1,992,007 1,699,193
1,199,251 1,380,296 3,040,536 2,699,951
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 5–


--- page 608 ---
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
The carrying amounts of the above bank borrowings
are repayable (based on scheduled repayment
dates set out in the loan agreements):
W i t h i no n ey e a r....................... 905,251 1,207,296 3,040,536 2,699,951
Within a period of more than one year but not
exceeding two years ................... 294,000 173,000 — —
1,199,251 1,380,296 3,040,536 2,699,951
Less: Amounts due within one year shown under
c u r r e n tl i a b i l i t i e s................... ( 905,251) (1,207,296) (3,040,536) (2,699,951)
Amounts shown under non- current liabilities ..... 294,000 173,000 — —
The ranges of effective interest rates (which are als o equal to contracted interest rates) on the Company’s
bank borrowings are 2.85% to 4.00% per annum, 2. 95% to 3.95% per annum, 2.85% to 3.40% per annum and
2.80% to 3.60% per annum as at 31 December 2021, 2022 and 2023 and 30 June 2024, respectively.
Bank borrowings of the Company of RMB270,000,000, RMB99,900,000, RMBNil and RMBNil as at 31
December 2021, 2022 and 2023 and 30 June 2024 are guaranteed by Mr. Shi respectively.
Bank borrowings of the Company of RMB200,000,000, RMB380,000,000 and RMB900,000,000 and
RMB1,000,749,000 as at 31 December 2021, 2022 and 2023 and 30 June 2024 are guaranteed by Mr. and Mrs.
Shi, the spouse of Mr. Shi respectively.
29. LEASE LIABILITIES
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Lease liabilities payable:
W i t ho n ey e a r .......................... 157,431 297,391 294,752 220,759
Within a period of more than one year but not more
t h a nt w oy e a r s ........................ 188,751 201,959 57,921 120,141
Within a period of more than two years but not more
t h a nf i v ey e a r s ........................ — 1 5 8 , 6 4 3 2 9 2 , 0 0 8 555,354
W i t h i nap e r i o do fm o r et h a nf i v ey e a r s ........ — — 4 4 5 , 4 8 9 218,140
346,182 657,993 1,090,170 1,114,394
Less: Amounts for settlement with 12 months shown
under current liabilities ............... ( 157,431) (297,391) (294,752) (220,759)
Amount due for settlement after 12 months shown
under non-current liabilities ............... 188,751 360,602 795,418 893,635
The weighted average incremental borrowing rates applied to lease liabilities at 4.53%, 4.18%,
4.11% and 4.06% as at 31 December 2021, 2022 and 2023 and 30 June 2024 respectively.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 6–


--- page 609 ---
30. DEFERRED INCOME
The Group
RMB’000
At 1 January 2021 ..................................................... 4 2 , 0 6 8
A d d i t i o nd u r i n gt h ey e a r ................................................ 3 , 0 9 8
R e c o g n i s e di nc o n s o l i d a t e ds t a t e m e n to fp r o f i to rl o s s........................... ( 6 , 9 8 5 )
At 31 December 2021 and 1 January 2022 .................................... 3 8 , 1 8 1
A d d i t i o nd u r i n gt h ey e a r ................................................ 7 , 9 8 3
R e c o g n i s e di nc o n s o l i d a t e ds t a t e m e n to fp r o f i to rl o s s........................... ( 1 2 , 3 3 0 )
At 31 December 2022 and 1 January 2023 .................................... 3 3 , 8 3 4
A d d i t i o nd u r i n gt h ey e a r ................................................ 6 5 , 5 0 1
R e c o g n i s e di nc o n s o l i d a t e ds t a t e m e n to fp r o f i to rl o s s........................... ( 1 0 , 9 9 9 )
At 31 December 2023 and 1 January 2024 .................................... 8 8 , 3 3 6
A d d i t i o nd u r i n gt h ep e r i o d .............................................. 4 7 , 7 3 5
R e c o g n i s e di nc o n s o l i d a t e ds t a t e m e n to fp r o f i to rl o s s........................... ( 8 , 8 9 0 )
At 30 June 2024 ...................................................... 127,181
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Analysis for reporting purposes:
N o n - c u r r e n tp o r t i o n...................... 3 2 , 8 9 0 2 4 , 4 9 7 7 8 , 0 3 8 112,835
C u r r e n tp o r t i o n ......................... 5 , 2 9 1 9 , 3 3 7 1 0 , 2 9 8 1 4 , 3 4 6
38,181 33,834 88,336 127,181
The Company
RMB’000
At 1 January 2021 ..................................................... 4 , 6 2 8
R e c o g n i s e di ns t a t e m e n to fp r o f i to rl o s s ..................................... ( 1 , 0 7 1 )
At 31 December 2021 and 1 January 2022 .................................... 3 , 5 5 7
A d d i t i o nd u r i n gt h ey e a r ................................................ 4 , 8 0 0
R e c o g n i s e di ns t a t e m e n to fp r o f i to rl o s s ..................................... ( 4 , 2 1 5 )
At 31 December 2022 and 1 January 2023 .................................... 4 , 1 4 2
R e c o g n i s e di ns t a t e m e n to fp r o f i to rl o s s ..................................... ( 1 , 5 7 2 )
At 31 December 2023 and 1 January 2024 .................................... 2 , 5 7 0
R e c o g n i s e di ns t a t e m e n to fp r o f i to rl o s s ..................................... ( 7 8 6 )
At 30 June 2024 ...................................................... 1 , 7 8 4
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Analysis for reporting purposes:
N o n - c u r r e n tp o r t i o n...................... 2 , 6 0 6 2 , 5 7 1 9 9 9 2 1 3
C u r r e n tp o r t i o n ......................... 9 5 1 1 , 5 7 1 1 , 5 7 1 1 , 5 7 1
3,557 4,142 2,570 1,784
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 7–


--- page 610 ---
Deferred income mainly represents the PRC loca l government grants received from relevant PRC
authorities for compensate the Group’s development co sts and fixed asset investments. Government grants
received for compensate for the Group’s development c osts which has not yet been undertaken are included in
deferred income and recognised as income on a systemati c basis of over the periods that the cost, which it is
intended to compensate, are expensed. Government gran ts received relates to assets invested in laboratory
equipment and plant were credited to deferred income and are recognised as income over the expected useful
lives of the relevant assets.
31. DEFERRED TAX
The Group
The following are the Group’s major deferred tax a ssets/(liabilities) r ecognised and movements
thereon during the Track Record Period:
Impairment
of assets
Deductible
loss
Deferred
income
government
grant
Lease
liabilities/
right-of-use
assets
Appraisal
value-added
of assets in
business
combination
not under
common
control
Accelerated
depreciation
of fixed
assets Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
A t1J a n u a r y2 0 2 1 ........... 3 , 4 5 8 — — — ( 2 , 0 5 3 ) — 3 , 4 7 3 4 , 8 7 8
Arising from acquisition of
s u b s i d i a r i e s............. 2 , 7 6 0 — 1 9 2 4 8 ( 8 , 8 8 9 ) — 7 6 1 ( 5 , 1 2 8 )
Credited/(charged) to profit or loss 3,969 7,352 (42) 53 886 — (1,779) 10,439
At 31 December 2021 and 1 January
2 0 2 2 .................. 1 0 , 1 8 7 7 , 3 5 2 1 5 0 1 0 1 ( 1 0 , 0 5 6 ) — 2 , 4 5 5 1 0 , 1 8 9
Credited/(charged) to profit or loss 21,453 18,820 201 2,154 1,576 (42) (577) 43,585
At 31 December 2022 and 1 January
2 0 2 3 .................. 3 1 , 6 4 0 2 6 , 1 7 2 3 5 1 2 , 2 5 5 ( 8 , 4 8 0 ) ( 4 2 ) 1 , 8 7 8 5 3 , 7 7 4
Credited/(charged) to profit or loss 52,051 266,869 6,345 4,455 966 42 (1,128) 329,600
Credited to other comprehensive
i n c o m e................ — — — — — — 4 9 1 4 9 1
At 31 December 2023 and
1J a n u a r y2 0 2 4 ........... 8 3 , 6 9 1 2 9 3 , 0 4 1 6 , 6 9 6 6 , 7 1 0 ( 7 , 5 1 4 ) — 1 , 2 4 1 3 8 3 , 8 6 5
(Charged)/credited to profit or loss (49,392) 2,915 3,380 2,215 735 — 1,662 (38,485)
Charged to other comprehensive
i n c o m e................ — — — — — — ( 2 7 0 ) ( 2 7 0 )
A t3 0J u n e2 0 2 4............ 3 4 , 2 9 9 2 9 5 , 9 5 6 1 0 , 0 7 6 8 , 9 2 5 ( 6 , 7 7 9 ) — 2 , 6 3 3 3 4 5 , 1 1 0
For the purpose of presentation in the Historical Financial Information, certain deferred tax assets
and liabilities have been offset. The following is the analysis of the net deferred tax balances for financial
reporting purposes:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
N e td e f e r r e dt a xa s s e t s .................... 2 0 , 2 4 4 6 2 , 2 9 6 3 9 2 , 6 9 1 355,187
N e td e f e r r e dt a xl i a b i l i t i e s.................. ( 1 0 , 0 5 5 ) ( 8 , 5 2 2 ) ( 8 , 8 2 6 ) ( 1 0 , 0 7 7 )
10,189 53,774 383,865 345,110
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 8–


--- page 611 ---
As at 31 December 2021, 2022 and 2023 and 30 June 2024, the Group has unused tax losses of
RMB40,046,000, RMB176,006,000, RMB1,838,522, 000 and RMB2,249,353,000, respectively available for
offset against future profits. A deferred tax asset has been recognised in respect of RMB29,624,000,
RMB121,015,000, RMB1,751,390,000 and RMB1,697,049,000 as at 31 December 2021, 2022 and 2023 and
30 June 2024 respectively of such losses. No deferred tax asset has been recognised in respect of the
remaining RMB10,422,000, RMB54, 991,000, RMB154,354,000 and RMB552,304,000 as at 31 December
2021, 2022 and 2023 and 30 June 2024 re spectively due to the unpredictab ility of future profit streams.
The Group has unused tax losses that were not recognised as deferred tax assets due to the
unpredictability of future profit st reams. The unused tax losses can be carried forward for five years from
the year of the incurrence and an analysis of their expiry dates are as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Unused tax losses expiring in:
2 0 2 2 ............................... 5 , 0 5 8 — — —
2 0 2 3 ............................... 1 , 2 3 7 1 , 2 3 7 — —
2 0 2 4 ............................... 3 0 6 3 0 6 3 0 6 —
2 0 2 5 ............................... 3 9 1 3 9 1 3 9 1 3 9 1
2 0 2 6 ............................... 3 , 4 3 0 2 , 7 4 2 2 , 5 3 8 2 , 5 3 8
2 0 2 7 ............................... — 5 0 , 3 1 5 5 2 , 0 9 9 9 , 4 0 5
2 0 2 8 ............................... — — 9 9 , 0 2 0 5 6 , 5 8 6
2 0 2 9 ............................... — — — 483,384
10,422 54,991 154,354 552,304
The Company
The following are the Company’s major deferred tax assets recognised and movements thereon
during the Track Record Period:
Impairment of
assets Deductible loss
Accelerated
depreciation of
fixed assets Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
A t1J a n u a r y2 0 2 1 .................... 2 , 0 4 3 — — 8 6 1 2 , 9 0 4
C r e d i t e dt op r o f i to rl o s s ............... 3 8 5 — — 5 6 4 4 1
At 31 December 2021 and 1 January 2022 . . . . 2,428 — — 917 3,345
Credited/(charged) to profit or loss . . . . . . . . . 393 2,846 — (299) 2,940
At 31 December 2022 and 1 January 2023 . . . . 2,821 2,846 — 618 6,285
Credited/(charged) to profit or loss . . . . . . . . . 1,027 260 (1,186) (126) (25)
At 31 December 2023 and 1 January 2024 . . . . 3,848 3,106 (1,186) 492 6,260
(Charged)/credited to profit or loss . . . . . . . . . (202) — 1,126 1,687 2,611
At 30 June 2024 . . . . . . . . . . . . . . . . . . . . . 3,646 3,106 (60) 2,179 8,871
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 8 9–


--- page 612 ---
32. SHARE CAPITAL
The Company
Number of
shares Amount
RMB’000
Registered, issued and fully paid ordinary shares with par value of
RMB1.00 each share
A t1J a n u a r y2 0 2 1 ....................................... 344,368,246 344,368
R e p u r c h a s ea n dc a n c e l l a t i o no fs h a r e s( N o t e( a ) ) .................. ( 1 7 , 2 8 0 ) ( 1 7 )
I s s u eb yc a p i t a l i s a t i o no fc a p i t a lr e s e r v e( N o t e( b ) ) ................ 137,740,386 137,740
At 31 December 2021 and 1 January 2022 ....................... 482,091,352 482,091
I s s u eo fs h a r e s( N o t e( c ) ) ................................... 8 2 , 987,551 82,988
At 31 December 2022, 1 January 2023, 31 December 2023,
1 January 2024 and 30 June 2024 ........................... 565,078,903 565,079
Notes:
(a) Pursuant to the approval of the board of directors of the Company on 27 January 2021, the Company
repurchase part of the restricted shares granted. Upon the completion of repurchase of restricted share,
17,280 restricted shares were repurchased and cancelled on 30 March 2021.
(b) Pursuant to the approval of the board of directors of the Company on 25 March 2021, the Company
issued four capitalisat ion shares to all shareholders for every ten s hares by way of capitalisation of capital
reserve (the ‘‘Capitalisation Issue ’’). As such, based on the total number of issued shares of the Company
of 344,350,966 shares as at 25 March 2021, the total number of capitalisation shares under the
Capitalisation Issue was 137,740,386 shares. The new shares were listed on the Shanghai Stock Exchange
on 10 May 2021.
(c) On 16 June 2022, the registered share capital of the Company was increased from RMB482,091,000 to
RMB565,079,000 by placing, where a total number of 8 2,987,551 shares were subscribed at RMB26.51 per
share. Upon the completion of placing, net pro ceeds of RMB2,175,532,000 was raised by the Company.
The share capital of the Company increased by RMB82,988,000, the capital reserve of the Company
increased by RMB2,092,544,000.
(d) During the year ended 31 December 2022, the Compan y repurchased the Company’s own ordinary shares
on the Shanghai Stock Exchange, 480,800 ordinary shares were repurchased with aggregate consideration
of approximately RMB11,998,000. The above repur chase of ordinary shares are performed by the
Company. No other subsidiaries of the Company pur chased, sold or redeemed any of the Company’s
listed securities during the Track Record Period.
(e) During the year ended 31 December 2023, the Company repurchased the Company’s own ordinary shares
on the Shanghai Stock Exchange, 1,601,600 ordi nary shares were repurchased with aggregate
consideration of approximately RMB38,275,000. The above repurchase of ordinary shares are
performed by the Company. No other subsidiaries of the Company purchased, sold or redeemed any of
the Company’s listed securities during the Track Record Period.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 0–


--- page 613 ---
33. RESERVES
The Group
The amounts of the Group’s reserves and the movements therein are presented in the consolidated
statements of changes in equity of the Historical Financial Information.
Capital reserve
Capital reserve mainly comprised the excess/defici ency of the considerations paid for/received from
over the changes in the carrying amounts of non-controll ing interests in the acquisition of further interests
in subsidiaries or disposal of part inte rests in subsidiaries, respectively.
Translation reserve
The translation reserve comprises all foreign exchan ge differences arising fr om the translation of the
financial statements of foreign operations.
Share based payment reserve
The share-based payments reserve represents the fa ir value of restricted shares granted which are yet
to be vested and share options granted which are yet to be exercised. The amount will either be transferred
to the capital reserve when the related options are exe rcised, or be transferred to retained profits when the
related shares are vested and related options are expired or are forfeited.
Statutory reserve
Statutory reserves of the Group were established in accordance with the relevant PRC rules and
regulations and the articles of association of the co mpanies comprising the Group which are incorporated
in the PRC. Appropriations to the reserves were appr oved by the respective boards of directors. The
statutory reserve consists of statutory reserve funds and mai ntenance and production funds.
In accordance with the relevant PRC Regulations , the PRC subsidiaries of the Group are required
to appropriate 10% of the annual statutory net profi t, after offsetting any prior years’ losses to the
statutory reserve fund before distributing the net pr ofit. When the respective balance of the statutory
reserve fund reaches 50% of the share capital of the PR C subsidiaries, any further appropriation is at the
discretion of shareholders of the PRC subsidiaries.
For the entities concerned, statutory reserves fund c a nb eu s e dt oo f f s e ta c c u m u l a t e dl o s s e s ,i fa n y ,
and may be converted into capital in proportion to the exi sting equity interests of investors, provided that
the balance after such conversion is not less than 25% of the registered capital.
According to relevant PRC regulations, the Gr oup is required to transfer an amount to specific
reserve for the maintenance and producti on funds and other related expenditures.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 1–


--- page 614 ---
The Company
Capital
reserve
Treasury
shares
Share based
payment
reserve
Statutory
reserve
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
A t1J a n u a r y2 0 2 1......................... 9 3 3 , 0 8 5 ( 7 , 8 9 2 ) 7 , 8 9 2 5 7 , 0 1 8 4 1 1 , 2 8 2 1 , 4 0 1 , 3 8 5
P r o f i tf o rt h ey e a r......................... — — — — 1 0 4 , 8 1 1 1 0 4 , 8 1 1
T o t a lc o m p r e h e n s i v ei n c o m ef o rt h ey e a r .......... — — — — 1 0 4 , 8 1 1 1 0 4 , 8 1 1
A p p r o p r i a t i o nt os t a t u t o r yr e s e r v e.............. — — — 1 0 , 4 8 1 ( 1 0 , 4 8 1 ) —
D i v i d e n d sp a i d( N o t e1 3 ) .................... — — — — ( 6 0 , 9 5 0 ) ( 6 0 , 9 5 0 )
Appropriation to maintenance and production funds . . — — — 1,341 — 1,341
Utilisation of maintenance and production funds . . . . — — — (1,280) — (1,280)
R e p u r c h a s eo fs h a r e s( N o t e3 2 ( a ) ) .............. ( 7 3 ) 9 0 ( 9 5 ) — 9 5 1 7
C o n v e r t c a p i t a l r e s e r v e t o s h a r e c a p i t a l ( N o t e 3 2 ( b ) ) . . ( 1 3 7 , 7 4 0 ) ———— ( 1 3 7 , 7 4 0 )
R e s t r i c t e ds t o c kc i r c u l a t i o n( N o t e3 6 )............ 7 , 7 9 7 7 , 8 0 2 ( 7 , 7 9 7 ) — — 7 , 8 0 2
A t3 1D e c e m b e r2 0 2 1a n d1J a n u a r y2 0 2 2......... 8 0 3 , 0 6 9 — — 6 7 , 5 6 0 4 4 4 , 7 5 7 1 , 3 1 5 , 3 8 6
P r o f i tf o rt h ey e a r......................... — — — — 1 2 2 , 6 9 8 1 2 2 , 6 9 8
T o t a lc o m p r e h e n s i v ei n c o m ef o rt h ey e a r .......... — — — — 1 2 2 , 6 9 8 1 2 2 , 6 9 8
A p p r o p r i a t i o nt os t a t u t o r yr e s e r v e.............. — — — 1 2 , 2 7 0 ( 1 2 , 2 7 0 ) —
D i v i d e n d sp a i d( N o t e1 3 ) .................... — — — — ( 1 0 5 , 1 0 5 ) ( 1 0 5 , 1 0 5 )
Appropriation to maintenance and production funds . . — — — 860 — 860
Utilisation of maintenance and production funds . . . . — — — (876) — (876)
Issue of shares (Note 32(c)) . . . ................ 2 , 0 9 2 , 5 4 4 ———— 2 , 0 9 2 , 5 4 4
Recognition of equity-settled share-based payments
( N o t e3 6 )............................. — — 4 , 4 3 2 — — 4 , 4 3 2
R e p u r c h a s eo fs h a r e s( N o t e3 2 ( d ) ) .............. — ( 1 1 , 9 9 8 ) — — — ( 1 1 , 9 9 8 )
A t3 1D e c e m b e r2 0 2 2a n d1J a n u a r y2 0 2 3......... 2 , 8 9 5 , 6 1 3 ( 1 1 , 9 9 8 ) 4 , 4 3 2 7 9 , 8 1 4 4 5 0 , 0 8 0 3 , 4 1 7 , 9 4 1
L o s sf o rt h ey e a r .......................... — — — — ( 1 , 8 6 8 ) ( 1 , 8 6 8 )
T o t a lc o m p r e h e n s i v ee x p e n s ef o rt h ey e a r ......... — — — — ( 1 , 8 6 8 ) ( 1 , 8 6 8 )
Appropriation to maintenance and production funds . . — — — 117 — 117
Utilisation of maintenance and production funds . . . . — — — (142) — (142)
Recognition of equity-settled share-based payments
( N o t e3 6 )............................. — — 2 , 6 8 2 — — 2 , 6 8 2
T r a n s f e ru p o nl a p s e do fs h a r eo p t i o n ............ — — ( 4 , 4 3 2 ) — 4 , 4 3 2 —
R e p u r c h a s eo fs h a r e s( N o t e3 2 ( e ) ) .............. — ( 3 8 , 2 7 5 ) — — — ( 3 8 , 2 7 5 )
A t3 1D e c e m b e r2 0 2 3a n d1J a n u a r y2 0 2 4......... 2 , 8 9 5 , 6 1 3 ( 5 0 , 2 7 3 ) 2 , 6 8 2 7 9 , 7 8 9 4 5 2 , 6 4 4 3 , 3 8 0 , 4 5 5
L o s sf o rt h ep e r i o d ........................ — — — — ( 4 0 , 0 5 7 ) ( 4 0 , 0 5 7 )
T o t a lc o m p r e h e n s i v ee x p e n s ef o rt h ep e r i o d........ — — — — ( 4 0 , 0 5 7 ) ( 4 0 , 0 5 7 )
Recognition of equity-settled share-based payments
( N o t e3 6 )............................. — — 4 , 6 6 4 — — 4 , 6 6 4
A t3 0J u n e2 0 2 4 .......................... 2 , 8 9 5 , 6 1 3 ( 5 0 , 2 7 3 ) 7 , 3 4 6 7 9 , 7 8 9 4 1 2 , 5 8 7 3 , 3 4 5 , 0 6 2
34. CAPITAL COMMITMENTS
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Capital expenditure in respect of acquisition of
property and equipment and other intangible
assets contracted for but not provided in the
H i s t o r i c a lF i n a n c i a lI n f o r m a t i o n ............ 473,801 2,749,541 1,997,937 1,059,876
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 2–


--- page 615 ---
35. ACQUISITION OF SUBSIDIARIES
(a) Acquisition of Tianjin Nano and Jiangsu BTR NANO
On 23 April 2021, the Company with other 3 investors (together the ‘‘ Purchasers ’’) entered into an
agreement (the ‘‘Master Agreement ’’) with BTR Nano Tech Co., Ltd. (‘‘ BTR Nano ’’) and BTR (Jiangsu)
New Material Technology Co., Ltd. (‘‘ BTR Jiangsu ’’) (together the ‘‘ Vendors ’’). According to the
agreement, the Purchasers will form a company to a cquire 100% equity interest of Jiangsu BTR NANO
Technology Co., Ltd. (‘‘ Jiangsu BTR NANO ’’) and Beiterui (Tianjin) Nano Material Manufacturing Co.,
Ltd. (‘‘Tianjin Nano ’’) (together the ‘‘Target Companies ’’) at a consideration of RMB515,791,000 and
RMB328,640,000 respectively. On the same date, the Company entered into an agreement (‘‘ Shareholder
Agreement ’’) with Changzhou Youbailey Venture Capit al Center (Limited Partnership), BTR New
Material Group, Nanjing Kimberley Venture Capital Center (Limited Partnership) to form a company,
Changzhou Liyuan. The Company and the other 3 investors subscribed for RMB231,000,000 and
RMB84,000,000 of the registered capital of Chan gzhou Liyuan. Upon the completion of the capital
contribution, the Group holds 73.33% equity intere st in Changzhou Liyuan. On 30 May 2021, Changzhou
L i y u a ne n t e r e di n t oa na g r e e m e n tw i t hB T RN a n oa n dB T RJ i a n g s ut oa c q u i r e1 0 0 %e q u i t yi n t e r e s to f
Jiangsu BTR NANO and Tianjin Nano separately. T he details terms and conditions are same as the
Master Agreement. The Target Companies are p rincipally engaged in production and sales of LFP
cathode materials. The acquisition has been accounted for as acquisition of business using the acquisition
method.
Asset acquired and liabilities recognised at the date of acquisition
Changzhou
Liyuan
Tianjin
Nano
Jiangsu
BTR NANO Total
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
P r o p e r t y ,p l a n ta n de q u i p m e n t( N o t e1 5 ) ......... — 8 6 , 6 2 1 3 1 4 , 6 6 5 401,286
R i g h t - o f - u s ea s s e t s( N o t e1 6 ) .................. — 2 9 , 9 6 5 3 0 , 7 2 4 6 0 , 6 8 9
I n t a n g i b l ea s s e t s( N o t e1 8 ) .................... — 2 7 , 9 0 0 — 2 7 , 9 0 0
D e f e r r e dt a xa s s e t s( N o t e3 1 ) .................. — 2 , 9 2 3 8 3 9 3 , 7 6 2
Financial asset at fair value through profit or loss . . . — 12,450 — 12,450
Prepayment, deposits and other receivables ........ — 7 8 3 , 1 6 6 3 , 2 4 4
Current assets
I n v e n t o r i e s ............................... — 8 5 , 9 3 0 1 0 3 , 2 5 5 189,185
Trade and other receivables ................... 315,000 398,785 260,388 974,173
C a s ha n dc a s he q u i v a l e n t .................... — 1 9 , 0 4 8 5 , 4 7 5 2 4 , 5 2 3
Current liabilities
T r a d ea n do t h e rp a y a b l e s .................... ( 844,431) (286,052) (362,243) (1,492,726)
Tax payables ............................. — ( 3 , 0 1 1 ) ( 3 , 5 4 3 ) ( 6 , 5 5 4 )
L e a s el i a b i l i t i e s ............................ — ( 2 0 , 1 0 5 ) ( 1 9 , 5 6 3 ) ( 3 9 , 6 6 8 )
Non-current liabilities
L e a s el i a b i l i t i e s ............................ — — ( 1 6 , 4 4 1 ) ( 1 6 , 4 4 1 )
D e f e r r e dt a xl i a b i l i t i e s( N o t e3 1 ) ............... — ( 8 , 8 9 0 ) — ( 8 , 8 9 0 )
D e f e r r e di n c o m e ........................... — ( 1 , 2 8 0 ) — ( 1 , 2 8 0 )
Net (liabilities)/assets ....................... ( 529,431) 344,362 316,722 131,653
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 3–


--- page 616 ---
Goodwill arising on acquisition:
Total
RMB’000
C o n s i d e r a t i o nt r a n s f e r r e d ............................................... 231,000
N o n - c o n t r o l l i n gi n t e r e s t ................................................ 8 4 , 0 0 0
Less: recognised amounts of net assets acquired ................................ ( 131,653)
Goodwill arising on acquisition ........................................... 183,347
Goodwill arose in the business combination be cause the cost of the combination included a
premium paid to acquire the Target Companies . In addition, the consideration paid for the
combinations effectively included amounts in rel ation to the benefit of expected synergies, revenue
growth, future market development and the ass embled workforce of Target Companies. These
benefits are not recognised separately from goodw ill as the future economic benefits arising from
them cannot be reliably measured.
Net cash outflow on acquisition of Target Companies
Total
RMB’000
C a s hc o n s i d e r a t i o np a i d ................................................ ( 231,000)
L e s s :c a s ha n dc a s he q u i v a l e n t sb a l a n c e sa c q u i r e d.............................. 2 4 , 5 2 3
N e tc a s ho u t f l o w ..................................................... ( 206,477)
Impact of acquisition on the results of the Group
Included in the profit for the year ended 31 December 2021 is RMB47,276,000 and
RMB203,654,000 respectively attributable to the a dditional business generated by the Target
Companies. Revenue for the year ended 31 December 2021 includes RMB790,933,000 and
RMB1,236,558,000 generated from Tianjin Nano and Jiangsu Beiterui Nano respectively.
Had the acquisition been completed on 1 January 2021, revenue for the year ended 31
December 2021 of the Group would have been RMB4,544,861,000, and profit for the year ended 31
December 2021 of the Group would have been RMB483,228,000. The pro forma information is for
illustrative purposes only and is not necessarily an i ndication of revenue and results of operations of
the Group that actually would have been achieved had the acquisition been completed on 1 January
2021, nor is it intended to be a projection of future results.
In determining the ‘‘pro-forma’’ revenue and profit of the Group had the Target Companies
been acquired at the beginning of the current ye ar, the directors of the Company calculated
depreciation of property, plant and e quipment at the date of acquisition.
(b) Acquisition of Lopal Times
On 28 November 2022, the Company acquired 70% equity interest of Lopal Times at total
consideration of RMB1. Lopal Times is principall y engaged in sales of Chemical product, new material
technology research and development, non-metallic mi neral manufacturing and new material technology
promotion services. As at the acquisition date, the collective carrying amount of total assets and total
liabilities acquired before sha re by the non-controlling interest amounted to RMB362,312,000 and
RMB338,322,000, respectively, and the non-c ontrolling interest amounted to RMB25,396,000.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 4–


--- page 617 ---
Net cash inflow on acquisition of Lopal Times
RMB’000
C a s hc o n s i d e r a t i o np a i d ................................................ ( — ) *
L e s s :c a s ha n dc a s he q u i v a l e n t sb a l a n c e sa c q u i r e d.............................. 144,650
N e tc a s hi n f l o w ...................................................... 144,650
* Less than RMB1,000
Impact of acquisition on the results of the Group
Included in the profit for the year ended 31 Decem ber 2022 is RMB449,000 attributable to the
additional business generated by Lopal Times. No revenue for the year ended 31 December 2022 is
generated from Lopal Times.
Had the acquisition been completed on 1 January 2022, revenue for the year ended 31
December 2022 of the Group would have been RMB14,071,643,000, and profit for the year ended 31
December 2022 of the Group would have been RMB1,027,964,000. The pro forma information is for
illustrative purposes only and is not necessarily an i ndication of revenue and results of operations of
the Group that actually would have been achieved had the acquisition been completed on 1 January
2022, nor is it intended to be a projection of future results.
36. SHARE-BASED PAYMENT TRANSACTIONS
Equity-settled share option scheme of the Company
The Company’s share option scheme (the ‘‘ Scheme ’’) was adopted pursuant to a resolution in writing
passed by all the shareholders of the Company on 20 November 2020 for the primary purpose of
recognising and acknowledging the contribution of th e eligible participants had or may have made to the
Group. Under the Scheme, the board of directors o f the Company may grant options to eligible
participants, including employees, directors of t he Company and its subsidiaries and consultants, to
subscribe for shares of the Company. The Scheme will expire on 7 November 2024.
On 16 December 2020, the Company granted 5,700,000 share options, comprised (i) 895,000 share
options to the directors of the Company and (ii) 4,805, 000 share options to certain eligible participants
including members of the senior management and e mployees of the Company, to subscribe for the
ordinary shares of the Company at RMB26.56 per share.
On 16 April 2021, the Company issued capitalisation shares to all shareholders at 0.4 share for each
existing share from share capital reserve. The number of share option was adjusted from 5,700,000 to
7,980,000.
On 8 November 2021, the Company granted 420,000 share options to the directors of the Company,
to subscribe for the ordinary shares of the Company at RMB54.82 per share.
On 22 September 2023, the Company granted 6,130,000 shares options, comprised (i) 1,250,000
share options to the directors of the Company and ( ii) 4,790,000 share options to certain eligible
participants including members of the senior man agement and employees of the Company, to subscribe
for the ordinary shares of the Company at RMB11.92 per share.
Vesting of the share options is conditional upon the f ulfilment of certain performance targets as set
out in the respective offer letters to the grantees incl uding financial targets of the Group and individual
performance targets for certain periods.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 5–


--- page 618 ---
As at 31 December 2021, 2022 and 2023 and 30 June 2024, the number of shares in respect of which
options had been granted and remained outstanding under the Scheme was 6,006,000, 4,354,000, 6,040,000
and 5,680,000 respectively, representing approxim ately 1.25%, 0.77%, 1.07% and 1.01% of the shares of
the Company in issue at that date.
Details of the share options are as follows:
Date of grant
Number of share
options granted Exercisable period Exercise Price
16 December 2020 ....... 2 , 394,000 (Note) 16.12.2021 to 15.2.2022 RMB26.56 per share
2,394,000 (Note) 16.12.2022 to 15.2.2023
3,192,000 (Note) 16.12.2023 to 15.2.2024
7,980,000
8N o v e m b e r2 0 2 1....... 210,000 (Note) 8.11.2022 to 7.11.2023 RMB54.82 per share
210,000 (Note) 8.11.2023 to 7.11.2024
420,000
22 September 2023 ...... 3 , 020,000 (Note) 22.9.2024 to 21.9.2025 RMB11.92 per share
3,020,000 (Note) 22.9.2025 to 21.9.2026
6,040,000
Note: The options are vested upon the fulfilment of certa in performance targets to the grantees including
financial targets of the Group and individua l performance targets for certain periods.
The following table discloses movement of the Com pany’s share options held by eligible directors
and employees for the years ended 31 December 2021, 2022 and 2023 and the six months ended 30 June
2024 :
Date of grant Exercise price
Outstanding at
1 January
2021
Capitalisation
issue during
the year
Granted
during the
year
Forfeited
during the
year
Outstanding at
31 December
2021
16 December 2020 ................... R M B 1 8 . 8 5 5 , 7 0 0 , 0 0 0 2 , 280,000 — (2,394,000) 5,586,000
8 November 2021 . ................... R M B 5 4 . 8 2 — — 420,000 — 420,000
5,700,000 2,280,000 420,000 (2,394,000) 6,006,000
E x e r c i s a b l ea tt h ee n do ft h ey e a r......... — — — — —
W e i g h t e da v e r a g ee x e r c i s ep r i c e( R M B ) ...... 2 6 . 5 6 2 6 . 5 6 5 4 . 8 2 2 6 . 5 6 2 1 . 3 7
Date of grant Exercise price
Outstanding at
1 January
2022
Capitalisation
issue during
the year
Granted
during the
year
Forfeited
during the
year
Outstanding at
31 December
2022
16 December 2020 ................... R M B 1 8 . 6 6 5 , 5 8 6 , 0 0 0 — — ( 1 , 6 5 1 , 7 2 3 ) 3 , 934,277
8 November 2021 . ................... R M B 5 4 . 6 3 4 2 0 , 0 0 0 — — — 420,000
6,006,000 — — (1,651,723) 4,354,277
E x e r c i s a b l ea tt h ee n do ft h ey e a r......... — — — — 1 , 352,677
W e i g h t e da v e r a g ee x e r c i s ep r i c e( R M B ) ...... 2 1 . 3 7 — — 1 8 . 8 5 2 2 . 1 3
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 6–


--- page 619 ---
Date of grant Exercise price
Outstanding at
1 January
2023
Capitalisation
issue during
the year
Granted
during the
year
Forfeited
during the
year
Outstanding at
31 December
2023
16 December 2020 ................... R M B 1 8 . 6 6 3 , 9 3 4 , 2 7 7 — — ( 3 , 9 3 4 , 2 7 7 ) —
8 November 2021 . ................... R M B 5 4 . 6 3 4 2 0 , 0 0 0 — — ( 4 2 0 , 0 0 0 ) —
22 September 2023 ................... R M B 1 1 . 9 2 — — 6 , 040,000 — 6,040,000
4,354,277 — 6,040,000 (4,354,277) 6,040,000
E x e r c i s a b l ea tt h ee n do ft h ey e a r......... 1 , 3 5 3 , 0 0 0 — — — —
W e i g h t e da v e r a g ee x e r c i s ep r i c e( R M B ) ...... 2 2 . 1 3 — 1 1 . 9 2 2 2 . 1 3 1 1 . 9 2
Date of grant Exercise price
Outstanding at
1 January
2024
Capitalisation
issue during
the period
Granted
during the
period
Forfeited
during the
period
Outstanding at
30 June 2024
22 September 2023 ................... R M B 1 1 . 9 2 6 , 0 4 0 , 0 0 0 — — ( 3 6 0 , 0 0 0 ) 5 , 680,000
E x e r c i s a b l ea tt h ee n do ft h ep e r i o d ........ — — — — —
W e i g h t e da v e r a g ee x e r c i s ep r i c e( R M B ) ...... 1 1 . 9 2 — — — 1 1 . 9 2
The fair value of the share options of total R MB61,595,000, RMB8,915,000 and RMB26,379,000
granted during the years ended 31 December 2020, 2021 and 2023, respectively. The inputs into the model
were as follows:
Grant date 16/12/2020 08/11/2021 22/09/2023
S h a r ep r i c eo nt h ed a t eo fg r a n t .................. R M B 2 8 . 4 1 R M B 5 5 . 8 2 R M B 1 2 . 6 5
E x e r c i s ep r i c e ............................... R M B 2 6 . 5 6 R M B 5 4 . 8 2 R M B 1 1 . 9 2
E x p e c t e dv o l a t i l i t y ........................... 5 5 . 0 5 % 6 3 . 4 3 % 5 5 . 2 5 %
C o n t r a c t u a ll i f e ............................. 4y e a r s 3y e a r s 3y e a r s
R i s k - f r e er a t e ............................... 2 . 9 5 % 2 . 5 8 % 2 . 2 9 %
E x p e c t e dd i v i d e n dy i e l d ........................ 1 . 2 0 % 1 . 2 0 % 1 . 2 0 %
Expected volatility was determined by using the histo rical price volatilities of Company’s share price
as at the date of valuation.
The Group had recognised a charge of RMB4,432,000, RMB2,682,000 and RMB4,664,000 in the
staff costs for directors and employees, for the years ended 31 December 2022 and 2023 and the six months
ended 30 June 2024 in relation to share options granted by the Company.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 7–


--- page 620 ---
Equity-settled share award scheme of the Company
On 5 March 2018, the Company’s share award scheme (the ‘‘ Share Award Scheme ’’) was adopted
pursuant to a resolution passed on 19 December 2017 for the primary purpose of providing incentives to
directors and eligible employees of the Company (the ‘‘ Awardees ’’). Under the Share Award Scheme,
3,720,000 shares of the Company were granted to the Awardees and the board of directors of the
Company have right to further grant 210,000 shares of the Company to eligible employees within 12
months from the resolution passed ( collectively referred to as the ‘‘ Awarded Shares ’’). The Awardees are
required to paid RMB7.90 per Awarded Share at the date of grant. Subject to the acceptance of the
Awardees, that the Awardees remain as employees of the Company on the vesting date of the Awarded
Shares and fulfill certain conditions under the Share Award Scheme, the Awarded Shares shall be vested
as below:
Date of grant Vesting period
5 March 2018 ........... 5M a r c h2 0 1 8t o4M a r c h 2022
The following table discloses movements of the Awarded Shares under the Share Award Scheme
during the Track Record Period:
As at 31 December
As at
30 June
2021 2022 2023 2024
’000 ’000 ’000 ’000
Awarded Shares under restriction at 1 January . . . 1,438 — — —
R e l e a s ef r o mr e s t r i c t i o nd u r i n gt h ey e a r........ ( 1 , 4 2 1 ) — — —
F o r f e i t e dd u r i n gt h ey e a r ................... ( 1 7 ) — — —
Awarded Shares under restriction
at 31 December/30 June .................. — — — —
The fair value of the Awarded Shares was based on the average 20 days of transferred price
immediately before date of grant. No other featur e of the Awarded Shares was incorporated into the
m e a s u r e m e n to ft h ef a i rv a l u e s .
The Company recognised all the share award expens es over the service condition period prior to the
Track Record Period and no share award expense was recognised during the years ended 31 December
2021, 2022 and 2023 and the six months ended 30 June 2024, in respect of the Awarded Shares granted.
Date of grant
Number of restricted
shares released Vesting period
05/03/2018 ............................... — 0 5 / 0 3 / 2018 to 04/03/2020
1,468,800 05/03/2020 to 04/03/2021
1,421,280 05/03/2021 to 04/03/2022
2,890,080
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 8–


--- page 621 ---
37. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
The Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets
A tF V T O C I ............................ 9 2 , 4 5 0 9 2 , 4 5 0 1 4 1 , 4 5 0 141,450
A tF V T P L ............................. 4 3 1 3 0 , 7 3 8 5 9 , 5 2 7 841,126
A ta m o r t i s e dc o s t........................ 2 , 094,963 5,277,860 6,050,785 5,062,653
D e r i v a t i v ef i n a n c i a li n s t r u m e n t s .............. — — 9 5 0 5 6
2,187,844 5,401,048 6,252,712 6,045,285
Financial liabilities
A tF V T P L ............................. 345,000 345,000 451,250 853,032
A ta m o r t i s e dc o s t........................ 3 , 069,439 8,178,987 12,458,453 12,049,381
D e r i v a t i v ef i n a n c i a li n s t r u m e n t s .............. — — 4 , 0 6 2 3 , 4 3 4
3,414,439 8,523,987 12,913,765 12,905,847
The Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets
A tF V T O C I ............................ 8 0 , 0 0 0 8 0 , 0 0 0 1 2 9 , 0 0 0 129,000
A tF V T P L ............................. 4 3 1 3 0 , 7 3 8 5 9 , 5 2 7 380,776
A ta m o r t i s e dc o s t........................ 1 , 357,049 1,999,331 3,021,696 2,146,386
1,437,480 2,110,069 3,210,223 2,656,162
Financial liabilities
A ta m o r t i s e dc o s t........................ 1 , 362,442 1,688,610 3,093,038 2,902,773
(b) Financial risk management objectives and policies
The Group’s major financial instruments include financial assets at FVTOCI, financial assets at
FVTPL, trade and bills receivables , deposits and other receivables, restricted and pledged bank deposits,
cash and cash equivalents, trade and bills payables, other payables, bank borrowings and lease liabilities.
Details of the financial instruments are disclosed in respective notes.
The risks associated with these financial instrume nts include market risk (currency risk and interest
rate risk), credit risk and liquidity risk. The policie s on how to mitigate these risks are set out below. The
management of the Group manages and monitors thes e exposures to ensure appropriate measures are
i m p l e m e n t e di nat i m e l ya n de f f e c t i v em a n n e r .
Market risk
Currency risk
The Group and the Company currently does not have a foreign exchange hedging policy.
However, the management of the Group monitors foreign exchange exposure and will consider
hedging significant foreign excha nge exposure should the need arises.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 9 9–


--- page 622 ---
No sensitivity analysis on currency risk is presented as the management of the Group
considered that there would not be a significant ch ange of prevailing exchange rate and the exposure
of currency rate risk of the Group and the Company is insignificant.
Interest rate risk
The Group’s interest rate risk a rises primarily from cash at ba nks, bank borrowings and lease
liabilities. Bank balances and deposits at varia ble rates and fixed rates expose the Group to cash
flow interest rate risk and fair value interest rate risk, respectively. The Group’s bank balances and
deposits are placed with banks and the manageme nt of the Group manages this risk by placing
deposits at various maturities and interest rate terms. The Group is also exposed to fair value
interest rate risk for fixed rate bank borrowings and lease liabilities. The Group’s cash flow interest
rate risk is mainly concentrated on the fluctua tions of the market rates from bank balances. The
Group currently does not hedge its exposure to cash flow and fair value interest rate risk.
No sensitivity analysis is presented since the management of the Group consider the exposure
of cash flow interest rate risk arising from var iable-rate bank balances and term deposits is
insignificant.
Credit risk and impairment assessment
At the end of the reporting period, the Group’ s maximum exposure to credit risk which will
cause a financial loss to the Group due to failure t o discharge an obligation by the counterparties is
arising from the carrying amount of the respectiv e recognised financial assets as stated in the
consolidated statement of financial position.
Credit risk refers to the risk t hat the Group’s counterparties default on their contractual
obligations resulting in financial losses to t he Group. The Group’s credit risk exposures are
primarily attributable to trade and bills receivables, other receivabl es, restricted and pledged bank
deposits and bank balances. The Group does not hold a ny collateral or other credit enhancements to
cover its credit risks associated with its financial assets.
In order to minimise the credit risk, the management of the Group assesses the potential
customer’s credit quality and defines credit limits by customer and the credit limits assigned to each
customer is regularly reviewed by the management of the Group. Follow-up actions are taken by the
Group to recover overdue debts if any. The Group only accepts bills issued or guaranteed by
reputable PRC banks if trade receivables are settled by bills and therefore the management of the
Group considers the credit risk arising from the e ndorsed bills is insignificant. In addition, the
Group reviews the recoverable amount of each i ndividual trade debt at the end of the reporting
period to ensure that adequate impairment losses are made for irrecoverable amounts.
The Group has concentration of credit risk as 49%, 35%, 27% and 32% and 69%, 75%, 74%
and 69% of the total gross trade receivables was due from the Group’s largest customer and the five
largest customers as at 31 December 2021, 2022 and 2023 and 30 June 2024, respectively. There is no
other significant concentr ation risk during the year.
Trade receivables
For trade receivables, the management of the Gr oup assesses the collectability of the trade
receivables regularly and on a case-by-case basis fo r the determination of any loss allowance for the
trade receivables and by taking into account the customers’ financial condition, current
creditworthiness, past settlement history, busi ness relationship with the Group and other factors
such as current market conditions.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 0–


--- page 623 ---
Certain customers of the Group which has a sig nificant outstanding trade receivables and
balances due to the Group with gross carrying amount of RMB6,680,000, RMB10,317,000,
RMB8,344,000 and RMB9,021,000 in aggregate as at 31 December 2021, 2022 and 2023 and 30 June
2024, respectively, was assessed for allowance f or credit losses individually. The management
assessed for the allowance for credit losses for lif etime by estimating default rate taking into account
historical and forward looking information. As at 31 December 2021, 2022 and 2023 and 30 June
2024, allowance for expected credit losses of RMB5,779,000, RMB9,390,000, RMB8,344,000 and
RMB9,021,000, respectively, was made on the trade receivables due from these customers. During
the years ended 31 December 2021 and 2022 and the six months ended 30 June 2024, impairment
losses on trade receivables due from these cus tomers amounted to RMB697,000, RMB3,611,000 and
RMB677,000, respectively and during the year ended 31 December 2023, reversal of impairment
losses on trade receivables due from these customers amounted to RMB1,046,000 are provided and
included in the consolidated profit or loss. In thi s regard, the directors of the Company are in the
opinion that the provision of loss allo wance is sufficient and not excessive.
For the remaining debtors, the Group has applied the simplified approach in IFRS 9 to
measure the loss allowance at lifetime ECL, as the Group’s historical credit loss experience does not
indicate significant different loss patterns for d ifferent customer segments and the allowance for
credit losses based on the past due status is not furt her distinguished between the Group’s customer
bases.
The following table provides information a bout the Group’s exposure to credit risk within
lifetime ECL for trade receivables due from customer s, which are assessed based on provision matrix
and individually assessed as at 31 December 2021, 2022 and 2023 and 30 June 2024, respectively:
As at 31 December 2021 As at 31 December 2022 As at 31 December 2023 As at 30 June 2024
Expected
loss rate
Gross
carrying
amount
Loss
allowance
Net
carrying
amount
Expected
loss rate
Gross
carrying
amount
Loss
allowance
Net
carrying
amount
Expected
loss rate
Gross
carrying
amount
Loss
allowance
Net
carrying
amount
Expected
loss rate
Gross
carrying
amount
Loss
allowance
Net
carrying
amount
% RMB’000 RMB’000 RMB’000 % RMB’000 RMB’000 RMB’000 % RMB’000 RMB’000 RMB’000 % RMB’000 RMB’000 RMB’000
Less than 1 year . . . . . 5.00% 896,216 (44,808) 851,408 5.00% 2,224,215 (111,211) 2,113,004 5.00% 2,275,484 (113,774) 2,161,710 5.00% 1,609,405 (80, 470) 1,528,935
1t o2y e a r s........ 1 0 . 0 0 % 2 , 1 3 3 ( 2 1 3 ) 1 , 9 2 0 1 0 . 0 0 % 7 , 4 4 4 ( 7 4 4 ) 6 , 7 0 0 1 0 . 0 0 % 1 3 , 6 0 5 ( 1 , 3 6 0 ) 1 2 , 2 4 5 1 0 . 0 0 % 2 1 , 9 2 7 ( 2 , 1 9 3 ) 1 9 , 7 3 4
2t o3y e a r s........ 2 0 . 0 0 % 3 , 2 6 0 ( 6 5 2 ) 2 , 6 0 8 2 0 . 0 0 % 3 8 5 ( 7 7 ) 3 0 8 2 0 . 0 0 % 9 0 0 ( 1 8 0 ) 7 2 0 2 0 . 0 0 % 8 5 0 ( 1 7 0 ) 6 8 0
3t o4y e a r s........ 5 0 . 0 0 % 2 , 3 1 8 ( 1 , 1 5 9 ) 1 , 1 5 9 5 0 . 0 0 % 1 2 4 ( 6 2 ) 6 2 5 0 . 0 0 % 3 6 4 ( 1 8 2 ) 1 8 2 5 0 . 0 0 % 3 1 7 ( 1 5 8 ) 1 5 9
4t o5y e a r s........ 5 0 . 0 0 % 2 ( 1 ) 1 5 6 . 0 0 % 9 ( 5 ) 4 5 0 . 0 0 % 1 1 5 ( 5 8 ) 5 7 5 0 . 0 0 % 1 2 6 ( 6 3 ) 6 3
O v e r5y e a r s ........ 100.00% 462 (462) — 100.00% 61 (61) — 100.00% 70 (70) — 100.00% 106 (106) —
904,391 (47,295) 857,096 2,232,238 (112,160) 2,120,078 2,290,538 (115,624) 2,174,914 1,632,731 (83,160) 1,549,571
Individually evaluated
c u s t o m e r s ....... 6 , 6 8 0 ( 5 , 7 7 9 ) 9 0 1 1 0 , 3 1 7 ( 9 , 3 9 0 ) 9 2 7 8 , 3 4 4 ( 8 , 3 4 4 ) — 9 , 0 2 1 ( 9 , 0 2 1 ) —
B a l a n c ea sa t ....... 911,071 (53,074) 857,997 2,242,555 (121,550) 2,121,005 2,298,882 (123,968) 2,174,914 1,641,752 (92,181) 1,549,571
Note: The management of the Group determined the ECL rates for portfolio of trade receivables due from
customers with reference to past-due status of such ba lances by estimating their default rates taking into
account historical information (e.g. historical flow rate of receivables moving into the next aging bucket
in the subsequent period, actual historical lo ss, etc.) and forward-looking information.
The management of the Group reviewed the portfolio of customers contributing the trade receivables
balances for the respective past-due time band throughout the Track Record Period and noted that the
majority of the balances of the respective pas t-due time band were due from similar portfolio of
customers. The management of the Group further asse ssed these customers’ financial condition, current
creditworthiness, past settlement h istory, business relationship with the Group and other factors such as
current market conditions throughout the Track Reco rd Period, and considered that the credit risk for
the same portfolio of customers remains approxim ately the same throughout the Track Record Period.
Accordingly, the same ECL rates were adopted for t he same past-due time band throughout the Track
Record Period.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 1–


--- page 624 ---
Movements in the allowance for expected credit losses in respect of the trade receivables
during the track record period are as follows:
Lifetime ECL
(Not credit
impaired)
Lifetime ECL
(Credit
impaired) Total
RMB’000 RMB’000 RMB’000
At 1 January 2021 ............................ 1 3 , 6 8 5 5 , 0 8 2 1 8 , 7 6 7
A d d i t i o nf r o ma c q u i s i t i o no fs u b s i d i a r i e s ........... 1 5 , 7 2 9 — 1 5 , 7 2 9
I m p a i r m e n tl o s sr e c o g n i s e d..................... 1 7 , 8 8 1 6 9 7 1 8 , 5 7 8
At 31 December 2021 and 1 January 2022 ........... 4 7 , 2 9 5 5 , 7 7 9 5 3 , 0 7 4
I m p a i r m e n tl o s sr e c o g n i s e d..................... 6 4 , 8 8 7 3 , 6 1 1 6 8 , 4 9 8
W r i t t e n - o f f ................................. ( 2 2 ) — ( 2 2 )
At 31 December 2022 and 1 January 2023 ........... 1 1 2 , 1 6 0 9 , 3 9 0 121,550
I m p a i r m e n tl o s sr e c o g n i s e d / ( r e v e r s e d ) .............. 5 , 2 3 4 ( 1 , 0 4 6 ) 4 , 1 8 8
W r i t t e n - o f f ................................. ( 1 , 7 7 0 ) — ( 1 , 7 7 0 )
At 31 December 2023 and 1 January 2024 ........... 1 1 5 , 6 2 4 8 , 3 4 4 123,968
I m p a i r m e n tl o s s( r e v e r s e d ) / r e c o g n i s e d .............. ( 3 2 , 4 6 4 ) 6 7 7 ( 3 1 , 7 8 7 )
At 30 June 2024 ............................. 8 3 , 1 6 0 9 , 0 2 1 9 2 , 1 8 1
Other receivables
The Group measures the loss allowance equal to 12-month ECL of other receivables. For
those balances expected to have significant increas e in credit risk since initial recognition, the Group
apply lifetime ECL based on aging for classes wi th different credit risk characteristics and
exposures. Management makes periodic collective a ssessments as well as individual assessment on
the recoverability of other receivables based on his torical settlement records and past experience.
As at 31 December 2021, 2022 and 2023 and 30 June 2024, the Group has exposed to credit
risk on other receivables. As part of the Group’s credit risk management, the Group assessed the
expected credit losses for other receivables of RMB3,700,000, RMB2,116,000, RMB15,028,000 and
reversal of impairment losses of RMB725,000 were recognised in profit or loss for the years ended 31
December 2021, 2022 and 2023 and the six months ended 30 June 2024, respectively. The
management of the Group considers the probability of default based on the financial position of the
debtors and the economic environment of the debt ors operate. The credit risk on the remaining
balances are insignificant as th e probability of default is consid ered minimal after assessing the
counterparties’ financial ba ckground and creditability.
Movement in the loss allowance account in respect of other receivables during the Track
Record Period is as follows:
RMB’000
At 1 January 2021 ..................................................... 9 1 1
I m p a i r m e n tl o s sr e c o g n i s e d.............................................. 3 , 7 0 0
W r i t t e n - o f f .......................................................... ( 2 , 5 0 9 )
At 31 December 2021 and 1 January 2022 .................................... 2 , 1 0 2
I m p a i r m e n tl o s sr e c o g n i s e d.............................................. 2 , 1 1 6
At 31 December 2022 and 1 January 2023 .................................... 4 , 2 1 8
I m p a i r m e n tl o s sr e c o g n i s e d.............................................. 1 5 , 0 2 8
At 31 December 2023 and 1 January 2024 .................................... 1 9 , 2 4 6
R e v e r s a lo fi m p a i r m e n tl o s sr e c o g n i s e d ...................................... ( 7 2 5 )
At 30 June 2024 ...................................................... 1 8 , 5 2 1
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 2–


--- page 625 ---
Bills receivable
As at 31 December 2021, 2022 and 2023 and 30 June 2024, the Group has exposed to credit
risk on bills receivable. As part of the Group’s credit risk management, the Group assessed the
expected credit losses for bills receivable o f RMB856,000 and RMB2,054,000 were recognised in
profit or loss for the year ended 31 December 2021 and the six months ended 30 June 2024, and
reversal of RMB252,000 and RMB250,000 were recognised in profit or loss for the years ended 31
December 2022 and 2023, respectively. The managem ent of the Group considers the historical data,
current and forecast of the economic environment of the debtors operate. The credit risk on the bills
receivable are insignificant as the probability of d efault is considered minimal after assessing the
counterparties’ financial ba ckground and creditability.
Movement in the loss allowance account in respect of bills receivable during the Track Record
Period is as follows:
RMB’000
At 1 January 2021 ..................................................... —
I m p a i r m e n tl o s sr e c o g n i s e d.............................................. 8 5 6
At 31 December 2021 and 1 January 2022 .................................... 8 5 6
R e v e r s a lo fi m p a i r m e n tl o s sr e c o g n i s e d ...................................... ( 2 5 2 )
At 31 December 2022 and 1 January 2023 .................................... 6 0 4
R e v e r s a lo fi m p a i r m e n tl o s sr e c o g n i s e d ...................................... ( 2 5 0 )
At 31 December 2023 and 1 January 2024 .................................... 3 5 4
I m p a i r m e n tl o s sr e c o g n i s e d.............................................. 2 , 0 5 4
At 30 June 2024 ...................................................... 2 , 4 0 8
Pledged bank deposits and bank balances
Credit risk on pledged bank deposits and bank ba lances is limited because the counterparties
are reputable banks with high credit ratings assigne d by international credit agencies or state-owned
banks in the PRC.
Transferred financial assets that are derecognised in their entirety
At 31 December 2021, 2022 and 2023 and 30 June 2024, the Group, endorsed certain bills
receivables accepted by banks in the PRC (the ‘‘ derecognised bills ’’) to certain of its suppliers in
order to settle the trade payables due to such s uppliers with a carrying amount in aggregate of
RMB1,936,359,000, RMB10,837,018,000, RMB3, 013,822,000 and RMB3,836,228,000, respectively.
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 Instrument s in the PRC, the holders of the derecognised bills
have a right of recourse against the Group if the PRC banks default (the ‘‘ continuing involvement ’’).
In the opinion of the directors, the Group has transfe rred substantially all ri sks and rewards relating
to the derecognised bills. Accordingly, it ha s derecognised the full carrying amounts of the
derecognised bills and the associated trade p ayables. The maximum exposure to loss from the
Group’s continuing involvement in the derecogn ised bills and the undiscounted cash flows to
repurchase these derecognised bills is equal t o their carrying amounts. In the opinion of the
directors, the fair values of the Group’s continui ng involvement in the derecognised bills are not
significant.
During the years ended 31 December 2021, 2022 and 2023 and the six months ended 30 June
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 conti nuing involvement, both during the Track Record
Period or cumulatively. The endorsement has been made evenly throughout the year.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 3–


--- page 626 ---
Liquidity risk
In the management of the liquidity risk, the Gr oup monitors and maintains a level of cash and
cash equivalents deemed adequate by the manag ement to finance the Group’s operations and
mitigate the effects of fluctuations in cash fl ows. The management of the Group monitors the
utilisation of bank borrowings and ensu res compliance with loan covenants.
The following table details the Group’s and th e Company’s remaining contractual maturity
for its financial liabilities, derivative financial instruments and lease liab ilities. The table has been
drawn up based on the undiscounted cash flows of finan cial liabilities and leas e liabilities based on
the earliest date on which the Group can be required to pay.
Weighted
average
interest rate
On demand
and/or
less than
1y e a r 1t o3y e a r s
More than
3y e a r s
Total
contractual
undiscounted
cash flow
Total
carrying
amount
% RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 31 December 2021
Trade and other payables . . . . . . . . . — 919,653 — — 919,653 919,653
Bank and other borrowings . . . . . . . . 3.87% 1,129,765 513,273 639,484 2,282,522 2,148,604
L e a s el i a b i l i t i e s ................. 4 . 5 3 % 1 6 8 , 4 8 4 1 9 5 , 4 7 2 — 3 6 3 , 9 5 6 3 4 6 , 1 8 2
2,217,902 708,745 639,484 3,566,131 3,414,439
At 31 December 2022
Trade and other payables . . . . . . . . . — 2,240,148 — — 2,240,148 2,240,148
Bank and other borrowings . . . . . . . . 2.57% 4,107,091 782,137 1,061,989 5,951,217 5,625,846
Lease liabilities. . . . . . . . . . . . . . . . . 4.18% 307,120 295,403 85,824 688,347 657,993
6,654,359 1,077,540 1,147,813 8,879,712 8,523,987
At 31 December 2023
Trade and other payables . . . . . . . . . — 2,892,838 — — 2,892,838 2,892,838
Bank and other borrowings . . . . . . . . 2.89% 7,470,248 305,104 1,222,259 8,997,611 8,926,695
Lease liabilities. . . . . . . . . . . . . . . . . 4.11% 318,131 131,301 826,195 1,275,627 1,090,170
10,681,217 436,405 2,048,454 13,166,076 12,909,703
Derivative financial instruments
— gross settlement
F u t u r ec o n t r a c t ................ — 3 3 , 8 7 9 — — 3 3 , 8 7 9 4 , 0 6 2
At 30 June 2024
Trade and other payables . . . . . . . . . — 2,424,899 — — 2,424,899 2,424,899
Bank and other borrowings . . . . . . . . 2.79% 6,234,591 1,586,314 2,081,902 9,902,807 9,477,553
Lease liabilities. . . . . . . . . . . . . . . . . 4.06% 248,270 200,608 846,078 1,294,956 1,114,394
8,907,760 1,786,922 2,927,980 13,622,662 13,016,846
Derivative financial instruments
— gross settlement
F u t u r ec o n t r a c t ................ — 3 8 , 8 1 4 — — 3 8 , 8 1 4 3 , 4 3 4
(c) Capital management
The Group manages its capital to ensure that ent ities in the Group will be able to continue as a
going concern while maximising the return to share holders through the optimisation of the debt and
equity balance. The Group’s overall strategy re mains unchanged during the Track Record Period.
The capital structure of the Group consists of ne t debt, which includes the bank borrowings and
lease liabilities disclosed in Notes 28 and 29 resp ectively, net of cash and ca sh equivalents and equity
attributable to owners of the Company, comprising i ssued share capital, retained profits and other
reserves.
The directors of the Company review the capital str ucture on a regular basi s and considers the cost
of capital and the risks associated with each class of c apital. Based on recommendations of the directors of
the Company, the Group will balance its overall capital structure through the matu rity of lease liabilities
as well as new share issues and increase of banki ng facilities or redemption of existing debt.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 4–


--- page 627 ---
(d) Fair value measurements of financial instruments
The management of the Group considers that the ca rrying amounts of financial assets and financial
liabilities recorded at amortised cost in the Historical Financial Information appr oximate their fair values
at the end of each reporting period base d on discounted cash flow analysis.
Some of the Group’s financial assets and financial l iability are measured at fair value at the end of
each reporting period. The following table gives info rmation about how the fair values of these financial
assets and financial liability are determined (in parti cular, the valuation technique(s) and inputs used), as
well as the level of the fair value hierarchy into which the fair value measurements are categorised (Levels
1 to 3) based on the degree to which the inputs to the fair value measurements is observable.
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
At 31 December 2021
Asset
F i n a n c i a la s s e t sa tF V T O C I ......... — — 9 2 , 4 5 0 9 2 , 4 5 0
F i n a n c i a la s s e t sa tF V T P L .......... 4 3 1 — — 4 3 1
Total assets .................... 4 3 1 — 9 2 , 4 5 0 9 2 , 8 8 1
Liability
O t h e rb o r r o w i n ga tF V T P L ......... — — 345,000 345,000
At 31 December 2022
Asset
F i n a n c i a la s s e t sa tF V T O C I ......... — — 9 2 , 4 5 0 9 2 , 4 5 0
F i n a n c i a la s s e t sa tF V T P L .......... 7 3 8 — 3 0 , 0 0 0 3 0 , 7 3 8
Total assets .................... 7 3 8 — 122,450 123,188
Liability
O t h e rb o r r o w i n ga tF V T P L ......... — — 345,000 345,000
At 31 December 2023
Assets
F i n a n c i a la s s e t sa tF V T O C I ......... — — 141,450 141,450
F i n a n c i a la s s e t sa tF V T P L .......... 5 2 2 — 5 9 , 0 0 5 5 9 , 5 2 7
D e r i v a t i v ef i n a n c i a li n s t r u m e n t s ...... 9 5 0 — — 9 5 0
Total assets .................... 1 , 4 7 2 — 200,455 201,927
Liabilities
O t h e rb o r r o w i n ga tF V T P L ......... — — 451,250 451,250
D e r i v a t i v ef i n a n c i a li n s t r u m e n t s ...... 4 , 0 6 2 — — 4 , 0 6 2
Total liabilities .................. 4 , 0 6 2 — 451,250 455,312
At 30 June 2024
Assets
F i n a n c i a la s s e t sa tF V T O C I ......... — — 141,450 141,450
F i n a n c i a la s s e t sa tF V T P L .......... 2 4 7 — 840,879 841,126
D e r i v a t i v ef i n a n c i a li n s t r u m e n t s ...... 5 6 — — 5 6
Total assets .................... 3 0 3 — 982,329 982,632
Liabilities
O t h e rb o r r o w i n ga tF V T P L ......... — — 853,032 853,032
D e r i v a t i v ef i n a n c i a li n s t r u m e n t s ...... 3 , 4 3 4 — — 3 , 4 3 4
Total liabilities .................. 3 , 4 3 4 — 853,032 856,466
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 5–


--- page 628 ---
The following table presents the changes in level 3 instruments of financial assets at FVTOCI and
FVTPL as at 31 December 2021, 2022 and 2023 and 30 June 2024.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at FVTOCI (Note (i))
A tt h eb e g i n n i n go ft h ey e a r / p e r i o d ........... 8 0 , 0 0 0 9 2 , 4 5 0 9 2 , 4 5 0 141,450
A c q u i s i t i o no fs u b s i d i a r y( N o t e3 5 ) ........... 1 2 , 4 5 0 — — —
A d d i t i o n s .............................. — — 4 9 , 0 0 0 —
A tt h ee n do ft h ey e a r / p e r i o d ................ 9 2 , 4 5 0 9 2 , 4 5 0 1 4 1 , 4 5 0 141,450
Financial assets at FVTPL (Note (i))
A tt h eb e g i n n i n go ft h ey e a r / p e r i o d ........... 8 0 , 0 0 0 — 3 0 , 0 0 0 5 9 , 0 0 5
A d d i t i o n s .............................. 2 , 026,014 5,207,000 11,703,100 5,614,000
D i s p o s a l s .............................. ( 2 , 115,075) (5,194,370) (11,721,211) (4,826,862)
Gains/(losses) from changes in fair value of financial
a s s e t sa tF V T P L....................... 9 , 0 6 1 1 7 , 3 7 0 4 7 , 1 1 6 ( 5 , 2 6 4 )
A tt h ee n do ft h ey e a r / p e r i o d ................ — 3 0 , 0 0 0 5 9 , 0 0 5 840,879
The following table presents the changes in level 3 instruments of other borrowing at FVTPL as at
31 December 2021, 2022 and 2023 and 30 June 2024.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Other borrowing at FTVPL (Note (ii))
A tt h eb e g i n n i n go ft h ey e a r / p e r i o d ........... — 3 4 5 , 0 0 0 3 4 5 , 0 0 0 451,250
A d d i t i o n s .............................. 345,000 — — 385,427
Loss from changes in fair value of other borrowing — — 106,250 16,355
A tt h ee n do ft h ey e a r / p e r i o d ................ 345,000 345,000 451,250 853,032
Notes:
(i) The fair values of unlisted equity instrument s at FVTOCI and FVTPL as at 31 December 2021, 2022 and
2023 and 30 June 2024 have been arrived with reference to the valuation carried out on the dates by Jones
Lang LaSalle (Beijing) Consultants Ltd., an indepe ndent qualified professional valuer not connected to
the Group.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 6–


--- page 629 ---
RMB’000
Valuation
techniques
Key
unobservable
input(s)
Relationship of unobservable
inputs to fair values
Discount for
lack of
marketability
(‘‘DLOM’’)
Financial assets
Unlisted equity instruments at
FVTOCI
— Anhui Tomorrow New Energy
Technology Co., Ltd.
At 31 December 2021 . . . . . . . . . . . 80,000 Market approach 15.8% 5% increase/decrease in
DLOM would result in
decrease/increase in fair
value
A t3 1D e c e m b e r2 0 2 2 ........... 8 0 , 0 0 0 A d j u s t e dr e c e n t
transaction
N/A N/A
A t3 1D e c e m b e r2 0 2 3 ........... 8 0 , 0 0 0 A d j u s t e dr e c e n t
transaction
N/A N/A
A t3 0J u n e2 0 2 4............... 8 0 , 0 0 0 A d j u s t e dr e c e n t
transaction
N/A N/A
— Huanggang Linli New Energy
Technology Co. Ltd.
At 31 December 2021 . . . . . . . . . . . 12,450 Market approach 15.8% 5% increase/decrease in
DLOM would result in
decrease/increase in fair
value
At 31 December 2022 . . . . . . . . . . . 12,450 Market approach 15.7% 5% increase/decrease in
DLOM would result in
decrease/increase in fair
value
At 31 December 2023 . . . . . . . . . . . 12,450 Market approach 15.7% 5% increase/decrease in
DLOM would result in
decrease/increase in fair
value
A t3 0J u n e2 0 2 4............... 1 2 , 4 5 0 A d j u s t e dr e c e n t
transaction
N/A N/A
— Yiwei Automobile Technology
Co., Ltd
At 31 December 2023 . . . . . . . . . . . 49,000 Market approach 15.7% 5% increase/decrease in
DLOM would result in
decrease/increase in fair
value
A t3 0J u n e2 0 2 4............... 4 9 , 0 0 0 M a r k e ta p p r o a c h 1 5 . 7 % 5 %i n c r e a s e / d e c r e a s ei n
DLOM would result in
decrease/increase in fair
value
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 7–


--- page 630 ---
RMB’000
Valuation
techniques
Key
unobservable
input(s)
Relationship of unobservable
inputs to fair values
Discount for
lack of
marketability
(‘‘DLOM’’)
Unlisted fund investment at FVTPL
— 高騰海外權益5號私募證券投資基金
At 31 December 2023 . . . . . . . . . . . 59,005 Adjusted net asset N/A An increase/decrease in the
fair value of the assets of
the investee would result
in an increase/decrease in
the fair value
measurement of the
unlisted fund investment
An increase/decrease in the
fair value of liability of
the investee would result
in a decrease/increase in
the fair value
measurement of the
unlisted fund investment
A t3 0J u n e2 0 2 4............... 4 0 , 1 2 9 A d j u s t e dn e ta s s e t N / A A ni n c r e a s e / d e c r e a s ei nt h e
fair value of the assets of
the investee would result
in an increase/decrease in
the fair value
measurement of the
unlisted fund investment
An increase/decrease in the
fair value of liability of
the investee would result
in a decrease/increase in
the fair value
measurement of the
unlisted fund investment
As at 31 December 2021, 2022 and 2023 and 30 June 2024, the fair value of financial assets at FVTPL
amounting to RMB431,000,000, RMB 30,738,000, RMB59,527,000 and RM B800,750,000, respectively, is
determined by the spot rate quoted by the issuer of t he financial products. These wealth management
products are structured fixed deposits with financial institutions with maturiti es within one year. Details
are disclosed in Note 21(c).
If the fair values of the financial assets at FVTP L held by the Group had been 5% higher/lower, the
profit/(loss) before taxation for the years ended 31 December 2021, 2022 and 2023 and the six months
ended 30 June 2024 would have been approximately RMB22,000,000, RMB1,537,000, RMB2,976,000 and
RMB40,038,000, higher/lower respectively.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 8–


--- page 631 ---
(ii) The fair values of other borrowings at FVTPL as at 31 December 2021, 2022 and 2023 and 30 June 2024
have been arrived at on the basis of a valuation carr ied out on the dates by Jones Lang LaSalle (Beijing)
Consultants Ltd., an independent qualified pr ofessional valuer not connected to the Group.
RMB’000
Valuation
techniques
Key
unobservable
input(s)
Relationship of unobservable
inputs to fair values
Weighted
average cost of
capital
(‘‘WACC’’)
Financial liability
Other borrowing at FVTPL
At 31 December 2021 . . . . . . . . . . . 345,000 Binomial model 12.78% 5% increase/decrease in
WACC would result in
decrease/increase in fair
value
At 31 December 2022 . . . . . . . . . . . 345,000 Binomial model 11.52% 5% increase/decrease in
WACC would result in
decrease/increase in fair
value
At 31 December 2023 . . . . . . . . . . . 451,250 Binomial model 11.13% 5% increase/decrease in
WACC would result in
decrease/increase in fair
value
A t3 0J u n e2 0 2 4............... 8 5 3 , 0 3 2 B i n o m i a lm o d e l 1 0 . 5 9 % 5 %i n c r e a s e / d e c r e a s ei n
WACC would result in
decrease/increase in fair
value
If the fair values of the financial liability at FV TPL held by the Group had been 5% higher/lower, the
profit/(loss) before taxation for the years ended 31 December 2021, 2022 and 2023 and the six months
ended 30 June 2024 would have been approximately RMB17,250,000, RMB17,250,000, RMB22,563,000
and RMB42,652,000, higher/lower respectively.
There were no transfers between level 1, 2 and 3 of f air value hierarchy classifications during the
years ended 31 December 2021, 2022 and 2023 and the six months ended 30 June 2024.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 0 9–


--- page 632 ---
38. RECONCILIATION OF LIABILITIES GEN ERATED FROM FINANCING ACTIVITIES
The table below details changes in the Group’s liabilit ies from financing activities, including both cash
and non-cash changes. Liabilities arisi ng from financing activities are liab ilities for which cash flows were, or
future cash flows will be, cl assified in the Group’s consolidated sta tements of cash flows as cash flows from
financing activities:
Bank and
other
borrowings
Lease
liabilities
RMB’000 RMB’000
(Note 28) (Note 29)
At 1 January 2021 ........................................ 427,613 —
N e tf i n a n c i n gc a s hf l o w s................................... 1 , 333,399 (13,571)
Non-cash transactions
A c q u i s i t i o no fs u b s i d i a r i e s .................................. — 5 6 , 1 0 9
F i n a n c ec o s tr e c o g n i s e d .................................... 4 2 , 5 9 2 3 , 6 4 4
N e wl e a s e se n t e r e d....................................... — 300,000
Recognition of financial liability arising from put option held by
non-controlling interests (Note 28(b)) . ....................... 345,000 —
At 31 December 2021 and 1 January 2022 ....................... 2 , 148,604 346,182
N e tf i n a n c i n gc a s hf l o w s................................... 3 , 356,251 (235,758)
Non-cash transactions
F i n a n c ec o s tr e c o g n i s e d .................................... 118,406 21,316
N e wl e a s e se n t e r e d....................................... — 526,253
P u r c h a s eo fp r o p e r t y ,p l a n ta n de q u i p m e n t...................... 2 , 5 8 5 —
At 31 December 2022 and 1 January 2023 ....................... 5 , 625,846 657,993
N e tf i n a n c i n gc a s hf l o w s................................... 2 , 972,335 (407,539)
F i n a n c ec o s tr e c o g n i s e d .................................... 191,345 50,761
Loss from changes in fair value of other borrowing at fair value through
p r o f i to rl o s s .......................................... 106,250 —
N e wl e a s e se n t e r e d....................................... — 788,955
P u r c h a s eo fp r o p e r t y ,p l a n ta n de q u i p m e n t...................... 3 0 , 9 1 9 —
At 31 December 2023 and 1 January 2024 ....................... 8 , 926,695 1,090,170
N e tf i n a n c i n gc a s hf l o w s................................... 3 6 , 0 9 0 ( 180,111)
F i n a n c ec o s tr e c o g n i s e d .................................... 9 7 , 0 4 4 2 3 , 5 4 9
Loss from changes in fair value of other borrowing at fair value through
p r o f i to rl o s s .......................................... 1 6 , 3 5 5 —
Recognition of financial liability arising from put option held by
non-controlling interests (Note 28(c)) . ....................... 385,427 —
N e wl e a s e se n t e r e d....................................... — 1 8 , 4 3 3
E a r l yt e r m i n a t i o no fl e a s e s ................................. — ( 7 , 6 4 7 )
P u r c h a s eo fp r o p e r t y ,p l a n ta n de q u i p m e n t...................... 1 5 , 9 4 2 170,000
At 30 June 2024 ......................................... 9 , 477,553 1,114,394
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 1 0–


--- page 633 ---
39. RELATED PARTY TRANSACTIONS
The following significant transac tions were carried out between the Group and its related parties during
the Track Record Period. In the opinion of the directors of the Company, the related party transactions were
carried out at terms negotiated between th e Group and the respective related parties.
(a) Name and relationship with related parties
The following companies are related parties of the Group that had balances and/or transactions
with the Group during the Track Record Period.
Name of related parties Relationship with the Group
泰州市暢能瑞商貿有限公司
Taizhoushi Changnengrui Trading Co., Ltd.
(‘‘Taizhoushi Changnengrui ’ ’ ) ...........
The entity is controlled or jointly controlled by the
Company’s main investors, key managers, or family
members who are closely related.
南京威樂佳潤滑油有限公司
Nanjing Weilejia Lubricating Oil Co., Ltd.
(‘‘Nanjing Weilejia ’ ’ ) ................
The entity is controlled or jointly controlled by the
Company’s main investors, key managers, or family
members who are closely related.
南通聚途商貿有限公司
Nantong Jutu Trading Co., Ltd.
(‘‘Nantong Jutu ’ ’ ) ...................
The entity is controlled or jointly controlled by the
Company’s main investors, key managers, or family
members who are closely related.
泰州市恒安商貿有限公司
Taizhoushi Hengan Trading Co., Ltd.
(‘‘Taizhoushi Hengan ’ ’ ) ...............
The entity is controlled or jointly controlled by the
Company’s main investors, key managers, or family
members who are closely related.
南京瑞福特化工有限公司
Nanjing Ruifute Chemical Co., Ltd.
(‘‘Nanjing Ruifute ’ ’ ).................
The entity is controlled or jointly controlled by the
Company’s main investors, key managers, or family
members who are closely related.
湖北豐鋰新能
源科技有限公司
Huibei Fengli New Energy Technology
Co., Ltd. (‘‘Hubei Fengli ’ ’ )............
Associate of the Company
(b) Significant related party transactions
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue from sales of products and
provision of services
Nanjing Weilejia . . . . . . . . . . . . . . . . 5,300 5,762 6,947 3,564 3,337
Taizhoushi Changnengrui . . . . . . . . . . 14,331 8,695 9,051 5,517 6,501
N a n j i n gR u i f u t e ................. 2 , 3 1 2 8 — — —
Taizhoushi Hengan . . . . . . . . . . . . . . 4,020 3,731 4,547 2,518 3,080
N a n t o n gJ u t u .................. 1 , 3 3 5 1 , 4 6 8 1 , 5 8 6 9 7 7 7 9 0
27,298 19,664 22,131 12,576 13,708
Purchase
Hubei Fengli . . . . . . . . . . . . . . . . . . . — 197,875 158,935 81,973 80,256
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 1 1–


--- page 634 ---
(c) Significant balances with related parties
As disclosed in the consolidated statements of financial position, the Group had outstanding
balances with related parties at 31 December 2021, 2022 and 2023 and 30 June 2024 as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade and other receivables (Note (i))
T a i z h o u s h iC h a n g n e n g r u i .................. 1 5 0 3 1 9 1 9 3 5
N a n j i n gR u i f u t e......................... — 1 — 1
H u b e iF e n g l i ........................... — — 4 4 9 1
N a n t o n gJ u t u ........................... — — — 4 9
150 320 45 1,076
Trade and other payable (Note (i))
H u b e iF e n g l i ........................... — 5 4 , 2 5 3 2 8 , 7 1 5 4 5 , 0 3 4
N a n j i n gW e i l e j i a ......................... 2 5 1 1 1
T a i z h o u s h iH e n g a n ....................... 1 0 4 1 4 1 0
35 54,258 28,730 45,045
Contract liabilities (Note (i))
N a n j i n gR u i f u t e......................... 4 4 4 4
N a n j i n gW e i l e j i a ......................... 5 6 6 1 4 7 1
T a i z h o u s h iC h a n g n e n g r u i .................. 8 5 1 9 3 6 6 3 1 9
T a i z h o u s h iH e n g a n ....................... 6 2 4 2 5 7 2 7 3
N a n t o n gJ u t u ........................... 1 0 0 9 3 — 1
741 939 411 398
Notes:
(i) The balances with related parties and an associa te are trade in nature, uns ecured, interest-free and
repayable on demand.
(ii) As disclosed in Note 28 to the Historical Financia l Information, Mr. Shi and Mrs. Shi provided personal
guarantees to banks in respect of the Group’s and the Company’s bank borrowings as at 31 December
2021, 2022 and 2023 and 30 June 2024. Those personal guarantees would be released upon the full
settlement of such bank borrowings according to the repayment terms.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 1 2–


--- page 635 ---
(d) Key management personnel compensations
The compensations paid or payable to key manage ment personnel (including chief executive officer
and directors of the Company and other senior execu tives of the Group) for employee services are show
below:
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Wages, salaries and bonuses . . . . . . . . 17,783 12,800 8,318 3,803 6,451
Retirement benefit expense . . . . . . . . . 427 301 552 372 294
Social security costs, housing benefits
and other employee benefits . . . . . . . 410 631 582 96 296
Share-based compensation . . . . . . . . . . — 1,588 945 349 2,543
18,620 15,320 10,397 4,620 9,584
40. PARTLY-OWNED SUBSIDIARIES WITH MA TERIAL NON-CONTROLLING INTERESTS
The table below shows details of non-wholly-owned s ubsidiaries of the Group that have material NCI:
Name of entities
Proportion of ownership interests and
voting rights held by NCI Profit/(los s) allocated to NCI Accumulated NCI
At 31 December
At
30 June At 31 December
At
30 June At 31 December
At
30 June
2021 2022 2023 2024 2021 2022 2023 2024 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Jiangsu Ruilifeng. . . . . 30% 30% 30% 30% 36,608 17,303 19,224 10,097 212,998 219,885 233,397 239,073
Changzhou Liyuan . . . 33.04% 20.40% 20.40% 27.13% 48,706 260,214 (296,219) (68,637) 308,137 642,010 345,430 476,374
Summarised financial information in respect of Ji angsu Ruilifeng and Changzhou Liyuan are set out
below. The summarised financial information below represents amounts before i ntragroup eliminations.
Jiangsu Ruilifeng New Energy Technology Co., Ltd.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
C u r r e n ta s s e t s .......................... 264,259 220,038 233,790 217,767
N o n - c u r r e n ta s s e t s ....................... 129,292 244,213 267,623 258,133
C u r r e n tl i a b i l i t i e s........................ ( 2 8 , 5 6 7 ) ( 8 8 , 5 8 5 ) ( 1 0 3 , 8 7 3 ) ( 6 5 , 5 1 2 )
N o n - c u r r e n tl i a b i l i t i e s ..................... ( 1 , 7 4 6 ) ( 1 , 1 4 2 ) ( 9 5 3 ) ( 1 , 6 2 9 )
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 1 3–


--- page 636 ---
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue . . . . . . . . . . . . . . . . . . . . . . 349,338 299,608 371,965 171,865 177,235
Total expense . . . . . . . . . . . . . . . . . . (293,252) (270,905) (340,096) (160,331) (160,893)
Profit and total comprehensive income
for the year/period . . . . . . . . . . . . . 56,086 28,703 31,869 11,534 16,342
Net cash flows from/(used in) operating
activities . . . . . . . . . . . . . . . . . . . . 8,633 (5,498) 29,095 5,698 47,098
Net cash flows used in investing activities (26,259) (75,735) (10,292) (7,219) (15,388)
Net cash flows (used in)/from financing
activities . . . . . . . . . . . . . . . . . . . . (20,168) 32,113 (21,714) (10,774) (34,818)
Net decrease in cash and cash equivalents (37,794) (49,120) (2,911) (12,295) (3,108)
Changzhou Liyuan
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
C u r r e n ta s s e t s .......................... 1 , 892,533 7,030,132 4,411,544 4,220,238
N o n - c u r r e n ta s s e t s ....................... 1 , 133,439 3,067,863 4,662,277 4,735,347
C u r r e n tl i a b i l i t i e s........................ ( 1 , 461,320) (5,756,982) (5,944,551) (5,293,544)
N o n - c u r r e n tl i a b i l i t i e s ..................... ( 632,033) (1,193,905) (1,435,986) (1,904,951)
Year ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue . . . . . . . . . . . . . . . . . . . . . . 1,894,931 12,286,569 6,808,275 2,858,267 2,658,749
Total expense . . . . . . . . . . . . . . . . . . (1,669,812) (11,294,544) (8,260,327) (3,660,831) (2,980,943)
Profit/(loss) for the year/period . . . . . . 225,119 992,025 (1,452,052) (802,564) (322,194)
Total comprehensive income/(expense)
for the year/period . . . . . . . . . . . . . 225,119 992,025 (1,453,937) (802,564) (324,119)
Net cash flows (used in)/from operating
activities . . . . . . . . . . . . . . . . . . . . (603,447) (3,284,208) 987,747 (923,377) (287,064)
Net cash flows used in investing activities (1,066,068) (425,897) (752,020) (266,699) (397,020)
Net cash flows from/(used in) financing
activities . . . . . . . . . . . . . . . . . . . . 1,756,529 4,002,300 (297,605) 1,413,376 524,967
Net increase/(decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . 87,014 292,195 (61,878) 223,300 (159,117)
41. TRANSACTIONS WITH NON-CONTROLLING INTERESTS
Changzhou Liyuan
(a) Deemed partial disposal of interests in subsidiaries without loss of control
During the year ended 31 December 2021, Changzhou Liyuan, a subsidiary of the Company, entered
into a capital contribution agreement with the I nvestors A, the Investors A agreed to contribute
RMB345,000,000 and obtained 20% equity interests o f Changzhou Liyuan. After that, the Group effective
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 1 4–


--- page 637 ---
equity interests in Chanzhou Liyuan were dilu ted from 88.00% to 69.96%. As a result, the Group
recognised an increase in equi ty attributable to owners of the Company of approximately
RMB117,070,000 and an increase i n non-controlling interests of a pproximately RMB 227,930,000.
2021
RMB’000
Initial measurement amount of non-controll ing interest recognised upon completion of
c a p i t a lc o n t r i b u t i o n .................................................. ( 227,930)
Capital contributed by non-controlling interest ................................ 345,000
A d j u s t m e n tt oc o n s o l i d a t e de q u i t yr e c o g n i s e d................................. 117,070
During the year ended 31 December 2023, the Company has entered into share transfer agreement
with Changzhou Liyuan, a partially owned subsidia ry of the Company, the Company agreed to sell 100%
equity interest of LBM NEW ENERGY (AP) PTE. LTD., a wholly owned subsidiary of the Company, for
the consideration of RMB2,346,000. After that, t he Group’s effective equity interest in LBM NEW
ENERGY (AP) PTE. LTD. were dil uted from 100% to 79.60%. As a r esult, the Group recognise
increased in equity attribute to owners of the Company of RMB119,000, and decreased in NCI in
RMB119,000.
2023
RMB’000
Carrying amount of equity obtaine d by non-controlling interest .................... ( 1 1 9 )
Capital contributed by non-controlling interest ................................ —
Excess of consideration received recognised within equity . ........................ ( 1 1 9 )
During the six months ended 30 June 2024, Changzhou Liyuan, a subsidiary of the Company,
entered into capital contribution agreements with the Investors B, the Investors B agreed to contribute
RMB385,427,000 in Changzhou Liyuan and obtained 2 0% equity interests of Changzhou Liyuan. After
that, the Group’s effective equity interests in Cha nzhou Liyuan were diluted from 79.60% to 72.87%. As a
result, the Group recognised an increase in e quity attributable to owners of the Company of
approximately RMB185,301,000 and an increase in non-controlling interests of approximately
RMB200,126,000.
Six months
ended 30 June
2024
RMB’000
Initial measurement amount of non-controll ing interest recognised upon completion of
c a p i t a lc o n t r i b u t i o n .................................................. ( 200,126)
Capital contributed by non-controlling interest ................................ 385,427
A d j u s t m e n tt oc o n s o l i d a t e de q u i t yr e c o g n i s e d................................. 185,301
(b) Acquisition of additional interests in subsidiaries without change in control
During the year ended 31 December 2022, the Group acquired additional equity interests in
Changzhou Liyuan for a consideration of approximat ely RMB1,290,000,000. After that, the Group’s
effective equity interests in Changzhou Liyuan incr eased from 66.96% to 79.60%. The carrying amount of
the non-controlling interest i n this subsidiary on the date of a cquisition was approximately
RMB1,202,564,000. The Group recognised a decrease in non-controlling interest of approximately
RMB1,290,000,000 and an increase in equity attribut able to owners of the Company of approximately
RMB87,436,000.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 1 5–


--- page 638 ---
2022
RMB’000
Carrying amount of non-controlling interest acquired ............................ 1 , 202,564
Consideration paid to non-controlling interest ................................. ( 1 , 290,000)
E x c e s so fc o n s i d e r a t i o np a i dr e c o g n i s e dw i t h i ne q u i t y ............................ ( 8 7 , 4 3 6 )
42. PLEDGE OF ASSETS
The Group’s bank borrowings had been secured by t he Group’s assets and the carrying amounts of the
respective assets are as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
P r o p e r t y ,p l a n ta n de q u i p m e n t ............... 306,272 834,571 581,883 1,373,136
R i g h t - o f - u s ea s s e t s....................... 1 1 , 9 2 0 6 0 , 7 8 4 5 9 , 5 1 6 6 3 , 4 2 7
Trade and other receivables ................. 100,000 909,317 140,504 163,392
P l e d g eb a n kd e p o s i t s ...................... 1 9 , 4 9 9 5 0 0 , 3 0 8 3 5 0 , 7 2 6 8 7 , 6 0 4
437,691 2,304,980 1,132,629 1,687,559
As at 31 December 2021, 2022 and 2023 and 30 June 2024, bank borrowings were pledged by 100% equity
interest of subsidiaries with a carrying amount of investments in subsidiaries of RMB844,431,000.
43. SUBSEQUENT EVENT
On 6 March 2024, the Company (as the purchaser) enter ed into sale and purchase agreements with Lopal
International Holdings Co., Ltd ( 龍蟠國際控股有限公司)( t h e‘ ‘Vendors ’’), related party to the Group, to
acquire 100% equity interest of Shandong Meiduo Technology Company Limited ( 山東美多科技有限公司)
(‘‘Shandong Meiduo ’’) at consideration of RMB100,539,000 which shall be satisfied by cash payment. Up to the
date of these consolidated financial statements are aut horised to issue, the transaction is not yet completed.
Since early October 2024, the main lithium-mica con centrate provider of Lopal Times, has suspended its
supply to the Group considering lithium carbonate ma rket conditions. The Group ha s utilized this opportunity
to initiate a comprehensive maintenance overhaul at L opal Times starting in early October 2024. Such activities
are expected to last for one month. Upon completion of the overhaul, the Group plan to engage in discussions
with the lithium mica concentrate provider regarding subsequent production arra ngements, including the
potential resumption of the lithium carbonate processing operations. The lithium-mica concentrate provider has
contractual obligations to fulfill the requirements for lithium-mica concentrate or to otherwise negotiate
alternative cooperation methods with the Group, as out lined under several agreements including the Lopal
Times Transfer Agreement. As such, The directors of the Company believe that such temporary adjustments will
not have a material impact on the long-term business operations.
44. 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 30 June 2024.
APPENDIX IA ACCOUNTANTS’ REPORT
–I A - 1 1 6–


--- page 639 ---
The following is the text of a report set out on pages IB-1 to IB-38, prepared for inclusion
in this prospectus, received from the independent reporting accountants of the Company,
Moore CPA Limited, Certified Public Accountants, Hong Kong.
ACCOUNTANTS’ REPORT ON TIANJIN BEITERUI NANO HISTORICAL
FINANCIAL INFORMATION TO THE DIRECTORS OF JIANGSU LOPAL TECH.
CO., LTD., GUOTAI JUNAN CAPITAL LIMITED AND HALCYON CAPITAL
LIMITED
Introduction
We report on the historical financial inform ation of Beiterui (Tianjin) Nano Material
Manufacturing Co., Ltd. (‘‘ Tianjin Beiterui Nano ’’) set out on pages IB-3 to IB-38, which
comprises the statement of profit or loss and other comprehensive income, statement of
changes in equity and statement of cash flows of Tianjin Beiterui Nano for the five months
ended 31 May 2021 (the ‘‘ Pre-acquisition Period ’’), the statements of financial position of
Tianjin Beiterui Nano as at 31 May 2021, and material accounting policy information and
other explanatory inform ation (together, the ‘‘ Tianjin Beiterui Nano Historical Financial
Information ’’). The Tianjin Beiterui Nano Historical Financial Information set out on pages
IB-3 to IB-38 forms an integral part of this report, which has been prepared for inclusion in
the prospectus of Jiangsu Lopal Tech. Co., Ltd. (the ‘‘ Company ’’) dated 22 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 Tianjin Beit erui Nano Historical Financial Information
The directors of Tianjin Beiterui Nano ar e responsible for the preparation of the
Tianjin Beiterui Nano Historical Financial Information that gives a true and fair view in
accordance with the basis of preparation s et out in Note 2 to the Tianjin Beiterui Nano
Historical Financial Information, and for such internal control as the directors determine is
necessary to enable the preparation of the Tianjin Beiterui Nano Historical Financial
Information that is free from material misstatement, whether due to fraud or error.
Reporting accountants’ responsibility
Our responsibility is to express an opinio n on the Tianjin Beiterui Nano 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
(‘‘HKSIR 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 Tianjin Beiterui Nano
Historical Financial Information is free from material misstatement.
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 1–


--- page 640 ---
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Tianjin Beiterui Nano Historical Financial Information. The procedures
selected depend on the reporting accountants’ judgment, including the assessment of risks
of material misstatement of the Tianjin Beiterui Nano Historical Financial Information,
whether due to fraud or error. In making those risk assessments, the reporting accountants
consider internal control relevant to the enti ty’s preparation of the Tianjin Beiterui Nano
Historical Financial Information that gives a true and fair view in accordance with the basis
of preparation set out in Note 2 to the Tianjin Beiterui Nano 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 estimate s made by the directors, as well as evaluating
the overall presentation of the Tianjin Beiterui Nano 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 Tianjin Beiterui Nano Historical Financial Information gives, for
the purposes of the accountants’ report, a true and fair view of the financial position of
Tianjin Beiterui Nano as at 31 May 2021 and of the financial performance and cash flows of
Tianjin Beiterui Nano for the Pre-acquisition Period in accordance with the basis of
preparation set out in Note 2 to the Tianjin Beiterui Nano 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 Tianjin Beiterui Nano Historical Financial Information, no
adjustments to the Tianjin Beiterui Nano Underlying Financial Statements as defined on
page IB-3 have been made.
Dividends
No dividends have been paid by Tianjin Beiterui Nano in respect of the Pre-acquisition
Period.
Yours faithfully,
Moore CPA Limited
Certified Public Accountants
Pak Chi Yan
Practising Certificate Number: P06923
Hong Kong, 22 October 2024
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 2–


--- page 641 ---
I. THE TIANJIN BEITERUI NANO HIST ORICAL FINANCIAL INFORMATION
Preparation of the Tianjin Beiterui Nano Historical Financial Information
Set out below is the Tianjin Beiterui Nano Historical Financial Information which
forms an integral part of this accountants’ report.
The financial statements of Tianjin Beiterui Nano for the Pre-acquisition Period,
on which the Tianjin Beiterui Nano Historical Financial Information is based, have
been prepared in accordance with IFRS Accounting Standards (‘‘ IFRSs ’’) issued by
International Accounting Standards Board (the ‘‘ IASB ’’) and were audited by Moore
CPA Limited in accordance with Hong Kong Standards on Auditing issued by the
HKICPA (the ‘‘Tianjin Beiterui Nano Underlying Financial Statements ’’).
The Tianjin Beiterui Nano Historical Fi nancial Information is presented in
Renminbi (‘‘RMB’’) and all values are rounded to the nearest thousand (RMB’000)
except when otherwise indicated.
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3–


--- page 642 ---
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Five months
ended 31 May
Notes 2021
RMB’000
R e v e n u e ......................................... 6 2 2 2 , 5 0 7
C o s to fs a l e s ..................................... ( 1 6 5 , 8 2 4 )
G r o s sp r o f i t ...................................... 5 6 , 6 8 3
O t h e ri n c o m e ,g a i n sa n dl o s s e s ......................... 7 1 , 1 6 4
I m p a i r m e n tl o s s e so nf i n a n c i a la s s e t s .................... ( 2 , 6 1 2 )
Selling and distribution expenses . ...................... ( 5 6 )
A d m i n i s t r a t i v ee x p e n s e s ............................. ( 2 , 3 9 3 )
R e s e a r c ha n dd e v e l o p m e n te x p e n s e s..................... ( 1 6 , 6 0 4 )
F i n a n c ec o s t s..................................... 8 ( 6 1 6 )
P r o f i tb e f o r et a x a t i o n............................... 9 3 5 , 5 6 6
I n c o m et a xe x p e n s e ................................. 1 0 ( 2 , 4 7 8 )
Profit and total comprehensive income for the period .......... 3 3 , 0 8 8
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 4–


--- page 643 ---
STATEMENT OF FINANCIAL POSITION
As at
31 May
Notes 2021
RMB’000
NON-CURRENT ASSETS
P r o p e r t y ,p l a n ta n de q u i p m e n t ......................... 1 4 7 2 , 8 9 3
R i g h t - o f - u s ea s s e t s................................. 1 5 1 2 , 3 3 4
Financial assets at fair value through other comprehensive income 16 12,450
D e f e r r e dt a xa s s e t s................................. 2 4 2 , 9 2 2
P r e p a y m e n t s ,d e p o s i t sa n do t h e rr e c e i v a b l e s ............... 1 8 7 8
T o t a ln o n - c u r r e n ta s s e t s ............................. 1 0 0 , 6 7 7
CURRENT ASSETS
I n v e n t o r i e s ....................................... 1 7 8 5 , 9 3 0
T r a d ea n do t h e rr e c e i v a b l e s ........................... 1 8 3 9 8 , 7 8 4
C a s ha n dc a s he q u i v a l e n t s ............................ 1 9 1 9 , 0 4 8
T o t a lc u r r e n ta s s e t s ................................. 5 0 3 , 7 6 2
CURRENT LIABILITIES
T r a d ea n do t h e rp a y a b l e s ............................ 2 0 2 8 5 , 5 3 7
T a xp a y a b l e ...................................... 3 , 0 1 1
Lease liabilities. . . . . . .............................. 2 1 2 0 , 1 0 5
Contract liabilities . . . .............................. 2 2 5 1 5
D e f e r r e di n c o m e ................................... 2 3 5 5 6
T o t a lc u r r e n tl i a b i l i t i e s.............................. 3 0 9 , 7 2 4
NET CURRENT ASSETS ............................ 1 9 4 , 0 3 8
TOTAL ASSETS LESS CURRENT LIABILITIES .......... 2 9 4 , 7 1 5
NON-CURRENT LIABILITIES
D e f e r r e di n c o m e ................................... 2 3 7 2 4
Total non-current liabilities . .......................... 7 2 4
N e ta s s e t s ....................................... 2 9 3 , 9 9 1
EQUITY
S h a r ec a p i t a l ..................................... 2 5 1 0 0 , 0 0 0
R e s e r v e s ........................................ 2 6 1 9 3 , 9 9 1
T o t a le q u i t y ...................................... 2 9 3 , 9 9 1
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 5–


--- page 644 ---
STATEMENT OF CHANGES IN EQUITY
Share capital
Statutory
reserve
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000
(Note 25) (Note 26)
A t1J a n u a r y2 0 2 1 .......... 1 0 0 , 0 0 0 1 6 , 0 9 0 1 4 4 , 8 1 3 2 6 0 , 9 0 3
Profit and total comprehensive
i n c o m ef o rt h ep e r i o d ....... — — 3 3 , 0 8 8 3 3 , 0 8 8
Appropriation to statutory
r e s e r v e ................. — 3 , 3 0 9 ( 3 , 3 0 9 ) —
A t3 1M a y2 0 2 1............ 1 0 0 , 0 0 0 1 9 , 3 9 9 1 7 4 , 5 9 2 2 9 3 , 9 9 1
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 6–


--- page 645 ---
STATEMENT OF CASH FLOWS
Five months
ended 31 May
Notes 2021
RMB’000
CASH FLOWS FROM OPERATING ACTIVITIES
P r o f i tb e f o r et a x a t i o n............................... 3 5 , 5 6 6
Adjustments for:
F i n a n c ec o s t s.................................... 8 6 1 6
B a n ki n t e r e s ti n c o m e ............................... 7 ( 6 )
D e p r e c i a t i o no fp r o p e r t y ,p l a n ta n de q u i p m e n t ............ 1 4 5 , 0 7 1
D e p r e c i a t i o no fr i g h t - o f - u s ea s s e t s..................... 1 5 2 9 6
I m p a i r m e n tl o s s e so nt r a d er e c e i v a b l e s.................. 9 2 , 5 7 1
I m p a i r m e n tl o s s e so no t h e rr e c e i v a b l e s.................. 9 4 1
I m p a i r m e n tl o s s e so ni n v e n t o r i e s ...................... 9 1 2
Operating cash flows before movements in working capital . . . . . 44,167
I n c r e a s ei ni n v e n t o r i e s ............................... ( 5 9 , 1 7 5 )
D e c r e a s ei nt r a d ea n do t h e rr e c e i v a b l e s ................... 1 3 5 , 2 2 1
D e c r e a s ei nt r a d ea n do t h e rp a y a b l e s .................... ( 3 1 , 3 5 0 )
Decrease in contract liabilities . . . ...................... ( 1 , 8 7 5 )
D e c r e a s ei nd e f e r r e di n c o m e .......................... ( 6 6 1 )
C a s hf l o wf r o mo p e r a t i n ga c t i v i t i e s ...................... 8 6 , 3 2 7
I n c o m et a x e sp a i d .................................. —
N e tc a s hf l o wf r o mo p e r a t i n ga c t i v i t i e s ................... 8 6 , 3 2 7
CASH FLOWS FROM INVESTING ACTIVITIES
B a n ki n t e r e s ti n c o m e ................................ 6
P u r c h a s eo fp r o p e r t y ,p l a n ta n de q u i p m e n t................ ( 4 0 9 )
Purchase of financial assets at fair value through
o t h e rc o m p r e h e n s i v ei n c o m e......................... ( 1 2 , 4 5 0 )
N e tc a s hf l o w su s e di ni n v e s t i n ga c t i v i t i e s................. ( 1 2 , 8 5 3 )
CASH FLOWS FROM FINANCING ACTIVITIES
R e p a y m e n tt oi m m e d i a t eh o l d i n gc o m p a n y................ ( 6 4 , 6 1 7 )
N e tc a s hf l o w su s e di nf i n a n c i n ga c t i v i t i e s ................. ( 6 4 , 6 1 7 )
NET INCREASE IN CASH AND CASH EQUIVALENTS ..... 8 , 8 5 7
C a s ha n dc a s he q u i v a l e n t sa tb e g i n n i n go fp e r i o d ............ 1 9 1 0 , 1 9 1
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . 19 19,048
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
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II. NOTES TO THE TIANJIN BEITERUI NANO HISTORICAL FINANCIAL
INFORMATION
1. GENERAL INFORMATION
Tianjin Beiterui Nano is a company with limited liab ility established in the People’s Republic of China
(hereafter, the ‘‘ PRC’’) on 18 December 2015. The registered address of the office of Tianjin Beiterui Nano is
No. 9 Xingbao Road, Baodi Jiuyua n Industrial Park, Tianjin, PRC.
Tianjin Beiterui Nano is principally engaged in rese arch, development, producti on and sales of battery
materials.
The Tianjin Beiterui Nano Histor ical Financial Information is pr esented in RMB, which is also the
functional currency of Tianjin Beiterui Nano.
2. BASIS OF PREPARATION OF THE TIANJIN BEITERUI NANO HISTOR ICAL FINANCIAL
INFORMATION
The Tianjin Beiterui Nano Historical Financial Inf ormation has been prepared in accordance with IFRSs,
which comprise all standards and interpretations appr oved by the IASB. All IFRSs effective for the accounting
period commencing from 1 January 2024, together with th e relevant transitional provisions, have been early
adopted by Tianjin Beiterui Nano in the preparation o f the Tianjin Beiterui Nano Historical Financial
Information throughout the Pre-acquisition Period.
3. ADOPTION OF NEW AND AMENDMENTS TO IFRSS
For the purpose of preparing and presenting the Tianji n Beiterui Nano Historical Financial Information
for the Pre-acquisition Period, Tianjin Beiterui Nano h as consistently adopted the accounting policies which
includes all the International Accounting Standards (‘‘ IASs ’’), the IFRSs, amendments to IFRSs and the related
interpretations issued by the IASB, which are effective f or Tianjin Beiterui Nano’s financial year beginning on 1
January 2024, throughout the Pre-acquisition Period.
New and amendments to IFRSs in issue but not yet effective
At the date of this report, the following new and amendments to IFRS Accounting Standards have
been issued which are not yet effective:
IFRS 18 Presentation and Disclosures in Financial Statements 5
IFRS 19 Subsidiaries without Public Accountability: Disclosures 5
Amendments to IFRS 9 and
IFRS 7
Classification and Measurement of Financial Instruments 4
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture 3
Amendments to IFRS 16 Lease liability in a Sale and Leaseback 1
Amendments to IAS 1 Classification of Liabilities as Current or Non-current 1
Amendments to IAS 1 Non-current Liabilities with Covenants 1
Amendments to IAS 7 and
IFRS 7
Supplier Finance Arrangements 1
Amendments to IAS 21 Lack of Exchangeability 2
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1 Effective for annual periods be ginning on or after 1 January 2024
2 Effective for annual periods be ginning on or after 1 January 2025
3 Effective for annual periods beginni ng on or after a date to be determined
4 Effective for annual periods be ginning on or after 1 January 2026
5 Effective for annual periods be ginning on or after 1 January 2027
The directors of Tianjin Beiterui Nano anticipate that the application of all new and amendments to
IFRSs will have no material impact on the Tianjin Beit erui Nano Historical Financial Information in the
foreseeable future.
4. MATERIAL ACCOUNTING POLICY INFORMATION
The Tianjin Beiterui Nano Historical Financial Inf ormation has been prepared in accordance with all
IFRSs issued by the IASB. In addition, the Tianjin Beiter ui Nano Historical Financial Information includes
applicable disclosures required by the Rules Governing the Listing of Securities of The Stock Exchange of Hong
Kong Limited (‘‘Listing Rules ’’) and by the Hong Kong Companies Ordinance.
The Tianjin Beiterui Nano Historical Financial Infor mation has been prepared on the historical cost basis
except for certain financial instruments that are measu red at fair values at the end of each reporting period, as
explained in the accounting policies set out below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell a n asset or paid to transfer a liability in an orderly
transaction between market participants at the measure ment date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability,
Tianjin Beiterui Nano takes into account the characteris tics of the asset or liability if market participants would
take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in the Tianjin Beiterui Nano Historical Financial Information is
determined on such a basis, except for leasing transactions that are accounted for in accordance with IFRS 16,
and measurements that have some similarities to fair value but are not fair value, such as net realisable value in
IAS 2 ‘‘Inventories’’ or value in use i n IAS 36 ‘‘Impairment of Assets’’ (‘‘IAS 36 ’’).
In addition, for financial reporting purposes, fair val ue measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value me asurements are observable and the significance of the
inputs to the fair value measurement in its e ntirety, which are described as follows:
. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date;
. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for
the asset or liability, either directly or indirectly; and
. Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
4.1. Revenue from contracts with customers
Tianjin Beiterui Nano recognises revenue when (or a s) a performance obligation is satisfied, i.e.
when ‘‘control’’ of the goods or services underlying the p articular performance obl igation is transferred to
the customer.
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A performance obligation represents a good or service (or a bundle of goods or services) that is
distinct or a series of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over time by reference to the progress
towards complete satisfaction of t he relevant performance obligation if one of the following criteria is
met:
. the customer simultaneously receives and consumes the benefits provided by Tianjin Beiterui
Nano’s performance as Tianjin Beiterui Nano performs;
. Tianjin Beiterui Nano’s performance creates o r enhances an asset that the customer controls
as Tianjin Beiterui Nano performs; or
. Tianjin Beiterui Nano’s performance does not create an asset with an alternative use to
Tianjin Beiterui Nano and Tianjin Beiterui N ano has an enforceable right to payment for
performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct
good or service.
A contract asset represents Tianjin Beiterui Nano’s right to consideration in exchange for goods or
services that Tianjin Beiterui Nano has transfe rred to a customer that is not yet unconditional. It is
assessed for impairment in accordance with IFRS 9. In contrast, a receivable repr esents Tianjin Beiterui
Nano’s unconditional right to consideration, i.e. onl y the passage of time is required before payment of
that consideration is due.
A contract liability represents Tianjin Beiterui Nano’s obligation to transfer goods or services to a
customer for which Tianjin Beiterui Nano has recei ved consideration (or an amount of consideration is
due) from the customer.
A contract asset and a contract liability relat ing to the same contract are accounted for and
presented on a net basis.
Revenue from sales of goods
Tianjin Beiterui Nano sells lithium iron phospha te cathode materials and other goods directly to
customers in accordance with the contracts enter ed with the customers. Control is passed when the
products have been accepted by the customer. The nor mal credit term is within 90 days effective from the
date when the goods are accepted by the customers. When the customer pays in advance for the orders, the
transaction price received by Tianjin Beiterui Nano is recognised as a contract liability until the goods
have been delivered to the customer.
Principal versus agent
When another party is involved in providing goods or services to a customer, Tianjin Beiterui Nano
determines whether the nature of its promise is a per formance obligation to pro vide the specified goods or
services itself (i.e. Tianjin Beiterui Nano is a pri ncipal) or to arrange for those goods or services to be
provided by the other party (i.e. Tianjin Beiterui Nano is an agent).
Tianjin Beiterui Nano is a principal if it controls the specified good or service before that good or
service is transferred to a customer.
Tianjin Beiterui Nano is an agent if its performan ce obligation is to arrange for the provision of the
specified good or service by another party. In this c ase, Tianjin Beiterui Nano does not control the
specified good or service provided by another party before that good or service is transferred to the
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customer. When Tianjin Beiterui Nano acts as an age nt, it recognises revenue in the amount of any fee or
commission to which it expects to be entitled in excha nge for arranging for the specified goods or services
to be provided by the other party.
4.2. Leases
Definition of a lease
A contract is, or contains, a lease if the contract c onveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
For contracts entered into or modified on or afte r the date of initial application or arising from
business combinations, Tianjin Beit erui Nano assesses whether a contract is or contains a lease based on
the definition under IFRS 16 at inception, modificati on date or acquisition date, as appropriate. Such
contract will not be reassessed unless the terms and c onditions of the contract are subsequently changed.
Tianjin Beiterui Nano as a lessee
Allocation of consideration to components of a contract
For a contract that contains a lease component and one or more additional lease or non-lease
components, Tianjin Beiterui Nano allocates the con sideration in the contract to each lease component on
the basis of the relative stand-alone price of the lea se component and the aggregate stand-alone price of
the non-lease components.
Non-lease components are separated from lease co mponent and are accounted for by applying other
applicable standards.
Right-of-use assets
The cost of right-of-use asset includes:
. the amount of the initial measur ement of the lease liability;
. any lease payments made at or before the commencement date, less any lease incentives
received;
. any initial direct costs incurre d by Tianjin Beiterui Nano; and
. an estimate of costs to be incurred by Tianjin Be iterui Nano in dismantling and removing the
underlying assets, restoring the site on which it is located or restoring the underlying asset to
the condition required by the terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasure ment of lease liabilities.
Right-of-use assets in which Tianjin Beiterui Nan o is reasonably certain to obtain ownership of the
underlying leased assets at the end of the lease term are depreciated from commencement date to the end
of the useful life. Otherwise, right-of-use assets are d epreciated on a straight-li ne basis over the shorter of
its estimated useful life and the lease term.
When Tianjin Beiterui Nano obtains ownership of t he underlying leased assets at the end of the lease
term, upon exercising purchase options, the cost of the relevant right-of-use assets and the related
accumulated depreciation and impairment loss ar e transferred to property, plant and equipment.
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Tianjin Beiterui Nano presents right-of-use a ssets as a separate line item on the statement of
financial position.
Refundable rental deposits
Refundable rental deposits paid a re accounted under IFRS 9 and init ially measured at fair value.
Adjustments to fair value at initial recognition are co nsidered as additional lease payments and included
in the cost of right-of-use assets.
Lease liabilities
At the commencement date of a lease, Tianjin Beiterui Nano recognises and measures the lease
liability at the present value of lease payments that ar e unpaid at that date. In calculating the present value
of lease payments, Tianjin Beiterui Nano uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily determinable.
The lease payments include:
. fixed payments (including in-substance fixed payments) less any lease incentives receivable;
. variable lease payments that depend on an index o r a rate, initially measured using the index
or rate as at the commencement date;
. amounts expected to be payable by Tianjin Beite rui Nano under residual value guarantees;
. the exercise price of a purchase option if Tia njin Beiterui Nano is reasonably certain to
exercise the option; and
. payments of penalties for terminating a lease, i f the lease term reflects Tianjin Beiterui Nano
exercising an option to terminate the lease.
After the commencement date, lease liabilities are a djusted by interest accretion and lease payments.
Tianjin Beiterui Nano remeasures lease liabilit ies (and makes a corresponding adjustment to the
related right-of-use assets) whenever:
. the lease term has changed or there is a change in the assessment of exercise of a purchase
option, in which case the related lease liabilit y is remeasured by discounting the revised lease
payments using a revised discount rate at the date of reassessment.
. the lease payments change due to changes in market rental rates following a market rent
review, in which cases the related lease liabilit y is remeasured by discounting the revised lease
payments using the initial discount rate.
Tianjin Beiterui Nano presents lease liabilities a s a separate line item on the statement of financial
position.
Lease modifications
Tianjin Beiterui Nano accounts for a lease modification as a separate lease if:
. the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
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--- page 651 ---
. the consideration for the leases increases by an amount commensurate with the stand-alone
price for the increase in scope and any appropriate adjustments to that stand-alone price to
reflect the circumstances of the particular contract.
For a lease modification that is not accounted fo r as a separate lease, Tianjin Beiterui Nano
remeasures the lease liability, less any lease incent ives receivable, based on the lease term of the modified
lease by discounting the revised lease payments usin g a revised discount rate at the effective date of the
modification.
Tianjin Beiterui Nano accounts for the remeasure ment of lease liabilities by making corresponding
adjustments to the relevant right-of-use asset. When t he modified contract contains a lease component and
one or more additional lease or non-lease components, Ti anjin Beiterui Nano allocates the consideration
in the modified contract to each lease component on the b asis of the relative stand-alone price of the lease
component and the aggregate stand-alone price of the non-lease components.
4.3. Foreign currencies
In preparing the financial statements, transacti ons in currencies other than the functional currency
of Tianjin Beiterui Nano (foreign currencies) are recognised at the rates of exchanges prevailing on the
dates of the transactions. At the end of the reporti ng period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing a t that date. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of
monetary items, are recognised in profit o r loss in the period in which they arise.
4.4. Borrowing costs
All borrowing costs not directly attributable to the acquisition, construction or production of
qualifying assets are recognised in profit or loss in the period in which they are incurred.
4.5. Government grants
Government grants are not recognised until there i s reasonable assurance that Tianjin Beiterui Nano
will comply with the conditions attaching t o them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which
Tianjin Beiterui Nano recognises as expenses the related costs for which the grants are intended to
compensate. Specifically, government grants whos e primary condition is that Tianjin Beiterui Nano
should purchase, construct or otherwise acquire non- current assets are recognised as deferred income in
the statement of financial position and transferred t o profit or loss on a systematic and rational basis over
the useful lives of the related assets.
Government grants related to income that are receivable as compensation for expenses or losses
already incurred or for the purpose of giving immed iate financial support to Tianjin Beiterui Nano with
no future related costs are recognised in profit or loss in the period in which they become receivable. Such
grants are presented under ‘‘other income, gains and losses’’.
Where the grant relates to an asset, the fair val ue is credited to a deferred income account and is
released to the profit or loss over the expected useful life of the relevant asset by equal annual instalments.
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4.6. Employee benefits
Pension obligation
In accordance with the rules and regulations in the PRC, the PRC based employees of Tianjin
Beiterui Nano participate in various defined contri bution retirement benefit plans organised by the
relevant municipal and provincial governments i n the PRC under which Tianjin Beiterui Nano and the
PRC based employees are required to make monthl y contributions to these plans calculated as a
percentage of the employees’ salaries. The municipa l and provincial governments undertake to assume the
retirement benefit obligations of all existing and future retired PRC based employees’ payable under the
plans described above. Other than the monthly cont ributions, Tianjin Beiterui Nano has no further
obligation for the payment of retirement and other post- retirement benefits of its employees. The assets of
these plans are held separately from those of Tianjin Beiterui Nano in independe ntly administered funds
managed by the PRC government.
Tianjin Beiterui Nano’s contributions to the afore said defined contribution retirement schemes are
expensed as incurred.
Housing funds, medical insurances and other social insurances
E m p l o y e e so fT i a n j i nB e i t e r u iN a n oi nt h eP R C are entitled to participate in various
government-supervised housing funds, medical insu rances and other social insurance plan. Tianjin
Beiterui Nano contributes on a monthl y basis to these funds based on certa in percentages of the salaries of
the employees, subject to certain ceiling. Tianjin Be iterui Nano’s liability in respect of these funds is
limited to the contributions payable in each year. C ontributions to the housing funds, medical insurances
and other social insurances are expensed as incurred.
4.7. Taxation
Income tax expense represents the sum of current and deferred income tax expense.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit
before taxation because of income or expense that ar e taxable or deductible in other years and items that
are never taxable or deductible. Tianjin Beiterui Nano’ s liability for current tax is calculated using tax
rates that have been enacted or substantivel y enacted by the end of the reporting period.
Deferred tax is recognised on temporary differ ences between the carrying amounts of assets and
liabilities in the financial statements and the corre sponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are g enerally recognised for all taxable t emporary differences. Deferred tax
assets are generally recognised fo r all deductible temporary differen ces to the extent that it is probable
that taxable profits will be available against which thos e deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not recognis ed if the temporary difference arises from the initial
recognition (other than in a business combination) of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit a nd at the time of the transaction does not give rise to
equal taxable and deductible temporary differences. In a ddition, deferred tax liabilities are not recognised
if the temporary difference arises fro m the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable te mporary differences associated with investments
in subsidiaries and associates, and interests in joint v entures, except where Tianjin Beiterui Nano is able to
control the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax asse ts arising from deductible temporary differences
associated with such investments and interests are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and
they are expected to reverse in the foreseeable future.
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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 profits will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have
been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and a ssets reflects the tax consequences that would
follow from the manner in which Tianjin Beiterui N ano expects, at the end of the reporting period, to
recover or settle the carrying am ount of its assets and liabilities.
For the purposes of measuring deferred tax for leasi ng transactions in which Tianjin Beiterui Nano
recognises the right-of-use assets a nd the related lease liabilities, Tia njin Beiterui Nano first determines
whether the tax deductions are attributable to th e right-of-use assets or the lease liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, Tianjin
Beiterui Nano applies IAS 12 ‘‘Income Taxes’’ require ments to the lease liabilities and the related assets
separately. Tianjin Beiterui Nano recognises a deferre d tax asset related to lease liabilities to the extent
that it is probable that taxable profit will be availabl e against which the deductible temporary difference
can be utilised and a deferred tax liabilit y for all taxable temporary differences.
Deferred tax assets and liabilities are offset when the re is a legally enforceable right to set off current
tax assets against current tax liabilities and when t hey relate to income taxes levied to the same taxable
entity by the same taxation authority.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax
are also recognised in other comprehensive income or di rectly in equity, respectively. Where current tax or
deferred tax arises from the initial accounting for a business combination, the tax effect is included in the
accounting for the business combination.
4.8. Property, plant and equipment
Property, plant and equipment are tangible asset s that are held for use in the production or supply
of goods or services, or for administrative purposes o ther than assets under construction as described
below. Property, plant and equipment are stated in the statement of financial position at cost less
subsequent accumulated depreciation and subs equent accumulated impairment losses, if any.
Assets in the course of construction for production, supply or administrative purposes are carried at
cost, less any recognised impairment loss. Costs incl ude any costs directly attributable to bringing the
asset to the location and condition necessary for it t o be capable of operating in the manner intended by
management, including costs of testing whether t he related assets in functioning properly and, for
qualifying assets, borrowing costs capitalised in a ccordance with Tianjin Beiterui Nano’s accounting
policy. Depreciation of these assets, on the same ba sis as other property assets, commences when the
assets are ready for their intended use.
When Tianjin Beiterui Nano makes payments for own ership interests of properties which includes
both leasehold land and building elements, the entire c onsideration is allocated between the leasehold land
and the building elements in proportion to the relative f air values at initial recognition. To the extent the
allocation of the relevant payments can be made re liably, interest in leasehold land is presented as
‘‘right-of-use assets’’ in the statement of financia l position. When the consideration cannot be allocated
reliably between non-lease building element and undi vided interest in the underlying leasehold land, the
entire properties are classified as property, plant and equipment.
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Depreciation is recognised so as to write off the co st of assets other than construction in progress
less their residual values over their estimated usefu l lives, using the straigh t-line method, as follows:
P l a n ta n dm a c h i n e r y .......................................... 5–10 years
M o t o rv e h i c l e s.............................................. 5–10 years
O t h e re q u i p m e n t ............................................. 5y e a r s
L e a s e h o l di m p r o v e m e n t s....................................... 5–10 years
The estimated useful lives, residual values and de preciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property and equipment is derecogn ised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property and equipment i s determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in profit or loss.
4.9. Impairment on property, plant and equipment and right-of-use assets
At the end of the reporting period, Tianjin Bei terui Nano reviews the carrying amounts of its
property, plant and equipment and right-of-use asse ts to determine whether there is any indication that
these assets have suffered an impairment loss. If any su ch indication exists, the recoverable amount of the
relevant asset is estimated in order to determi ne the extent of the impairment loss (if any).
The recoverable amount of property, plant and e quipment and right-of-use assets are estimated
individually. When it is not possible to estimate the recoverable amount indivi dually, Tianjin Beiterui
Nano estimates the recoverable amount of the cas h-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment , corporate assets are allocated to the relevant
cash-generating unit when a reasonable and consistent basis of allocation can be es tablished, or otherwise
they are allocated to the smallest group of cash gene rating units for which a rea sonable and consistent
allocation basis can be establishe d. The recoverable amount is determined for the cash-generating unit or
group of cash-generating units to which the corpor ate asset belongs, and is compared with the carrying
amount of the relevant cash-generating unit or group of cash-generating units.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are dis counted 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
(or a cash-generating unit) for which the estim ates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-ge nerating unit) is estima ted to be less than its
carrying amount, the carrying amount of the asset (or a ca sh-generating unit) is reduced to its recoverable
amount. For corporate assets or portion of corpor ate assets which cannot be allocated on a reasonable
and consistent basis to a cash-gener ating unit, Tianjin Beiterui Nano compares the carrying amount of a
group of cash-generating units, including the car rying amounts of the corporate assets or portion of
corporate assets allocated to that group of cash-gen erating units, with the recoverable amount of the
group of cash-generating units. In allocating the impa irment loss, the impairment loss is allocated first to
reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis
based on the carrying amount of each asset in the unit o r the group of cash-generating units. The carrying
amount of an asset is not reduced below the highest of i ts fair value less costs of disposal (if measurable),
its value in use (if determinable) and zero. The am ount of the impairment loss that would otherwise have
been allocated to the asset is allocated pro r ata to the other assets of the unit or the group of
cash-generating units. An impairment loss i s recognised immediately in profit or loss.
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Where an impairment loss subsequently reve rses, the carrying amount of the asset (or
cash-generating unit or a group of cash-generating units) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss bee n recognised for the asset (or a cash-generating
unit or a group of cash-generating units) in prior ye ars. A reversal of an impairment loss is recognised
immediately in profit or loss.
4.10. Cash and cash equivalents
Cash and cash equivalents presented on the st atement of financial position include:
(a) cash, which comprises of cash on hand and demand deposits, excluding bank balances that are
subject to regulatory restrictions that result in such balances no longer meeting the definition
of cash; and
(b) cash equivalents, which comprises of short-te rm (generally with original maturity of three
months or less), highly liquid investments th at are readily convertible to a known amount of
cash and which are subject to an insignificant r isk of changes in value. Cash equivalents are
held for the purpose of meeting short-term cash commitments rather than for investment or
other purposes.
For the purposes of the statement of cash flows, ca sh and cash equivalents consist of cash and cash
equivalents as defined above and form an integral pa rt of Tianjin Beiterui Nano’s cash management.
4.11. Inventories
Inventories are stated at the lower of cost and n et realisable value. Costs of inventories are
determined on a weighted average method. Net realisabl e value represents the estimated selling price for
inventories less all estimated costs of comp letion and costs necessary to make the sale.
4.12. Provisions
Provisions are recognised when Tianjin Bei terui Nano has a present obligation (legal or
constructive) as a result of a past event, it is proba ble that Tianjin Beiterui Nano will be required to
settle that obligation, and a re liable estimate can be made o f the amount of the obligation.
The amount recognised as a provision is the best est imate of the consideration required to settle the
present obligation at the end of the reporting peri od, taking into account the risks and uncertainties
surrounding the obligation. When a p rovision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the prese nt value of those cash flows (where the effect of the
time value of money is material).
Warranties
Provisions for the expected cost of assurance-type warranty obligations under the relevant contracts
with customers for sales of lithium iron phosphate ca thode material are recognised at the date of sale of
the relevant products, at the directors’ best estimate of the expenditure required to settle Tianjin Beiterui
Nano’s obligation.
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4.13. Financial instruments
Financial assets and financial liabilities are re cognised when a group entity becomes a party to the
contractual provisions of the instr ument. All regular way purchases or sales of financial assets are
recognised and derecognised on a tra de date basis. Regular way purchases or sales are purchases or sales
of financial assets that require delivery of assets within the time frame established by regulation or
convention in the market place.
Financial assets and financial liabilities are initial ly measured at fair value except for trade and bills
receivables and contract assets arising from contract s with customers which are initially measured in
accordance with IFRS 15 ‘‘Revenue from Contracts with Customers’’ (‘‘ IFRS 15 ’’). Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets at fair value through profit or loss (‘‘ FVTPL ’ ’ )a r ea d d e dt oo rd e d u c t e df r o mt h ef a i r
value of the financial assets or financial liabilities, as a ppropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financia l assets at FVTPL are recognis ed immediately in profit
or loss.
The effective interest method is a method of calcul ating the amortised cost of a financial asset or
financial liability and of allocating interest incom e and interest expense over the relevant period. The
effective interest rate is the rate that exactly dis counts estimated future cash receipts and payments
(including all fees and points paid o r received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) th rough the expected life of the financial asset or
financial liability, or, where appropriate, a shor ter period, to the net carrying amount on initial
recognition.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditi ons are subsequently measured at amortised cost:
. the financial asset is held within a business model whose objective is to collect contractual cash
flows; and
. the contractual terms give rise on specified da tes to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets that meet the fol lowing conditions are subsequently measured at fair value through
other comprehensive income:
. the financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling; and
. the contractual terms give rise on specified da tes to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
All other financial assets are subsequently measur ed at FVTPL, except that at initial recognition of
a financial asset Tianjin Beiterui Nano may irrevocabl y elect to present subsequent changes in fair value of
an equity investment in other comprehensive income if that equity investment is neither held for trading
nor contingent consideration recognised by an ac quirer in a business combination to which IFRS 3
Business Combinations applies.
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A financial asset is held for trading if:
. it has been acquired principally for t he purpose of selling in the near term; or
. on initial recognition it is a part of a portfolio of identified financial instruments that Tianjin
Beiterui Nano manages together and has a recent a ctual pattern of short-term profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.
Amortised cost and interest income
Interest income is recognised using the effectiv e interest method for financial assets measured
subsequently at amortised cost. Interest income is ca lculated by applying the effective interest rate to the
gross carrying amount of a financial asset, except fo r financial assets that have subsequently become
credit-impaired. For financial assets that have subs equently become credit-impaired, interest income is
recognised by applying the effective i nterest rate to the amortised cost o f the financial asset from the next
reporting period. If the credit risk on the credit-imp aired financial instrument improves so that the
financial asset is no longer credit-im paired, interest income is recognised by applying the effective interest
rate to the gross carrying amount of the financial asset from the beginning of the reporting period
following the determination that the asset is no longer credit-impaired.
Equity instruments designated as at fair val ue through other comprehensive income (‘‘ FVTOCI ’’)
Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains
and losses arising from changes in fair value recogn ised in other comprehensive income and accumulated
in the FVTOCI reserve; and are not subject to impairm ent assessment. The cumulative gain or loss will not
be reclassified to profit or loss on disposal of the equity investments, and will be transferred to retained
profits/will continue to be held in the FVTOCI reserve.
Dividends from these investments in equity instrume nts are recognised in profit or loss when Tianjin
Beiterui Nano’s right to receive the dividends is esta blished, unless the dividends clearly represent a
recovery of part of the cost of the investment. Divid ends are included in the ‘‘other income, gains and
losses’’ line item in profit or loss.
Impairment of financial assets
Tianjin Beiterui Nano performs impairmen t assessment under expected credit loss (‘‘ ECL’’) model
on financial assets (including trade and other recei vables, and bank balances and cash) which are subject
to impairment assessment under IFRS 9. The amount of ECL is updated at each reporting date to reflect
changes in credit risk since initial recognition.
Lifetime ECL represents the ECL t hat will result from all possible default events over the expected
life of the relevant instrument. In contrast, 12-month ECL (‘‘ 12m ECL ’’) represents the portion of lifetime
ECL that is expected to result from default events tha t are possible within 12 m onths after the reporting
date. Assessments are done based on Tianjin Beiterui Na no’s historical credit loss experience, adjusted for
factors that are specific to the debtors, general ec onomic conditions and an assessment of both the current
conditions at the reporting date as well as the forecast of future conditions.
Tianjin Beiterui Nano always reco gnises lifetime ECL for trade receivables and bills receivables.
For all other instruments, Tianjin Beiterui Nano measures the loss allowance equal to 12m ECL,
unless there has been a significant in crease in credit risk since initial recognition, in which case Tianjin
Beiterui Nano recognises lifetime ECL. The asse ssment of whether lifetime E CL should be recognised is
based on significant increases in the likelihood or ri sk of a default occurring since initial recognition.
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Significant increase in credit risk
In assessing whether the credit risk has increased s ignificantly since initi al recognition, Tianjin
Beiterui Nano compares the risk of a default occurrin g on the financial instrument as at the reporting date
with the risk of a default occurring on the financial i nstrument as at the date of initial recognition. In
making this assessment, Tianjin Beiterui Nano cons iders both quantitative a nd qualitative information
that is reasonable and supportable, in cluding historical experience and f orward-looking information that
is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk has
increased significantly:
. an actual or expected significant deteriorati on in the financial instrument’s external (if
available) or internal credit rating;
. significant deterioration in external market indi cators of credit risk, e.g. a significant increase
in the credit spread, the credit default swap prices for the debtor;
. existing or forecast adverse changes in busin ess, financial or economic conditions that are
expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;
. an actual or expected significant deterioration in the operating results of the debtor;
. an actual or expected significant adverse chan ge in the regulatory, economic, or technological
environment of the debtor that results in a sign ificant decrease in the debtor’s ability to meet
its debt obligations.
Irrespective of the outcome of the above assessment, Tianjin Beiterui Nano presumes that the credit
risk has increased significantly since initial recogn ition when contractual payments are more than 30 days
past due, unless Tianjin Beiterui Nano has reasona ble and supportable informa tion that demonstrates
otherwise.
Tianjin Beiterui Nano regularly monitors the effec tiveness of the criteria used to identify whether
there has been a significant increase in credit risk and revises them as appropriate to ensure that the
criteria are capable of identifyin g significant increase in credit risk before the amount become past due.
Definition of default
For internal credit risk management, Tianjin Be iterui Nano considers an event of default occurs
when information developed internally or obtaine d from external sources indicates that the debtor is
unlikely to pay its creditors, incl uding Tianjin Beiterui Nano, in full (without taking into account any
collaterals held by Tianjin Beiterui Nano).
Irrespective of the above, Tianjin Beiterui Nano con siders that default has occurred when a financial
asset is more than 90 days past due unless Tianji n Beiterui Nano has reasonable and supportable
information to demonstrate that a more laggi ng default criterion is more appropriate.
Credit-impaired financial assets
A financial asset is credit-impaired when one or mo re events that have a detrimental impact on the
estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is
credit-impaired includes observab le data about the following events:
(a) significant financial difficu lty of the issuer or the borrower;
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--- page 659 ---
(b) a breach of contract, such a s a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s
financial difficulty, having granted to the borrower a concession(s) that the lender(s) would
not otherwise consider; or
(d) it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation.
Write-off policy
Tianjin Beiterui Nano writes off a financial asse t when there is information indicating that the
counterparty is in severe financial difficulty and the re is no realistic prospect of recovery, for example,
when the counterparty has been placed under liquida tion or has entered into bankruptcy proceedings.
Financial assets written off may still be subject to en forcement activities unde r Tianjin Beiterui Nano’s
recovery procedures, taking into account legal adv ice where appropriate. A write-off constitutes a
derecognition event. Any subsequent reco veries are recognised in profit or loss.
Measurement and recognition of ECL
The measurement of ECL is a function of the proba bility of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the expos ure at default. The assessment of the probability of
default and loss given default is based on historical d ata and forward-looking information. Estimation of
ECL reflects an unbiased and probabi lity-weighted amount that is determined with the respective risks of
default occurring as the weights. Tianjin Beiterui N ano uses a practical expedient in estimating ECL on
trade and bills receivables and contract assets using a pr ovision matrix taking into consideration historical
credit loss experience, adjusted for forward looki ng information that is available without undue cost or
effort.
Generally, the ECL is the difference between al l contractual cash flows that are due to Tianjin
Beiterui Nano in accordance with the contract and the cash flows that Tianjin Beiterui Nano expects to
receive, discounted at the effective interes t rate determined at initial recognition.
Lifetime ECL for certain trade and bills receivables and contract assets are considered on a
collective basis taking into consideration past due information and relevant credit information such as
forward looking macroeconomic information.
For collective assessment, Tianjin Beiterui N ano takes into consideration the following
characteristics when formulating the grouping:
. past-due status;
. nature, size and industry of debtors; and
. external credit ratings where available.
The grouping is regularly reviewed by manage ment to ensure the constituents of each group
continue to share similar credit risk characteristics.
Tianjin Beiterui Nano measures ECL for the remaining trade and bills receivables and contract
assets on an individual basis.
Interest income is calculated based on the gross c arrying amount of the financial asset unless the
financial asset is credit-impaired, in which case inte rest income is calculated based on amortised cost of
the financial asset.
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Tianjin Beiterui Nano recognises an impairmen t gain or loss in profit or loss for all financial
instruments by adjusting their carrying amount, wit h the exception of trade and bills receivables, contract
assets and other receivables where the corresponding adjustment is recognised through a loss allowance
account.
Foreign exchange gains and losses
The carrying amount of financial assets that are de nominated in a foreign currency is determined in
that foreign currency and translated at the spot rate at the end of each reporting period. Specifically:
. For financial assets measured at amortised c ost that are not part of a designated hedging
relationship, exchange differences are recognis ed in profit or loss in the ‘‘Other income, gains
and losses’’ line item as part of the net foreign exchange gains/(losses);
. For financial assets measured at FVTPL that are not part of a designated hedging
relationship, exchange differences are recogn ised in profit or loss in the ‘‘Other income,
gains and losses’’ line item as part of the gains/( losses) from changes in fair value of financial
assets at FVTPL.
Derecognition of financial assets
Tianjin Beiterui Nano derecognises a financial as set only when the contractual rights to the cash
flows from the asset expire, or when it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity.
On derecognition of a financial asset measured at a mortised cost, the differ ence between the asset’s
carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
On derecognition of an investment in equity instrument which Tianjin Beiterui Nano has elected on
initial recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in the
FVTOCI reserve is not reclassified to profit or loss, but is transferred to retained profits.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangements a nd the definitions of a financial liability and an
equity instrument.
Equity instruments
An equity instrument is any contract that evidences a r esidual interest in the assets of an entity after
deducting all of its liabilities. E quity instruments issued by Tianjin Beiterui Nano are recognised at the
proceeds received, net of direct issue costs.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is designated as FVTPL.
A financial liability is classified as held for trading if:
. it has been acquired principally for the pur pose of repurchasing it in the near term; or
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. on initial recognition it is a part of a portfolio of identified financial instruments that Tianjin
Beiterui Nano manages together and has a recent a ctual pattern of short-term profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a fi nancial liability held for trading or contingent consideration of an
acquirer in a business combination may be designated as at FVTPL upon initial recognition if:
. such designation eliminates or significa ntly reduces a measurement or recognition
inconsistency that would otherwise arise; or
. the financial liability forms part of a group of fi nancial assets or financ ial liabilities or both,
which is managed and its performance is evaluated on a fair value basis, in accordance with
Tianjin Beiterui Nano’s documented risk management or investment strategy, and
information about the grouping is provided internally on that basis; or
. it forms part of a contract containing one or mo re embedded derivatives, and IFRS 9 permits
the entire combined contract to be designated as at FVTPL.
For financial liabilities that a re designated as at FVTPL, the amount of changes in the fair value of
the financial liability that is attributable to changes in the credit risk of that liability is recognised in other
comprehensive income, unless the recognition of the eff ects of changes in the liability’s credit risk in other
comprehensive income would create or enlarge an a ccounting mismatch in profit or loss. For financial
liabilities that contain embedded derivatives, the ch anges in fair value of the embedded derivatives are
excluded in determining the amount to be presented in o ther comprehensive income. Changes in fair value
attributable to a financial liability’s credit risk tha t are recognised in other com prehensive income are not
subsequently reclassified to profit or loss; instead, they are transferred to retained profits/others upon
derecognition of the financial liability.
Financial liabilities at amortised cost
Financial liabilities including trade and other payables and accruals are subsequently measured at
amortised cost, using the effective interest method.
Foreign exchange gains and losses
For financial liabilities that ar e denominated in a foreign currency and are measured at amortised
cost at the end of each reporting period, the foreign ex change gains and losses are determined based on the
amortised cost of the instruments. These foreign exchange gains and losses are recognised in the ‘‘Other
income, gains and losses’’ line item in profit or loss as part of net foreign exchange gains/(losses) for
financial liabilities that are not part of a designate d hedging relationship. For those which are designated
as a hedging instrument for a hedge of foreign curr ency risk, foreign exchange gains and losses are
recognised in other comprehensive income and a ccumulated in a separate component of equity.
Derecognition of financial liabilities
Tianjin Beiterui Nano derecognises financial lia bilities when, and only when, Tianjin Beiterui
Nano’s obligations are discharged, cancelled or hav e expired. The difference between the carrying amount
of the financial liability derecogn ised and the consideration paid and payable is recognised in profit or
loss.
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4.14. Related parties
A person or a close member of that person’s family is related to Tianjin Beiterui Nano if that person:
(i) has control or joint control over Tianjin Beiterui Nano;
(ii) has significant influenc e over Tianjin Beiterui Nano; or
(iii) is a member of key management personnel of Tia njin Beiterui Nano or Tianjin Beiterui Nano’s
parent. Or
An entity is related to Tianjin Beiterui Nano if any of the following conditions apply:
(i) The entity and Tianjin Beiterui Nano are mem bers of the same group (which means that each
parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of t he other entity (or an associate or joint venture
of a member of a group of which the other entity is a member).
(iii) Both entities 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 pla n for the benefit of the employees of Tianjin
Beiterui Nano or an entity related to Tianjin Beiterui Nano.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significa nt influence over the entity or is a member of key
management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management
personnel services to the reporting entity or to the parent of the reporting entity.
Close members of the family of a person are t hose family members who may be expected to
influence, or be influenced by, that person in their dealings with the entity.
5. MATERIAL ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of the Tianjin Beit erui Nano Historical Financial Information requires management to
make judgments, estimates and assumptions that aff ect the application of policies and reported amounts of
assets, liabilities income and expenses. The estimat es and associated assumptions are based on historical
experience and various other factors that are believed t o be reasonable under the circumstances, the results of
which form the basis of making the judgements about carryi ng values of assets and liabilities that are not readily
apparent from other sources. Actual res ults may differ from these estimates.
The estimates and underlying assumptions are revie wed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estim ate is revised if the revision affects only that period, or
in the period of the revision and future periods if th e revision affects both current and future periods.
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Estimation uncertainty
The key assumptions concerning the future and ot her 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.
Provision of ECL for trade receivables
Trade receivables with credit-impaired are asse ssed for ECL individuall y. In addition, Tianjin
Beiterui Nano uses practical expedient in estimati ng ECL in trade receivables which are not assessed
individually using a provision matr ix. The provision rates are based on aging of debtors as groupings of
various debtors taking into consid eration Tianjin Beiterui Nano’s h istorical defaults rates and
forward-looking information that is reasona ble and supportable available without undue costs or
effort. At every reporting date, the historical obser ved default rates are reassessed and changes in the
forward-looking information are considered.
6. REVENUE AND SEGMENT INFORMATION
(a) Revenue
Revenue represents the aggregate of the net amoun ts received and receivable from customers during
the Pre-acquisition Period. There is no seasonality and cyclicality of the opera tions of Tianjin Beiterui
Nano. The performance obligation in contracts has an original expected duration of one year or less.
Revenue during the Pre-acquisition Period are as follows:
Five months
ended 31 May
2021
RMB’000
Revenue from contracts with customers under IFRS 15
Sales of lithium iron phos phate cathode material ............................... 222,375
O t h e r s ............................................................. 1 3 2
222,507
Timing of revenue recognition within the scope of IFRS 15
A tap o i n ti nt i m e ..................................................... 222,507
The major customers which contributed more th an 10% of the total revenue for the five months
ended 31 May 2021 are listed as below:
Five months
ended 31 May
2021
RMB’000
C u s t o m e rA......................................................... 7 5 , 4 5 6
C u s t o m e rB......................................................... 103,958
C u s t o m e rC......................................................... 3 2 , 1 6 0
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--- page 664 ---
(b) Segment
For the purpose of resource allocati on and performance assessment , Tianjin Beiterui Nano’s chief
executive officer, being the chief operating decisi on maker, reviews the results when making decisions
about allocating resources and assessment performa nce of Tianjin Beiterui Nano and hence, Tianjin
Beiterui Nano has only one reportable segment and no fur ther analysis of this single segment is presented.
All the revenue from Tianjin Beiterui Nano durin g the Pre-acquisition Period was attributable to
customers established in the PRC, which is the place o f domicile of Tianjin Beit erui Nano’s operating and
Tianjin Beiterui Nano’s non-current assets are substa ntially located in the PRC, accordingly, no analysis
of geographical segment is presented.
7. OTHER INCOME, GAINS AND LOSSES
Five months
ended 31 May
2021
RMB’000
I n t e r e s ti n c o m eo nb a n kd e p o s i t s.......................................... 6
G o v e r n m e n tg r a n t s( N o t e ) ............................................... 9 0 7
O t h e r s ............................................................. 2 5 1
1,164
Note: Included in the amount are government grants r eceived by Tianjin Beiterui Nano amounting to
RMB246,000 for the five months ended 31 May 2021, representing operating subsidies and various
industry-specific subsidies granted by the governm ent authorities to reward Tianjin Beiterui Nano’s
effort for technological innovation. There are no unf ulfilled conditions relating to such government
subsidies recognised.
8. FINANCE COSTS
Five months
ended 31 May
2021
RMB’000
Interest expenses on:
—B a n kb o r r o w i n g s ................................................. 1 9 5
—L e a s el i a b i l i t i e s .................................................. 4 2 1
616
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9. PROFIT BEFORE TAXATION
Tianjin Beiterui Nano’s profit before taxatio n is arrived at after charging/(crediting):
Five months
ended 31 May
2021
RMB’000
A u d i t o r ’ sr e m u n e r a t i o n( N o t e ) ............................................ —
C o s to fi n v e n t o r i e ss o l d ................................................. 138,384
I m p a i r m e n tl o s s e so ni n v e n t o r i e s.......................................... 1 2
I m p a i r m e n tl o s s e so nt r a d er e c e i v a b l e s...................................... 2 , 5 7 1
Impairment losses on other receivables . . .................................... 4 1
D e p r e c i a t i o no fp r o p e r t y ,p l a n ta n de q u i p m e n t( N o t e1 4 )......................... 5 , 0 7 1
D e p r e c i a t i o no fr i g h t - o f - u s ea s s e t s( N o t e1 5 ) .................................. 2 9 6
Staff costs (including direct ors’, chief executives’, and s upervisors’ remuneration):
W a g e s ,s a l a r i e sa n db o n u s e s ............................................ 6 , 3 3 7
R e t i r e m e n tb e n e f i te x p e n s e ............................................ 6 3 4
Social security costs, housing benefit s and other employee benefits . . .............. 1 , 3 6 4
8,335
Note: The auditor’s remuneration was born by the immediat e holding company of Tianjin Beiterui Nano for
the five months ended 31 May 2021.
10. INCOME TAX EXPENSE
Five months
ended 31 May
2021
RMB’000
PRC Enterprise Income Tax
—C u r r e n tt a x....................................................... 2 , 8 1 9
—D e f e r r e dt a x( N o t e2 4 )............................................... ( 3 4 1 )
2,478
Under the Law of the PRC on Enterprise Income Tax (the ‘‘ EIT Law ’’) and Implementation Regulation of
the EIT Law, the tax rate is 25% unless subject to tax exemption set out below.
Tianjin Beiterui Nano was accredited as a ‘‘High and New Technology Enterprise’’ in 2020, and therefore
Tianjin Beiterui Nano was entitled to a preferentia l income tax rate of 15% for the five months ended 31 May
2021, respectively. This qualification is subject to review by the relevant tax authority in the PRC for every three
years.
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The tax expense for the five months ended 31 May 2021 can be reconciled to the profit before taxation per
the statements of profit or loss and other comprehensive income as follows:
Five months
ended 31 May
2021
RMB’000
P r o f i tb e f o r et a x a t i o n.................................................. 3 5 , 5 6 6
T a xa tt h es t a t u t o r yt a xr a t eo f1 5 % ........................................ 5 , 3 3 5
T a xe f f e c to fe x p e n s e st h a ta r en o td e d u c t i b l ef o rt a xp u r p o s e s..................... 1 0 3
U t i l i s a t i o no fd e d u c t i b l et e m p o r a r yd i f f e r e n c e sp r e v i o u s l yn o tr e c o g n i s e d .............. ( 1 , 1 1 7 )
Effects of additional tax deducti on for eligible research and
d e v e l o p m e n te x p e n s e s ................................................ ( 1 , 8 4 3 )
I n c o m et a xe x p e n s ef o rt h ep e r i o d ......................................... 2 , 4 7 8
11. DIRECTORS’, CHIEF EXECUTIVE’ S AND SUPERVISORS’ EMOLUMENTS
Mr. Huang Youyuan is the chief executive of Tianji n Beiterui Nano and his emolument disclosed below
included those for services rendered by him as th e chief executive of Tianjin Beiterui Nano.
There were no fees and other emoluments payable to executive directors, Mr. Huang Youyuan, Mr.
Huang Yingfang and Mr. Zhang Xiaofeng, and superv isor Mr. Cui Lide during the Pre-acquisition Period.
There was no arrangement under which a director, supe rvisor or the chief executive waived or agreed to
waive any remuneration during the Pre-acquisition Period.
12. FIVE HIGHEST PAID EMPLOYEES
The individuals whose emoluments were the top 5 high est in Tianjin Beiterui Nano for the five months
ended 31 May 2021 were not directors of Tianjin Beiter ui Nano. Details of the emoluments of the individuals
during the Pre-acquisition Period are as follows:
Five months
ended 31 May
2021
RMB’000
Wages, salaries and bonuses .............................................. 5 1 0
R e t i r e m e n tb e n e f i te x p e n s e s .............................................. 3 7
S o c i a ls e c u r i t yc o s t s ,h o u s i n gb e n e f i t sa n do t h e re m p l o y e eb e n e f i t s .................. 2 7
574
The number of highest paid employees whose remunera tion fell within the following band is as follows:
Five months
ended 31 May
2021
Nil to HK$1,000,000 . . . ................................................ 5
During the Pre-acquisition Period, no emolumen ts were paid by Tianjin Beiterui Nano to any of the
directors or the five highest paid i ndividuals (including directors and employees) as an inducement to join or
upon joining Tianjin Beiterui Nano or as compensation for loss of office.
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13. DIVIDENDS
No dividend has been paid or declared by Tianjin Be iterui Nano during the Pr e-acquisition Period.
14. PROPERTY, PLANT AND EQUIPMENT
Construction
in progress
Plant and
machinery
Motor
vehicles
Other
equipment
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST
At 1 January 2021 (Unaudited) . . 889 106,777 1,124 4,147 14,966 127,903
A d d i t i o n s .................. 4 6 1 2 7 2 3 6 — — 4 0 9
D i s p o s a l s .................. — — — — ( 9 7 ) ( 9 7 )
T r a n s f e r s .................. ( 2 7 4 ) 2 7 4 — — — —
A t3 1M a y2 0 2 1............. 6 6 1 1 0 7 , 1 7 8 1 , 3 6 0 4 , 1 4 7 1 4 , 8 6 9 128,215
ACCUMULATED
DEPRECIATION
At 1 January 2021 (Unaudited) . . — 40,911 585 2,422 6,333 50,251
Depreciation provided for the
p e r i o d .................. — 3 , 9 7 6 8 8 3 1 8 6 8 9 5 , 0 7 1
A t3 1M a y2 0 2 1............. — 4 4 , 8 8 7 6 7 3 2 , 7 4 0 7 , 0 2 2 5 5 , 3 2 2
CARRYING AMOUNT
A t3 1M a y2 0 2 1............. 6 6 1 6 2 , 2 9 1 6 8 7 1 , 4 0 7 7 , 8 4 7 7 2 , 8 9 3
15. RIGHT-OF-USE ASSETS
Leasehold
properties
RMB’000
CARRYING AMOUNT
A t1J a n u a r y2 0 2 1( U n a u d i t e d ) ........................................... 1 2 , 6 3 0
D e p r e c i a t i o nc h a r g e ................................................... ( 2 9 6 )
A t3 1M a y2 0 2 1...................................................... 1 2 , 3 3 4
16. FINANCIAL ASSETS AT FAIR VALUE THR OUGH OTHER COMPREHENSIVE INCOME
As at
31 May
2021
RMB’000
Unlisted equity investments, at fair value
— Huanggang Linli New Energy Technology Co., Ltd.
(‘‘Huanggang Linli ’ ’ ) ............................................... 1 2 , 4 5 0
17. INVENTORIES
As at
31 May
2021
RMB’000
R a wm a t e r i a l s ....................................................... 5 6 , 8 2 8
W o r ki np r o g r e s s ..................................................... 1 , 2 3 3
Finished goods ....................................................... 2 7 , 8 6 9
85,930
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 2 9–


--- page 668 ---
The impairment losses on inventories of approxim ately RMB12,000 was recognised for the five months
ended 31 May 2021.
18. TRADE AND OTHER RECEIVABLES
As at
31 May
2021
RMB’000
T r a d er e c e i v a b l e s ..................................................... 293,000
B i l l sr e c e i v a b l e....................................................... 9 7 , 2 0 8
Other receivables ..................................................... 8 , 6 5 4
398,862
Analysis for reporting purposes:
N o n - c u r r e n tp o r t i o n................................................... 7 8
C u r r e n tp o r t i o n ...................................................... 398,784
398,862
Tianjin Beiterui Nano’s trading terms with its cu stomers are mainly on credit. The credit period is
generally from 30 days to 90 days. Tianjin Beiterui Nano seeks to maintain strict control over its outstanding
receivables to minimise credit risk. Overdue balances are reviewed regularly by senior management. Tianjin
Beiterui Nano does not hold any collateral or other credi t enhancements over its trade receivable balances. The
balances of trade receivables are non-interest-bearing.
The following is an aged analysis of trade receivables n et of allowance for expected credit losses presented
based on revenue recognition date.
As at
31 May
2021
RMB’000
W i t h i n1y e a r ........................................................ 293,000
All bills received by Tianjin Beiterui Nano ar e with a maturity period of less than one year.
19. CASH AND CASH EQUIVALENTS
As at
31 May
2021
RMB’000
Bank balances and cash
C a s ho nh a n d ........................................................ 2
C a s ha tb a n k s ....................................................... 1 9 , 0 4 6
19,048
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 0–


--- page 669 ---
20. TRADE AND OTHER PAYABLES
As at
31 May
2021
RMB’000
T r a d ep a y a b l e s ....................................................... 224,453
B i l l sp a y a b l e s ........................................................ 4 8 , 0 0 5
Other payables ....................................................... 1 3 , 0 7 9
285,537
The following is an aged analysis of trade payables as at 31 May 2021, presented based on the invoice date
are as follows:
As at
31 May
2021
RMB’000
W i t h i n1y e a r ........................................................ 224,453
The trade payables are non-interest-bearing and are normally settled on terms of 90 days.
The bills payables are guaranteed by banks in the PRC and have maturities of 3 to 6 months.
21. LEASE LIABILITIES
As at
31 May
2021
RMB’000
Lease liabilities payable:
W i t h i no n ey e a r...................................................... 2 0 , 1 0 5
20,105
Less: Amounts for settlement within 12 m onths shown under current liabilities .......... ( 2 0 , 1 0 5 )
Amounts due for settlement after 12 mont hs shown under non-current liabilities ......... —
The weighted average incremental borrowing rates a pplied to lease liabilities at 4.9% as at 31 May 2021.
22. CONTRACT LIABILITIES
Tianjin Beiterui Nano recognised the following revenue-related contract liabilities:
As at
31 May
2021
RMB’000
Sales of lithium iron phos phate cathode material ............................... 5 1 5
As at 1 January 2021, contract liabilities amounted to RMB2,390,000.
Tianjin Beiterui Nano receives certain amount of t he contract values as receipt in advances upon receiving
the purchase orders from customers. The receipt in advan ce results in contract liabilities being recognised until
the customer obtains control of the goods.
All contract liabilities are expected to be recognised as income within one year.
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 1–


--- page 670 ---
23. DEFERRED INCOME
RMB’000
At 1 January 2021 (Unaudited) ............................................ 1 , 9 4 1
R e c o g n i s e di ns t a t e m e n to fp r o f i to rl o s s ..................................... ( 6 6 1 )
At 31 May 2021 ...................................................... 1 , 2 8 0
As at
31 May
2021
RMB’000
Analysis for reporting purposes:
N o n - c u r r e n tp o r t i o n................................................... 7 2 4
C u r r e n tp o r t i o n ...................................................... 5 5 6
1,280
Deferred income mainly represents the PRC loca l government grants received from relevant PRC
authorities for compensate Tianjin Beiterui Nano’s dev elopment costs and fixed asset investments. Government
grants received for compensate for Tianjin Beiterui Nano’s development costs which has not yet been
undertaken are included in deferred income and recognis ed as income on a systematic basis of over the periods
that the cost, which it is intended to compensate, are e xpensed. Government grants received relates to assets
invested were credited to deferred income and are reco gnised as income over the expected useful lives of the
relevant assets.
24. DEFERRED TAX ASSETS
The following are the Tianjin Beiterui Nano’s major deferred tax assets recognised and movements
thereon during the Pre-acquisition Period:
Impairment
of assets
Accrued
expenses Tax losses
Deferred
income Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
A t1J a n u a r y2 0 2 1( U n a u d i t e d ) .... 1 , 6 4 3 5 9 0 5 7 2 9 1 2 , 5 8 1
Credited/(charged) to profit or loss. . 370 127 (57) (99) 341
A t3 1M a y2 0 2 1............... 2 , 0 1 3 7 1 7 — 1 9 2 2 , 9 2 2
25. SHARE CAPITAL
Number of
shares Amount
RMB’000
Registered, issued and fully paid ordinary shares with par value of
RMB1.00 each share
A t1J a n u a r y2 0 2 1( U n a u d i t e d )a n d3 1M a y2 0 2 1 .................. 100,000,000 100,000
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 2–


--- page 671 ---
26. RESERVES
The amounts of Tianjin Beiterui Nano’s reserves and th e movements therein are presented in the statement
of changes in equity of the Tianjin Beiterui Nano Historical Financial Information.
Statutory reserve
In accordance with the relevant laws and regulations in the PRC, Tianjin Beiterui Nano are required to
appropriate 10% of the annual statutory net profit, after o ffsetting any prior years’ losses to the statutory
reserve fund before distributing the net profit. When the r espective balance of the statutory reserve fund reaches
50% of the share capital of Tianjin Beiterui Nano, any fur ther appropriation is at the discretion of shareholders
of Tianjin Beiterui Nano. The statutory reserve fund can be used to offset prior years’ losses, if any, and may be
converted into share capital by issuing new shares to shar eholders in proportion to th eir existing shareholding
or by increasing the par value of the shares currently held by them, provided that the respective remaining
balance of the statutory reserve f und after such issue is not less than 25 % of registered capital of Tianjin
Beiterui Nano.
27. FINANCIAL INSTRUMENTS
Categories of financial instruments
As at
31 May
2021
RMB’000
Financial assets
U n l i s t e de q u i t yi n s t r u m e n ta tf a i rv a l u et h r o u g ho t h e rc o m p r e h e n s i v ei n c o m e ........... 1 2 , 4 5 0
Trade and other receivables — amortised cost ................................. 393,046
C a s ha n dc a s he q u i v a l e n t s—a m o r t i s e dc o s t.................................. 1 9 , 0 4 8
424,544
Financial liabilities
F i n a n c i a ll i a b i l i t i e si n c l u d e di nt r a d ea n do t h e rp a y a b l e s ......................... 283,315
L e a s el i a b i l i t i e s ....................................................... 2 0 , 1 0 5
303,420
Financial risk management objectives and policies
Tianjin Beiterui Nano’s major financial instrum ents include financial assets at fair value through
other comprehensive income, trade and other recei vables, cash and cash equivalents, trade and other
payables and lease liabilities. Details of the financial instruments are disclosed in respective notes.
The risks associated with these financial instru ments include credit risk and liquidity risk. The
policies on how to mitigate these risks are set out below. The management of Tianjin Beiterui Nano
manages and monitors these exposures to ensure a ppropriate measures are imp lemented in a timely and
effective manner.
Credit risk and impairment assessment
At the end of the reporting period, Tianjin Beite rui Nano’s maximum exposure to credit risk which
will cause a financial loss to Tia njin Beiterui Nano due to failure to discharge an obligation by the
counterparties is arising from the carrying amount of th e respective recognised financial assets as stated in
the statement of financial position.
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 3–


--- page 672 ---
Credit risk refers to the risk that Tianjin Beiterui Nano’s counterparties default on their contractual
obligations resulting in financial losses to Tianjin B eiterui Nano. Tianjin Beiterui Nano’s credit risk
exposures are primarily attributable to trade and othe r receivables and cash and cash equivalents. Tianjin
Beiterui Nano does not hold any collateral or other credi t enhancements to cover its credit risks associated
with its financial assets.
Movements in the allowance for expected credit losses in respect of the trade receivables during the
Pre-acquisition Period are as follows:
Weighted
average loss
rate
Gross carrying
amount Loss allowance
Net carrying
amount
RMB’000 RMB’000 RMB’000
As at 31 May 2021
ECL assessed collectively based on
debtors’ aging
W i t h i n1y e a r ................... 5 . 5 2 % 2 3 5 , 3 5 1 1 2 , 9 9 1 222,360
E C La s s e s s e di n d i v i d u a l l y.......... 7 0 , 6 4 0 — 7 0 , 6 4 0
305,991 12,991 293,000
Movement in lifetime ECL that has been recogn ised for trade receivables, under the simplified
approach is as follows:
RMB’000
At 1 January 2021 (Unaudited) ............................................ 1 0 , 4 2 0
Impairment loss under expected credit loss model, net of reversal ................... 2 , 5 7 1
At 31 May 2021 ...................................................... 1 2 , 9 9 1
Other receivables
Tianjin Beiterui Nano measures the loss allowa nce equal to 12-month ECL of other receivables. For
those balances expected to have significant increase in c redit risk since initial recognition, Tianjin Beiterui
Nano apply lifetime ECL based on aging for classes with different credit risk characteristics and
exposures. Management makes periodic collectiv e assessments as well as individual assessment on the
recoverability of other receivable s based on historical settlement records and past experience.
Movement in the loss allowance account in respect of other receivables during the Pre-acquisition
Period is as follows:
RMB’000
At 1 January 2021 (Unaudited) ............................................ 8 4
I m p a i r m e n tl o s sr e c o g n i s e d.............................................. 4 1
At 31 May 2021 ...................................................... 1 2 5
Cash and cash equivalents
Credit risk on cash and cash equivalents is limite d because the counterparties are reputable banks
with high credit ratings assigned by internationa l credit agencies or state-owned banks in the PRC.
Liquidity risk
In the management of the liquidity risk, Tianjin Beiterui Nano monitors and maintains a level of
cash and cash equivalents deemed adequate by the management to finance Tianjin Beiterui Nano’s
operations and mitigate the effect s of fluctuations in cash flows.
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 4–


--- page 673 ---
The following table details Tianji n Beiterui Nano’s remaining contra ctual maturity for its financial
liabilities and lease liabilities. The table has b een drawn up based on the undiscounted cash flows of
financial liabilities and lease liabilities based on the earliest date on which Tianjin Beiterui Nano can be
required to pay.
Weighted
average
interest rate
On demand
and/or less
t h a n1y e a r 1t o2y e a r s
Total
contractual
undiscounted
cash flow
Total
carrying
amount
% RMB’000 RMB’000 RMB’000 RMB’000
At 31 May 2021
T r a d ea n do t h e rp a y a b l e s ........ 0 . 0 1 % 283,346 — 283,346 283,315
L e a s el i a b i l i t i e s ................ 4 . 9 0 % 2 1 , 0 0 0 — 2 1 , 0 0 0 2 0 , 1 0 5
304,346 — 304,346 303,420
Capital management
Tianjin Beiterui Nano manages its capital to ens ure that Tianjin Beiterui Nano will be able to
continue as a going concern while maximising the ret urn to shareholders throug h the optimisation of the
debt and equity balance. Tianjin Beiterui Nano’ s overall strategy remains unchanged during the
Pre-acquisition Periods.
The capital structure of Tianjin Beiterui Nano consists of net debt, which includes the lease
liabilities disclosed in Note 21, net of cash and ca sh equivalents and equity at tributable to owners of
Tianjin Beiterui Nano, comprising issued share capital, retained profits and other reserves.
The directors of Tianjin Beiterui Nano review the c apital structure on a regular basis and considers
the cost of capital and the risks associated with eac h class of capital. Based on recommendations of the
directors of Tianjin Beiterui Nano, Ti anjin Beiterui Nano will balance its overall capital structure through
the maturity of lease liabilities as well as new share i ssues and increase of banking facilities or redemption
of existing debt.
Fair value measurements of financial instruments
The management of Tianjin Beiterui Nano considers that the carrying amounts of financial assets
and financial liabilities recorded at amortised cos t in the Tianjin Beiterui Nano Historical Financial
Information approximate their fair values at the en d of each reporting period based on discounted cash
flow analysis.
Some of Tianjin Beiterui Nano’s financial asse ts are measured at fair value at the end of each
reporting period. The following table gives informat ion about how the fair values of these financial assets
are determined (in particular, the valuation technique(s) and inputs used), as well as the level of the fair
value hierarchy into which the fair value measuremen ts are categorised (Levels 1 to 3) based on the degree
to which the inputs to the fair value measurements is observable.
Level 3
RMB’000
At 31 May 2021
F i n a n c i a la s s e t sa tf a i rv a l u et h r o u g ho t h e rc o m p r e h e n s i v ei n c o m e .................. 1 2 , 4 5 0
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 5–


--- page 674 ---
The following table presents the changes in level 3 instruments of financial assets at fair value
through other comprehensive income as at 31 May 2021.
As at
31 May
2021
RMB’000
Fair value through other comprehensive income (Note)
A tt h eb e g i n n i n go ft h ep e r i o d ............................................ —
A d d i t i o n s ........................................................... 1 2 , 4 5 0
A tt h ee n do ft h ep e r i o d ................................................ 1 2 , 4 5 0
Note: The fair values of unlisted equity instruments at fai r value through other comprehensive income as at 31
May 2021 is assessed by the management of Tianji n Beiterui Nano with reference to its recent
transaction prices.
28. RELATED PARTY TRANSACTIONS
The following significant transactions were carrie d out between Tianjin Beiterui Nano and its related
parties during the Pre-acquisition Period. In the opini on of the directors of Tianjin Beiterui Nano, the related
party transactions were carried out at te rms negotiated between Tianjin Beiterui Nano and the respective related
parties.
Name and relationship with related parties
The following companies are related parties of Tianjin Beiterui Nano that had balances and/or
transactions with Tianjin Beiterui Nano during the Pre-acquisition Period.
Name of related parties Relationship with Tianjin Beiterui Nano
BTR Nano Tech Co., Ltd. (‘‘ BTR Nano Tech ’ ’ )......... T h ei m m e d i a t eh o l d i n gc o m p a n y
BTR New Material Group (‘‘ BTR New Material ’ ’ )....... T h ei n t e r m e d i a t eh o l d i n gc o m p a n y
BTR (Jiangsu) New Material Technology Co., Ltd.
(‘‘BTR (Jiangsu) New Material ’ ’ ) ..................
A fellow subsidiary
BTR (Jiangsu) New Energy Material Co., Ltd.
(‘‘BTR (Jiangsu) New Energy ’ ’ )...................
A fellow subsidiary
Jiangsu BTR NANO Technology Co., Ltd.
(‘‘Jiangsu Beiterui Nano ’ ’ ) .......................
A fellow subsidiary
Tianjin BTR New Energy Technology Co., Ltd.
(‘‘Tianjin BTR ’ ’ ) .............................
A fellow subsidiary
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 6–


--- page 675 ---
Significant related party transactions
Five months
ended 31 May
2021
RMB’000
Revenue from sales of products
B T RN a n oT e c h ...................................................... 7 1 3
B T R( J i a n g s u )N e wM a t e r i a l............................................. 1 1 , 4 6 8
B T RN e wM a t e r i a l .................................................... 7
J i a n g s uB e i t e r u iN a n o .................................................. 6 3 , 2 6 8
75,456
Purchase
B T RN a n oT e c h ...................................................... 2 9 0
B T R( J i a n g s u )N e wM a t e r i a l............................................. 8 9 , 3 2 5
J i a n g s uB e i t e r u iN a n o .................................................. 181,377
270,992
Interest expenses
B T RN e wM a t e r i a l .................................................... 9 4
B T RN a n oT e c h ...................................................... 2 1 1
305
Significant balances with related parties
As disclosed in the statement of financial positi on, Tianjin Beiterui Nano had outstanding balances
with related parties at 31 May 2021 as follows:
As at
31 May
2021
RMB’000
Trade receivables from (Note (a))
B T R( J i a n g s u )N e wM a t e r i a l............................................. 9 , 2 3 6
J i a n g s uB e i t e r u iN a n o .................................................. 7 0 , 2 0 2
79,438
Other receivables from (Note (b))
B T R( J i a n g s u )N e wM a t e r i a l............................................. 2 , 5 0 9
2,509
81,947
Trade payables to (Note (a))
B T RN a n oT e c h ...................................................... 3 2
B T R( J i a n g s u )N e wM a t e r i a l............................................. 2 , 8 9 4
J i a n g s uB e i t e r u iN a n o .................................................. 150,477
153,403
Other payables to (Note (c))
B T RN a n oT e c h ...................................................... 7 1 1
711
154,114
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 7–


--- page 676 ---
Notes:
(a) All balances are trade in nature, unsecured, interes t-free and with credit period from one to three months.
(b) All balances are trade in nature, unsecured, interest-free and repayable on demand.
(c) All balance are non-trade in nature, unsecured, repa yable on demand and bearing fixed interest rate of
4.00% to 4.35% per annum.
Key management personnel compensations
No compensation paid or payable to key management personnel (including chief executive officer,
directors of Tianjin Beiterui Nano and supervisors o f Tianjin Beiterui Nano) for employee services during
the Pre-acquisition Period.
29. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by Tianjin Beiterui Nano in respect of any period
subsequent to 30 June 2024.
APPENDIX IB ACCOUNTANTS’ REPORT OF TIANJIN BEITERUI NANO
–I B - 3 8–


--- page 677 ---
The following is the text of a report set out on pages IC-1 to IC-36, prepared for inclusion
in this prospectus, received from the independent reporting accountants of the Company,
Moore CPA Limited, Certified Public Accountants, Hong Kong.
ACCOUNTANTS’ REPORT ON JIANGSU BEITERUI NANO HISTORICAL
FINANCIAL INFORMATION TO THE DIRECTORS OF JIANGSU LOPAL TECH.
CO., LTD., GUOTAI JUNAN CAPITAL LIMITED AND HALCYON CAPITAL
LIMITED
Introduction
We report on the historical financial inform ation of Jiangsu Beit erui Nano Technology
Co., Ltd. (‘‘Jiangsu Beiterui Nano ’ ’ )s e to u to np a g e sI C - 3t oI C - 3 6 ,w h i c hc o m p r i s e st h e
statement of profit or loss and other comprehensive income, statement of changes in equity
and statement of cash flows of Jiangsu Beiterui Nano for the period from 28 January 2021
(date of incorporation) to 31 May 2021 (the ‘‘ Pre-acquisition Period ’’), the statement of
financial position of Jiangsu Beiterui Nano as at 31 May 2021, and material accounting
policy information and other explanatory information (together, the ‘‘ Jiangsu Beiterui Nano
Historical Financial Information ’’). The Jiangsu Beiterui Nano Historical Financial
Information set out on pages IC-3 to IC-36 forms an integral part of this report, which
has been prepared for inclusion in the prospectus of Jiangsu Lopal Tech Co., Ltd. (the
‘‘Company ’’) dated 22 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 Jiangsu Beiterui Nano Hist orical Financia l Information
The directors of Jiangsu Beiterui Nano are responsible for the preparation of the
Jiangsu Beiterui Nano Historical Financial Information that gives a true and fair view in
accordance with the basis of preparation set out in Note 2 to the Jiangsu Beiterui Nano
Historical Financial Information, and for such internal control as the directors determine is
necessary to enable the preparation of the Jiangsu Beiterui Nano 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 o n the Jiangsu Beiterui Nano 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
(‘‘HKSIR 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 Jiangsu Beiterui Nano
Historical Financial Information is free from material misstatement.
APPENDIX IC ACCOUNTANTS’ REPORT OF JIANGSU BEITERUI NANO
–I C - 1–


--- page 678 ---
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Jiangsu Beiterui Nano Histo rical Financial Information. The procedures
selected depend on the reporting accountants’ judgment, including the assessment of risks
of material misstatement of the Jiangsu Beite rui Nano Historical Financial Information,
whether due to fraud or error. In making those risk assessments, the reporting accountants
consider internal control relevant to the enti ty’s preparation of the Jiangsu Beiterui Nano
Historical Financial Information that gives a true and fair view in accordance with the basis
of preparation set out in Note 2 to the Jiangsu Beiterui Nano 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 estimate s made by the directors, as well as evaluating
the overall presentation of the Jiangsu Beiterui Nano 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 Jiangsu Beiterui Nano Historical Financial Information gives, for
the purposes of the accountants’ report, a true and fair view of the financial position of
Jiangsu Beiterui Nano as at 31 May 2021 and of the financial performance and cash flows of
Jiangsu Beiterui Nano for the Pre-acquisi tion Period in accordance with the basis of
preparation set out in Note 2 to the Jiangsu Beiterui Nano 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 Jiangsu Beiterui Nano H istorical Financial Information, no
adjustments to the Jiangsu Beiterui Nano Underlying Financial Statements as defined on
page IC-3 have been made.
Dividends
No dividends have been paid by Jiangsu Beiterui Nano in respect of the Pre-acquisition
Period.
Yours faithfully,
Moore CPA Limited
Certified Public Accountants
Pak Chi Yan
Practising Certificate Number: P06923
Hong Kong, 22 October 2024
APPENDIX IC ACCOUNTANTS’ REPORT OF JIANGSU BEITERUI NANO
–I C - 2–


--- page 679 ---
I. THE JIANGSU BEITERUI NANO HIST ORICAL FINANCIAL INFORMATION
Preparation of the Jiangsu Beiterui Nano Historical Financial Information
Set out below is the Jiangsu Beiterui Nano Historical Financial Information
which forms an integral part of this accountants’ report.
The financial statements of Jiangsu Beiterui Nano for the Pre-acquisition Period,
on which the Jiangsu Beiterui Nano Historical Financial Information is based, have
been prepared in accordance with IFRS Accounting Standards (‘‘ IFRSs ’’) issued by
International Accounting Standards Board (the ‘‘ IASB ’’) and were audited by Moore
CPA Limited in accordance with Hong Kong Standards on Auditing issued by the
HKICPA (the ‘‘Jiangsu Beiterui Nano Underlying Financial Statements ’’).
The Jiangsu Beiterui Nano Historical Financial Information is presented in
Renminbi (‘‘RMB’’) and all values are rounded to the nearest thousand (RMB’000)
except when otherwise indicated.
APPENDIX IC ACCOUNTANTS’ REPORT OF JIANGSU BEITERUI NANO
–I C - 3–


--- page 680 ---
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Notes
Period from
28 January 2021
to 31 May 2021
RMB’000
R e v e n u e ....................................... 6 2 6 8 , 8 4 8
C o s to fs a l e s ................................... ( 2 3 6 , 5 4 1 )
G r o s sp r o f i t .................................... 3 2 , 3 0 7
O t h e ri n c o m e ,g a i n sa n dl o s s e s ....................... 7 4 9 5
I m p a i r m e n tl o s s e so nf i n a n c i a la s s e t s .................. ( 2 , 9 0 2 )
Selling and distribution expenses . .................... ( 2 0 )
A d m i n i s t r a t i v ee x p e n s e s ........................... ( 2 , 6 9 6 )
R e s e a r c ha n dd e v e l o p m e n te x p e n s e s................... ( 4 , 9 0 7 )
F i n a n c ec o s t s................................... 8 ( 1 , 2 6 5 )
P r o f i tb e f o r et a x a t i o n............................. 9 2 1 , 0 1 2
I n c o m et a xe x p e n s e ............................... 1 0 ( 4 , 2 9 0 )
Profit and total comprehensive income for the period ........ 1 6 , 7 2 2
APPENDIX IC ACCOUNTANTS’ REPORT OF JIANGSU BEITERUI NANO
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STATEMENT OF FINANCIAL POSITION
As at
31 May
Notes 2021
RMB’000
NON-CURRENT ASSETS
P r o p e r t y ,p l a n ta n de q u i p m e n t ....................... 1 4 3 1 4 , 6 6 5
R i g h t - o f - u s ea s s e t s............................... 1 5 3 0 , 7 2 4
D e f e r r e dt a xa s s e t s............................... 2 2 8 3 8
P r e p a y m e n t s ,d e p o s i t sa n do t h e rr e c e i v a b l e s ............. 1 7 3 , 1 6 6
T o t a ln o n - c u r r e n ta s s e t s ........................... 3 4 9 , 3 9 3
CURRENT ASSETS
I n v e n t o r i e s ..................................... 1 6 1 0 3 , 2 5 6
T r a d ea n do t h e rr e c e i v a b l e s ......................... 1 7 2 6 0 , 3 8 8
C a s ha n dc a s he q u i v a l e n t s .......................... 1 8 5 , 4 7 5
T o t a lc u r r e n ta s s e t s ............................... 3 6 9 , 1 1 9
CURRENT LIABILITIES
T r a d ea n do t h e rp a y a b l e s .......................... 1 9 3 6 0 , 8 9 6
T a xp a y a b l e .................................... 3 , 5 4 3
Lease liabilities. . . . . . ............................ 2 0 1 9 , 5 6 3
Contract liabilities . . . ............................ 2 1 1 , 3 4 7
T o t a lc u r r e n tl i a b i l i t i e s............................ 3 8 5 , 3 4 9
NET CURRENT LIABILITIES ...................... ( 1 6 , 2 3 0 )
TOTAL ASSETS LESS CURRENT LIABILITIES ........ 3 3 3 , 1 6 3
NON-CURRENT LIABILITY
Lease liabilities. . . . . . ............................ 2 0 1 6 , 4 4 1
N e ta s s e t s ..................................... 3 1 6 , 7 2 2
EQUITY
S h a r ec a p i t a l ................................... 2 3 3 0 0 , 0 0 0
R e s e r v e s ...................................... 2 4 1 6 , 7 2 2
T o t a le q u i t y .................................... 3 1 6 , 7 2 2
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STATEMENT OF CHANGES IN EQUITY
Share capital
Statutory
reserve
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000
(Note 23)
Issue of share upon
i n c o r p o r a t i o n ............ 3 0 0 , 0 0 0 — — 3 0 0 , 0 0 0
Profit and total comprehensive
i n c o m ef o rt h ep e r i o d ....... — — 1 6 , 7 2 2 1 6 , 7 2 2
Appropriation to statutory
r e s e r v e ................. — 1 , 6 7 2 ( 1 , 6 7 2 ) —
A t3 1M a y2 0 2 1............ 3 0 0 , 0 0 0 1 , 6 7 2 1 5 , 0 5 0 3 1 6 , 7 2 2
APPENDIX IC ACCOUNTANTS’ REPORT OF JIANGSU BEITERUI NANO
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STATEMENT OF CASH FLOWS
Notes
Period from
28 January 2021
to 31 May 2021
RMB’000
CASH FLOWS FROM OPERATING ACTIVITIES
P r o f i tb e f o r et a x a t i o n............................. 2 1 , 0 1 2
Adjustments for:
F i n a n c ec o s t s.................................. 8 1 , 2 6 5
I n t e r e s ti n c o m eo nb a n kd e p o s i t ..................... 7 ( 2 )
D e p r e c i a t i o no fp r o p e r t y ,p l a n ta n de q u i p m e n t .......... 1 4 6 , 7 4 4
D e p r e c i a t i o no fr i g h t - o f - u s ea s s e t s................... 1 5 4 , 8 5 1
I m p a i r m e n tl o s s e so nt r a d er e c e i v a b l e s................ 9 2 , 8 9 1
I m p a i r m e n tl o s s e so no t h e rr e c e i v a b l e s................ 9 1 1
I m p a i r m e n tl o s s e so ni n v e n t o r i e s .................... 9 8 5
Operating cash flows before movements in working capital . . . 36,857
I n c r e a s ei ni n v e n t o r i e s ............................. ( 1 0 3 , 3 4 1 )
Increase in trade and other receivables . ................ ( 2 6 6 , 4 5 6 )
I n c r e a s ei nt r a d ea n do t h e rp a y a b l e s ................... 2 6 9 , 7 4 1
I n c r e a s ei nc o n t r a c tl i a b i l i t i e s ........................ 1 , 3 4 7
C a s hu s e di no p e r a t i o n s ........................... ( 6 1 , 8 5 2 )
I n c o m et a xp a i d................................. ( 1 , 5 8 5 )
N e tc a s hf l o w su s e di no p e r a t i n ga c t i v i t i e s ............... ( 6 3 , 4 3 7 )
CASH FLOWS FROM INVESTING ACTIVITIES
I n t e r e s ti n c o m er e c e i v e d ........................... 2
P u r c h a s eo fp r o p e r t y ,p l a n ta n de q u i p m e n t.............. ( 3 2 1 , 4 0 9 )
N e tc a s hf l o w su s e di ni n v e s t i n ga c t i v i t i e s............... ( 3 2 1 , 4 0 7 )
CASH FLOWS FROM FINANCING ACTIVITY
P r o c e e df r o mi s s u eo fs h a r e s ........................ 3 0 0 , 0 0 0
A d v a n c e sf r o mi m m e d i a t eh o l d i n gc o m p a n y ............. 9 0 , 3 1 9
N e tc a s hf l o w sf r o mf i n a n c i n ga c t i v i t y ................. 3 9 0 , 3 1 9
NET INCREASE IN CASH AND CASH EQUIVALENTS AND
CASH AND CASH EQUIVALENTS AT END OF PERIOD 18 5,475
APPENDIX IC ACCOUNTANTS’ REPORT OF JIANGSU BEITERUI NANO
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II. NOTES TO THE JIANGSU BEITERUI NANO HISTORICAL FINANCIAL
INFORMATION
1. GENERAL INFORMATION
Jiangsu Beiterui Nano is a company with limited liability established in the People’s Republic of China
(hereafter, the ‘‘PRC’’) on 28 January 2021. The registered address o f the office of Jiangsu Beiterui Nano is No.
519, Jiangdong Avenue, Jinta n District, Changzhou, PRC.
Jiangsu Beiterui Nano is principally engaged in resea rch, development, production and sales of battery
materials.
The Jiangsu Beiterui Nano Historical Financial I nformation is presented in RMB, which is also the
functional currency of Jiangsu Beiterui Nano.
2. BASIS OF PREPARATION OF THE JIANGSU BEITERUI NANO HISTOR ICAL FINANCIAL
INFORMATION
The Jiangsu Beiterui Nano Historical Financial Inf ormation has been prepared in accordance with IFRSs,
which comprise all standards and interpretations appr oved by the IASB. All IFRSs effective for the accounting
period commencing from 1 January 2024, together with th e relevant transitional provisions, have been early
adopted by Jiangsu Beiterui Nano in the preparation o f the Jiangsu Beiterui Nano Historical Financial
Information throughout the Pre-acquisition Period.
3. ADOPTION OF NEW AND AMENDMENTS TO IFRSS
For the purpose of preparing and presenting the Jiangs u Beiterui Nano Historical Financial Information
for the Pre-acquisition Period, Jiangsu Beiterui Nano h as consistently adopted the accounting policies which
includes all the International Accounting Standards (‘‘ IASs ’’), the IFRSs, amendments to IFRSs and the related
interpretations issued by the IASB, which are effective f or Jiangsu Beiterui Nano’s f inancial year beginning on 1
January 2024, throughout the Pre-acquisition Period.
New and amendments to IFRSs in issue but not yet effective
At the date of this report, the following new and amendments to IFRS Accounting Standards have
been issued which are not yet effective:
IFRS 18 Presentation and Disclosures in Financial Statements 5
IFRS 19 Subsidiaries without Public Accountability: Disclosures 5
Amendments to IFRS 9 and
IFRS 7
Classification and Measurement of Financial Instruments 4
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture 3
Amendments to IFRS 16 Lease liability in a Sale and Leaseback 1
Amendments to IAS 1 Classification of Liabilities as Current or Non-current 1
Amendments to IAS 1 Non-current Liabilities with Covenants 1
Amendments to IAS 7 and
IFRS 7
Supplier Finance Arrangements 1
Amendments to IAS 21 Lack of Exchangeability 2
1 Effective for annual periods be ginning on or after 1 January 2024
2 Effective for annual periods be ginning on or after 1 January 2025
3 Effective for annual periods beginni ng on or after a date to be determined
4 Effective for annual periods be ginning on or after 1 January 2026
5 Effective for annual periods be ginning on or after 1 January 2027
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The sole director of Jiangsu Beiterui Nano ant icipates that the application of all new and
amendments to IFRSs will have no material impact o n the Jiangsu Beiterui Nano Historical Financial
Information in the foreseeable future.
4. MATERIAL ACCOUNTING POLICY INFORMATION
The Jiangsu Beiterui Nano Historic al Financial Information has been prepared in accordance with all
IFRSs issued by the IASB. In addition, the Jiangsu Beiter ui Nano Historical Financial Information includes
applicable disclosures required by the Rules Governing the Listing of Securities of The Stock Exchange of Hong
Kong Limited (‘‘Listing Rules ’’) and by the Hong Kong Companies Ordinance.
The Jiangsu Beiterui Nano Historical Financial Infor mation has been prepared on the historical cost basis
except for certain financial instruments that are measu red at fair values at the end of each reporting period, as
explained in the accounting policies set out below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell a n asset or paid to transfer a liability in an orderly
transaction between market participants at the measure ment date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability,
Jiangsu Beiterui Nano takes into account the characteristics of th e asset or liability if market participants would
take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in the Jiangsu Beiterui Nano Historical Financial Information is
determined on such a basis, except for leasing transactions that are accounted for in accordance with IFRS 16,
and measurements that have some similarities to fair value but are not fair value, such as net realisable value in
IAS 2 ‘‘Inventories’’ or value in use i n IAS 36 ‘‘Impairment of Assets’’ (‘‘IAS 36 ’’).
In addition, for financial reporting purposes, fair val ue measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value me asurements are observable and the significance of the
inputs to the fair value measurement in its e ntirety, which are described as follows:
. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date;
. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for
the asset or liability, either directly or indirectly; and
. Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
4.1. Revenue from contracts with customers
Jiangsu Beiterui Nano recognises revenue when (or as) a performance obligation is satisfied, i.e.
when ‘‘control’’ of the goods or services underlying the p articular performance obl igation is transferred to
the customer.
A performance obligation represents a good or service (or a bundle of goods or services) that is
distinct or a series of distinct goods or services that are substantially the same.
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Control is transferred over time and revenue is recognised over time by reference to the progress
towards complete satisfaction of t he relevant performance obligation if one of the following criteria is
met:
. the customer simultaneously receives and consum es the benefits provided by Jiangsu Beiterui
Nano’s performance as Jiangsu Beiterui Nano performs;
. Jiangsu Beiterui Nano’s performance creates o r enhances an asset that the customer controls
as Jiangsu Beiterui Nano performs; or
. Jiangsu Beiterui Nano’s performance does not create an asset with an alternative use to
Jiangsu Beiterui Nano and Jiangsu Beiterui Nano has an enforceable right to payment for
performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct
good or service.
A contract asset represents Jiang su Beiterui Nano’s right to consideration in exchange for goods or
services that Jiangsu Beiterui Nano has transfer red to a customer that is not yet unconditional. It is
assessed for impairment in accordance with IFRS 9. In c ontrast, a receivable represents Jiangsu Beiterui
Nano’s unconditional right to consideration, i.e. onl y the passage of time is required before payment of
that consideration is due.
A contract liability represents J iangsu Beiterui Nano’s obligatio n to transfer goods or services to a
customer for which Jiangsu Beiterui Nano has recei ved consideration (or an amount of consideration is
due) from the customer.
A contract asset and a contract liability relat ing to the same contract are accounted for and
presented on a net basis.
Revenue from sales of goods
Jiangsu Beiterui Nano sells lithium iron phos phate cathode materials and other goods directly
to customers in accordance with the contracts ent ered with the customers. Control is passed when
the products have been accepted by the customer. The normal credit term is within 90 days effective
from the date when the goods are accepted by the customers. When the customer pays in advance for
the orders, the transaction price received by J iangsu Beiterui Nano is recognised as a contract
liability until the goods have been delivered to the customer.
Principal versus agent
When another party is involved in providing goods or services to a customer, Jiangsu Beiterui
Nano determines whether the nature of its promise is a performance obligation to provide the
specified goods or services itself (i.e. Jiangsu Be iterui Nano is a principal) or to arrange for those
goods or services to be provided by the other pa rty (i.e. Jiangsu Beiterui Nano is an agent).
Jiangsu Beiterui Nano is a principal if it contro ls the specified good or service before that good
or service is transferred to a customer.
Jiangsu Beiterui Nano is an agent if its performance obligation is to arrange for the provision
of the specified good or service by another party . In this case, Jiangsu Beiterui Nano does not
control the specified good or service provided by another party before that good or service is
transferred to the customer. When Jiangsu Beit erui Nano acts as an agent, it recognises revenue in
the amount of any fee or commission to which it expects to be entitled in exchange for arranging for
the specified goods or services to be provided by the other party.
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4.2. Leases
Definition of a lease
A contract is, or contains, a lease if the contra ct conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
For contracts entered into or modified on or af ter the date of initial application or arising
from business combinations, Jiang su Beiterui Nano assesses whether a contract is or contains a lease
based on the definition under IFRS 16 at incepti on, modification date or acquisition date, as
appropriate. Such contract will not be reassessed unless the terms and conditions of the contract are
subsequently changed.
Jiangsu Beiterui Nano as a lessee
Allocation of consideration to components of a contract
For a contract that contains a lease component and one or more additional lease or non-lease
components, Jiangsu Beiterui Nano allocates th e consideration in the contract to each lease
component on the basis of the relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
Non-lease components are separated from lea se component and are accounted for by applying
other applicable standards.
Right-of-use assets
The cost of right-of-use asset includes:
. the amount of the initial measurement of the lease liability;
. any lease payments made at or before the commencement date, less any lease incentives
received;
. any initial direct costs incurred by Jiangsu Beiterui Nano; and
. an estimate of costs to be incurred by Jia ngsu Beiterui Nano in dismantling and
removing the underlying assets, restoring th e site on which it is located or restoring the
underlying asset to the condition required b y the terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any reme asurement of lease liabilities.
Right-of-use assets in which Jiangsu Beiterui Nano is reasonably certain to obtain ownership
of the underlying leased assets at the end of the lea se term are depreciated from commencement date
to the end of the useful life. Otherwise, right-of-u se assets are depreciated on a straight-line basis
over the shorter of its estimated useful life and the lease term.
When Jiangsu Beiterui Nano obtains ownership of the underlying leased assets at the end of
the lease term, upon exercising purchase options, t he cost of the relevant right-of-use assets and the
related accumulated depreciation and impairme nt loss are transferred to property, plant and
equipment.
Jiangsu Beiterui Nano presents right-of-use a ssets as a separate line item on the statement of
financial position.
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Refundable rental deposits
Refundable rental deposits paid are account ed under IFRS 9 and initially measured at fair
value. Adjustments to fair value at initial recog nition are considered as additional lease payments
and included in the cost of right-of-use assets.
Lease liabilities
At the commencement date of a lease, Jiangsu Beiterui Nano recognises and measures the lease
liability at the present value of lease payments tha t are unpaid at that date. In calculating the present
value of lease payments, Jiangsu Beiterui Nano uses the incremental borrowing rate at the lease
commencement date if the interest rate implic it in the lease is not readily determinable.
The lease payments include:
. fixed payments (including in-substance fix ed payments) less any lease incentives
receivable;
. variable lease payments that depend on an i ndex or a rate, initially measured using the
index or rate as at the commencement date;
. amounts expected to be payable by Jiangsu Beiterui Nano under residual value
guarantees;
. the exercise price of a purchase option if Jia ngsu Beiterui Nano is reasonably certain to
exercise the option; and
. payments of penalties for terminating a lease , if the lease term reflects Jiangsu Beiterui
Nano exercising an option to terminate the lease.
After the commencement date, lease liabilities are adjusted by interest accretion and lease
payments.
Jiangsu Beiterui Nano remeasures lease liabil ities (and makes a corresponding adjustment to
the related right-of-use assets) whenever:
. the lease term has changed or there is a change in the assessment of exercise of a
purchase option, in which case the related lea se liability is remeasured by discounting
the revised lease payments using a revised discount rate at the date of reassessment.
. the lease payments change due to changes in market rental rates following a market rent
review, in which cases the related lease liabil ity is remeasured by discounting the revised
lease payments using the initial discount rate.
Jiangsu Beiterui Nano presents lease liabilit ies as a separate line item on the statement of
financial position.
Lease modifications
Jiangsu Beiterui Nano accounts for a lease modification as a separate lease if:
. the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
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. the consideration for the leases increases by an amount commensurate with the
stand-alone price for the increase in scope and any appropriate adjustments to that
stand-alone price to reflect the circu mstances of the particular contract.
For a lease modification that is not accounted fo r as a separate lease, Jiangsu Beiterui Nano
remeasures the lease liability, less any lease in centives receivable, based on the lease term of the
modified lease by discounting t he revised lease payments using a revised discount rate at the
effective date of the modification.
Jiangsu Beiterui Nano accounts for the remea surement of lease liabilities by making
corresponding adjustments to the relevant ri ght-of-use asset. When the modified contract
contains a lease component and one or more addi tional lease or non-lease components, Jiangsu
Beiterui Nano allocates the consideration in the modified contract to each lease component on the
basis of the relative stand-alone price of the leas e component and the aggregate stand-alone price of
the non-lease components.
4.3. Foreign currencies
In preparing the financial statements, transacti ons in currencies other than the functional currency
of Jiangsu Beiterui Nano (foreign currencies) are r ecognised at the rates of exchanges prevailing on the
dates of the transactions. At the end of the reporti ng period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing a t that date. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of
monetary items, are recognised in profit o r loss in the period in which they arise.
4.4. Borrowing costs
All borrowing costs not directly attributable to the acquisition, construction or production of
qualifying assets are recognised in profit or loss in the period in which they are incurred.
4.5. Employee benefits
Pension obligation
In accordance with the rules and regulations in the PRC, the PRC based employees of Jiangsu
Beiterui Nano participate in vari ous defined contribution retiremen t benefit plans organised by the
relevant municipal and provinci al governments in the PRC under which Jiangsu Beiterui Nano and
the PRC based employees are required to make mont hly contributions to these plans calculated as a
percentage of the employees’ salaries. The muni cipal and provincial governments undertake to
assume the retirement benefit obligations of all e xisting and future retired PRC based employees’
payable under the plans described above. Other tha n the monthly contributions, Jiangsu Beiterui
Nano has no further obligation for the payment of ret irement and other post-retirement benefits of
its employees. The assets of these plans are held s eparately from those of Jiangsu Beiterui Nano in
independently administered funds managed by the PRC government.
Jiangsu Beiterui Nano’s contributions to the a foresaid defined contribution retirement
schemes are expensed as incurred.
Housing funds, medical insurances and other social insurances
Employees of Jiangsu Beiterui Nano in the PR C are entitled to participate in various
government-supervised housing funds, medical insu rances and other social insurance plan. Jiangsu
Beiterui Nano contributes on a monthly basis to th ese funds based on certain percentages of the
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salaries of the employees, subject to certain ceiling . Jiangsu Beiterui Nano’s liability in respect of
these funds is limited to the contributions payable in each year. Contributions to the housing funds,
medical insurances and other social insurances are expensed as incurred.
4.6. Taxation
Income tax expense represents the sum of current and deferred income tax expense.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit
before taxation because of income or expense that ar e taxable or deductible in other years and items that
are never taxable or deductible. Jiangsu Beiterui Na no’s liability for current ta x is calculated using tax
rates that have been enacted or substantivel y enacted by the end of the reporting period.
Deferred tax is recognised on temporary differ ences between the carrying amounts of assets and
liabilities in the financial statements and the corre sponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are g enerally recognised for all taxable t emporary differences. Deferred tax
assets are generally recognised fo r all deductible temporary differen ces to the extent that it is probable
that taxable profits will be available against which thos e deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not recognis ed if the temporary difference arises from the initial
recognition (other than in a business combination) of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit a nd at the time of the transaction does not give rise to
equal taxable and deductible temporary differences. In a ddition, deferred tax liabilities are not recognised
if the temporary difference arises fro m the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable te mporary differences associated with investments
in subsidiaries and associates, and in terests in joint ventures, except where Jiangsu Beiterui Nano is able to
control the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax asse ts arising from deductible temporary differences
associated with such investments and interests are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and
they are expected to reverse in the foreseeable future.
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 profits will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have
been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and a ssets reflects the tax consequences that would
follow from the manner in which Jiangsu Beiterui Nano expects, at the end of the reporting period, to
recover or settle the carrying am ount of its assets and liabilities.
For the purposes of measuring deferred tax for leasi ng transactions in which Jiangsu Beiterui Nano
recognises the right-of-use assets a nd the related lease liabilities, Jia ngsu Beiterui Nano first determines
whether the tax deductions are attributable to th e right-of-use assets or the lease liabilities.
For leasing transactions in which the tax deductions are attributable to the le ase liabilities, Jiangsu
Beiterui Nano applies IAS 12 ‘‘Income Taxes’’ require ments to the lease liabilities and the related assets
separately. Jiangsu Beiterui Nano recognises a defe rred tax asset related to lease liabilities to the extent
that it is probable that taxable profit will be availabl e against which the deductible temporary difference
can be utilised and a deferred tax liabilit y for all taxable temporary differences.
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Deferred tax assets and liabilities are offset when the re is a legally enforceable right to set off current
tax assets against current tax liabilities and when t hey relate to income taxes levied to the same taxable
entity by the same taxation authority.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax
are also recognised in other comprehensive income or di rectly in equity, respectively. Where current tax or
deferred tax arises from the initial accounting for a business combination, the tax effect is included in the
accounting for the business combination.
4.7. Property, plant and equipment
Property, plant and equipment are tangible asset s that are held for use in the production or supply
of goods or services, or for administrative purposes o ther than assets under construction as described
below. Property, plant and equipment are stated in the statement of financial position at cost less
subsequent accumulated depreciation and subs equent accumulated impairment losses, if any.
Assets in the course of construction for production, supply or administrative purposes are carried at
cost, less any recognised impairment loss. Costs incl ude any costs directly attributable to bringing the
asset to the location and condition necessary for it t o be capable of operating in the manner intended by
management, including costs of testing whether t he related assets in functioning properly and, for
qualifying assets, borrowing costs c apitalised in accordance with Jiangsu Beiterui Nano’s accounting
policy. Depreciation of these assets, on the same ba sis as other property assets, commences when the
assets are ready for their intended use.
When Jiangsu Beiterui Nano makes payments for own ership interests of properties which includes
both leasehold land and building elements, the entire c onsideration is allocated between the leasehold land
and the building elements in proportion to the relative f air values at initial recognition. To the extent the
allocation of the relevant payments can be made re liably, interest in leasehold land is presented as
‘‘right-of-use assets’’ in the statement of financia l position. When the consideration cannot be allocated
reliably between non-lease building element and undi vided interest in the underlying leasehold land, the
entire properties are classified as property, plant and equipment.
Depreciation is recognised so as to write off the co st of assets other than construction in progress
less their residual values over their estimated usefu l lives, using the straigh t-line method, as follows:
P l a n ta n dm a c h i n e r y .......................................... 5–10 years
M o t o rv e h i c l e s.............................................. 5–10 years
O t h e re q u i p m e n t ............................................. 5y e a r s
L e a s e h o l di m p r o v e m e n t s....................................... 5–10 years
The estimated useful lives, residual values and de preciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property and equipment is derecogn ised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property and equipment i s determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in profit or loss.
4.8. Impairment on property, plant and equipment and right-of-use assets
At the end of the reporting period, Jiangsu Bei terui Nano reviews the carrying amounts of its
property, plant and equipment and right-of-use asse ts to determine whether there is any indication that
these assets have suffered an impairment loss. If any su ch indication exists, the recoverable amount of the
relevant asset is estimated in order to determi ne the extent of the impairment loss (if any).
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The recoverable amount of property, plant and e quipment and right-of-use assets are estimated
individually. When it is not possible to estimate the r ecoverable amount individually, Jiangsu Beiterui
Nano estimates the recoverable amount of the cas h-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment , corporate assets are allocated to the relevant
cash-generating unit when a reasonable and consistent basis of allocation can be es tablished, or otherwise
they are allocated to the smallest group of cash gene rating units for which a rea sonable and consistent
allocation basis can be establishe d. The recoverable amount is determined for the cash-generating unit or
group of cash-generating units to which the corpor ate asset belongs, and is compared with the carrying
amount of the relevant cash-generating unit or group of cash-generating units.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are dis counted 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
(or a cash-generating unit) for which the estim ates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-ge nerating unit) is estima ted to be less than its
carrying amount, the carrying amount of the asset (or a ca sh-generating unit) is reduced to its recoverable
amount. For corporate assets or portion of corpor ate assets which cannot be allocated on a reasonable
and consistent basis to a cash-gene rating unit, Jiangsu Beiterui Nan o compares the carrying amount of a
group of cash-generating units, including the car rying amounts of the corporate assets or portion of
corporate assets allocated to that group of cash-gen erating units, with the recoverable amount of the
group of cash-generating units. In allocating the impa irment loss, the impairment loss is allocated first to
reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis
based on the carrying amount of each asset in the unit o r the group of cash-generating units. The carrying
amount of an asset is not reduced below the highest of i ts fair value less costs of disposal (if measurable),
its value in use (if determinable) and zero. The am ount of the impairment loss that would otherwise have
been allocated to the asset is allocated pro r ata to the other assets of the unit or the group of
cash-generating units. An impairment loss i s recognised immediately in profit or loss.
Where an impairment loss subsequently reve rses, the carrying amount of the asset (or
cash-generating unit or a group of cash-generating units) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss bee n recognised for the asset (or a cash-generating
unit or a group of cash-generating units) in prior ye ars. A reversal of an impairment loss is recognised
immediately in profit or loss.
4.9. Cash and cash equivalents
Cash and cash equivalents presented on the st atement of financial position include:
(a) cash, which comprises of cash on hand and demand deposits, excluding bank balances that are
subject to regulatory restrictions that result in such balances no longer meeting the definition
of cash; and
(b) cash equivalents, which comprises of short-te rm (generally with original maturity of three
months or less), highly liquid investments th at are readily convertible to a known amount of
cash and which are subject to an insignificant r isk of changes in value. Cash equivalents are
held for the purpose of meeting short-term cash commitments rather than for investment or
other purposes.
For the purposes of the statement of cash flows, ca sh and cash equivalents consist of cash and cash
equivalents as defined above and form an integral pa rt of Jiangsu Beiterui Nano’s cash management.
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4.10. Inventories
Inventories are stated at the lower of cost and n et realisable value. Costs of inventories are
determined on a weighted average method. Net realisabl e value represents the estimated selling price for
inventories less all estimated costs of comp letion and costs necessary to make the sale.
4.11. Provisions
Provisions are recognised when Jiangsu Beiterui Nano has a present obligation (legal or
constructive) as a result of a past event, it is proba ble that Jiangsu Beiterui Nano will be required to
settle that obligation, and a re liable estimate can be made o f the amount of the obligation.
The amount recognised as a provision is the best est imate of the consideration required to settle the
present obligation at the end of the reporting peri od, taking into account the risks and uncertainties
surrounding the obligation. When a p rovision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the prese nt value of those cash flows (where the effect of the
time value of money is material).
Warranties
Provisions for the expected cost of assuran ce-type warranty obligations under the relevant
contracts with customers for sales of lithium ir on phosphate cathode material are recognised at the
date of sale of the relevant products, at the direct ors’ best estimate of the expenditure required to
settle Jiangsu Beiterui Nano’s obligation.
4.12. Financial instruments
Financial assets and financial liabilities are re cognised when a group entity becomes a party to the
contractual provisions of the instr ument. All regular way purchases or sales of financial assets are
recognised and derecognised on a tra de date basis. Regular way purchases or sales are purchases or sales
of financial assets that require delivery of assets within the time frame established by regulation or
convention in the market place.
Financial assets and financial liabilities are initial ly measured at fair value except for trade and bills
receivables and contract assets arising from contract s with customers which are initially measured in
accordance with IFRS 15 ‘‘Revenue from Contracts with Customers’’ (‘‘ IFRS 15 ’’). Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets at fair value through profit or loss (‘‘ FVTPL ’ ’ )a r ea d d e dt oo rd e d u c t e df r o mt h ef a i r
value of the financial assets or financial liabilities, as a ppropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financia l assets at FVTPL are recognis ed immediately in profit
or loss.
The effective interest method is a method of calcul ating the amortised cost of a financial asset or
financial liability and of allocating interest incom e and interest expense over the relevant period. The
effective interest rate is the rate that exactly dis counts estimated future cash receipts and payments
(including all fees and points paid o r received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) th rough the expected life of the financial asset or
financial liability, or, where appropriate, a shor ter period, to the net carrying amount on initial
recognition.
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Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following condi tions are subsequently measured at amortised
cost:
. the financial asset is held within a bus iness model whose objective is to collect
contractual cash flows; and
. the contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Financial assets that meet the following condi tions are subsequently measured at fair value
through other comprehensive income:
. the financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling; and
. the contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
All other financial assets are subsequent ly measured at FVTPL, except that at initial
recognition of a financial asset Jiangsu Beiterui Nano may irrevocably elect to present subsequent
changes in fair value of an equity investment in other comprehensive income if that equity
investment is neither held for trading nor contin gent consideration recognised by an acquirer in a
business combination to which IFRS 3 Business Combinations applies.
A financial asset is held for trading if:
. it has been acquired principally for the purpose of selling in the near term; or
. on initial recognition it is a part of a portfol io of identified financial instruments that
Jiangsu Beiterui Nano manages together and has a recent actual pattern of short-term
profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.
Amortised cost and interest income
Interest income is recognised using the effectiv e interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying th e effective interest rate
to the gross carrying amount of a financial asset, except for financial assets that have subsequently
become credit-impaired. For financial assets th at have subsequently become credit-impaired,
interest income is recognised by applying the eff ective interest rate to the amortised cost of the
financial asset from the next reporting period. If t he credit risk on the credit-impaired financial
instrument improves so that the financial asset is no longer credit-impaired, interest income is
recognised by applying the effective interest rate t o the gross carrying amount of the financial asset
from the beginning of the reporting period follow ing the determination that the asset is no longer
credit-impaired.
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Impairment of financial assets
Jiangsu Beiterui Nano performs impairment assessment under expected credit loss (‘‘ ECL’’)
model on financial assets (including trade and other receivables, and bank balances and cash) which
are subject to impairment assessment under I FRS 9. The amount of ECL is updated at each
reporting date to reflect changes in cre dit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the
expected life of the relevant instrum ent. In contrast, 12-month ECL (‘‘ 12m ECL ’’) represents the
portion of lifetime ECL that is expected to result f rom default events that are possible within 12
months after the reporting date. A ssessments are done based on Jiangsu Beiterui Nano’s historical
credit loss experience, adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current conditions at the reporting date as well as the
forecast of future conditions.
Jiangsu Beiterui Nano always recognises li fetime ECL for trade receivables and bills
receivables.
For all other instruments, Jiangsu Beiterui Nano measures the loss allowance equal to 12m
ECL, unless there has been a significant increase in cr edit risk since initial recognition, in which case
Jiangsu Beiterui Nano recognises lifetime ECL. The assessment of whether lifetime ECL should be
recognised is based on significant increases in t he likelihood or risk of a default occurring since
initial recognition.
Significant increase in credit risk
In assessing whether the credit risk has increased s ignificantly since initi al recognition, Jiangsu
Beiterui Nano compares the risk of a default occurring on the financial instrument as at the
reporting date with the risk of a default occurring on t he financial instrument as at the date of initial
recognition. In making this assessment, Jiangsu Beiterui Nano considers both quantitative and
qualitative information that is reasonable and s upportable, including historical experience and
forward-looking information that is available without undue cost or effort.
In particular, the following information is ta ken into account when assessing whether credit
risk has increased significantly:
. an actual or expected significant deteriorati on in the financial instrument’s external (if
available) or internal credit rating;
. significant deterioration in external market indicators of credit risk, e.g. a significant
increase in the credit spread, the credit default swap prices for the debtor;
. existing or forecast adverse changes in bus iness, financial or economic conditions that
are expected to cause a significant decrease in the debtor’s ability to meet its debt
obligations;
. an actual or expected significant deteriora tion in the operating results of the debtor;
. an actual or expected significant adverse change in the regulatory, economic, or
technological environment of the debtor th at results in a significant decrease in the
debtor’s ability to meet its debt obligations.
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Irrespective of the outcome of the above assessmen t, Jiangsu Beiterui Nano presumes that the
credit risk has increased significantly since init ial recognition when contractual payments are more
than 30 days past due, unless Jiangsu Beiterui Na no has reasonable and supportable information
that demonstrates otherwise.
Jiangsu Beiterui Nano regularly monitors the e ffectiveness of the criteria used to identify
whether there has been a significant increase in cr edit risk and revises them as appropriate to ensure
that the criteria are capable of i dentifying significant increase in credit risk before the amount
become past due.
Definition of default
For internal credit risk management, Jiangs u Beiterui Nano considers an event of default
occurs when information developed internally or obtained from external sources indicates that the
debtor is unlikely to pay its creditors, including Jiangsu Beiterui Nano, in full (without taking into
account any collaterals held by Jiangsu Beiterui Nano).
Irrespective of the above, Jiangsu Beiterui N ano considers that default has occurred when a
financial asset is more than 90 days past due unl ess Jiangsu Beiterui Nano has reasonable and
supportable information to demons trate that a more lagging default criterion is more appropriate.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on
the estimated future cash flows of that financial a sset have occurred. Evidence that a financial asset
is credit-impaired includes observab le data about the following events:
(a) significant financ ial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the
borrower’s financial difficul ty, having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider; or
(d) it is becoming probable that the borrowe r will enter bankruptcy or other financial
reorganisation.
Write-off policy
Jiangsu Beiterui Nano writes off a financial asse t when there is information indicating that the
counterparty is in severe financial difficulty a nd there is no realistic prospect of recovery, for
example, when the counterparty has been placed u nder liquidation or has entered into bankruptcy
proceedings. Financial assets written off may still be subject to enforcement activities under Jiangsu
Beiterui Nano’s recovery procedures, taking into account legal advice where appropriate. A
write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or
loss.
Measurement and recognition of ECL
The measurement of ECL is a function of the proba bility of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on historical data and forward-looking
information. Estimation of ECL reflects an unb iased and probability-weighted amount that is
determined with the respective risks of default occu rring as the weights. Jiangsu Beiterui Nano uses
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a practical expedient in estimating ECL on trad e and bills receivables and contract assets using a
provision matrix taking into consideration histori cal credit loss experience, adjusted for forward
looking information that is available without undue cost or effort.
Generally, the ECL is the difference between all c ontractual cash flows that are due to Jiangsu
Beiterui Nano in accordance with the contract and the cash flows that Jiangsu Beiterui Nano expects
to receive, discounted at the effective interes t rate determined at initial recognition.
Lifetime ECL for certain trade and bills recei vables and contract assets are considered on a
collective basis taking into consideration past due information and relevant credit information such
as forward looking macroeconomic information.
For collective assessment, Jiangsu Beiterui Nano takes into consideration the following
characteristics when formulating the grouping:
. past-due status;
. nature, size and industry of debtors; and
. external credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics.
Jiangsu Beiterui Nano measures ECL for the remaining trade and bills receivables and
contract assets on an individual basis.
Interest income is calculated based on the gross carrying amount of the financial asset unless
the financial asset is credit-impaired, in which ca se interest income is calculated based on amortised
cost of the financial asset.
Jiangsu Beiterui Nano recognises an impairment gain or loss in profit or loss for all financial
instruments by adjusting their carrying amount , with the exception of trade and bills receivables,
contract assets and other receiva bles where the corresponding adju stment is recognised through a
loss allowance account.
Foreign exchange gains and losses
The carrying amount of financial assets that are denominated in a foreign currency is
determined in that foreign currency and transl ated at the spot rate at the end of each reporting
period. Specifically:
. For financial assets measured at amortised cost that are not part of a designated hedging
relationship, exchange differences are recognised in profit or loss in the ‘‘Other income,
gains and losses’’ line item as part of the net foreign exchange gains/(losses);
. For financial assets measured at FVTPL that are not part of a designated hedging
relationship, exchange differences are recognised in profit or loss in the ‘‘Other income,
gains and losses’’ line item as part of the gains/(losses) from changes in fair value of
financial assets at FVTPL.
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Derecognition of financial assets
Jiangsu Beiterui Nano derecognises a financia l asset only when the contractual rights to the
cash flows from the asset expire, or when it transfer s the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the
asset’s carrying amount and the sum of the consideration received and receivable is recognised in
profit or loss.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabi lities or as equity in
accordance with the substance of the contractual a rrangements and the definitions of a financial
liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity in struments issued by Jiangsu Beiterui Nano are
recognised at the proceeds received, net of direct issue costs.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTP L when the financial lia bility is designated as
FVTPL.
A financial liability is classified as held for trading if:
. it has been acquired principally for the purpose of repurchasing it in the near term; or
. on initial recognition it is a part of a portfol io of identified financial instruments that
Jiangsu Beiterui Nano manages together and has a recent actual pattern of short-term
profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a f inancial liability held for trad ing or contingent consideration
of an acquirer in a business combination may be des ignated as at FVTPL upon initial recognition if:
. such designation eliminates or significan tly reduces a measurement or recognition
inconsistency that would otherwise arise; or
. the financial liability forms part of a group of financial assets or financial liabilities or
both, which is managed and its performance is evaluated on a fair value basis, in
accordance with Jiangsu Beiterui Nano’s documented risk management or investment
strategy, and information about the grouping is provided internally on that basis; or
. it forms part of a contract containing one or more embedded derivatives, and IFRS 9
permits the entire combined contract to be designated as at FVTPL.
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For financial liabilities that are designat ed as at FVTPL, the amount of changes in the fair
value of the financial liability that is attributab le to changes in the credit risk of that liability is
recognised in other comprehensive income, unles s the recognition of the effects of changes in the
liability’s credit risk in other comprehensive income would create or enlarge an accounting
mismatch in profit or loss. For financial liabilitie s that contain embedded derivatives, the changes in
fair value of the embedded derivatives are excl uded in determining the amount to be presented in
other comprehensive income. Changes in fair value a ttributable to a financial liability’s credit risk
that are recognised in other comprehensive income ar e not subsequently reclassified to profit or loss;
instead, they are transferred to re tained profits/others upon derecogn ition of the financial liability.
Financial liabilities at amortised cost
Financial liabilities includi ng trade and other payables and accruals are subsequently
measured at amortised cost, usin g the effective interest method.
Foreign exchange gains and losses
For financial liabilities that are denominat ed in a foreign currency and are measured at
amortised cost at the end of each reporting peri od, the foreign exchange gains and losses are
determined based on the amortised cost of the inst ruments. These foreign exchange gains and losses
are recognised in the ‘‘Other income, gains and losses’’ line item in profit or loss as part of net
foreign exchange gains/(losses) for financial li abilities that are not part of a designated hedging
relationship. For those which are designated as a he dging instrument for a hedge of foreign currency
risk, foreign exchange gains and losses are r ecognised in other comprehensive income and
accumulated in a separa te component of equity.
Derecognition of financial liabilities
Jiangsu Beiterui Nano derecognises financial lia bilities when, and only when, Jiangsu Beiterui
Nano’s obligations are discharged, cancelled or h ave expired. The difference between the carrying
amount of the financial liability derecognised and t he consideration paid and payable is recognised
in profit or loss.
4.13. Related parties
A person or a close member of that person’s family is related to Jiangsu Beiterui Nano if that
person:
(i) has control or joint control over Jiangsu Beiterui Nano;
(ii) has significant influenc e over Jiangsu Beiterui Nano; or
(iii) is a member of key management personnel of Jiangsu Beiterui Nano or Jiangsu Beiterui
Nano’s parent. Or
An entity is related to Jiangsu Beiterui Nano if any of the following conditions apply:
(i) The entity and Jiangsu Beiterui Nano are members of the same group (which means that each
parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of t he other entity (or an associate or joint venture
of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
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(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 pla n for the benefit of the employees of Jiangsu
Beiterui Nano or an entity related to Jiangsu Beiterui Nano.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significa nt influence over the entity or is a member of key
management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management
personnel services to the reporting entity or to the parent of the reporting entity.
Close members of the family of a person are t hose family members who may be expected to
influence, or be influenced by, that person in their dealings with the entity.
5. MATERIAL ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of the Jiangsu Beiterui Nano Histor ical Financial Information requires management to
make judgments, estimates and assumptions that aff ect the application of policies and reported amounts of
assets, liabilities income and expenses. The estimat es and associated assumptions are based on historical
experience and various other factors that are believed t o be reasonable under the circumstances, the results of
which form the basis of making the judgements about carryi ng values of assets and liabilities that are not readily
apparent from other sources. Actual res ults may differ from these estimates.
The estimates and underlying assumptions are revie wed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estim ate is revised if the revision affects only that period, or
in the period of the revision and future periods if th e revision affects both current and future periods.
Estimation uncertainty
The key assumptions concerning the future and ot her 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.
Provision of ECL for trade receivables
Trade receivables with credit-impaired are assess ed for ECL individually. In addition, Jiangsu
Beiterui Nano uses practical expedient in estimati ng ECL in trade receivables which are not assessed
individually using a provision matr ix. The provision rates are based on aging of debtors as groupings of
various debtors taking into consideration Jiangsu Beiterui Nano’s historical defaults rates and
forward-looking information that is reasona ble and supportable available without undue costs or
effort. At every reporting date, the historical obser ved default rates are reassessed and changes in the
forward-looking information are considered.
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6. REVENUE AND SEGMENT INFORMATION
(a) Revenue
Revenue represents the aggregate of the net amoun ts received and receivable from customers during
the Pre-acquisition Period. There i s no seasonality and cyclicality of the operations of Jiangsu Beiterui
Nano. The performance obligation in contracts has an original expected duration of one year or less.
Revenue during the Pre-acquisition Period is as follows:
Period from
28 January 2021
to 31 May 2021
RMB’000
Revenue from contracts with customers under IFRS 15
Sales of LFP cathode materials ......................................... 260,531
O t h e r s ........................................................... 8 , 3 1 7
268,848
Timing of revenue recognition within the scope of IFRS 15
A tap o i n ti nt i m e ................................................... 268,848
The major customers which contributed more than 10% of the total revenue for the period from 28
January 2021 to 31 May 2021 are listed as below:
Period from
28 January 2021
to 31 May 2021
RMB’000
C u s t o m e rA....................................................... 183,154
C u s t o m e rB....................................................... 3 0 , 4 6 7
C u s t o m e rC....................................................... 2 7 , 2 8 4
(b) Segment
For the purpose of resource allocation and perform ance assessment, Jiang su Beiterui Nano’s chief
executive officer, being the chief operating decisi on maker, reviews the results when making decisions
about allocating resources and assessment performa nce of Jiangsu Beiterui Nano and hence, Jiangsu
Beiterui Nano has only one reportable segment and no fur ther analysis of this single segment is presented.
All the revenue from Jiangsu Beiterui Nano during t he Pre-acquisition Period was attributable to
customers established in the PRC, which is the place of domicile of Jiangsu Beiterui Nano’s operating and
Jiangsu Beiterui Nano’s non-current assets are substa ntially located in the PRC , accordingly, no analysis
of geographical segment is presented.
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7. OTHER INCOME, GAINS AND LOSSES
Period from
28 January 2021
to 31 May 2021
RMB’000
I n t e r e s ti n c o m eo nb a n kd e p o s i t ......................................... 2
O t h e r s ........................................................... 4 9 3
495
8. FINANCE COSTS
Period from
28 January 2021
to 31 May 2021
RMB’000
Interest expenses on:
—O t h e rp a y a b l e s ................................................. 8 3 6
—L e a s el i a b i l i t i e s ................................................ 4 2 9
1,265
9. PROFIT BEFORE TAXATION
Jiangsu Beiterui Nano’s profit before taxation is arrived at after charging:
Period from
28 January 2021
to 31 May 2021
RMB’000
A u d i t o r ’ sr e m u n e r a t i o n( N o t e ) .......................................... —
C o s to fi n v e n t o r i e ss o l d ............................................... 201,520
I m p a i r m e n tl o s s e so ni n v e n t o r i e s( N o t e1 6 ) ................................. 8 5
I m p a i r m e n tl o s s e so nt r a d er e c e i v a b l e s( N o t e2 5 ) ............................. 2 , 8 9 1
Impairment losses on other receivables (Note 25) ............................. 1 1
D e p r e c i a t i o no fp r o p e r t y ,p l a n ta n de q u i p m e n t( N o t e1 4 )....................... 6 , 7 4 4
D e p r e c i a t i o no fr i g h t - o f - u s ea s s e t s( N o t e1 5 ) ................................ 4 , 8 5 1
Staff costs (including director’s, chief ex ecutive’s and supervisor’s remuneration):
W a g e s ,s a l a r i e sa n db o n u s e s .......................................... 6 , 0 7 0
R e t i r e m e n tb e n e f i te x p e n s e .......................................... 7 7 4
Social security costs, housing benefit s and other employee benefits . . ............ 4 3 0
7,274
Note: The auditor’s remuneration was born by the immedi ate holding company for the period ended 31 May
2021.
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10. INCOME TAX EXPENSES
Period from
28 January 2021
to 31 May 2021
RMB’000
PRC Enterprise Income Tax
—C u r r e n tt a x................................................... 5 , 1 2 8
D e f e r r e dt a x( N o t e2 2 ) ............................................... ( 8 3 8 )
4,290
Under the Law of the PRC on Enterprise Income Tax (the ‘‘ EIT Law ’’) and Implementation Regulation of
the EIT Law, the tax rate is 25%.
The tax charge for the period from 28 January 2021 to 31 May 2021 can be reconciled to the profit before
taxation per the statement of profit or loss and other comprehensive income as follows:
Period from
28 January 2021
to 31 May 2021
RMB’000
P r o f i tb e f o r et a x a t i o n................................................ 2 1 , 0 1 2
T a xa tt h es t a t u t o r yt a xr a t eo f2 5 % ...................................... 5 , 2 5 3
T a xe f f e c to fe x p e n s e st h a ta r en o td e d u c t i b l ef o rt a xp u r p o s e s................... ( 4 3 )
E f f e c t so fa d d i t i o n a lt a xd e d u c t i o nf o re l i g i b l er e s e a r c ha n dd e v e l o p m e n te x p e n s e s ..... ( 9 2 0 )
I n c o m et a xe x p e n s ef o rt h ep e r i o d ....................................... 4 , 2 9 0
11. DIRECTOR’S, CHIEF EXECUTIVE’ S AND SUPERVISOR’S EMOLUMENTS
Mr. Xi Xiaobing is the chief executive of Jiangsu Be iterui Nano and his emolument disclosed below
included those for services rendered by him as th e chief executive of Jiangsu Beiterui Nano.
There were no fees and other emoluments payable to executive director, Mr. Xi Xiaobing, and supervisor,
Ms. Wu Xiaozhen, during the Pre-acquisition Period.
Mr. Xi Xiaobing was appointed as executive director of Jiangsu Beiterui Nano wit h effect from 28 January
2021.
Ms. Wu Xiaozhen was appointed as supervisor of Jian gsu Beiterui Nano with effect from 28 January 2021.
12. FIVE HIGHEST PAID EMPLOYEES
The individuals whose emoluments were the top 5 high est in Jiangsu Beiterui Nano for the period from 28
January 2021 to 31 May 2021 were not director of Jiangs u Beiterui Nano. Details of the emoluments of the
individuals during the Pre-acqui sition Period are as follows:
Period from
28 January 2021
to 31 May 2021
RMB’000
Wages, salaries and bonuses ............................................ 3 2 4
R e t i r e m e n tb e n e f i te x p e n s e s ............................................ 3 9
S o c i a ls e c u r i t yc o s t s ,h o u s i n gb e n e f i t sa n do t h e re m p l o y e eb e n e f i t s ................ 5 9
422
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The number of highest paid employees whose remunera tion fell within the following band is as follows:
Period from
28 January 2021
to 31 May 2021
Nil to HK$1,000,000 . . . .............................................. 5
During the Pre-acquisition Peri od, no emoluments were paid by Jiangsu Beiterui Nano to any of the
director or the five highest paid individuals (includi ng director and employees) as an inducement to join or upon
joining Jiangsu Beiterui Nano or as compensation for loss of office.
13. DIVIDENDS
No dividend has been paid or declared by Jiangsu B eiterui Nano during the Pre-acquisition Period.
14. PROPERTY, PLANT AND EQUIPMENT
Construction
in progress
Plant and
machinery
Motor
vehicles
Other
equipment
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST
A d d i t i o n s .................. 4 1 , 1 1 9 2 7 0 , 4 5 9 7 7 6 5 , 1 4 3 3 , 9 1 2 321,409
T r a n s f e r s .................. ( 6 , 1 3 7 ) 6 , 1 3 7 — — — —
A t3 1M a y2 0 2 1............. 3 4 , 9 8 2 2 7 6 , 5 9 6 7 7 6 5 , 1 4 3 3 , 9 1 2 321,409
ACCUMULATED
DEPRECIATION
Depreciation provided for
t h ep e r i o d ................ — 6 , 1 7 1 4 0 2 0 0 3 3 3 6 , 7 4 4
A t3 1M a y2 0 2 1............. — 6 , 1 7 1 4 0 2 0 0 3 3 3 6 , 7 4 4
CARRYING AMOUNT
A t3 1M a y2 0 2 1............. 3 4 , 9 8 2 2 7 0 , 4 2 5 7 3 6 4 , 9 4 3 3 , 5 7 9 314,665
15. RIGHT-OF-USE ASSETS
Leasehold
properties
RMB’000
CARRYING AMOUNT
A d d i t i o n ......................................................... 3 5 , 5 7 5
D e p r e c i a t i o nc h a r g e ................................................. ( 4 , 8 5 1 )
A t3 1M a y2 0 2 1.................................................... 3 0 , 7 2 4
16. INVENTORIES
As at
31 May
2021
RMB’000
R a wm a t e r i a l s ..................................................... 5 5 , 4 3 4
W o r ki np r o g r e s s ................................................... 1 2 , 1 6 8
Finished goods ..................................................... 3 5 , 6 5 4
103,256
The impairment losses on inventories of RMB85,000 was recognised for the five months ended 31 May
2021.
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17. TRADE AND OTHER RECEIVABLES
As at
31 May
2021
RMB’000
T r a d er e c e i v a b l e s ................................................... 203,787
B i l l sr e c e i v a b l e..................................................... 2 0 , 8 5 8
Other receivables ................................................... 3 8 , 9 0 9
263,554
Analysis for reporting purposes:
N o n - c u r r e n tp o r t i o n................................................. 3 , 1 6 6
C u r r e n tp o r t i o n .................................................... 260,388
263,554
Jiangsu Beiterui Nano’s trading terms with its cu stomers are mainly on credit. The credit period is
generally from 30 days to 90 days. Jiangsu Beiterui Nano seeks to maintain strict control over its outstanding
receivables to minimise credit risk. Overdue balances are reviewed regularly by senior management. Jiangsu
Beiterui Nano does not hold any collateral or other credi t enhancements over its trade receivable balances. The
balances of trade receivables are non-interest-bearing.
The following is an aged analysis of trade receivables n et of allowance for expected credit losses presented
based on revenue recognition date.
As at
31 May
2021
RMB’000
W i t h i n1y e a r ...................................................... 203,787
Bills receivable have an average orig inal maturity period of 180 days.
18. CASH AND CASH EQUIVALENTS
As at
31 May
2021
RMB’000
Bank balances and cash
C a s ho nh a n d ...................................................... 7
C a s ha tb a n k s ..................................................... 5 , 4 6 8
5,475
19. TRADE AND OTHER PAYABLES
As at
31 May
2021
RMB’000
T r a d ep a y a b l e s ..................................................... 267,537
Other payables (Note) . . .............................................. 9 3 , 3 5 9
360,896
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Note: As at 31 May 2021, the other payables included a balance of RMB90,319,000 due to immediate holding
company, bear interest rate of from 4.00% to 4.35% per annum, unsecured and repayable on demand.
The following is an aged analysis of trade payables as a t 31 May 2021, presented based on the invoice date.
As at
31 May
2021
RMB’000
W i t h i n1y e a r ...................................................... 267,537
The trade payables are non-interest-bearing and are normally settled on terms from 30 days to 60 days.
20. LEASE LIABILITIES
As at
31 May
2021
RMB’000
Lease liabilities payable:
W i t h i no n ey e a r.................................................... 1 9 , 5 6 3
W i t h i nap e r i o do fm o r et h a no n ey e a rb u tn o tm o r et h a nt w oy e a r s............... 1 6 , 4 4 1
36,004
Less: Amounts for settlement within 12 m onths shown under current liabilities ....... ( 1 9 , 5 6 3 )
Amounts due for settlement after 12 mont hs shown under non-current liabilities ....... 1 6 , 4 4 1
The weighted average incremental borrowing rates applied to lease liabilities at 5% as at 31 May 2021.
21. CONTRACT LIABILITIES
Jiangsu Beiterui Nano recognised the followi ng revenue-related c ontract liabilities:
As at
31 May
2021
RMB’000
Sales of LFP cathode materials ......................................... 1 , 3 4 7
Jiangsu Beiterui Nano receives certain amount of th e contract values as receipt in advances upon receiving
the purchase orders from customers. The receipt in advan ce results in contract liabilities being recognised until
the customer obtains control of the goods.
All contract liabilities are expected to be recognised as income within one year.
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22. DEFERRED TAX ASSETS
The following are the Jiangsu Beiterui Nano’s major deferred tax assets recognised and movements
thereon during the Pre-acquisition Period:
Impairment of
assets
Accrued
expenses
Lease
liabilities/
right-of-use
assets Total
RMB’000 RMB’000 RMB’000 RMB’000
C r e d i t e dt op r o f i to rl o s s ........... 7 4 7 4 3 4 8 8 3 8
A t3 1M a y2 0 2 1................. 7 4 7 4 3 4 8 8 3 8
23. SHARE CAPITAL
Number of
shares Amount
RMB’000
Registered, issued and fully paid ordinary shares with par value of RMB1.00
each share
I s s u eo fs h a r e s( N o t e )..................................... 300,000,000 300,000
A t3 1M a y2 0 2 1......................................... 300,000,000 300,000
Note: Jiangsu Beiterui Nano was incorporated in Janua ry 2021 with initial authorised share capital of
RMB300,000,000 divided into 300,000,000 shares with par value of RMB1 each.
24. RESERVES
The amounts of Jiangsu Beiterui Nano’s reserves and the movements therein are presented in the
statement of changes in equity of the Jiangsu Be iterui Nano Historical Financial Information.
Statutory reserve
In accordance with the relevant laws and regulati ons in the PRC, Jiangsu Beiterui Nano are required
to appropriate 10% of the annual statutory net profi t, after offsetting any prior years’ losses to the
statutory reserve fund before distributing the net pr ofit. When the respective balance of the statutory
reserve fund reaches 50% of the share capital of Jiang su Beiterui Nano, any further appropriation is at the
discretion of shareholders of Jiangsu Beiterui Nano. The statutory reserve fund can be used to offset prior
years’ losses, if any, and may be converted into share capital by issuing new shares to shareholders in
proportion to their existing shareholding or by incr easing the par value of the shares currently held by
them, provided that the respective remaining balance of the statutory reserve fund after such issue is not
less than 25% of registered capital of Jiangsu Beiterui Nano.
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25. FINANCIAL INSTRUMENTS
Categories of financial instruments
As at
31 May
2021
RMB’000
Financial assets
A ta m o r t i s e dc o s t................................................... 264,954
Financial liabilities
A ta m o r t i s e dc o s t................................................... 360,896
L e a s el i a b i l i t i e s ..................................................... 3 6 , 0 0 4
396,900
Financial risk management objectives and policies
Jiangsu Beiterui Nano’s major financial instrum ents include trade and other receivables, cash and
cash equivalents, trade and other payables and lease liabilities. Details of the financial instruments are
disclosed in respective notes.
The risks associated with these financial instru ments include credit risk and liquidity risk. The
policies on how to mitigate these risks are set out b elow. The management of Jiangsu Beiterui Nano
manages and monitors these exposures to ensure a ppropriate measures are imp lemented in a timely and
effective manner.
Credit risk and impairment assessment
At the end of the reporting period, Jiangsu Beiter ui Nano’s maximum exposure to credit risk which
will cause a financial loss to Jiangsu Beiterui Na no due to failure to discharge an obligation by the
counterparties is arising from the carrying amount of th e respective recognised financial assets as stated in
the statement of financial position.
Credit risk refers to the risk that Jiangsu Beiterui Nano’s counterparties defau lt on their contractual
obligations resulting in financial losses to Jiangsu Beiterui Nano. Jiangsu Beiterui Nano’s credit risk
exposures are primarily attributable to trade and othe r receivables and cash and cash equivalents. Jiangsu
Beiterui Nano does not hold any collateral or other credi t enhancements to cover its credit risks associated
with its financial assets.
Trade receivables
Jiangsu Beiterui Nano measures loss allowances fo r trade receivables at an amount equal to lifetime
ECLs, which perform impairment assessment under E CL model on trade balance individually or based on
provision matrix.
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Movements in the allowance for expected credit losses in respect of the trade receivables during the
Pre-acquisition Period are as follows:
Weighted
average loss
rate
Gross carrying
amount Loss allowance
Net carrying
amount
RMB’000 RMB’000 RMB’000
As at 31 May 2021
ECL assessed collectively based on
debtor’s ageing
W i t h i n1y e a r ................... 5 . 5 2 % 5 2 , 3 8 3 2 , 8 9 1 4 9 , 4 9 2
E C La s s e s s e di n d i v i d u a l l y.......... 1 5 4 , 2 9 5 — 154,295
206,678 2,891 203,787
Movement in lifetime ECL that has been recogn ised for trade receivables, under the simplified
approach is as follows:
RMB’000
Impairment loss under expected credit loss model, net of reversal ................. 2 , 8 9 1
At 31 May 2021 .................................................... 2 , 8 9 1
Other receivables
Jiangsu Beiterui Nano measures the loss allowance equal to 12-month ECL of other receivables. For
those balances expected to have significant increase in c redit risk since initial recognition, Jiangsu Beiterui
Nano apply lifetime ECL based on aging for classes with different credit risk characteristics and
exposures. Management makes periodic collectiv e assessments as well as individual assessment on the
recoverability of other receivable s based on historical settlement records and past experience.
Movement in the loss allowance account in respect of other receivables during the Pre-acquisition
Period is as follows:
RMB’000
Impairment loss under expected credit loss model ............................ 1 1
At 31 May 2021 .................................................... 1 1
Cash and cash equivalents
Credit risk on cash and cash equivalents is limite d because the counterparties are reputable banks
with high credit ratings assigned by internationa l credit agencies or state-owned banks in the PRC.
Liquidity risk
In the management of the liquidity risk, Jiangsu Beiterui Nano monitors and maintains a level of
cash and cash equivalents deemed adequate by the management to finance Jiangsu Beiterui Nano’s
operations and mitigate the effect s of fluctuations in cash flows.
The following table details Jiangsu Beiterui Nano’ s remaining contractual maturity for its financial
liabilities and lease liabilities. The table has b een drawn up based on the undiscounted cash flows of
financial liabilities and lease liabilities based on the earliest date on which Jiangsu Beiterui Nano can be
required to pay.
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Weighted
average
interest rate
On demand
and/or
less than
1y e a r 1t o3y e a r s
Total
contractual
undiscounted
cash flow
Total
carrying
amount
% RMB’000 RMB’000 RMB’000 RMB’000
At 31 May 2021
T r a d ea n do t h e rp a y a b l e s ........ 1 . 1 8 365,412 — 365,412 360,896
L e a s el i a b i l i t i e s ................ 5 . 0 0 2 0 , 6 8 1 1 6 , 6 3 8 3 7 , 3 1 9 3 6 , 0 0 4
386,093 16,638 402,731 396,900
Capital management
Jiangsu Beiterui Nano manages its capital to ens ure that Jiangsu Beiter ui Nano will be able to
continue as a going concern while maximising the ret urn to shareholders throug h the optimisation of the
debt and equity balance. Jiangsu Beiterui Nano’ s overall strategy remains unchanged during the
Pre-acquisition Period.
The capital structure of Jiangsu Beiterui Nano consists of net debt, which includes the lease
liabilities disclosed in Note 20, net of cash and ca sh equivalents and equity at tributable to owners of
Jiangsu Beiterui Nano, comprising issued share capital, retained profits and other reserves.
The sole director of Jiangsu Beiterui Nano reviews the capital structure on a regular basis and
considers the cost of capital and the risks associat ed with each class of capital. Based on recommendations
of the sole director of Jiangsu Beiterui Nano, Jiangs u Beiterui Nano will balance its overall capital
structure through the maturity of le ase liabilities as well as new sha re issues and increase of banking
facilities or redemption of existing debt.
Fair value measurements of financial instruments
The management of Jiangsu Beiterui Nano consid ers that the carrying amounts of financial assets
and financial liabilities recorded at amortised cos t in the Jiangsu Beiterui Nano Historical Financial
Information approximate their fair values at the en d of each reporting period based on discounted cash
flow analysis.
26. RELATED PARTY TRANSACTIONS
The following significant transactions were carrie d out between Jiangsu Beiterui Nano and its related
parties during the Pre-acquisition Period. In the opini on of the sole director of Jiangsu Beiterui Nano, the
related party transactions were carried out at term s negotiated between Jiangsu Beiterui Nano and the
respective related parties.
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Name and relationship with related parties
The following companies are related parties of Jiangsu Beiterui Nano that had balances and/or
transactions with Jiangsu Beiterui N ano during the Pre-acquisition Period.
Name of related parties Relationship with Jiangsu Beiterui Nano
BTR (Jiangsu) New Material Technology Co., Ltd.
(‘‘BTR (Jiangsu) New Material ’ ’ ) ..................
The immediate holding company
BTR New Material Group
(‘‘BTR New Material ’ ’ ) .........................
The intermediate holding company
Beiterui (Tianjin) Nano Material Manufacturing Co., Ltd.
(‘‘Tianjin Beiterui Nano ’ ’ ).......................
A fellow subsidiary
BTR Nano Tech Co., Ltd.
(‘‘BTR Nano Tech ’ ’ ) ...........................
A fellow subsidiary
BTR (Jiangsu) New Energy Material Co., Ltd.
(‘‘BTR (Jiangsu) New Energy ’ ’ )...................
A fellow subsidiary
Tianjin BTR New Energy Technology Co., Ltd.
(‘‘Tianjin BTR ’ ’ ) .............................
A fellow subsidiary
Significant related party transactions
Period from
28 January 2021
to 31 May 2021
RMB’000
Revenue from sales of products
T i a n j i nB e i t e r u iN a n o................................................ 181,377
B T R( J i a n g s u )N e wM a t e r i a l........................................... 1 , 2 6 9
B T RN e wM a t e r i a l .................................................. 5 0 4
B T RN a n oT e c h .................................................... 4
183,154
Purchase
T i a n j i nB e i t e r u iN a n o................................................ 6 3 , 2 6 8
B T R( J i a n g s u )N e wM a t e r i a l........................................... 4 7 , 5 7 5
110,843
Purchase of property, plant and equipment
B T R( J i a n g s u )N e wM a t e r i a l........................................... 260,218
Purchase of right-of-use assets
B T R( J i a n g s u )N e wE n e r g y............................................ 5 , 0 8 9
Other service fee
B T R( J i a n g s u )N e wM a t e r i a l........................................... 1 4 , 9 4 2
Interest expenses
B T R( J i a n g s u )N e wM a t e r i a l........................................... 1 , 2 6 5
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Significant balances with related parties
As disclosed in the statement of financial positi on, Jiangsu Beiterui Nano had outstanding balances
with related parties at 31 May 2021 as follows:
As at
31 May
2021
RMB’000
Trade receivables from (Note (a))
T i a n j i nB e i t e r u iN a n o................................................ 150,477
B T R( J i a n g s u )N e wM a t e r i a l........................................... 1 , 4 3 4
B T RN e wM a t e r i a l .................................................. 5 7 0
152,481
Trade payables to (Note (a))
T i a n j i nB e i t e r u iN a n o................................................ 7 0 , 2 0 2
B T R( J i a n g s u )N e wM a t e r i a l........................................... 6 4 , 8 8 4
B T R( J i a n g s u )N e wE n e r g y............................................ 1 , 9 0 8
136,994
Other payables to (Note (b))
B T R( J i a n g s u )N e wM a t e r i a l........................................... 9 0 , 3 1 9
Lease liabilities payable to
B T R( J i a n g s u )N e wM a t e r i a l........................................... 3 6 , 0 0 4
263,317
Notes:
(a) All balances are trade in nature, unsecured, interes t-free and with credit period from one to three months.
(b) As at 31 May 2021, the balance of RMB85,000,000 is non-trade in nature and bearing fixed interest rate of
5% per annum, unsecured and repayable on demand. The remaining balances with related parties are
non-trade in nature, unsecured, intere st-free and repayable on demand.
Key management personnel compensations
No compensation paid or payable to key manageme nt personnel (including sole director of Jiangsu
Beiterui Nano and supervisor of Jiangsu Beiterui Na no) for employee services during the Pre-acquisition
Period.
27. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by Jiangsu Beiterui Nano in respect of any period
subsequent to 30 June 2024.
APPENDIX IC ACCOUNTANTS’ REPORT OF JIANGSU BEITERUI NANO
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The following is the text of a report set out on pages ID-1 to ID-32, prepared for inclusion
in this prospectus, received from the independent reporting accountants of the Company,
Moore CPA Limited, Certified Public Accountants, Hong Kong.
ACCOUNTANTS’ REPORT ON SHANDONG MEIDUO HISTORICAL FINANCIAL
INFORMATION TO THE DIRECTORS OF JIANGSU LOPAL TECH. CO., LTD.,
GUOTAI JUNAN CAPITAL LIMITED AND HALCYON CAPITAL LIMITED
Introduction
We report on the historical financial information of Shandong Meiduo Technology
Company Limited (‘‘ Shandong Meiduo ’’) set out on pages ID-4 to ID-32, which comprises
the statement of profit or loss and other comprehensive income, statement of changes in
equity and statement of cash flows of Shandong Meiduo for the period from 20 September
2022 (date of incorporation) to 31 December 2022, the year ended 31 December 2023 and
the six months ended 30 June 2024 (the ‘‘ Pre-acquisition Periods ’’), the statements of
financial position of Shandong Meiduo as at 31 December 2022 and 2023 and 30 June 2024,
and material accounting policy information and other explanatory information (together,
the ‘‘Shandong Meiduo Historical Financial Information ’’). The Shandong Meiduo Historical
Financial Information set out on pages ID-4 to ID-32 forms an integral part of this report,
which has been prepared for inclusion in the p rospectus of Jiangsu Lopal Tech. Co., Ltd.
(the ‘‘Company ’’) dated 22 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 f or the Shandong Meiduo Historical Financial Information
The directors of Shandong Meiduo are responsible for the preparation of the
Shandong Meiduo Historical Financial Information that gives a true and fair view in
accordance with the basis of preparation set out in Note 2 to the Shandong Meiduo
Historical Financial Information, and for such internal control as the directors determine is
necessary to enable the preparation of th e Shandong Meiduo Historical Financial
Information that is free from material misstatement, whether due to fraud or error.
Reporting accountants’ responsibility
Our responsibility is to express an opini on on the Shandong Meiduo 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
(‘‘HKSIR 200 ’’) ‘‘Accountants’ Reports on Historical Financial Information in Investment
Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
–I D - 1–


--- page 714 ---
(‘‘HKICPA ’’). This standard requires that we comply with ethical standards and plan and
perform our work to obtain reasonable assurance about whether the Shandong Meiduo
Historical Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Shandong Meiduo Historical Financial Information. The procedures
selected depend on the reporting accountants’ judgment, including the assessment of risks
of material misstatement of the Shandong Meiduo Historical Financial Information,
whether due to fraud or error. In making those risk assessments, the reporting accountants
consider internal control relevant to the en tity’s preparation of the Shandong Meiduo
Historical Financial Information that gives a true and fair view in accordance with the basis
of preparation set out in Note 2 to the Shandong Meiduo 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 effectiv eness of the entity’s internal control. Our
work also included evaluating the appropria teness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the
overall presentation of the Shandong Meiduo 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 Shandong Meiduo Historical Financial Information gives, for the
purposes of the accountants’ report, a true and fair view of the financial position of
Shandong Meiduo as at 31 December 2022 and 2023 and 30 June 2024 and of the financial
performance and cash flows of Shandong Meiduo for the Pre-acquisition Periods in
accordance with the basis of preparation set out in Note 2 to the Shandong Meiduo
Historical Financial Information.
Review of stub period comparative financial information
We have reviewed the stub period comparative financial information of Shandong
Meiduo which comprises the statement of profit or loss and other comprehensive income,
statement of changes in equity and statement of cash flows of Shandong Meiduo for the six
months ended 30 June 2023, and other explanatory information (the ‘‘ Stub Period
Comparative Financial Information ’’). The directors of Shandong Meiduo are responsible
for the preparation and presentation of the Stub Period Comparative Financial Information
in accordance with the basis of preparation set out in Note 2 to the Shandong Meiduo
Historical Financial Informa tion. Our responsibility is to express a conclusion on the Stub
Period 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 a udit 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 identified in an audit.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 715 ---
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 Stub Period Comparative Financial
Information, for the purposes of the accountant’s report, is not prepared, in all material
respects, in accordance with the basis of preparation set out in Note 2 to the Shandong
Meiduo 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 Shandong Meiduo Historical Financial Information, no adjustments
to the Shandong Meiduo Underlying Financial Statements as defined on page ID-4 have
been made.
Dividends
No dividends have been paid by Shandong Meiduo in respect of the Pre-acquisition
Periods.
Yours faithfully,
Moore CPA Limited
Certified Public Accountants
Pak Chi Yan
Practising Certificate Number: P06923
Hong Kong, 22 October 2024
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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I. THE SHANDONG MEIDUO HISTORICAL FINANCIAL INFORMATION
Preparation of the Shandong Meiduo Historical Financial Information
Set out below is the Shandong Meiduo Historical Financial Information which
forms an integral part of this accountants’ report.
The financial statements of Shandong Meiduo for the Pre-acquisition Periods, on
which the Shandong Meiduo Historical Financial Information is based, have been
prepared in accordance with IFRS Accounting Standards (‘‘ IFRSs ’’) issued by
International Accounting Standards Board (the ‘‘ IASB ’’) and were audited by Moore
CPA Limited in accordance with Hong Kong Standards on Auditing issued by the
HKICPA (the ‘‘Shandong Meiduo Underlying Financial Statements ’’).
The Shandong Meiduo Historical Financial Information is presented in Renminbi
(‘‘RMB’’) and all values are rounded to the nearest thousand (RMB’000) except when
otherwise indicated.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Notes
Period from
20 September
2022 to
31 December
2022
Year ended
31 December
2023
Six months
ended 30 June
2023
Six months
ended 30 June
2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
R e v e n u e .............. 6 — — — —
Other income, gains and
l o s s e s .............. 7 1 8 8 2 1 6 5 5 7
Administrative expenses . . (8) (1,706) (67) (1,376)
Research and development
e x p e n s e s ............ — ( 4 2 5 ) ( 3 7 ) ( 9 4 )
(Loss)/profit before taxation 8 (7) (1,249) 61 (1,413)
I n c o m et a xe x p e n s e ...... 9 — — — —
(Loss)/profit and total
comprehensive (expense)/
income for the period/year (7) (1,249) 61 (1,413)
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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STATEMENTS OF FINANCIAL POSITION
Notes
As at
31 December
2022
As at
31 December
2023
As at
30 June
2024
RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
P r o p e r t y ,p l a n ta n de q u i p m e n t ........... 1 3 6 0 9 9 0 , 7 0 8 120,756
I n t a n g i b l ea s s e t s ..................... 1 4 — 5 1 4 4
Prepayments, deposits and other receivables . 16 6,780 15,487 13,666
Total non-current assets ............... 7 , 3 8 9 106,246 134,466
CURRENT ASSETS
I n v e n t o r i e s ......................... 1 5 — 2 4 5 4 2
Bills and other receivables .............. 1 6 2 1 1 4 , 8 6 9 2 5 , 3 3 8
P l e d g e db a n kd e p o s i t s ................. 1 7 5 , 7 9 8 1 , 0 0 5 6 , 0 1 6
C a s ha n dc a s he q u i v a l e n t s .............. 1 7 1 3 , 6 0 7 2 7 , 8 1 0 2 8 , 6 9 2
T o t a lc u r r e n ta s s e t s ................... 1 9 , 4 2 6 4 3 , 7 0 8 6 0 , 5 8 8
CURRENT LIABILITIES
B i l l sa n do t h e rp a y a b l e s ............... 1 8 6 , 8 2 2 101,210 46,538
O t h e rb o r r o w i n g s.................... 1 9 — — 2 0 , 4 3 9
T o t a lc u r r e n tl i a b i l i t i e s................ 6 , 8 2 2 101,210 66,977
NET CURRENT ASSETS/(LIABILITIES) . . 12,604 (57,502) (6,389)
NON-CURRENT LIABILITY
O t h e rb o r r o w i n g s.................... 1 9 — — 3 0 , 7 4 6
N e ta s s e t s ......................... 1 9 , 9 9 3 4 8 , 7 4 4 9 7 , 3 3 1
EQUITY
S h a r ec a p i t a l ....................... 2 0 2 0 , 0 0 0 5 0 , 0 0 0 100,000
A c c u m u l a t e dl o s s e s ................... ( 7 ) ( 1 , 2 5 6 ) ( 2 , 6 6 9 )
T o t a le q u i t y ........................ 1 9 , 9 9 3 4 8 , 7 4 4 9 7 , 3 3 1
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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STATEMENTS OF CHANGES IN EQUITY
Share capital
(Accumulated
losses)/
retained
profits Total
RMB’000 RMB’000 RMB’000
(Note 20)
Capital contribution upon incorporation (Note 20) .... 2 0 , 0 0 0 — 2 0 , 0 0 0
Loss and total comprehensive expense for the period . . . — (7) (7)
At 31 December 2022 . . ....................... 2 0 , 0 0 0 ( 7 ) 1 9 , 9 9 3
C a p i t a lc o n t r i b u t i o n( N o t e2 0 ) ................... 3 0 , 0 0 0 — 3 0 , 0 0 0
L o s sa n dt o t a lc o m p r e h e n s i v ee x p e n s ef o rt h ey e a r ..... — ( 1 , 2 4 9 ) ( 1 , 2 4 9 )
At 31 December 2023 . . ....................... 5 0 , 0 0 0 ( 1 , 2 5 6 ) 4 8 , 7 4 4
C a p i t a lc o n t r i b u t i o n( N o t e2 0 ) ................... 5 0 , 0 0 0 — 5 0 , 0 0 0
Loss and total comprehensive expense for the period . . . — (1,413) (1,413)
A t3 0J u n e2 0 2 4............................. 1 0 0 , 0 0 0 ( 2 , 6 6 9 ) 9 7 , 3 3 1
(Unaudited)
A t1J a n u a r y2 0 2 3 ........................... 2 0 , 0 0 0 ( 7 ) 1 9 , 9 9 3
C a p i t a lc o n t r i b u t i o n( N o t e2 0 ) ................... 3 0 , 0 0 0 — 3 0 , 0 0 0
Profit and total comprehensive income for the period . . . — 61 61
A t3 0J u n e2 0 2 3( u n a u d i t e d ) .................... 5 0 , 0 0 0 5 4 5 0 , 0 5 4
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STATEMENTS OF CASH FLOWS
Notes
Period from
20 September
2022 to
31 December
2022
Year ended
31 December
2023
Six months
ended 30
June 2023
Six months
ended 30
June 2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES
(Loss)/profit before taxation ......... ( 7 ) ( 1 , 2 4 9 ) 6 1 ( 1 , 4 1 3 )
Adjustments for:
I n t e r e s ti n c o m e ................. 7 ( 1 ) ( 8 8 0 ) ( 1 6 5 ) ( 4 8 )
Depreciation of property, plant and
e q u i p m e n t .................. 1 3 — 7 0 — 5 9
Amortisation of intangible assets . . . . 14 — 14 — 7
Operating cash flows before movements in
w o r k i n gc a p i t a l ................. ( 8 ) ( 2 , 0 4 5 ) ( 1 0 4 ) ( 1 , 3 9 5 )
I n c r e a s ei ni n v e n t o r i e s .............. — ( 2 4 ) — ( 5 1 8 )
Increase in bills and other receivables . . . (6,800) (23,620) (28,191) (8,648)
Increase/(decrease) in bills and other
p a y a b l e s ...................... 6 , 8 2 1 5 9 , 9 3 4 1 2 8 , 7 0 3 ( 5 4 , 7 0 2 )
Net cash flows from/(used in) operating
a c t i v i t i e s ...................... 1 3 3 4 , 2 4 5 1 0 0 , 4 0 8 ( 6 5 , 2 6 3 )
CASH FLOWS FROM INVESTING
ACTIVITIES
I n t e r e s ti n c o m er e c e i v e d ............ 7 1 8 8 0 1 6 5 4 8
Purchase of property, plant and
e q u i p m e n t .................... ( 6 0 9 ) ( 5 5 , 7 1 5 ) ( 5 2 , 5 3 8 ) ( 2 9 , 8 9 2 )
(Placement)/withdraw al of pledged bank
d e p o s i t s...................... ( 5 , 7 9 8 ) 4 , 7 9 3 ( 6 7 , 6 3 3 ) ( 5 , 0 1 1 )
Net cash flows used in investing activities (6,406) (50,042) (120,006) (34,855)
CASH FLOWS FROM FINANCING
ACTIVITY
A d d i t i o no fo t h e rb o r r o w i n g s ......... 2 4 — — — 5 1 , 0 0 0
Proceed from capital contributed from a
s h a r e h o l d e r .................... 2 0 , 0 0 0 3 0 , 0 0 0 3 0 , 0 0 0 5 0 , 0 0 0
Net cash flows from financing activity . . 20,000 30,000 30,000 101,000
Net increase in cash and cash equivalents 13,607 14,203 10,402 882
Cash and cash equivalents at beginning of
t h ep e r i o d / y e a r................. — 1 3 , 6 0 7 1 3 , 6 0 7 2 7 , 8 1 0
CASH AND CASH EQUIVALENTS AT
END OF PERIOD/YEAR,
REPRESENTING BANK BALANCES
A N DC A S H ................... 1 7 1 3 , 6 0 7 2 7 , 8 1 0 2 4 , 0 0 9 2 8 , 6 9 2
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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II. NOTES TO THE SHANDONG MEIDUO HISTORICAL FINANCIAL
INFORMATION
1. GENERAL INFORMATION
Shandong Meiduo is a company with limited liability established in the People’s Republic of China
(hereafter, the ‘‘ PRC’’) on 20 September 2022. The registered address of the office of Shandong Meiduo is 88
meters south of the intersection of Beihuan Road and Le ize Avenue, Chenwang Street, Juancheng County, Heze
City, Shandong Province.
Shandong Meiduo is principally engaged in the business of NEV battery recycling and cascade using and
energy storage technology service, the products of whic h are extensively used in LFP and cathode materials for
ternary batteries.
The Shandong Meiduo Historical Fina ncial Information is presented in RMB, which is also the functional
currency of Shandong Meiduo.
2. BASIS OF PREPARATION OF THE SHANDO NG MEIDUO HISTOR ICAL FINANCIAL
INFORMATION
The Shandong Meiduo Historical Financial Informa tion has been prepared in accordance with IFRSs,
which comprise all standards and interpretations appr oved by the IASB. All IFRSs effective for the accounting
period commencing from 1 January 2024, together with th e relevant transitional provisions, have been early
adopted by Shandong Meiduo in the preparation of the Shandong Meiduo Historical Financial Information
throughout the Pre-acquisition Periods.
3. ADOPTION OF NEW AND AMENDMENTS TO IFRSS
For the purpose of preparing and presenting the Histor ical Financial Informati on for the Pre-acquisition
Periods, Shandong Meiduo has consistently adopted the acc ounting policies which includes all the International
Accounting Standards (‘‘ IASs ’’), the IFRSs, amendments to IFRSs and the related interpretations issued by the
IASB, which are effective for Shandong Meiduo’s financi al year beginning on 1 January 2024, throughout the
Pre-acquisition Periods.
New and amendments to IFRSs in issue but not yet effective
At the date of this report, the following new and amendments to IFRS Accounting Standards have
been issued which are not yet effective:
IFRS 18 Presentation and Disclosures in Financial Statements 5
IFRS 19 Subsidiaries without Public Accountability: Disclosures 5
Amendments to IFRS 9 and
IFRS 7
Classification and Measurement of Financial Instruments 4
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture 3
Amendments to IFRS 16 Lease liability in a Sale and Leaseback 1
Amendments to IAS 1 Classification of Liabilities as Current or Non-current 1
Amendments to IAS 1 Non-current Liabilities with Covenants 1
Amendments to IAS 7 and
IFRS 7
Supplier Finance Arrangements 1
Amendments to IAS 21 Lack of Exchangeability 2
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1 Effective for annual periods be ginning on or after 1 January 2024
2 Effective for annual periods be ginning on or after 1 January 2025
3 Effective for annual periods beginni ng on or after a date to be determined
4 Effective for annual periods be ginning on or after 1 January 2026
5 Effective for annual periods be ginning on or after 1 January 2027
The directors of Shandong Meiduo anticipate that the application of all new and amendments to
IFRSs will have no material impact on the Shandong Me iduo Historical Financ ial Information in the
foreseeable future.
4. MATERIAL ACCOUNTING POLICY INFORMATION
The Shandong Meiduo Historical Financial Informati on has been prepared in accordance with all IFRSs
issued by the IASB. In addition, the Shandong Meiduo Hist orical Financial Information includes applicable
disclosures required by the Rules Governing the Lis ting of Securities of The Stock Exchange of Hong Kong
Limited (‘‘Listing Rules ’’) and by the Hong Kong Companies Ordinance.
The Shandong Meiduo Historical Fina ncial Information has been prepared on the historical cost basis
except for certain financial instruments that are measu red at fair values at the end of each reporting period, as
explained in the accounting policies set out below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell a n asset or paid to transfer a liability in an orderly
transaction between market participants at the measure ment date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability,
Shandong Meiduo takes into account the characteristics of the asset or liability if market participants would
take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in the Shando ng Meiduo Historical Financial Information is
determined on such a basis, except for leasing transactions that are accounted for in accordance with IFRS 16,
and measurements that have some similarities to fair value but are not fair value, such as net realisable value in
IAS 2 ‘‘Inventories’’ or value in use i n IAS 36 ‘‘Impairment of Assets’’ (‘‘IAS 36 ’’).
In addition, for financial reporting purposes, fair val ue measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value me asurements are observable and the significance of the
inputs to the fair value measurement in its e ntirety, which are described as follows:
. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date;
. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for
the asset or liability, either directly or indirectly; and
. Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
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4.1. Employee benefits
Pension obligation
In accordance with the rules and regulat ions in the PRC, the PRC based employees of
Shandong Meiduo participate in various defined cont ribution retirement benefit plans organised by
the relevant municipal and provincial govern ments in the PRC under which Shandong Meiduo and
the PRC based employees are required to make mont hly contributions to these plans calculated as a
percentage of the employees’ salaries. The muni cipal and provincial governments undertake to
assume the retirement benefit obligations of all e xisting and future retired PRC based employees’
payable under the plans described above. Othe r than the monthly contributions, Shandong Meiduo
has no further obligation for the payment of retir ement and other post-retirement benefits of its
employees. The assets of these plans are hel d separately from those of Shandong Meiduo in
independently administered funds managed by the PRC government.
Shandong Meiduo’s contributions to the aforesaid defined contribution retirement schemes
are expensed as incurred.
Housing funds, medical insurances and other social insurances
Employees of Shandong Meiduo in the PRC ar e entitled to participate in various
government-supervised housing funds, medical insurances and other social insurance plan.
Shandong Meiduo contributes on a monthly basis to these funds based on certain percentages of
the salaries of the employees, subject to certain ceiling. Shandong Meiduo’s liability in respect of
these funds is limited to the contributions payable in each year. Contributions to the housing funds,
medical insurances and other social insurances are expensed as incurred.
4.2. Taxation
Income tax expense represents the sum of current and deferred income tax expense.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit
before taxation because of income or expense that ar e taxable or deductible in other years and items that
are never taxable or deductible. Shandong Meiduo’s liabi lity for current tax is calculated using tax rates
that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differ ences between the carrying amounts of assets and
liabilities in the financial statements and the corre sponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are g enerally recognised for all taxable t emporary differences. Deferred tax
assets are generally recognised fo r all deductible temporary differen ces to the extent that it is probable
that taxable profits will be available against which thos e deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not recognis ed if the temporary difference arises from the initial
recognition (other than in a business combination) of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit a nd at the time of the transaction does not give rise to
equal taxable and deductible temporary differences. In a ddition, deferred tax liabilities are not recognised
if the temporary difference arises fro m the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable te mporary differences associated with investments
in subsidiaries and associates, and interests in j oint ventures, except where Shandong Meiduo is able to
control the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax asse ts arising from deductible temporary differences
associated with such investments and interests are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and
they are expected to reverse in the foreseeable future.
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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 profits will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have
been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and a ssets reflects the tax consequences that would
follow from the manner in which Shandong Meiduo expects, at the end of the reporting period, to recover
or settle the carrying amount of its assets and liabilities.
For the purposes of measuring deferred tax for l easing transactions in which Shandong Meiduo
recognises the right-of-use assets and the related l ease liabilities, Shandong Meiduo first determines
whether the tax deductions are attributable to th e right-of-use assets or the lease liabilities.
For leasing transactions in which the tax deduc tions are attributable to the lease liabilities,
Shandong Meiduo applies IAS 12 ‘‘Income Taxes’’ requi rements to the lease liab ilities and the related
assets separately. Shandong Meiduo recognises a deferre d tax asset related to lease liabilities to the extent
that it is probable that taxable profit will be availabl e against which the deductible temporary difference
can be utilised and a deferred tax liabilit y for all taxable temporary differences.
Deferred tax assets and liabilities are offset when the re is a legally enforceable right to set off current
tax assets against current tax liabilities and when t hey relate to income taxes levied to the same taxable
entity by the same taxation authority.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax
are also recognised in other comprehensive income or di rectly in equity, respectively. Where current tax or
deferred tax arises from the initial accounting for a business combination, the tax effect is included in the
accounting for the business combination.
4.3. Property, plant and equipment
Property, plant and equipment are tangible asset s that are held for use in the production or supply
of goods or services, or for administrative purposes o ther than assets under construction as described
below. Property, plant and equipment are stated in the statement of financial position at cost less
subsequent accumulated depreciation and subs equent accumulated impairment losses, if any.
Assets in the course of construction for production, supply or administrative purposes are carried at
cost, less any recognised impairment loss. Costs incl ude any costs directly attributable to bringing the
asset to the location and condition necessary for it t o be capable of operating in the manner intended by
management, including costs of testing whether t he related assets in functioning properly and, for
qualifying assets, borrowing costs capitalised in accordance with Shandong Meiduo’s accounting policy.
Depreciation of these assets, on the same basis as other property assets, commences when the assets are
ready for their intended use.
When Shandong Meiduo makes payments for ownershi p interests of properties which includes both
leasehold land and building elements, the entire cons ideration is allocated between the leasehold land and
the building elements in proportion to the relative f air values at initial recognition. To the extent the
allocation of the relevant payments can be made re liably, interest in leasehold land is presented as
‘‘right-of-use assets’’ in the statement of financia l position. When the consideration cannot be allocated
reliably between non-lease building element and undi vided interest in the underlying leasehold land, the
entire properties are classified as property, plant and equipment.
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Depreciation is recognised so as to write off the co st of assets other than construction in progress
less their residual values over their estimated usefu l lives, using the straigh t-line method, as follows:
M o t o rv e h i c l e s.............................................. 5–10 years
O t h e re q u i p m e n t ............................................. 5y e a r s
The estimated useful lives, residual values and de preciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property and equipment is derecogn ised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property and equipment i s determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in profit or loss.
4.4. Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at costs less
accumulated amortisation and any accumulated imp airment losses. Amortisation for intangible
assets with finite useful lives is recognised on a strai ght-line basis over their estimated useful lives.
The estimated useful life and amortisation method are reviewed at the end of each reporting period,
with the effect of any changes in estimate being a ccounted for on a prospective basis. Intangible
assets with indefinite us eful lives that are acquired separately a re carried at cost less any subsequent
accumulated impairment losses.
An intangible asset is derecognised on dispos al, or when no future economic benefits are
expected from use or disposal. Gains and losses ari sing from derecognition of an intangible asset,
measured as the difference between the net dis posal proceeds and the carrying amount of the asset,
are recognised in profit or loss when the asset is derecognised.
Internally-generated intangible asset s — research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is
incurred.
4.5. Impairment on property, plant and equipment
At the end of the reporting period, Shandong Mei duo reviews the carrying amounts of its property,
plant and equipment to determine whether there is any indication that these assets have suffered an
impairment loss. If any such indication exists, the r ecoverable amount of the relevant asset is estimated in
order to determine the extent of the impairment loss (if any).
The recoverable amount of property, plant and equi pment are estimated individually. When it is not
possible to estimate the recoverable amount indivi dually, Shandong Meiduo estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment , corporate assets are allocated to the relevant
cash-generating unit when a reasonable and consistent basis of allocation can be es tablished, or otherwise
they are allocated to the smallest group of cash gene rating units for which a rea sonable and consistent
allocation basis can be establishe d. The recoverable amount is determined for the cash-generating unit or
group of cash-generating units to which the corpor ate asset belongs, and is compared with the carrying
amount of the relevant cash-generating unit or group of cash-generating units.
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Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are dis counted 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
(or a cash-generating unit) for which the estim ates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-ge nerating unit) is estima ted to be less than its
carrying amount, the carrying amount of the asset (or a ca sh-generating unit) is reduced to its recoverable
amount. For corporate assets or portion of corpor ate assets which cannot be allocated on a reasonable
and consistent basis to a cash-generating unit, Shandong Meiduo compares the carrying amount of a
group of cash-generating units, including the car rying amounts of the corporate assets or portion of
corporate assets allocated to that group of cash-gen erating units, with the recoverable amount of the
group of cash-generating units. In allocating the impa irment loss, the impairment loss is allocated first to
reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis
based on the carrying amount of each asset in the unit o r the group of cash-generating units. The carrying
amount of an asset is not reduced below the highest of i ts fair value less costs of disposal (if measurable),
its value in use (if determinable) and zero. The am ount of the impairment loss that would otherwise have
been allocated to the asset is allocated pro r ata to the other assets of the unit or the group of
cash-generating units. An impairment loss i s recognised immediately in profit or loss.
Where an impairment loss subsequently reve rses, the carrying amount of the asset (or
cash-generating unit or a group of cash-generating units) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss bee n recognised for the asset (or a cash-generating
unit or a group of cash-generating units) in prior ye ars. A reversal of an impairment loss is recognised
immediately in profit or loss.
4.6. Cash and cash equivalents
Cash and cash equivalents presented on the st atement of financial position include:
(a) cash, which comprises of cash on hand and demand deposits, excluding bank balances that are
subject to regulatory restrictions that result in such balances no longer meeting the definition
of cash; and
(b) cash equivalents, which comprises of short-te rm (generally with original maturity of three
months or less), highly liquid investments th at are readily convertible to a known amount of
cash and which are subject to an insignificant r isk of changes in value. Cash equivalents are
held for the purpose of meeting short-term cash commitments rather than for investment or
other purposes.
For the purposes of the statement of cash flows, ca sh and cash equivalents consist of cash and cash
equivalents as defined above and form an integral part of Shandong Meiduo’s cash management.
4.7. Inventories
Inventories are stated at the lower of cost and n et realisable value. Costs of inventories are
determined on a weighted average method. Net realisabl e value represents the estimated selling price for
inventories less all estimated costs of comp letion and costs necessary to make the sale.
4.8. Provisions
Provisions are recognised when Shandong Meiduo has a present obligation (legal or constructive) as
a result of a past event, it is probable that Shandong Meid uo will be required to settle that obligation, and
a reliable estimate can be made of the amount of the obligation.
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The amount recognised as a provision is the best est imate of the consideration required to settle the
present obligation at the end of the reporting peri od, taking into account the risks and uncertainties
surrounding the obligation. When a p rovision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the prese nt value of those cash flows (where the effect of the
time value of money is material).
Warranties
Provisions for the expected cost of assuran ce-type warranty obligations under the relevant
contracts with customers for sales of lithium ir on phosphate cathode material are recognised at the
date of sale of the relevant products, at the direct ors’ best estimate of the expenditure required to
settle Shandong Meiduo’s obligation.
4.9. Financial instruments
Financial assets and financial liabilities are re cognised when a group entity becomes a party to the
contractual provisions of the instr ument. All regular way purchases or sales of financial assets are
recognised and derecognised on a tra de date basis. Regular way purchases or sales are purchases or sales
of financial assets that require delivery of assets within the time frame established by regulation or
convention in the market place.
Financial assets and financial liabilities are initial ly measured at fair value except for trade and bills
receivables and contract assets arising from contract s with customers which are initially measured in
accordance with IFRS 15 ‘‘Revenue from Contracts with Customers’’ (‘‘ IFRS 15 ’’). Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets at fair value through profit or loss (‘‘ FVTPL ’ ’ )a r ea d d e dt oo rd e d u c t e df r o mt h ef a i r
value of the financial assets or financial liabilities, as a ppropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financia l assets at FVTPL are recognis ed immediately in profit
or loss.
The effective interest method is a method of calcul ating the amortised cost of a financial asset or
financial liability and of allocating interest incom e and interest expense over the relevant period. The
effective interest rate is the rate that exactly dis counts estimated future cash receipts and payments
(including all fees and points paid o r received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) th rough the expected life of the financial asset or
financial liability, or, where appropriate, a shor ter period, to the net carrying amount on initial
recognition.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following condi tions are subsequently measured at amortised
cost:
. the financial asset is held within a bus iness model whose objective is to collect
contractual cash flows; and
. the contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
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--- page 728 ---
Financial assets that meet the following condi tions are subsequently measured at fair value
through other comprehensive income:
. the financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling; and
. the contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
All other financial assets are subsequent ly measured at FVTPL, except that at initial
recognition of a financial asset Shandong Meiduo may irrevocably elect to present subsequent
changes in fair value of an equity investment in other comprehensive income if that equity
investment is neither held for trading nor contin gent consideration recognised by an acquirer in a
business combination to which IFRS 3 Business Combinations applies.
A financial asset is held for trading if:
. it has been acquired principally for the purpose of selling in the near term; or
. on initial recognition it is a part of a portfol io of identified financial instruments that
Shandong Meiduo manages together and has a recent actual pattern of short-term
profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.
Amortised cost and interest income
Interest income is recognised using the effectiv e interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying th e effective interest rate
to the gross carrying amount of a financial asset, except for financial assets that have subsequently
become credit-impaired. For financial assets th at have subsequently become credit-impaired,
interest income is recognised by applying the eff ective interest rate to the amortised cost of the
financial asset from the next reporting period. If t he credit risk on the credit-impaired financial
instrument improves so that the financial asset is no longer credit-impaired, interest income is
recognised by applying the effective interest rate t o the gross carrying amount of the financial asset
from the beginning of the reporting period follow ing the determination that the asset is no longer
credit-impaired.
Impairment of financial assets
Shandong Meiduo performs impairment asse ssment under expected credit loss (‘‘ ECL’’) model
on financial assets (including trade and other r eceivables, and bank balances and cash) which are
subject to impairment assessment under IFRS 9 . The amount of ECL is updated at each reporting
date to reflect changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the
expected life of the relevant instrum ent. In contrast, 12-month ECL (‘‘ 12m ECL ’’) represents the
portion of lifetime ECL that is expected to result f rom default events that are possible within 12
months after the reporting date. Assessments are done based on Shandong Meiduo’s historical
credit loss experience, adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current conditions at the reporting date as well as the
forecast of future conditions.
Shandong Meiduo always recognises lifetime EC L for trade receivables and bills receivables.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 729 ---
For all other instruments, Shandong Meiduo me asures the loss allowance equal to 12m ECL,
unless there has been a significant increase in cred it risk since initial recognition, in which case
Shandong Meiduo recognises lifetime ECL. The a ssessment of whether lifetime ECL should be
recognised is based on significant increases in t he likelihood or risk of a default occurring since
initial recognition.
Significant increase in credit risk
In assessing whether the credit risk has increas ed significantly since initial recognition,
Shandong Meiduo compares the risk of a default o ccurring on the financial instrument as at the
reporting date with the risk of a default occurring on t he financial instrument as at the date of initial
recognition. In making this assessment, Sha ndong Meiduo considers both quantitative and
qualitative information that is reasonable and s upportable, including historical experience and
forward-looking information that is available without undue cost or effort.
In particular, the following information is ta ken into account when assessing whether credit
risk has increased significantly:
. an actual or expected significant deteriorati on in the financial instrument’s external (if
available) or internal credit rating;
. significant deterioration in external market indicators of credit risk, e.g. a significant
increase in the credit spread, the credit default swap prices for the debtor;
. existing or forecast adverse changes in bus iness, financial or economic conditions that
are expected to cause a significant decrease in the debtor’s ability to meet its debt
obligations;
. an actual or expected significant deteriora tion in the operating results of the debtor;
. an actual or expected significant adverse change in the regulatory, economic, or
technological environment of the debtor th at results in a significant decrease in the
debtor’s ability to meet its debt obligations.
Irrespective of the outcome of the above asse ssment, Shandong Meiduo presumes that the
credit risk has increased significantly since init ial recognition when contractual payments are more
than 30 days past due, unless Shandong Meiduo has r easonable and supportable information that
demonstrates otherwise.
Shandong Meiduo regularly monitors the effectiven ess of the criteria used to identify whether
there has been a significant increase in credit risk and revises them as appropriate to ensure that the
criteria are capable of identifying significant in crease in credit risk before the amount become past
due.
Definition of default
For internal credit risk management, Shandong Me iduo considers an event of default occurs
when information developed internally or obtaine d from external sources indicates that the debtor is
unlikely to pay its creditors, including Shandong Me iduo, in full (without taking into account any
collaterals held by Shandong Meiduo).
Irrespective of the above, Shandong Meiduo c onsiders that default has occurred when a
financial asset is more than 90 days past due unless Shandong Meiduo has reasonable and
supportable information to demons trate that a more lagging default criterion is more appropriate.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 730 ---
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on
the estimated future cash flows of that financial a sset have occurred. Evidence that a financial asset
is credit-impaired includes observab le data about the following events:
(a) significant financ ial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the
borrower’s financial difficul ty, having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider; or
(d) it is becoming probable that the borrowe r will enter bankruptcy or other financial
reorganisation.
Write-off policy
Shandong Meiduo writes off a financial asset whe n there is information indicating that the
counterparty is in severe financial difficulty a nd there is no realistic prospect of recovery, for
example, when the counterparty has been placed u nder liquidation or has entered into bankruptcy
proceedings. Financial assets wr itten off may still be subject to enforcement activities under
Shandong Meiduo’s recovery procedures, takin g into account legal advice where appropriate. A
write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or
loss.
Measurement and recognition of ECL
The measurement of ECL is a function of the proba bility of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on historical data and forward-looking
information. Estimation of ECL reflects an unb iased and probability-weighted amount that is
determined with the respective r isks of default occurring as the weights. Shandong Meiduo uses a
practical expedient in estimating ECL on trade and bills receivables and contract assets using a
provision matrix taking into consideration histori cal credit loss experience, adjusted for forward
looking information that is available without undue cost or effort.
Generally, the ECL is the difference between all contractual cash flows that are due to
Shandong Meiduo in accordance with the contract and the cash flows that Shandong Meiduo
expects to receive, discounted at the effective int erest rate determined at initial recognition.
Lifetime ECL for certain trade and bills recei vables and contract assets are considered on a
collective basis taking into consideration past due information and relevant credit information such
as forward looking macroeconomic information.
For collective assessment, Shandong Meiduo takes into consideration the following
characteristics when formulating the grouping:
. past-due status;
. nature, size and industry of debtors; and
. external credit ratings where available.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 731 ---
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics.
Shandong Meiduo measures ECL for the remaining trade and bills receivables and contract
assets on an individual basis.
Interest income is calculated based on the gross carrying amount of the financial asset unless
the financial asset is credit-impaired, in which ca se interest income is calculated based on amortised
cost of the financial asset.
Shandong Meiduo recognises an impairment gain o r loss in profit or loss for all financial
instruments by adjusting their carrying amount , with the exception of trade and bills receivables,
contract assets and other receiva bles where the corresponding adju stment is recognised through a
loss allowance account.
Foreign exchange gains and losses
The carrying amount of financial assets that are denominated in a foreign currency is
determined in that foreign currency and transl ated at the spot rate at the end of each reporting
period. Specifically:
. For financial assets measured at amortised cost that are not part of a designated hedging
relationship, exchange differences are recognised in profit or loss in the ‘‘Other income,
gains and losses’’ line item as part of the net foreign exchange gains/(losses);
. For financial assets measured at FVTPL that are not part of a designated hedging
relationship, exchange differences are recognised in profit or loss in the ‘‘Other income,
gains and losses’’ line item as part of the gains/(losses) from changes in fair value of
financial assets at FVTPL.
Derecognition of financial assets
Shandong Meiduo derecognises a financial asset only when the contractual rights to the cash
flows from the asset expire, or when it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the
asset’s carrying amount and the sum of the consideration received and receivable is recognised in
profit or loss.
On derecognition of an investment in equity instrument which Shandong Meiduo has elected
on initial recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in
the FVTOCI reserve is not reclassified to profit or loss, but is transferred to retained profits.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabi lities or as equity in
accordance with the substance of the contractual a rrangements and the definitions of a financial
liability and an equity instrument.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 732 ---
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity in struments issued by Shandong Meiduo are recognised at
the proceeds received, net of direct issue costs.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTP L when the financial lia bility is designated as
FVTPL.
A financial liability is classified as held for trading if:
. it has been acquired principally for the purpose of repurchasing it in the near term; or
. on initial recognition it is a part of a portfol io of identified financial instruments that
Shandong Meiduo manages together and has a recent actual pattern of short-term
profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a f inancial liability held for trad ing or contingent consideration
of an acquirer in a business combination may be des ignated as at FVTPL upon initial recognition if:
. such designation eliminates or significan tly reduces a measurement or recognition
inconsistency that would otherwise arise; or
. the financial liability forms part of a group of financial assets or financial liabilities or
both, which is managed and its performance is evaluated on a fair value basis, in
accordance with Shandong Meiduo’s docum ented risk management or investment
strategy, and information about the grouping is provided internally on that basis; or
. it forms part of a contract containing one or more embedded derivatives, and IFRS 9
permits the entire combined contract to be designated as at FVTPL.
For financial liabilities that are designat ed as at FVTPL, the amount of changes in the fair
value of the financial liability that is attributab le to changes in the credit risk of that liability is
recognised in other comprehensive income, unles s the recognition of the effects of changes in the
liability’s credit risk in other comprehensive income would create or enlarge an accounting
mismatch in profit or loss. For financial liabilitie s that contain embedded derivatives, the changes in
fair value of the embedded derivatives are excl uded in determining the amount to be presented in
other comprehensive income. Changes in fair value a ttributable to a financial liability’s credit risk
that are recognised in other comprehensive income ar e not subsequently reclassified to profit or loss;
instead, they are transferred to re tained profits/others upon derecogn ition of the financial liability.
Financial liabilities at amortised cost
Financial liabilities including other borrowi ngs, trade and other payables and accruals are
subsequently measured at amortised cos t, using the effective interest method.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 733 ---
Foreign exchange gains and losses
For financial liabilities that are denominat ed in a foreign currency and are measured at
amortised cost at the end of each reporting peri od, the foreign exchange gains and losses are
determined based on the amortised cost of the inst ruments. These foreign exchange gains and losses
are recognised in the ‘‘Other income, gains and losses’’ line item in profit or loss as part of net
foreign exchange gains/(losses) for financial li abilities that are not part of a designated hedging
relationship. For those which are designated as a he dging instrument for a hedge of foreign currency
risk, foreign exchange gains and losses are r ecognised in other comprehensive income and
accumulated in a separa te component of equity.
Derecognition of financial liabilities
Shandong Meiduo derecognises financial liabili ties when, and only when, Shandong Meiduo’s
obligations are discharged, cancelled or have exp ired. The difference between the carrying amount
of the financial liability derecognised and the cons ideration paid and payable is recognised in profit
or loss.
4.10. Related parties
A person or a close member of that person’s fam ily is related to Shandong Meiduo if that person:
(i) has control or joint control over Shandong Meiduo;
(ii) has significant infl uence over Shandong Meiduo; or
(iii) is a member of key management per sonnel of Shandong Meiduo or Shandong Meiduo’s
parent. Or
An entity is related to Shandong Meiduo if any of the following conditions apply:
(i) The entity and Shandong Meiduo are members of the same group (which means that each
parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of t he other entity (or an associate or joint venture
of a member of a group of which the other entity is a member).
(iii) Both entities 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 the employees of Shandong
Meiduo or an entity related to Shandong Meiduo.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significa nt influence over the entity or is a member of key
management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management
personnel services to the reporting entity or to the parent of the reporting entity.
Close members of the family of a person are t hose family members who may be expected to
influence, or be influenced by, that person in their dealings with the entity.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 734 ---
5. MATERIAL ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of the Shandong Meiduo Historical Fi nancial Information requires management to make
judgments, estimates and assumpti ons that affect the application of pol icies and reported amounts of assets,
liabilities, income and expenses. The estimates and ass ociated assumptions are bas ed on historical experience
and various other factors that are believed to be reas onable under the circumstances, the results of which form
the basis of making the judgements a bout carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are revie wed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estim ate is revised if the revision affects only that period, or
in the period of the revision and future periods if th e revision affects both current and future periods.
Estimation uncertainty
The key assumptions concerning the future and ot her 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.
Provision of ECL for bills receivables
Bills receivables are assessed for ECL individua lly. The management of Shandong Meiduo makes
periodic individual assessment on the recoverability of bills receivables based on historical settlement
records, past experience, and also quantitative a nd qualitative information that is reasonable and
supportive forward-looking information. The man agement of Shandong Meiduo believes that there are no
significant increase in credit risk of these am ounts since initial recognition and Shandong Meiduo
provided impairment based on 12m ECL. As at 31 December 2022 and 2023 and 30 June 2024, the
carrying amount of bills receivables are RMBNil, R MB5,353,000 and RMB10,435,000, respectively.
During the period from 20 September 2022 to 31 December 2022, the year ended 31 December 2023 and
the six months ended 30 June 2024, no impairment losses on bills receivables were recognised.
6. REVENUE AND SEGMENT INFORMATION
(a) Revenue
Revenue represents the aggregate of the net amoun ts received and receivable from customers during
the Pre-acquisition Periods. The performance obligat ion is part of a contract that has an original expected
duration of one year or less.
Shandong Meiduo did not generate any revenue during the period from 20 September 2022 to 31
December 2022, the year ended 31 December 2023 and the six months ended 30 June 2023 and 2024.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 735 ---
7. OTHER INCOME, GAINS AND LOSSES
An analysis of other income, gains and losses is as follows:
Period from
20 September
2022 to
31 December
2022
Year ended
31 December
2023
Six months
ended 30 June
2023
Six months
ended 30 June
2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
I n t e r e s ti n c o m e .................. 1 8 8 0 1 6 5 4 8
O t h e r s ........................ — 2 — 9
1 882 165 57
8. (LOSS)/PROFIT BEFORE TAXATION
Shandong Meiduo’s (loss)/profit before t axation is arrived at after charging:
Period from
20 September
2022 to
31 December
2022
Year ended
31 December
2023
Six months
ended 30 June
2023
Six months
ended 30 June
2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
A u d i t o r ’ sr e m u n e r a t i o n ............ — — — —
Depreciation of property, plant and
e q u i p m e n t( N o t e1 3 )............ — 7 0 — 5 9
Amortisation of intangible assets
( N o t e1 4 ).................... — 1 4 — 7
Staff costs (including director’s, chief
executive’s and supervisor’s
remuneration):
Wages, salaries and bonuses ......... 4 4 0 5 , 7 3 1 1 , 4 8 7 4 , 9 3 6
R e t i r e m e n tb e n e f i te x p e n s e ......... 5 3 8 5 1 5 3 2 5 9
Social security costs, housing benefits
a n do t h e re m p l o y e eb e n e f i t s....... 6 4 9 8 1 5 2 4 5 0
451 6,614 1,792 5,645
9. INCOME TAX EXPENSES
No provision for EIT has been made as Shandong Meiduo did not have any estimated assessable profits
for the period from 20 September 2022 to 31 December 2022, the year ended 31 December 2023 and the six
months ended 30 June 2023 and 2024.
Under the EIT Law and the Implementation Regula tion of the EIT Law, Shandong Meiduo is subject to
the tax rate of 25% on the estimated assessable profit s for the period from 20 September 2022 to 31 December
2022, the year ended 31 December 2023 and the six months ended 30 June 2023 and 2024.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 736 ---
The tax charge for the Pre-acquisition Periods can be rec onciled to the (loss)/profit before taxation per the
statement of profit or loss and othe r comprehensive income as follows:
Period from
20 September
2022 to
31 December
2022
Year ended
31 December
2023
Six months
ended 30 June
2023
Six months
ended 30 June
2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
(Loss)/profit before taxation ........ ( 7 ) ( 1 , 2 4 9 ) 6 1 ( 1 , 4 1 3 )
Tax at the statutory tax rate of 25%. . . (2) (312) 15 (353)
Utilisation of tax losses previously not
r e c o g n i s e d ................... — — ( 2 ) —
Tax effect of tax losses not recognised . 2 312 — 353
O t h e r s ........................ — — ( 1 3 ) —
I n c o m et a xe x p e n s e ............... — — — —
As at 31 December 2022 and 2023 and 30 June 2023 and 2024, the Company has unused tax losses of
RMB7,000, RMB1,256,000, RMBnil and RMB2,669,000, respect ively available for offset against future profits.
No deferred tax assets has been recognised in respect of these tax losses due to the unpredictability of future
profits streams.
10. DIRECTOR’S, CHIEF EXECUTIVE’ S AND SUPERVISOR’S EMOLUMENTS
Mr. Shi Junfeng is the chief executive of Shandong Mei duo and his emolument disclosed below included
those for services rendered by him as the chief executive of Shandong Meiduo.
There were no fees and other emoluments payable to executive director, Mr. Shi Junfeng, and supervisor,
Mr. Lu Congjiang during the Pre-acquisition Periods.
Mr. Shi Junfeng was appointed as executive direct or of Shandong Meiduo with effect from 20 September
2022.
Mr. Lu Congjiang was appointed as executive di rector of Shandong Meiduo with effect from 20
September 2022.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 737 ---
11. FIVE HIGHEST PAID EMPLOYEES
The individuals whose emoluments were the top 5 highest in Shandong Meiduo for the period from 20
September 2022 to 31 December 2022, the year ended 31 December 2023 and the six months ended 30 June 2023
and 2024 were not director of Shandong Meiduo. Details of the emoluments of the individuals during the
Pre-acquisition Periods are as follows:
Period from
20 September
2022 to
31 December
2022
Year ended
31 December
2023
Six months
ended 30 June
2023
Six months
ended 30 June
2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Wages, salaries and bonuses ......... 4 3 4 1 , 0 0 0 7 5 6 7 8 6
R e t i r e m e n tb e n e f i te x p e n s e s ......... 3 8 1 2 9 2 7
Social security costs, housing benefits
a n do t h e re m p l o y e eb e n e f i t s....... 3 2 5 3 1 3 6
440 1,106 816 849
The number of highest paid employees whose remunera tion fell within the following band is as follows:
Period from
20 September
2022 to
31 December
2022
Year ended
31 December
2023
Six months
ended 30 June
2023
Six months
ended 30 June
2024
(Unaudited)
Nil to HK$1,000,000 . . . ........... 5 5 5 5
During the Pre-acquisition Periods, no emolumen ts were paid by Shandong Meiduo to any of the director
or the five highest paid individuals (including director and employees) as an inducement to join or upon joining
Shandong Meiduo or as compensation for loss of office.
12. DIVIDEND
No dividend has been paid or declared by Shandong Meiduo during the Pre-acquisition Periods.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 738 ---
13. PROPERTY, PLANT AND EQUIPMENT
Construction
in progress Motor vehicles
Other
equipment Total
RMB’000 RMB’000 RMB’000 RMB’000
COST
A d d i t i o n s ...................... 6 0 9 — — 6 0 9
At 31 December 2022 and
1 January 2023 ................ 6 0 9 — — 6 0 9
A d d i t i o n s ...................... 9 0 , 1 6 9 — — 9 0 , 1 6 9
T r a n s f e r s ...................... ( 5 9 3 ) 4 4 7 1 4 6 —
At 31 December 2023 and
1 January 2024 ................ 9 0 , 1 8 5 4 4 7 1 4 6 9 0 , 7 7 8
A d d i t i o n s ...................... 3 0 , 0 0 0 — 1 0 7 3 0 , 1 0 7
A t3 0J u n e2 0 2 4................. 1 2 0 , 1 8 5 4 4 7 2 5 3 120,885
ACCUMULATED DEPRECIATION
At 31 December 2022 and
1 January 2023 ................ — — — —
D e p r e c i a t i o np r o v i d e df o rt h ey e a r .... — 5 0 2 0 7 0
At 31 December 2023 and
1 January 2024 ................ — 5 0 2 0 7 0
Depreciation provided for the period . . — 42 17 59
A t3 0J u n e2 0 2 4................. — 9 2 3 7 1 2 9
CARRYING AMOUNT
At 31 December 2022 . . ........... 6 0 9 — — 6 0 9
At 31 December 2023 . . ........... 9 0 , 1 8 5 3 9 7 1 2 6 9 0 , 7 0 8
A t3 0J u n e2 0 2 4................. 1 2 0 , 1 8 5 3 5 5 2 1 6 120,756
14. INTANGIBLE ASSETS
Software
RMB’000
COST
At 31 December 2022 and 1 January 2023 .................................... —
A d d i t i o n s ........................................................... 6 5
At 31 December 2023, 1 January 2024 and 30 June 2024. . ........................ 6 5
ACCUMULATED AMORTISATION
At 31 December 2022 and 1 January 2023 .................................... —
C h a r g e df o rt h ey e a r ................................................... 1 4
At 31 December 2023 and 1 January 2024 .................................... 1 4
C h a r g e df o rt h ep e r i o d ................................................. 7
A t3 0J u n e2 0 2 4...................................................... 2 1
CARRYING AMOUNT
At 31 December 2022 . . ................................................ —
At 31 December 2023 . . ................................................ 5 1
A t3 0J u n e2 0 2 4...................................................... 4 4
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
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--- page 739 ---
15. INVENTORIES
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
R a wm a t e r i a l s .............................. — 2 4 5 4 2
16. BILLS AND OTHER RECEIVABLES
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
B i l l sr e c e i v a b l e s( N o t e( a ) ) ...................... — 5 , 3 5 3 1 0 , 4 3 5
Prepayments and other receivables (Note (b)) ........ 6 , 8 0 1 2 5 , 0 0 3 2 8 , 5 6 9
6,801 30,356 39,004
Analysis for reporting purposes:
N o n - c u r r e n tp o r t i o n.......................... 6 , 7 8 0 1 5 , 4 8 7 1 3 , 6 6 6
C u r r e n tp o r t i o n ............................. 2 1 1 4 , 8 6 9 2 5 , 3 3 8
6,801 30,356 39,004
Notes:
(a) All bills received by Shandong Meiduo are with a maturity period of less than one year.
(b) The prepayment and other receivables mainly repres ent prepayments to purchase of property, plant and
equipment amounting to RMB6,780,000, RMB 15,487,000 and RMB13,666,000 as at 31 December 2022
and 2023 and 30 June 2024, respectively.
17. BANK BALANCES AND RESTR ICTED AND PLEDGED DEPOSITS
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
C a s ha tb a n k............................... 1 3 , 6 0 7 2 7 , 8 1 0 2 8 , 6 9 2
P l e d g e db a n kd e p o s i t s ......................... 5 , 7 9 8 1 , 0 0 5 6 , 0 1 6
19,405 28,815 34,708
Cash at banks earns interest at floating rates based on daily bank deposit rates.
Pledged bank deposits carry fixed interest rate ranged from 1.30% to 1.50%, 1.75% and 1.2% as at 31
December 2022 and 2023 and 30 June 2024, respectively. Pledged bank deposits represent deposits pledged to
financial institutions to secure bills payable and therefore classified as current assets.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
–I D - 2 7–


--- page 740 ---
18. BILLS AND OTHER PAYABLES
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
B i l l sp a y a b l e( N o t e( a ) ) ........................ 5 , 7 9 8 1 , 0 0 5 6 , 0 1 6
Other payables (Note (b)) ...................... 1 , 0 2 4 100,205 40,522
6,822 101,210 46,538
Notes:
(a) The bills payable are guaranteed by banks in the PRC and have maturities of 6 months.
(b) The other payables mainly represent tender deposits to customers amounting to RMB3,410,000 and
RMB2,758,000, amount due to a director and his clos e family member amounting to RMB61,355,000 and
RMBnil and payable to suppliers for acquisition of property, plant and equipment amounting to
RMB34,454,000 and RMB34,484,000 as at 31 December 2023 and 30 June 2024, respectively. The
amounts due to a director and his close family bear f ixed interest rate of 4.6% per annum, unsecured and
repayable on demand.
19. OTHER BORROWINGS
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
Fixed-rate borrowings (Note (a))
S e c u r e d................................. — — 2 1 , 1 7 2
Variable rate borrowing (Note (a))
S e c u r e d................................. — — 3 0 , 0 1 3
— — 51,185
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
The carrying amounts of the above other borrowings are
repayable (based on scheduled repayment dates set out
in the loan agreements):
W i t h i no n ey e a r........................... — — 2 0 , 4 3 9
Within a period of more than one year but not exceeding
t w oy e a r s.............................. — — 2 0 , 7 4 6
Within a period of more than two years but not
exceeding five years ....................... — — 1 0 , 0 0 0
— — 51,185
Less: amounts due within one year shown under current
l i a b i l i t i e s ............................. — — ( 2 0 , 4 3 9 )
Amounts shown under non- current liabilities ......... — — 3 0 , 7 4 6
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
–I D - 2 8–


--- page 741 ---
Note:
(a) The ranges of effective interest rates (which are als o equal to contracted interest rates) on the fixed-rate
other borrowings are 4.65% to 4.65% per annum as at 30 June 2024.
The effective interest rate (which is also equal to c ontracted interest rate) on the variable rate other
borrowing is 5-year Loan Prime Rate plus 0.03% per annum as at 30 June 2024.
Other borrowings of RMB51,185,000 as at 30 June 2024 are guaranteed by Mr. Shi.
20. SHARE CAPITAL
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
Registered shares capital
As at 20 September 2022 (date of incorporation),
31 December 2022 and 2023 and 30 June 2024 ...... 1 0 0 , 0 0 0 100,000 100,000
Issued and fully paid
A tb e g i n n i n go ft h ep e r i o d / y e a r.................. — 2 0 , 0 0 0 5 0 , 0 0 0
C a p i t a lc o n t r i b u t i o n( N o t e )..................... 2 0 , 0 0 0 3 0 , 0 0 0 5 0 , 0 0 0
A te n do ft h ep e r i o d / y e a r ...................... 2 0 , 0 0 0 5 0 , 0 0 0 100,000
Note: Shandong Meiduo was incorporated on 20 Septem ber 2022 with registered share capital of
RMB100,000,000 and the shareholder has cont ributed RMB20,000,000 to Shandong Meiduo. For the
year ended 31 December 2023 and the six months ended 30 June 2024, the shareholder has contributed
RMB30,000,000 and RMB50,000,00 0 to Shandong Meiduo, respectively.
21. CAPITAL COMMITMENTS
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
Capital expenditure in respect of acquisition of property
and equipment and other intangible assets contracted
for but not provided in the Pre-acquisition Financial
I n f o r m a t i o n .............................. 3 7 3 , 1 8 6 256,227 204,946
22. FINANCIAL INSTRUMENTS
Categories of financial instruments
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
Financial assets
A ta m o r t i s e dc o s t............................ 1 9 , 4 1 3 3 4 , 2 2 1 3 3 , 4 5 6
Financial liabilities
A ta m o r t i s e dc o s t............................ 6 , 8 2 2 101,210 97,723
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
–I D - 2 9–


--- page 742 ---
Financial risk management objectives and policies
Shandong Meiduo’s major financial instruments in clude bills and other receivables, cash and cash
equivalents, bills and other payables and other borro wings. Details of the financial instruments are
disclosed in respective notes.
The risks associated with these financial instru ments include credit risk and liquidity risk. The
policies on how to mitigate these risks are set out below. The management of Shandong Meiduo manages
and monitors these exposures to ensure appropriate me asures are implemented in a timely and effective
manner.
Credit risk and impairment assessment
Shandong Meiduo has no significant concentrati ons of credit risk. The carrying amounts of cash
and cash equivalents and bills and other receivable s included in the statement of financial position
represent Shandong Meiduo’s maximum exposure to cre dit risk in relation to its financial assets.
For the bills and other receivables, the management make periodic collective assessments as well as
individual assessment on the recoverability of bills a nd other receivables based on historical settlement
records and past experiences. Shandong Meiduo asse ssed that the expected credit losses for these
receivables are not material under the 12 months expected losses method. In view of the history of
cooperation with debtors and the collection history of these receivables, the management believes that the
credit risk inherent in Shandong Meiduo’s outstandi ng bills and other receivables balances are not
significant.
As at 31 December 2022 and 2023 and 30 June 2024, cash and cash equivalents were deposited in
banks with high credit rating wi thout significant credit risk.
Liquidity risk
In management of the liquidity risk, Shandong Me iduo monitors and maintains a level of cash and
cash equivalents deemed adequate by the manag ement to finance Shandong Meiduo’s operations and
mitigate the effects of fluctuations in cash flows.
The following table details Shandong Meiduo’s remai ning contractual maturity for its financial
liabilities. The table has been drawn up based on the undiscounted cash flows of fin ancial liabilities based
on the earliest date on which Shandong Meiduo can be required to pay.
Weighted
average
interest rate
On demand
and/or less
than 1 year 1 to 3 years
Total
contractual
undiscounted
cash flow
Total
carrying
amount
% RMB’000 RMB’000 RMB’000 RMB’000
At 31 December 2022
Bills and other payables . . — 6,822 — 6,822 6,822
At 31 December 2023
Bills and other payables . . 2.88% 102,140 — 102,140 101,210
At 30 June 2024
Bills and other payables . . — 46,538 — 46,538 46,538
O t h e rb o r r o w i n g s....... 4 . 2 6 % 2 2 , 0 8 3 3 1 , 9 4 2 5 4 , 0 2 5 5 1 , 1 8 5
68,621 31,942 100,563 97,723
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
–I D - 3 0–


--- page 743 ---
Capital management
Shandong Meiduo manages its capital to ensure t hat entities in Shandong Meiduo will be able to
continue as a going concern while maximising the ret urn to shareholders throug h the optimisation of the
debt and equity balance. Shandong Meiduo’s overa ll strategy remains unchanged during the
Pre-acquisition Periods.
Shandong Meiduo manages its capital structure and adjusts it in light of changes in economic
conditions and the risk characteristics of the underlying assets. To maintain or adjus t the capital structure,
Shandong Meiduo may adjust the return capital to sha reholders or issue new shares. No changes were
made in the objectives, policies or processes for managing capital as at the ended of 31 December 2022 and
2023 and 30 June 2024.
23. RELATED PARTY TRANSACTIONS
The following significant transactions were carrie d out between Shandong Meiduo and its related parties
during the Pre-acquisition Periods. In the opinion of t he sole director of Shandong Meiduo, the related party
transactions were carried out at terms negotiated bet ween Shandong Meiduo and the respective related parties.
Significant balances with related parties
As disclosed in the statement of financial positi on, Shandong Meiduo had outstanding balances with
related parties at 31 December 2022 and 2023 and 30 June 2024 as follows:
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
Other payables to (Note (a))
S h iJ u n f e n g ................................ — 5 0 , 9 9 1 —
Z h uX i a n g l a n ............................... — 1 0 , 3 6 4 —
— 61,355 —
Note:
(a) As at 31 December 2023, the balance of RMB59,504,000 is non-trade in nature and bearing fixed interest
rate of 4.6% per annum, unsecured and repayable on demand.
Key management personnel compensations
No compensation paid or payable to key mana gement personnel (including sole director of
Shandong Meiduo and supervisor of Shandong Meiduo) for e mployee services during the Pre-acquisition
Periods.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
–I D - 3 1–


--- page 744 ---
24. RECONCILIATION OF LIABILITIES GEN ERATED FROM FINANCING ACTIVITIES
The table below details changes in the Shandong Meiduo’s l iabilities from financing activities, including
both cash and non-cash changes. Liabilities arising from fi nancing activities are liabilities for which cash flows
were, or future cash flows will be, classified in the Shandong Meiduo’s statements of cash flows as cash flows
from financing activities:
Other
borrowings
RMB’000
(Note 19)
At 31 December 2022, 1 January 2023, 31 December 2023 and
1 January 2024 ..................................................... —
N e tf i n a n c i n gc a s hf l o w s................................................ 5 1 , 0 0 0
P u r c h a s eo fp r o p e r t y ,p l a n ta n de q u i p m e n t................................... 1 8 5
At 30 June 2024 ...................................................... 5 1 , 1 8 5
25. PLEDGE OF ASSETS
Shandong Meiduo’s other borrowings had been secured b y the its assets and the carrying amounts of the
respective assets are as follows:
As 31 December
As at
30 June
2022 2023 2024
RMB’000 RMB’000 RMB’000
P r o p e r t y ,p l a n ta n de q u i p m e n t ................... — — 5 2 , 1 7 3
26. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been pr epared by Shandong Meiduo in respect of any period
subsequent to 30 June 2024.
APPENDIX ID ACCOUNTANTS’ REPORT OF SHANDONG MEIDUO
–I D - 3 2–


--- page 745 ---
The information set forth in this appendix does not form part of the Accountants’
Report prepared by Moore CPA Limited, Certified Public Accountants, Hong Kong, the
reporting accountants of our Company, as set forth in Appendix IA to this prospectus, and is
included herein for illustrative purposes only.
The unaudited pro forma financial information should be read in conjunction with the
section headed ‘‘Financial Information’’ in this prospectus and the Accountants’ Report set
forth in Appendix IA to this prospectus.
A. UNAUDITED PRO FORMA 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 th e 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 o ut here to illustrate the effect of the Global
Offering on our consolidated net tangible a ssets as of 30 June 2024 as if it had taken place
on 30 June 2024.
The unaudited pro forma adjusted consolidated net tangible assets 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
30 June 2024 or any future dates. It is prepared based on our consolidated net tangible
assets as of 30 June 2024 as set out in the Accountants’ Report as set out in Appendix IA to
this prospectus, and adjusted as described below. The unaudited pro forma adjusted
consolidated net tangible assets does not form part of the Accountants’ Report as set out in
Appendix IA to this prospectus.
Consolidated
net tangible
assets
attributable to
owners of the
Company as of
30 June 2024
Estimated net
proceeds from
the Global
Offering
Unaudited pro
forma adjusted
consolidated
net tangible
assets
Unaudited pro forma
adjusted consolidated
net tangible assets
per Share
RMB’000 RMB’000 RMB’000 RMB HKD
(note 1) (note 2) (note 3) (note 4)
B a s e do na nO f f e rP r i c eo f
H K $ 4 . 5p e rS h a r e....... 2 , 7 1 4 , 1 5 5 3 8 6 , 1 2 3 3 , 1 0 0 , 2 7 8 4 . 6 8 5 . 1 4
B a s e do na nO f f e rP r i c eo f
H K $ 7 . 0p e rS h a r e....... 2 , 7 1 4 , 1 5 5 6 0 7 , 3 2 8 3 , 3 2 1 , 4 8 3 5 . 0 1 5 . 5 1
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 1–


--- page 746 ---
Notes:
(1) The consolidated net tangible assets attributable to owners of the Company as of 30 June 2024 is extracted
from ‘‘Appendix IA — Accountants’ Report’’, wh ich is based on the audited consolidated equity
attributable to owners of the Company as of 30 June 2024 of approximately RMB3,037,687,000 less
goodwill of approximately RMB264,577,000 and other intangible assets of approximately RMB58,955,000
as of 30 June 2024.
(2) The estimated net proceeds from the Global Offer ing are based on the Offer Price of HK$4.5 per Share or
HK$7.0 per Share, after deduction of the underwriting fees and other related expenses payable by the
Group (excluding the listing expenses that have be en charged to profit or loss during the Track Record
Period) and do not take into account of any Shares which may be issued upon the exercise of the
Over-allotment Option. The estimated net proceed s from the Global Offering are converted from Hong
Kong dollars into Renminbi at an exchange rate of HK$1.0990 to RMB1.
(3) The unaudited pro forma adjusted consolidated ne t tangible assets per Share is calculated based on
662,996,503 Shares (excluding treasury shares) in i ssue 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 t angible assets per Share is converted into Hong Kong
dollars at an exchange rate of HK$1.0990 to RMB1.
(5) No adjustment has been made to the unaudited pro forma adjusted net tangible assets of the Group to
reflect any trading results or other transactions of the Group entered into subsequent to 30 June 2024.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 2–


--- page 747 ---
B. INDEPENDENT REPORTING ACCOU NTANTS’ ASSURANCE REPORT ON
THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION
The following is the text of a report received from the Company’s reporting
accountants, Moore CPA Limited, Certified Public Accountants, Hong Kong, for the
purpose for inclusion in this prospectus.
To the Directors of Jiangsu Lopal Tech. Co., Ltd
We have completed our assurance engagement to report on the compilation of pro
forma financial information of Jia ngsu Lopal Tech. Co., Ltd (the ‘‘ Company ’’) and its
subsidiaries (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 unaudited pro fo rma consolidated net tangible assets as at 30
June 2024, and related notes (the ‘‘ Unaudited Pro Forma Financial Information ’’) as set out
on pages II-1 to II-2 of the prospectus dated 22 October 2024 issued by the Company (the
‘‘Prospectus ’’), in connection with the proposed initial public offering of the shares of the
Company. The applicable criteria on the bas is of which the Directors have compiled the
Unaudited Pro Forma Financial Information are described in notes thereto.
The Unaudited Pro Forma Financial Inform ation has been compiled by the Directors
to illustrate the impact of the public offering on the Group’s financial position as at 30 June
2024 as if the transaction had taken place at 30 June 2024. As part of this process,
information about the Group’s financial position as at 30 June 2024 has been extracted by
the Directors from the Group’s historical financial information for the six months ended 30
June 2024, on which an accountants’ report set out in Appendix IA of the Prospectus has
been published.
Directors’ Responsibility for the Unaud ited Pro Forma Finan cial Information
The Directors are responsible for compiling the Unaudited Pro Forma Financial
Information in accordance with paragraph 4.29 of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (the ‘‘ Listing Rules ’’) and with
reference to Accounting Guideline (‘‘ AG’’) 7 Preparation of Pro Forma Financial
Information for Inclusio n in Investment Circulars issued by the Hong Kong Institute of
Certified Public Accountants (the ‘‘ HKICPA ’’).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 3–


--- page 748 ---
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on
fundamental principles of integrity, objectivity, professional competence and due care,
confidentiality and professional behavior.
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, profe ssional 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 Unaudited Pro Forma F inancial Information and to report our
opinion to you. We do not accept a ny responsibility for any reports previously given by us
on any financial information used in the comp ilation of the Unaudited Pro Forma Financial
I n f o r m a t i o nb e y o n dt h a to w e dt ot h o s et ow h om 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 Unaudited Pro Forma Financial
I n f o r m a t i o ni na c c o r d a n c ew i t hp a r a g r a p h4 . 2 9o ft h eL i s t i n gR u l e sa n dw i t hr e f e r e n c et o
AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the Unaudited
Pro Forma Financial Information, nor have we, in the course of this engagement,
performed an audit or review of the financial information used in compiling the Unaudited
Pro Forma Financial Information.
The purpose of the Unaudited Pro Forma Financial Information included in the
Prospectus is solely to illustrate the impac t of the event or transaction 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 event or transaction at 30 June 2024 would have been as
presented.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 4–


--- page 749 ---
A reasonable assurance engagement to report on whether the Unaudited Pro Forma
Financial Information has been properly comp iled on the basis of the applicable criteria
involves performing procedures to assess wh ether the applicable criteria used by the
Directors in the compilation of the Unaudited Pro Forma Financial Information provide a
reasonable basis for presenting the significant effects directly attributable to the event or
t r a n s a c t i o n ,a n dt oo b t a i ns u f f i c i e nt appropriate evidence about whether:
. the related pro forma adjustments give app ropriate effect to those criteria; and
. the Unaudited Pro Forma Financial Information reflects the proper application
of those adjustments to the unadjusted financial information.
The procedures selected depend on the repor ting accountants’ judgment, having regard
to the reporting accountants’ understanding of the nature of the Group, the event or
transaction in respect of which the Unaudited Pro Forma Financial Information has been
compiled, and other relevant e ngagement circumstances.
The engagement also involves evaluating the overall presentation of the Unaudited Pro
Forma Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Opinion
In our opinion:
(a) the Unaudited 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 Unaudited Pro Forma
Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing
Rules.
Yours faithfully,
Moore CPA Limited
Certified Public Accountants
Pak Chi Yan
Practising Certificate Number: P06923
Hong Kong, 22 October 2024
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 5–


--- page 750 ---
This Appendix contains a summary of the principal provisions of the Company’s Articles
of Association. The major objective of this Appendix is to provide potential investors with an
overview of the Company’s Articles of Association, and therefore it may not contain all the
information that may be important to potential investors.
SHARES AND REGISTERED CAPITAL
Shares of the Company shall take the form of registered share certificates. The par
value of the shares shall be denominated in RMB.
The shares of the Company shall be issued in accordance with the principles of open,
fairness and justice. Each share of the same class shall carry the same rights.
Shares of the same class and the same issuance shall be issued on the same conditions
and at the same price. Any entity or individual shall pay the same price for each of the
Shares it/he/she subscribes for.
INCREASE, REDUCTION, REPUR CHASE AND TRANSFER OF SHARES
Increase and Reduction of Shares
Based on its operation and development need s, in accordance with the relevant laws
and regulations, and subject to the resolutions of the general meeting, the Company may
increase its capital by any of the following ways:
(i) public issuance of shares;
(ii) non-public issuance of shares;
(iii) distribution of bonus shares to existing Shareholders;
(iv) conversion of capital reserve into share capital;
(v) other means permitted by laws and admin istrative regulations and approved by
the CSRC.
The Company may reduce its registered capital. The reduction of registered capital
shall comply with the Company Law and oth er relevant regulations as well as the
procedures stipulated in the Articles of Association.
Repurchase of Shares
The Company shall not buy back its shares, except in one of the following
circumstances:
(i) reduction of the Company’s registered capital;
(ii) mergers with another company holding shares of the Company;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
–I I I - 1–


--- page 751 ---
(iii) use of shares for employee shareh olding scheme or equity incentives;
(iv) Shareholders who object to resolutions of the general meeting on merger or
division of the Company requesting the Company to purchase their shares;
(v) use of shares for conversion of corporate bonds issued by the Company which are
convertible into shares;
(vi) where it is necessary for the Company to preserve its value and Shareholders’
interest.
Where the Company purchases its shares under the circumstances set forth in items (i)
and (ii) above, it shall be resolved at a general meeting. Where the Company purchases its
shares under the circumstances set forth in items (iii), (v) and (vi) above, a resolution
thereon may, pursuant to the se curities regulatory rules of the place where the shares of the
Company are listed, be resolved at a Boa rd meeting that is attended by more than
two-thirds of the Directors. Upon the purchas e of its A shares by the Company pursuant to
the above provisions, under the circumstance set forth in item (i), such shares shall be
cancelled within 10 days from the day of purchase; under the circumstances set forth in
items (ii) and (iv), such shares shall be transferred or cancelled within six months; under the
circumstances set forth in items (iii), (v) and ( vi), the total number of A shares held by the
Company shall not exceed 10% of the total issued A shares of the Company, and shall be
transferred or cancelled within three years.
Upon the purchase of its H shares by the Company pursuant to the above provisions,
such H shares may, at the option of the Company, be cancelled immediately or held as
Treasury Shares in accordance with the Hong K ong Listing Rules. In the event that the
Directors do not specify that the relevant Shares are to be held as Treasury Shares, such H
shares shall be cancelled. The Company shall hold Treasury Shares in a clearly identifiable
separate account within the Central Clearing and Settlement System. The Company shall
not exercise any right in respect of the Treasury Shares, and no dividend may be declared or
paid in respect of a Treasury Share. Treasury Shares may be disposed of by the Company on
such terms and conditions as determined by the Directors subject to the Hong Kong Listing
Rules.
If the Company purchases its own shares, it shall fulfil its disclosure obligation as
required under the securities regulatory rules of the place where shares of the Company are
listed.
The Company may purchase its own shares by the centralized trading on the stock
exchange or other ways approved by the laws, administrative regulations, the CSRC and
other stock exchanges of the place where the Company’s shares are listed.
Transfer of Shares
Shares issued prior to the public offering of A shares of the Company shall not be
transferred within one year from the date on w hich the A shares of the Company are listed
a n dt r a d e do nt h es t o c ke x c h a n g e ( s ) .
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
–I I I - 2–


--- page 752 ---
Directors, Supervisors and senior management of the Company shall report to the
Company their holdings of shares of the Company and the changes thereof. During their
term of office determined upon taking office , the shares transferred by any of them each
year shall not exceed 25% of the total shares of the Company held by them. The shares of
the Company held by the aforesaid persons shall not be transferred within one year from
the date on which the shares of the Company are listed and traded. The above personnel
shall not transfer the shares of the Company held by them within 6 months after the expiry
of their term of office.
If the shares of the Company are pledged during the restricted transfer period
stipulated by laws and administrative regulat ions, the pledgee shall not exercise the pledge
right during the restricted transfer period.
Where Shareholders holding 5% or above shares of the Company, Directors,
Supervisors and senior management sell the shares of the Company or other securities
with an equity nature within 6 months after purchasing the same, or purchase the shares of
the Company or other securities with an equity nature as held within 6 months after selling
the same, the earnings arising therefrom shall belong to the Company, and the Board of the
Company shall recover such earnings. However, the restriction shall not be applicable to a
securities company holding 5% or above of the shares of the Company as a result of its
purchase of the remaining unsold shares underwritten by it and other circumstances
stipulated by the CSRC. Other listing rules at the place where the shares of the Company
are listed shall prevail.
SHAREHOLDERS AND GENERAL MEETINGS
Shareholders
The Company shall establish a register of members with the evidence provided by the
securities registration authority. The register of members shall be sufficient evidence of the
holding of the shares of the Company by the Shareholders. The original copy of the register
of members of H shares listed in Hong Kong shall be kept in Hong Kong for shareholders’
inspection. However, the Company may susp end the registration of Shareholders in
accordance with the provisions of the applicable laws and regulations and the securities
regulatory rules of the place where shares of the Company are listed. Shareholders shall
enjoy the rights and assume the obligations ac cording to the class of the shares they hold.
Shareholders holding the same class of shares shall enjoy the same rights and assume the
same obligations.
Shareholders of the Company shall enjoy the following rights:
(i) to receive dividends and other distributions in proportion to the shares they hold;
(ii) to request, convene, hold, attend or appoint a proxy to attend general meetings
and exercise the corresponding voting rights in accordance with laws;
(iii) to supervise, present suggestions on or make inquiries about the operations of the
Company;
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--- page 753 ---
(iv) to transfer, gift or pledge the shares it holds in accordance with laws,
administrative regulations and regulations of the Articles of Association;
(v) to inspect and copy the Articles of Association, register of members, record of
bondholders, minutes of general meetings, resolutions of Board meetings,
resolutions of Supervisory Commi ttee meeting and financial reports;
(vi) in the event of termination or liquida tion of the Company, to participate in the
distribution of the remaining property of the Company in proportion with the
number of shares held by them;
(vii) to require the Company to purchase their shares in the event of objection to the
resolutions of the general meeting o n merger or division of the Company;
(viii) to enjoy other rights stipulated by laws, adm inistrative regulations, departmental
rules, the securities regulatory rules of the place where the shares of the Company
are listed and regulations of the Articles of Association.
If any resolution of a general meeting or the Board is in violation of the laws or
administrative regulations, Shareholders shall have the right to request the People’s court to
invalidate the said resolution. If the convening procedures and voting method of the general
meetings or Board meetings are in violation of the laws, administrative regulations or the
Articles of Association or if the contents of any resolution are in breach of the Articles of
Association, Shareholders shall have the right to request the People’s court to revoke such
resolution within 60 days from the date on which the resolution is approved. However, if
the convening procedures or voting methods of the general meetings or Board meetings are
only slightly flawed and have no substantial impact on the resolution, this will be an
exception. Shareholders who are not notified to attend the general meetings have the right
to request the People’s Court to revoke the resolution within 60 days from the date they
know or should know that the general meeting resolution was made; if they do not exercise
the right to revoke within one year from the date the resolution was made, the right to
revoke will be extinguished.
Shareholders of the Company shall assume the following obligations:
(i) to abide by the laws, administrative regulations and the Articles of Association;
(ii) to pay capital contribution as per the shares subscribed for and the method of
subscription;
(iii) not to return Shares unless prescribed otherwise in laws and regulations;
(iv) 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 intere sts of the creditors of the Company;
(v) to assume other obligations prescribed by the laws, administrative regulations and
the Articles of Association.
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--- page 754 ---
Shareholders of the Company who abuse their Shareholders’ rights and thereby cause
loss on the Company or other Shareholders shall be liable for loss compensation according
to the laws. Where Shareholders of the Company abuse the Company’s position as an
independent legal person and t he limited liabilities of Shareholders for the purposes of
evading repayment of debts, the reby materially impairing the interests of the creditors of
the Company, such Shareholders shall be jointly and severally liable for the debts owed by
the Company; if a shareholder uses two or more companies under his control to carry out
the above-mentioned acts, each company shal l bear joint and several liability for the debts
of any one company.
General Provisions for General Meeting
The general meeting is the organ of authority of the Company and shall exercise the
following duties and powers in accordance with laws:
(i) to elect and replace Directors or Supervisors and to determine matters relating to
the remuneration of the Directors or Supervisors;
(ii) to consider and approve the reports of the Board;
(iii) to consider and approve the rep orts of the Supervisory Committee;
(iv) to consider and approve the profit distr ibution plan and loss recovery plans of the
Company;
(v) to resolve on the increase or reduction of the registered capital of the Company;
(vi) to resolve on the issue of corporate bonds;
(vii) to resolve on the merger, division, diss olution, liquidation or change in corporate
form of the Company;
(viii) to amend the Articles of Association;
(ix) to resolve on the appointment and dism issal of accounting firms by the Company;
(x) to consider and approve the guarantee issu es specified in Article 40 of the Articles
of Association;
(xi) to consider matters relating to the pur chase and sale by the Company within one
year of material assets valued at more than 30% of the audited total assets of the
Company as at the most recent period;
(xii) to consider and approve matters rela ting to changes in the use of proceeds;
(xiii) to consider share incentive scheme and employee shareholding scheme;
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--- page 755 ---
(xiv) where the Company purchases its own shares under the circumstances set forth in
items (iii), (v) and (vi) of Article 23 Paragraph 1 of the Articles of Association, the
general meeting shall authorize the Board to consider;
(xv) to consider other matters to be resolved by the general meeting as required by
laws, administrative regulations, departmental rules, the securities regulatory
rules of the place where the shares of the Company are listed or the Articles of
Association.
The general meeting may authorize Board meeting to make resolutions on the issuance
of corporate bonds.
The following provision of external guarantees by the Company is subject to the
consideration and approval of the general meeting upon the consideration and approval of
the Board:
(i) the total amount of the external guarantees provided by the Company and its
holding subsidiaries exceeding 50% of the latest audited net assets;
(ii) the total amount of the external guarantees provided by the Company exceeding
30% of the latest audited total assets;
(ii) the amount of the guarantees provided by the Company within one year exceeding
30% of the latest audited total assets;
(iv) any guarantee to be provided to a recipien t of such security whose asset to liability
r a t i oi so v e r7 0 % ;
(v) any single guarantee with an amount exceeding 10% of the latest audited net
assets;
(vi) any guarantee provided to Shareholde rs, de facto controllers, and their related
parties;
(vii) any guarantees to be considered and approved by the general meeting as required
by relevant laws and regulations, listing rules at the place where the shares of the
Company are listed and the Articles of Association.
When a guarantee mentioned in item (3) above is considered at the general meeting, it
shall be passed by more than two-thirds of the voting rights held by the Shareholders
present at the meeting.
When the general meeting is considerin g a proposal to provide guarantee for any
Shareholder, de facto controller and their related parties, the said Shareholder or the
Shareholders controlled by the said de facto controller shall be abstained from voting on the
proposal, and the proposal shall be subject to approval by more than half of the voting
rights of the other attending Shareholders.
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--- page 756 ---
The general meetings are classified into an nual general meetings and extraordinary
general meetings. The annual general meetings shall be convened once a year within six
months from the end of the previous fiscal year.
The Company shall convene an extraordinar y general meeting within two months from
the date of occurrence of any of the following circumstances:
(i) when the number of Directors is less than the statutory minimum quorum
provided for in the Company Law or two-thirds of the number specified in the
Articles of Association;
(ii) when the uncovered loss of the Company reaches one-third of its total paid-up
share capital;
(iii) upon written request(s) by shareholder(s ) individually or collectively holding 10%
or above of the shares of the Company;
(iv) when the Board deems it necessary;
(v) when the Supervisory Committee proposes such a meeting be held;
(vi) other circumstances required by the laws, administrative regulations,
departmental rules, securities regulato ry rules of the place where the shares of
the Company are listed or the Articles of Association.
Summoning of General Meetings
The independent Directors shall have the right to propose to the Board to convene an
extraordinary general meet ing. The Board shall, in accordance with relevant laws,
administrative regulations and the Articles of Association, give a written response on
whether or not it agrees to convene such an extraordinary general meeting within 10 days
after the receipt of the proposal. If the Board agrees to convene an extraordinary general
meeting, it shall give a notice convening such m eeting within 5 days after it has so resolved.
If the Board does not agree to convene the extraordinary general meeting, it shall give the
reasons and make an announcement.
The Supervisory Committee shall have the right to propose to the Board in writing to
convene an extraordinary general meeting. The Board shall, in accordance with relevant
laws, administrative regulations and the Articles of Association, give a written response on
whether or not it agrees to convene such an extraordinary general meeting within 10 days
after the receipt of the proposal. If the Board agrees to convene an extraordinary general
meeting, it shall give a notice convening such m eeting within 5 days after it has so resolved.
Any changes to be made to the original request in the notice shall be subject to approval of
the Supervisory Committee. If the Board does not agree to convene an extraordinary
general meeting or fails to give a response within 10 days after the receipt of the proposal,
the Supervisory Committee may convene and preside over such meeting on its own.
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--- page 757 ---
Shareholders that hold, individually or collectively, 10% or more of the shares in the
Company shall have the right to request in writing the Board to convene an extraordinary
general meeting. The Board shall, in accordance with relevant laws, administrative
regulations and the Articles of Association, give a written response on whether or not it
agrees to convene such an extraordinary gene ral meeting within 10 days after the receipt of
the proposal and shall respond to the shareholders in writing. If the Board agrees to
convene an extraordinary general meeting, it shall give a notice convening such meeting
within 5 days after it has so resolved. Any changes to be made to the original request in the
notice shall be subject to approval of the relevant Shareholders. If the Board does not agree
to convene an extraordinary general meeting or fails to give a response within 10 days after
the receipt of the proposal, the Shareholders t hat hold, individually or collectively, 10% or
more of the Shares of the Company may propose to the Supervisory Committee to convene
an extraordinary general meeting. The Supervisory Committee shall, in accordance with the
provisions of laws, administrative regulations and the Articles of Association, decide
whether to convene an extraordinary general meeting within 10 days after the receipt of the
proposal and shall respond to the shareholders in writing. If the Supervisory Committee
agrees to convene an extraordinary general meeting, it shall give a notice convening such
meeting within 5 days after it has so resolved. Any changes to be made to the original
request in the notice shall be subject to approval of the relevant Shareholders. If the
Supervisory Committee fails to give the notice convening such meeting within the period
s p e c i f i e dh e r e i n a b o v e ,i ts h a l lb ed e e m e dt oh a v ef a i l e dt oc o n v e n ea n dp r e s i d eo v e rs u c h
meeting. The Shareholders that hold, indivi dually or collectively, 10% or more of the shares
in the Company for 90 days or more consecutively may convene and preside over such
meeting on their own.
Where the Supervisory Committee or the Shareholder(s) decide to convene a general
meeting on its or their own, it or they shall notify the Board in writing and file with the
stock exchange(s). Before the announcement of the resolutions of the general meeting is
made, the shareholding of the convening shareholder(s) shall not be less than 10%. Upon
giving the notice of the general meeting and the announcement of the resolutions of the
general meeting, the Supervisory Committee or the convening shareholder(s) shall submit
the relevant supporting mater ials to the stock exchange(s).
Where the Supervisory Committee or the Shareholder(s) convene a general meeting on
its or their own, the Board and the secretary to the board shall provide assistance. The
Board will provide the register of members as of the date of the share registration.
Any necessary expenses incurred in connect ion with the convening and holding of the
general meeting by the Supervisory Committee or the Shareholder(s) on its or their own
shall be borne by the Company.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 758 ---
PROPOSALS AND NOTICES OF GENERAL MEETINGS
The content of proposals shall fall within the functions and powers of the general
meeting, have clear subject fo r discussion and specific matters to be resolved and comply
with relevant requirements of the laws, administ rative regulations, the securities regulatory
rules of the place where the shares of the Company are listed and the Articles of
Association.
The Board, the Supervisory Committee or Shareholders that hold, individually or
collectively, 1% or more of the Shares of the Company shall have the right to propose
resolutions. Shareholders that hold, individually or collectively, 1% or more of the Shares
of the Company may submit ad hoc proposals in writing to the convener 10 days before the
convening of the general meeting. The ad hoc proposals should have clear agenda and
specific matters that need to be resolved. The convener shall give a supplemental notice of
the general meeting within 2 days upon receipt of the proposals and announce the contents
of the ad hoc proposals. The convener shall submit the ad hoc proposals to the general
meeting except where the ad hoc proposal violates the provisions of laws, administrative
regulations or the Articles of Association, or is not within the scope of the general meeting’s
authority.
The convener of an annual general meeting shall notify all Shareholders by means of
an announcement 21 days before the meeting; t he convener of an extraordinary general
meeting shall notify all Shareholders by means of an announcement 15 days before the
meeting. When calculating the period for giv ing notice, the day of the meeting shall not be
included.
A notice of a general meeting shall include the following:
(i) the time, venue and duration of the meeting;
(ii) matters and proposals submitted to the meeting for consideration;
(iii) a prominent written statement that all S hareholders are entitl ed to attend general
meeting and are entitled to appoint in writing a proxy to attend and vote at the
meeting and that such proxy need not be a shareholder of the Company;
(iv) the record date of registration of Shareholders entitled to attend the general
meeting;
(v) the name and contact method of the regular contact person for the meeting;
(vi) the time and procedure for voting online or through other means.
Notices or supplementary notices of general meetings shall adequately and completely
disclose the specific contents of all proposals. Where the opinions of an independent
Director are required on the matters to be discussed, such opinions and reasons thereof
shall also be disclosed when the notices or supplementary notices of general meetings are
served.
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--- page 759 ---
CONVENING OF GENERAL MEETINGS
All Shareholders registered on the share right registration date or their proxies shall be
entitled to attend the general meetings and exercise voting rights in accordance with
relevant laws, regulations and the Articles of Association. Shareholder may attend the
general meeting in person, or appoint one or more persons (need not be a shareholder) as
proxy(ies) to attend or vote on behalf of such Shareholder.
Individual shareholders attending the meeting in person shall present his or her
identity card or other valid license or certific ate or stock account card that can prove his or
her identity. Proxies appointed to attend the meeting shall present valid proof of their
identities and the power of attorney from the appointing shareholder.
Shareholder that is a legal person shall attend the meeting by its legal representative or
by proxies appointed by it. If a legal representative attends the meeting, he/she shall present
his/her identity card or valid certificate proving his/her qualifications as a legal
representative. Where the meeting is attende d by proxy, he/she shall present his/her
identity card and written power of attorney issued by the legal representative of the
corporate shareholder unit in accordance with the law.
Where such Shareholder is a Recognized Clearing House (or its nominees) as defined
by the relevant ordinances or regulations e nacted in Hong Kong from time to time, it may
authorize one or more persons or company rep resentatives as it thinks fit to act as its
proxy(ies) or representative(s) at any meetin g (including but not limited to general meeting
and creditor meeting); however, if more than one person are so authorized, the power of
attorney shall specify the number and class of shares in respect of which each such person is
so authorized, and be signed by the person authorized by the Recognized Clearing House.
The person(s) so authorized will be entitled to attend meetings (without being required to
present share certificate, notarized author ization and/or further evidence of formal
authorization) to speak and exercise the same power on behalf of the Recognized
Clearing House (or its nominees) at the meeting as if such person was an individual
shareholder of the Company.
Shareholders shall appoint a proxy in writing, signed by the appointing shareholder or
the agent entrusted by him in writing; if the app ointing shareholder is a legal person, it shall
be affixed with the seal of the legal person or signed by its director or formally appointed
agent. The power of attorney issued by a shareholder to appoint a proxy to attend any
general meeting shall contain the following:
(i) name of the proxy;
(ii) matters and powers of the proxy, and whether there are voting rights;
(iii) instructions for voting for, against or a bstaining from voting on each matter to be
considered on the agenda of general meeting;
(iv) the date of issuance and term of validity of the power of attorney.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 760 ---
If the Shareholder does not give specific instructions on authorizing a proxy to attend
the general meeting, the power of attorney sh all state whether the proxy may vote as he/she
thinks fit.
If the power of attorney is sign by other personnel authorized by consignor, the power
of attorney for authorized signature or other authorization documents should be certified
by a notary. The certificate of authorization or other authorization documents certified by a
notary. The power of attorney or other auth orization documents upon notarized shall,
together with the power of attorney for votin g, be placed at the domicile of the Company or
such other location as specified in the notice of the meeting. If the consignor is a legal
person, its legal representative or any person authorized by resolutions of the Board or
other decision-making institutions shall attend the general meeting on behalf of the
consignor.
All Directors, Supervisors and secretary to the Board shall attend general meetings of
the Company, and the general manager and other senior management shall attend the
meeting as non-voting participants. Subject to compliance with the securities regulatory
rules of the place where the shares of the Comp any are listed, the aforementioned persons
may attend the meeting through the internet, video, telephone or other means with
equivalent effect.
A general meeting shall be presided ov er by chairman of the Board. Where the
chairman of the Board is unable or fails to pe rform his/her duties, the meeting shall be
presided over by a Director jointly elected by more than half of the Directors. A general
meeting convened by the Supervisory Committee shall be presided over by the chairman of
the Supervisory Committee. Where the chairman of the Supervisory Committee is unable or
fails to perform his/her duties, the meeting shall be presided over by a Supervisor jointly
elected by more than half of the Supervisors. A general meeting convened by Shareholders
shall be presided over by a representative el ected by convener(s). Where the host of the
meeting violates the rules of procedure and makes it impossible to continue the meeting,
with the consent of more than half of the shareholders present at the meeting with voting
rights, the general meeting may elect a person to serve as the host of the meeting and
continue the meeting.
Voting of General Meetings
Resolutions of a general meeting are divided into ordinary resolutions and special
resolutions. Ordinary resolutions of a general meeting shall be passed by votes representing
more than half of the voting rights held by Shareholders (including proxies thereof)
attending the general meeting. Special resolutions of a general meeting shall be passed by
votes representing more than two-thirds of voting rights held by Shareholders (including
proxies thereof) attending the general meeting.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 761 ---
The following matters shall be passed by ord inary resolutions at a general meeting:
(i) work reports of the Board and the Supervisory Committee;
(ii) profit distribution plans and plans for recovery of losses formulated by the Board;
(iii) appointment and dismissal of mem bers of the Board and the Supervisory
Committee, their remunerations and methods of payment;
(iv) annual reports of the Company;
(v) matters other than those required by the laws, administrative regulations, the
securities regulatory rules of the place w here the shares of the Company are listed
or the Articles of Association to be passed by special resolution.
The following matters shall be passed by s pecial resolutions at a general meeting:
(i) increase or reduction of registered capital of the Company;
(ii) division, spin-off, merger, dissolution and liquidation of the Company;
(iii) the amendment of the Articles of Association;
(iv) the purchase and sale of material assets or amount of guarantee provided by the
Company to others within one year valued at more than 30% of the audited total
assets of the Company as at the most recent period;
(v) share incentive scheme;
(vi) modification of the dividend policy of the Company;
(vii) other matters as required by the laws, ad ministrative regulations, the securities
regulatory rules of the place where the shares of the Company are listed or the
Articles of Association, and considered by the general meeting, by way of an
ordinary resolution, to be of a nature which may have a material impact on the
Company, shall be passed b y a special resolution.
If at any time the company’s shares are divided into different classes of shares, and the
Company intends to change or abolish the rights of a particular class of shareholders, such
change or abolition shall be passed by a special resolution of the affected class of
shareholders at a separately convened shareholders’ meeting.
Shareholders (including proxies thereof) have the right to speak at general meetings
and exercise their voting rights based on the number of voting shares they represent. Each
share is entitled to one vote, unless individual shareholders are required to abstain from
voting on individual matters in accordance with the securities regulatory rules of the place
where the shares of the Company are listed.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 762 ---
When considering the material matters affect ing the interests of minority investors at
the general meeting, the votes by minority in vestors shall be counted separately, and the
results of such separate vote counting sha ll be publicly disclosed in a timely manner.
The shares of the Company held by the Company do not carry voting rights, and shall
not be counted in the total number of voting shares represented by Shareholders attending a
general meeting.
Shareholders who purchase the voting shares of the Company in violation of the
provisions of Clause 1 and Clause 2 of Article 63 of the Securities Law shall not exercise the
voting right of the shares that exceed the p rescribed ratio within 36 months after the
purchase, and such number shall not be counted in the total number of voting shares
represented by Shareholders attending a general meeting.
The Board, independent Directors and Shareholders who hold more than one percent
of voting shares of the Company or investors protection institutes established in accordance
with laws, administrative regulations or rules of the CSRC may publicly solicit for the
voting shares from Shareholders. Information including the specific voting intention shall
be fully disclosed to the Shareholders from whom voting rights are being collected.
Consideration or de facto consideration for soliciting Shareholders’ voting rights is
prohibited. Except for statutory conditions, the Company shall not impose any minimum
shareholding limitation for soliciting voting rights.
When a connected transaction is considered at a general meeting, the connected
shareholders shall refrain from voting and the number of voting shares that they represent
shall not be counted the total number of valid voting shares. Announcement of resolutions
of the general meeting shall fully disclose the voting of non-connected shareholders.
Where any Shareholder is, under the Hong Kong Listing Rules, required to abstain
from voting on any particular resolution or res t r i c t e dt ov o t i n go n l yf o r( o ro n l ya g a i n s t )
any particular resolution, any votes cast by the Shareholder (or his/her proxy) in
contravention of such requirement or restriction shall not be counted.
BOARD OF DIRECTORS
Directors
Directors of the Company shall be natural persons. A person may not serve as a
Director of the Company in case of any of the following circumstances:
(i) the person is without civil conduct capacity or with limited civil conduct capacity;
(ii) the person who has committed an offence of corruption, bribery, conversion of
property, misappropriation of property or sabotaging the market economic order
of socialism and has been punished therefor; or who has been deprived of his/her
political rights, in each case where less than five years have elapsed since the date
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
–I I I - 1 3–


--- page 763 ---
of the completion of implementation of such punishment or deprivation if a
suspended sentence is pronounced, where less than two years have elapsed since
the date of expiration of the probation period;
(iii) the person who is a former director, factory director or manager of a company or
enterprise which is insolvent and under liquidation and he/she is personally liable
for the insolvency of such company or enterprise, where less than three years have
elapsed since the date of the completion of such insolvency and liquidation of the
company or enterprise;
(iv) the person who is a former legal representative of a company or enterprise which
had its business license revoked and was ordered to shut down due to a violation
of the law and who incurred personal liab ility, where less than three years have
elapsed since the date of such revocation of the business license or such order to
shut down;
(v) the person is listed as a judgement defaulter by the People’s Court because of
failure to repay a relatively large amount of due debts;
(vi) the person has been banned by the CSRC from access to the securities market, and
the term of prohibition has not expired;
(vii) the person was subject to administrative punishment by the CSRC within the past
three years;
(viii) the person was subject to the public cen sure or, for three times or more,
announced criticism by the stock exchange within the past three years;
(ix) the person is publicly deemed by a stock exchange as unsuitable to serve as a
director, supervisor and senior management of a listed company;
(x) the person is unable to ensure sufficient time and commitment on the affairs of the
Company during the terms of office in order to earnestly perform all the duties as
a Director, supervisor and senior management;
(xi) the person is under investigation by judicial authorities on suspicion of
committing a crime or under investigation by the CSRC on suspicion of
breaching laws or regulations where no d efinitive conclusion has been reached;
(xii) other contents stipulated by laws, administrative regulations or departmental
rules or the listing rules of the place where the shares of the Company are listed.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 764 ---
Directors shall be elected or replaced at the general meeting. Pursuant to the laws,
administrative regulations and securities re gulatory rules of the place where the shares of
the Company are listed, the general meeting may depose any director whose term has not
expired by ordinary resolution. If a director is dismissed before the expiration of his term of
office without justifiable reasons, the d irector may request compensation from the
company. A Director shall serve a term of three years and may serve consecutive terms if
re-elected upon the expiration of their terms in accordance with securities regulatory rules
of the place where the shares of the Company are listed.
The term of office of a Director shall commence from the date of taking the position
until the expiry of the term of office of the current session of the Board. A Director shall
sign a confidentiality agreement with the Company within three days of his/her
appointment and strictly abide by the obligation to keep the business secrets of the
Company.
Where a re-election fails to be carried out in a timely manner upon the expiry of the
term of office of a Director, such Director shall continue to perform his/her duties as a
Director in accordance with the laws, administrative regulations, departmental rules and
the Articles of Association until the new ly elected Director assumes the office.
Senior management officers may serve concurrently as Directors, provided that the
total number of such Directors who concurrently serve as senior management officers and
the employee representatives shall not excee d a half of the total number of the Directors of
the Company.
Directors may resign prior to the expiration of their terms of office. The Directors who
resign shall submit to the Board a written report in relation to their resignation. Relevant
information shall be disclosed by the Board within 2 days. In the event that the resignation
of any Director results in the number of membe rs of the Board falling below the statutory
minimum requirement, the resigned Directors shall continue to perform his/her duties in
accordance with laws, administrative regulat ions, departmental rules and the Articles of
Association until the newly elected Director assumes the office.
The terms of appointment, nomination and election procedures, functions and powers
of independent non-executive Directors shall be implemented in accordance with the laws,
the relevant provisions of the CSRC and the stock exchange of the place where the shares of
the Company are listed. The number of independent non-executive Directors shall not be
less than three and shall not be less than one-third of all Directors, and at least one shall
include financial or accounting expertise in compliance with the requirements of Rule
3.10(2) of the Hong Kong Listing Rules. One independent non-executive Director should be
permanently resident in Hong Kong. All independent non-executive Directors must possess
the independence as provided under Rule 3.13 of the Hong Kong Listing Rules.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 765 ---
Board of Directors
A director is not required to hold shares of the Company.
The Company has established a Board which shall be accountable to the general
meetings. Special committees are set up under the Board of the Company, namely Strategy
Committee, Audit Committee, Nomination Co mmittee and Remuneration and Evaluation
Committee. The Board shall comprise ten Directors, with four independent non-executive
Directors and one chairman.
The Board shall exercise the following duties and powers:
(i) to convene general meetings and rep ort its work to the general meetings;
(ii) to implement the resolutions of the general meetings;
(iii) to formulate business operation plans and investment plans of the Company;
(iv) to formulate the profit distribution plans and plans for recovery of losses of the
Company;
(v) to formulate plans of the Company regarding increase or reduction of the
registered capital, issuance of bonds or other securities and listing;
(vi) to draft plans for major acquisitions of the Company, the purchase of Shares of
the Company, merger, division, dissolution or change in the form of the
Company;
(vii) to determine, to the extent authorized by the general meeting, on such matters as
the external investments, purchase or sale of assets, assets mortgage, external
guarantee, entrusted wealth management , connected transactions and external
donations of the Company;
(viii) to determine the internal management structure of the Company;
(ix) to determine the appointment or dismissal of the manager of the Company or
secretary to the Board and decide on their remuneration, rewards and penalties;
and based on the nomination of the manager, to determine the appointment or
dismissal of the senior management including vice manager(s) and chief financial
officer of the Company and determine their remuneration, rewards and penalties;
(x) to formulate the basic management system of the Company;
(xi) to formulate proposals for any amendment of the Articles of Association;
(xii) to manage the information disclosure of the Company;
(xiii) to propose to the general meeting for appointment or replacement of the
accounting firms which provide audit services to the Company;
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--- page 766 ---
(xiv) to listen to work reports of the manager of the Company and review his/her work;
(xv) to determine the acquisition by the Company of its own shares under the
circumstances as provided in items (iii), (v) or (vi) of Article 23 of the Articles of
Association;
(xvi) other duties as stipulated in laws, administr ative regulations, departmental rules,
securities regulatory rules of the place w here the shares of the Company are listed
and the Articles of Association.
Borrowing Powers
The Articles of Association do not contain an y specific provisions regarding Directors’
exercise of borrowing powers, but there are relevant provisions regarding Directors’ power
to determine, to the extent authorized by the general meeting, on such matters as the
external investments, purchase or sale of a ssets, assets mortgage, external guarantee,
entrusted wealth management, connected transactions and external donations of the
Company.
The Board shall consider the following major transactions within the scope of
permissions: (save for the Company’s provision of guarantee, being gifted with cash assets
and indebtedness for the mere reduction of or exemption from the listed company’s
obligations):
(i) the total amount of assets involved in the transaction exceeds 10% of the latest
audited total assets of the Company; where the total amount of assets involved in
the transaction exceeds 50% of the latest audited total assets of the Company,
such transaction shall be submitted to the general meeting for consideration; and
if such total amount of assets involved in the transaction has both book value and
assessed value, the higher shall be used for calculation.
(ii) the transaction consideration (incl uding debts and expenses assumed) exceeds
10% of the latest audited net assets of the Company, and the absolute amount of
which exceeds RMB10 million; where the tr ansaction consideration (including
debts and expenses assumed) exceeds 50% of the latest audited net assets of the
Company, and the absolute amount of which exceeds RMB50 million, such
transaction shall be submitted to the general meeting for consideration.
(iii) the profit arising from the transacti on exceeds 10% of the audited net profit of the
Company in the most recent financial year, and the absolute amount of which
exceeds RMB1 million; where the profit ar ising from the transaction exceeds 50%
of the audited net profit of the Company in the most recent financial year, and the
absolute amount of which exceeds RM B5 million, such transaction shall be
submitted to the general meeting for consideration.
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--- page 767 ---
(iv) the operating revenue generated by the subject matter (such as equity interest) of
the transaction in the most recent financial year exceeds 10% of the audited
operating revenue of the Company in the most recent financial year, and the
absolute amount of which e xceeds RMB10 million; wher e the operating revenue
generated by the subject matter (such as equity interest) of the transaction in the
most recent financial year exceeds 50% of the audited operating revenue of the
Company in the most recent financial year, and the absolute amount of which
exceeds RMB50 million, such transactio n shall be submitted to the general
meeting for consideration.
(v) the net profit generated by the subject matter (such as equity interest) of the
transaction in the most recent financial year exceeds 10% of the audited net profit
of the Company in the most recent financial year, and the absolute amount of
which exceeds RMB1 million; where the net p rofit generated by the subject matter
(such as equity interest) of the transaction in the most recent financial year
exceeds 50% of the audited net profit of the Company in the most recent financial
year, and the absolute amount of which exceeds RMB5 million, such transaction
shall be submitted to the general meeting for consideration.
(vi) the net assets involved in the subject matter (such as equity interest) of the
transaction exceeds 10% of the latest audited net assets of the listed company, and
the absolute amount of which exceed s RMB10 million; where the net assets
involved in the subject matter (such as equi ty interest) of the transaction exceeds
50% of the latest audited net assets of the listed company, and the absolute
amount of which exceeds RMB50 million, su ch transaction shall be submitted to
the general meeting for consideration; a n di fs u c hn e ta s s e t si n v o l v e di nt h e
transaction has both book value and assessed value, the higher shall be used for
calculation.
Transactions between the Company and its controlling subsidiaries or other entities
under its control within the scope of consolidated statements, or transactions between the
said controlling subsidiaries or other entities under its contro l, shall be exempted from the
requirements of disclosure and fulfillment o f the corresponding procedures in accordance
with the Articles of Association, unless otherwise provided by the CSRC or the Shanghai
Stock Exchange or the Hong Kong Listing Rules.
The chairman of the Board shall be elected or dismissed by more than half of all the
Directors. The chairman of the Board shall exercise the following duties and powers:
(i) to convene and preside over Board meetings, and to preside over general meetings;
(ii) to supervise and examine the impl ementation of resolutions of Board;
(iii) other duties and powers as authorised by the Board.
Where the chairman of the Board is unable or fails to perform his/her duties, the duties
shall be performed by a Director jointly elected by more than half of the Directors.
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--- page 768 ---
The Board shall convene at least two meetings per year, and all Directors and
Supervisors shall be notified in writing of each meeting 10 days prior to the meeting.
Shareholders representing more than one-tenth of the voting rights, more than one-third of
the Directors or the Supervisory Committee may propose to convene an extraordinary
meeting of the Board. The chairman of the Board shall convene and preside over the
extraordinary meeting of the Board within 10 days from the receipt of the proposal. The
Board of Directors shall notify all Directors and Supervisors in writing, by fax or by mail 2
days before convening the extraordinary meeti ng of the Board. If the notice is not delivered
directly, it shall also be confirmed b y telephone and reco rded accordingly.
The quorum of a Board meeting shall consist of more than one half of all Directors. A
resolution of the Board shall be passed by more than half of all Directors. When the Board
considers a resolution on the purchase of the shares of the Company within the Board’s
decision-making authority, the resolution shall be made with the attendance of at least
two-thirds of the Directors of the Board and shall be passed by more than half of all
Directors. When voting on the resolutions of the Board, each Director shall have one vote.
Where a Director has any connected relationship with the enterprise or individual
involved in the matter to be decided at the m eeting, he/she shall promptly report it in
writing to the Board and shall not exercise his/her voting rights on the resolution, nor shall
he/she exercise his/her voting rights on behalf of other Directors. Such a Board meeting
may be held only if more than one half of the Directors without a connected relationship are
present, and the resolutions made at such a Board meeting shall require adoption by more
than one half of the Directors without a connected relationship. If the number of
non-connected Directors in presence is less than 3 persons, the matter shall be submitted to
the general meeting for consideration. If there are any additional restrictions imposed by
laws and regulations and the securities regula tory rules of the place where the shares of the
Company are listed on the participation of Directors in the Board meetings and voting,
such provisions shall apply.
The voting in respect of a resolution made at a Board meeting shall be: by open ballot
or a show of hands. Each Director has the right to one vote. Resolutions of extraordinary
meetings of the Board may be adopted by voting through telecommunication (including but
not limited to telephone, facsimile etc.), prov ided that the Directors are allowed to freely
express their views and the resolutions shall be signed by the attending Directors.
Directors shall attend Board meetings in person. If any Director is unable to attend the
meeting for any reason, he/she may by a written power of attorney appoint another
Director to attend the meeting on his/her behalf. The power of attorney shall include the
name of the proxy, the subject, scope of authorization and validity period, which shall be
signed or officially sealed by the appointing Director. A Director appointed as the
representative of another Director to attend the meeting shall exercise the rights of a
Director within the scope of authorization. Where a Director does not attend a Board
meeting and does not appointed a proxy to attend the meeting on his behalf, he/she shall be
deemed to have waived his/her voting right at the meeting.
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--- page 769 ---
Managers and other senior management
The Company shall have one general manager, who shall be appointed or dismissed by
the Board. The Company may have deputy general managers as necessary. Deputy general
managers shall be nominated by the general manager and appointed or dismissed by the
Board, and the deputy general manager shall assist the general manager in his/her work.
The circumstances of disqualification for Directors prescribed in Article 91 of the
Articles of Association shall also be applicable to senior management.
The general manager shall serve for a term of 3 years and may serve consecutive terms
if re-appointed.
The general manager shall report to the Board and exercise the following duties and
powers:
(i) to take charge of the production, operation and management of the Company,
organize the implementation of the Board, and report to the Board;
(ii) to organize the implementation annual business plans and investment plans of the
Company;
(iii) to draft the plans for establishment o f the internal management organization of
the Company;
(iv) to draft the basic management system of the Company;
(v) to formulate the rules and regulations of the Company;
(vi) to propose to the Board the appointment or dismissal of the deputy general
manager and chief financial officer of the Company;
(vii) to determine the appointment or dismissal of management personnel other than
those whose appointment or dismissal shall be determined by the Board;
(viii) other duties and powers as may be conferred by the Articles or by the Board.
The Company shall have a secretary to the Board, who is responsible for preparing for
general meeting and Board meetings, maintaining documents and managing Shareholders’
information, as well as handling information disclosure matters.
The senior management of the Company shall perform their duties faithfully, and
safeguard the best interests o f the Company and all Shareholders. If the senior management
of the Company fails to perform their duties fait hfully or violates their fiduciary duties,
causing damage to the interests of the Company and public Shareholders, they shall be
liable for compensation in accordance with the laws.
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--- page 770 ---
SUPERVISORY COMMITTEE
Supervisors
The circumstances of disqualification for Directors prescribed in Article 91 of the
Articles of Association shall be applicable to Supervisors. Directors, the general manager
and other senior management shall not concurrently serve as Supervisors.
Supervisors shall comply with laws, admin istrative regulations and the Articles of
Association and shall assume the duties of hon esty and due diligence towards the Company.
Supervisors shall not receive brides or other illegal income in abuse of the position or
authority, or embezzle the company assets.
A Supervisor shall serve for a term of 3 yea rs and may serve consecutive terms if
re-appointed upon expiry of a term.
Where a re-election fails to be carried out in a timely manner upon the expiry of the
term of office of a Supervisor, or in the event that the resignation of the Supervisor during
his/her term of office results in the number of members of the Supervisory Committee
falling below the statutory minimum requirement, such Supervisor shall continue to
perform his/her duties as a Supervisor in accordance with the laws, administrative
regulations, departmental rules and the Articles of Association until the newly elected
Supervisor assumes the office.
If circumstances stated in Article 178 of the Company Law occur on the part of a
Supervisor during term of office, and if a Supervisor during term of office is subject to
market debarment measures by the CSRC prohib iting the person from acting as a director,
supervisor and senior management of a listed company, the period of which has not yet
expired, the Supervisory Committee of the Company shall, from the date of occurrence of
the relevant circumstances, immediately stop the relevant Supervisor from performing
his/her duties and recommend to the general meeting that the Supervisor be replaced.
Supervisory Committee
The Company shall have a Supervisory Co mmittee. The Supervisory Committee
comprises three Supervisors. It shall have one chairman, who shall be elected by more than
half of all the Supervisors. The chairman of the Supervisory Committee shall convene and
preside over Supervisory Committee meetings. Where the chairman of the Supervisory
Committee is unable or fails to perform his/her duties, the Supervisory Committee meetings
shall be convened or presided over by a Supervisor jointly elected by more than half of the
Supervisors.
The Supervisory Committee shall include representatives of Shareholders and a proper
proportion of employee representatives of the Company. The proportion of employee
representatives shall be no less than one third of the Supervisors appointed. The employee
representatives of the Supervisory Committee shall be elected at the employee
representatives’ meeting, employee meeting or otherwise democratically.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
–I I I - 2 1–


--- page 771 ---
The Supervisory Committee shall exercise the following duties and powers:
(i) to review the periodic reports of the Company prepared by the Board and express
its written opinion;
(ii) to check the financial condition of the Company;
(iii) to monitor the performance of dutie s in the Company by Directors and senior
management and propose dismissal of D irectors and senior management who
have violated laws, administrative regul ations, the Articles of Association or the
resolutions of general meetings;
(iv) to require Directors and the senior m anagement to make corrections if their
conduct has damaged the interests of the Company;
(v) to propose the convening of extraordinary general meetings and, in the event that
the Board fails to perform the obligations to convene and preside over the general
meetings in accordance with Company Law, to convene and preside over the
general meetings;
(vi) to propose proposals to the general meetings;
(vii) to attend Board meetings;
(viii) to file lawsuit against Directors and senior management in accordance with
Article 189 of the Company Law;
(ix) in case of any irregularity identified in the operations of the Company,
investigations may be conducted, and if ne cessary, professional institutions such
as accounting firms and law firms may be engaged to assist in their work at the
expense of the Company;
(x) The Supervisory Committee may require directors and senior management to
submit reports on the performance of their duties. Directors and senior
management shall truthfully provide the Supervisory Committee with relevant
information and materials and shall n ot hinder the Supervisory Committee or
Supervisors from exercising their powers.
The Supervisory Committee shall convene at least one meeting every six months.
Supervisors may propose to convene an extraordinary Supervisor Committee meeting.
Resolutions of the Supervisory Committee shall be passed by more than half of the
Supervisors.
FINANCIAL ACCOUNTING SYSTEM, DISTRIBUTION OF PROFITS AND AUDIT
Financial Accounting System
The Company shall formulate its financial and accounting systems in accordance with
laws, administrative regul ations and requirements of relevant PRC authorities.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 772 ---
The Company shall report and disclose its annual reports to the CSRC and the stock
exchange(s) within four months from the ending date of each fiscal year, and report and
disclose its interim report to the delegated authority of the CSRC and the stock exchange(s)
within two months from the end of the first hal fo fe a c hf i s c a ly e a r .T h ea f o r e m e n t i o n e d
annual reports and interim reports shall be prepared in accordance with relevant laws,
administrative regulations and regulations of the CSRC and the stock exchange(s).
The Company shall not keep accounts other than those provided by law. Any assets of
the Company shall not be kept under any account opened in the name of any individual.
Profit distribution
When distributing after-tax profits of the year, the Company shall set aside 10% of its
after-tax profits for the Company’s statuto ry reserve fund. When the aggregate balance in
the statutory reserve fund has reached 50% or more of the Company’s registered capital,
the Company needs not make any further allocations to that fund. Where the Company’s
statutory reserve fund is not enough to make up losses of the Company for the preceding
year, the current year’s profits shall be applied firstly to make up the losses before being
allocated to the statutory reserve in accordance with the preceding provision. Subject to a
resolution passed at a general meeting, after allocation has been made to the Company’s
statutory reserve fund from its after-tax pro fits, the Company may set aside funds for the
discretionary reserve fund. Except for those no t distributed in proportion as prescribed in
the Articles of Association, the remaining a fter-tax profit, after recovery of losses and
appropriation of statutory reserve funds, shall be distributed to Shareholders in proportion
to their shareholdings. No profit shall be distributed in respect of the shares of the
Company which are held by the Company. If the Company distributes profits to
Shareholders in violation of the Articles of Association, the Shareholders must refund to
the Company the profits distributed in violati on of the provision. If losses are caused to the
company, the shareholders and responsible Directors, Supervisors, and senior management
shall bear liability for compensation.
The reserve fund of the Company shall be used for making up for the loss, expansion of
the operation or increase of capital of the Company. When using the reserve fund to make
up for the loss, the discretionary reserve fund and statutory reserve fund should be used
first; if the loss still cannot be made up, the capital reserve fund may be used in accordance
with regulations. When the statutory reserve f und is capitalized, the retained portion of the
fund shall not be less than 25% of the regi stered capital of the Company before the
capitalization.
The Company may distribute profits in the form of cash, shares or a combination of
both, or in any other manner permitted by laws and regulations. The Company shall
prioritize the use of cash dividends for profit distribution. Based on the cash flow position,
business growth, net asset size per share and other real and reasonable factors, the
Company may adopt the method of distributing share dividends for profit distribution.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
–I I I - 2 3–


--- page 773 ---
Internal audit
The Company shall implement an internal audit system which is equipped with
dedicated audit personnel to conduct internal audits for supervision of financial income and
expenditure and economic activities of the Company.
The internal audit system of the Company and the duties of audit personnel shall be
implemented upon approval by the Board. The head of audit shall be accountable and
report to the Board.
Appointment of an Accounting Firm
The Company shall appoint such accounting firm which has complied with the
Securities Law for carrying out the audit for the accounting statements, net asset
verification, and other relevant consultancy services. The term of appointment shall be 1
year and can be re-appointed.
The appointment of accounting firm by the Company shall be subject to the approval
of general meetings. The Board shall not appoint accounting firm before the approval of the
general meeting.
The Company guarantees that it shall provide the appointed accounting firm with true
and complete accounting proofs, accounting books, financial and accounting reports and
other accounting information, and that it engages without any refusal, withholding, and
misrepresentation.
The auditing fee of the accounting firm sha ll be determined by the general meeting.
In the event of termination of the appointment or non-renewal of appointment of an
accounting firm, the Company shall notify the accounting firm 30 days in advance; when
the general meeting votes on termination of appointment of an accounting firm, the
accounting firm shall be allowed to make its representation.
An accounting firm proposing to resign sha ll state at a general meeting whether the
Company has committed any improper act.
MERGER, DIVISION, CAPITAL IN CREASE, CAPITAL REDUCTION,
DISSOLUTION AND LIQUIDATION
Merger, Division, Capital Increase and Capital Reduction
Merger of the Company may take the form of absorption or establishment of a new
company.
In case of merger by absorption, a company absorbs any other company and the
absorbed company is dissolved. In case of m erger by new establishment, two or more
companies merge into a new one and the parties to the merger are dissolved.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 774 ---
If the Company is involved in a merger, th e parties to the merger shall enter into a
merger agreement, and shall prepare a balance sheet and a property list. The Company shall
notify its creditors within 10 days as of the date of the resolution for the merger and shall
publish an announcement on the media that complies with the requirements of the CSRC or
National Enterprise Credit In formation Publicity System, the website of the Shanghai Stock
Exchange (
http://www.sse.com.cn ) and the website of the Hong Kong Stock Exchange
(www.hkexnews.hk ) within 30 days as of the date of such resolution. A creditor may within
30 days as of the receipt of the notice or, in case where he/she fails to receive such notice
within 45 days of the date of the announcement, to demand the Company to repay its debts
or provide guarantees for such debts. Other listing rules at the place where the shares of the
Company are listed shall prevail.
When the Company is merged, the claims and debts of each party to the merger shall
be succeeded to by the company surviving t he merger or the new company established
subsequent to the merger.
Where there is a division of the Company, its assets shall be divided accordingly.
Where there is a division of the Company, a balance sheet and property list shall be
prepared. The Company shall notify its creditors within 10 days as of the date of the
resolution for the division and shall publish an announcement on the media that complies
with the requirements of the CSRC or National Enterprise Credit Information Publicity
System, the website of the Shanghai Stock Exchange (
http://www.sse.com.cn )a n dt h e
website of the Hong Kong Stock Exchange ( www.hkexnews.hk ) within 30 days as of the date
of such resolution. Other listing rules at the place where the shares of the Company are
listed shall prevail.
Unless a written agreement has been entered into, before the division, by the Company
and its creditors in relation to the repayment of debts, debts of the Company prior to the
division shall be jointly assumed by the surviving companies after the division.
Where the Company reduces its registered capital, it shall prepare a balance sheet and
property list.
The Company shall notify its creditors within 10 days as of the date of the resolution
for the reduction of its registered capital and shall publish an announcement on the media
that complies with the requirements of the CSRC or National Enterprise Credit
Information Publicity System, the web site of the Shanghai Stock Exchange
(
http://www.sse.com.cn ) and the website of the Hong Kong Stock Exchange
(www.hkexnews.hk ) within 30 days as of the date of such resolution. A creditor may
within 30 days as of the receipt of the notice or, in case where he/she fails to receive such
notice within 45 days of the date of the announcement, to demand the Company to repay its
debts or provide guarantees for such debts. Other listing rules at the place where the shares
of the Company are listed shall prevail.
When the Company reduces its registered capital, it shall reduce the amount of its
contributions or shares in proportion to the contributions or shares held by Shareholders,
except otherwise provided by law or the Articles of Association.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
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--- page 775 ---
The registered capital of the Company after the reduction shall not be less than the
statutory minimum amount.
Where there is a merger or division of the Co mpany, the Company shall, in accordance
with the laws, apply for change in its registrat ion with the company registration authority
for any changes of its registered informat ion caused thereby. Where the Company is
dissolved, the Company shall apply for cancellation of its registration in accordance with
the laws. Where a new company is established, the Company shall apply for registration of
incorporation in accordance with the laws.
Where there is an increase or reduction in the registered capital, the Company shall, in
accordance with the laws, apply for change in registration with the company registration
authority.
Dissolution and Liquidation
The Company shall be dissolved upon the occurrence of any of the following events:
(1) expiry of the term of business provid ed in the Articles of Association or other
cause of dissolution as specified therein;
(2) a resolution on dissolution is passed by general meeting;
(3) dissolution is required due to the merger or division of the Company;
(4) the business license of the Company is revoked or the Company is ordered to close
down or dissolved in acco rdance with the laws;
(5) the Company suffers significant hardships in operation and management that
cannot be resolved through other means, and its continuation may cause
substantial loss in Shareholders’ interests, Shareholders representing 10% or
above of the total voting rights of the Company may plead the people’s court to
dissolve the Company.
If the above-mentioned event (1) and (2) occur and the property has not yet been
distributed to the Shareholders, the Company may continue to exist by amending the
Articles of Association or resolution of the general meeting. Amendments to the Articles of
Association or resolution of the general meeting pursuant to the preceding paragraph shall
be subject to the approval of Shareholders representing two-thirds or above of the voting
rights present at the general meetings.
Where the Company is dissolved pursuant to sub-paragraph (1), (2), (4) or (5) above, it
shall be liquidated. Directors shall be the persons responsible for liquidation of the
Company and shall establish a liquidation committee within 15 days as of the dissolution
circumstance arises, and the liquidation shall be started. The liquidation committee shall be
composed of Directors, except where the Articles of Association provide otherwise or the
general meeting resolves to elect other persons. If the liquidation committee is not
established to conduct liquidation within the p rescribed time limit or the liquidation is not
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
–I I I - 2 6–


--- page 776 ---
conducted after the liquidation committee is established, the interested parties may apply to
the People’s Court to designate relevant personnel to form a liquidation committee to
conduct liquidation.
As of the date of its establishment, the liquidation committee shall notify the creditors
within 10 days and make public announcement on the media that complies with the
requirements of the CSRC or National Enterprise Credit Information Publicity System, the
website of the Shanghai Stock Exchange (
http://www.sse.com.cn ) and the website of the
Hong Kong Stock Exchange ( www.hkexnews.hk ) within 60 days. Creditors shall, within 30
days as of the receipt of the notice or, in case where he/she fails to receive such notice,
within 45 days as of the date of the announcement, declare their claims to the liquidation
committee. Other listing rules at the place w here the shares of the Company are listed shall
prevail.
Creditors shall provide explanations and evidence for their claims upon their
declarations of such claims. The liquidation committee shall record the creditors’ claims.
The liquidation committee shall not pay off any debts to any creditors during period of
credit declaration.
After checking the assets of the Company and preparing a balance sheet and property
list, the liquidation committee shall formul ate a liquidation plan for the confirmation by
general meeting or the people’s court. The remaining properties of the Company, after the
payment for liquidation expenses, wages, social insurance premiums and statutory
compensation of staffs, taxes and debts of t he Company, shall be distributed to the
shareholders in proportion to their shareholdings. During the liquidation period, the
Company shall continue to exist but shall not ca rry out any business activities unrelated to
liquidation. The assets of the Company shall not be distributed to the shareholders until the
settlement of debts in accordance with the preceding article.
If the liquidation committee, after checking the assets of the Company and preparing a
balance sheet and property list, finds that the assets of the Company are insufficient to pay
off its debts, it shall immediately file an application to the people’s court for bankruptcy
liquidation. After the People’s Court accepts the bankruptcy application, the liquidation
committee shall hand over the liquidation matters to the bankruptcy administrator
designated by the People’s Court.
Upon completion of liquidation of the Company, the liquidation committee shall
prepare a liquidation report and submit the report to the general meeting or the people’s
court for confirmation, and submit the report to the company registration authority to
apply for de-registration of the Company.
Where the Company is declared bankruptcy in accordance with law, it shall implement
bankruptcy liquidation in accordance with the relevant laws relating to bankruptcy of
enterprise.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
–I I I - 2 7–


--- page 777 ---
AMENDMENTS TO THE ARTICLES OF ASSOCIATION
The Company shall amend the Articles of Association in any of the following
circumstances:
(1) after amendments are made to the Company Law or other relevant laws,
administrative regulations and regulato ry rules at the place where the shares of
the Company are listed, any term contain ed in the Articles of Association become
inconsistent with the said amendments;
(2) if certain changes of the Company occur res ulting in the inconsistency with certain
terms specified in the Articles of Association;
(3) the general meeting has resolved to amend the Articles of Association.
Where the amendments to the Articles of Association passed by resolutions of the
general meetings require approval of the competent authorities, the amendments shall be
submitted to the relevant authorities for a pproval. Where the amendments involve
registration matters of the Company, the involved change shall be registered in
accordance with the laws.
The Board shall amend the Articles of Associ ation in accordance with the resolution of
the general meetings on amendment to the Articles of Association and the examination and
approval opinions from relevant authorities.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
–I I I - 2 8–


--- page 778 ---
A. FURTHER INFORMATION ABOUT OUR GROUP
1. Incorporation of Our Company
Our Company was incorporated in the PRC as a limited liability company on
March 11, 2003 and was converted to a jo int stock liability company with limited
liability on January 23, 2014 under the PRC Company Law.
We have established a principal place of business in Hong Kong at 46/F, Hopewell
Centre,183 Queen’s Road East, Wan Chai, Hong Kong and have been registered with
the Registrar of Companies in Hong Kong as a non-Hong Kong company under Part
16 of the Companies Ordinance on August 22, 2023. Ms. Cheung Lai Ha has been
appointed as the authorized representa tive of our Company for the acceptance of
service of process and notices in Hong Kong, whose correspondence address is the
same as our principal place of business in Hong Kong.
As our Company was incorporated in the PRC, our corporate structure and
Articles of Association are subject to the relevant PRC Law. A summary of the
relevant PRC Law and of the Articles of A ssociation is set out in ‘‘Regulatory
Overview’’ and Appendix III, respectively.
2. Changes in the Share Capital of Our Company
When our Company was converted into a joint stock liability company with
limited liability under the PRC Company Law, our initial registered capital was
RMB156,000,000, divided into 156,000,000 Shares with a nominal value of RMB1.00
each.
Assuming the Over-allotment Option is not exercised and the options granted
under the 2023 Share Option Scheme are not exercised, upon completion of the Global
Offering, our issued share capital will increase to RMB665,078,903, made up of
565,078,903 A Shares and 100,000,000 H Shares fully paid up or credited as fully paid
up, representing 84.96% and 15.04% of our registered share capital, respectively. For
further details, see ‘‘Share Capital’’ in this prospectus.
Save as disclosed above, there has been no alteration in the share capital of our
Company within the two years immediately preceding the date of this prospectus.
3. The Shareholders’ Resolutions of Our Company
At the extraordinary general meeting of our Company held on October 9, 2023,
the following resolutions, among other things, were duly passed:
(i) the issue by our Company of H Shares with a nominal value of RMB1.00
each and such H Shares be listed on the Hong Kong Stock Exchange;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1–


--- page 779 ---
(ii) the number of H Shares to be issued shall be up to 113,015,000, and the grant
of the Over-allotment Option in respect of no more than 15% of the number
of H Shares issued pursuant to the Global Offering;
(iii) authorization of the Board or its au thorized individual to handle all matters
relating to, among other things, the Global Offering, the issue and listing of
H Shares on the Hong Kong Stock Exchange; and
(iv) 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.
4. Changes in the Share Capital of Our Subsidiaries
Our subsidiaries are referred to in Not e 1 to Part II of the Accountants’ Report,
the text of which is set out in Appendix IA. Save for the subsidiaries mentioned in the
Accountants’ Report, we do not have any other subsidiaries.
The following subsidiaries have been incorporated within the two years
immediately preceding the date of this prospectus:
Name of Subsidiary
Place of
Incorporation Date of Incorporation
Jiangsu Lopal New Material Technology Co., Ltd.
(江蘇龍蟠新材料科技有限公司) ...........
PRC January 4, 2023
Lopal Mining (Hong Kong) Co., Limited
(龍蟠礦業（香港）有限公司) ...............
Hong Kong January 30, 2023
L B MN e wE n e r g yS i n g a p o r eP t e .L t d . ....... S i n g a p o r e F e b r u a r y8 ,2 0 2 3
P TL B ME n e r g iB a r uI n d o n e s i a ............ I n d o n e s i a F e b r u a r y2 2 ,2 0 2 3
The following alterations in the share capital of our subsidiaries have taken place
within the two years immediately preceding the date of this prospectus:
Changzhou Liyuan
On February 5, 2024, the share capital of Changzhou Liyuan was increased
from RMB720,741,131 to RMB735,071,009.
On May 29, 2024, the share capital of Changzhou Liyuan was increased from
RMB735,071,009 to RMB778,614,662.
Jiangsu Tianlan Intelligent Equipment Co., Ltd. ( 江蘇天藍智能裝備有限公司)
On May 4, 2023, the registered capital of Jiangsu Tianlan Intelligent
Equipment Co., Ltd ( 江蘇天藍智能裝備有限公司)w a si n c r e a s e df r o m
RMB20,000,000 to RMB200,000,000.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2–


--- page 780 ---
Shandong Liyuan
On September 27, 2024, the sole shareholder of Shandong Liyuan has
resolved to increase the registered capital of Shandong Liyuan from
RMB160,000,000 to RMB410,000,000. As of the Latest Practicable Date, the
said capital increase has not been completed.
Hubei Liyuan
On October 14, 2024, the registered capital of Hubei Liyuan increased from
RMB160,000,000 to RMB410,000,000.
Jiangsu Lopal Green Energy Co., Ltd. (
江蘇龍蟠綠色能源有限公司)
On September 19, 2024, the registered capital of Jiangsu Lopal Green Energy
Co., Ltd. was increased from RMB20,000,000 to RMB100,000,000.
LBM New Energy Singapore Pte. Ltd.
On December 20, 2023, the share capital of LBM New Energy Singapore Pte.
Ltd. was increased from US$2,000 to US$7,000.
L B MN e wE n e r g y( A P )P t e .L t d .
On January 5, 2024, the share capital of LBM New Energy (AP) Pte. Ltd. was
increased from US$3,300,000 to US$3,742,000.
On February 7, 2024, the share capital of LBM New Energy (AP) Pte. Ltd.
was further increased from US$3,742,000 to US$54,164,463.
Lopal New Material
On June 21, 2024, the registered capital of Lopal New Material was increased
from RMB100,000,000 to RMB145,000,000.
PT LBM Energi Baru Indonesia
On June 3, 2024, the share capital of PT LBM Energi Baru Indonesia was
increased from 300,000,000,000 Indonesian Rupiah to 851,873,000,000
Indonesian Rupiah.
Save as disclosed above, there have been no alterations in the share capital of our
subsidiaries within the two years immedia tely preceding the date of this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3–


--- page 781 ---
5. 2023 Share Option Scheme
The following is a summary of the principal terms of the 2023 Share Option
Scheme approved and adopted by our Shareholders at the extraordinary general
meeting held on September 22, 2023 and the de tails regarding the outstanding options
granted under the 2023 Share Option Scheme.
Since no options or awards will be granted by our Company pursuant to the 2023
Share Option Scheme after the Listing, the provisions of Chapter 17 of the Listing
Rules do not apply to the terms of the 2023 Share Option Scheme.
(a) Purpose
The purposes of the 2023 Share Option Scheme are as follows:
(i) to align the interests of our Company, Shareholders and employees,
facilitate the parties’ mutual in terests to focus on the long-term
development of our Company, thus bring about more attractive and
sustainable returns for our Shareholders;
(ii) to improve the corporate governance structure and the long-term and
effective incentive mechanisms of our Company to ensure long-term and
stable development of our Company;
(iii) to incentivize the management personnel and employees, attract and
retain management talents and key personnel, prevent loss of talents,
and enhance cohesiveness and competitiveness of our Company.
(b) Who may participate
The scope of the eligible participants of the 2023 Share Option Scheme
(‘‘2023 Eligible Participants ’’) is determined and approved by our Board, having
taken into account the actual situation of our Company, in accordance with the
PRC Company Law, the PRC Securities Law, other relevant laws, regulations and
regulatory documents and th e Articles of Association.
The 2023 Eligible Participants includ e the directors, senior management,
mid-level management and key technical (business) personnel of our Company
and shall not include the independent directors, supervisors and any shareholders
or actual controllers of over 5% equity in terests of our Company, together with
their spouses, parents and children.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4–


--- page 782 ---
(c) 2023 Scheme Mandate Limit
The total number of underlying Shares which may be issued upon exercise of
all outstanding options granted under the 2023 Share Option Scheme (the ‘‘ 2023
Scheme Mandate Limit ’’) shall be 5,295,000 A Shares and shall not be more than
10% of the share capital of our Company in aggregate. The 2023 Scheme Mandate
Limit shall be adjusted in the event of any alteration in the capital structure of our
Company whilst any option remains exercisable, to proportionally reflect any
capitalization of profits or reserves, bon us issue, rights issue, sub-division,
consolidation of shares, dividend distribution, etc. of our Company.
(d) Maximum entitlement of a grantee
Any grant of the options to any grantees in respect of all the options granted
to such person under all validly subsisting share option schemes of the Company
in aggregate shall not exceed 1% of the Shares in issue.
(e) Duration of the 2023 Share Option Scheme
The 2023 Share Option Scheme shall be valid and effective for the period of
time commencing from the date of grant of options, i.e. September 22, 2023 (the
‘‘2023 Scheme Effective Date ’’) and expiring on the day when all options granted
to the 2023 Eligible Participants under the 2023 Share Option Scheme are
exercised or cancelled, which shall in any event be no later than the date which is
36 months after the 2023 Scheme Effective Date.
(f) Lock-up
The A Shares to be issued to the grantees pursuant to the exercise of the
options are subject to lock-up restricti ons in accordance with the PRC Company
Law, the PRC Securities Law and other relevant laws and regulations and the
Articles of Association, in particular, where the grantee is a director or a member
of the senior management of our Company, the number of Shares which may be
transferred by the grantee each year during his/her tenure of office shall not
exceed 25% of the total number of the Shares held by him/her, and the grantee
shall not transfer any Shares held by him/her within six months after his/her
resignation from the positions held in our Group.
(g) Transferability of options
The options granted to the 2023 Eligible Pa rticipants shall not be transferred
or used as guarantee or for repayment of debts during the vesting period.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 5–


--- page 783 ---
(h) Outstanding options granted under the 2023 Share Option Scheme
As of the Latest Practicable Date, a total of 162 2023 Eligible Participants
have been granted outstanding options under the 2023 Share Option Scheme to
subscribe for 5,295,000 A Shares in aggregate, representing 0.80% of the total
issued Shares immediately after the completion of the Global Offering (assuming
the Over-allotment Option is not exercised and the options granted under the 2023
Share Option Scheme are not exercised). All the outstanding options under the
2023 Share Option Scheme were granted on September 22, 2023 and our Company
will not grant any further options under the 2023 Share Option Scheme after the
Listing. No consideration was payable for the grant of the options.
Assuming full vesting and exercise of all outstanding options under the 2023
Share Option Scheme, the shareholding of our Shareholders immediately
following completion of the Global Off ering (assuming the Over-allotment
Option is not exercised) will be diluted by a maximum of approximately 0.79%.
The maximum dilution effect on our earnings per Share would be approximately
0.79%.
The table below sets out the details of outstanding options granted to our
Directors, senior management members and other connected persons of our
Company under the 2023 Share Option Scheme as of the Latest Practicable Date:
Name
Position or Connected
Relationship Address
Exercise
Price
(RMB per
Share)
Number of A
Shares
Underlying
the
Outstanding
Options Date of Grant Vesting Periods Exercise Periods
Approximate %
of Share Capital
of Our Company
Immediately after
Completion of the
Global Offering (1)
Shi Yingfei
(史瑩飛) .....
Executive president
of Liyuan
(Shenzhen)
Scientific Research
Co., Ltd.
Nephew of Mr. Shi
Room 306, Unit 3, Building 29,
No. 1 Qiaoxiang Road
Qixia District, Nanjing
Jiangsu Province
PRC
11.92 790,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.12%
Shen Zhiyong
(沈志勇) .....
Executive Director
and chief financial
officer of our
Company
Room 302, Unit 1, Building 3
No.18 Yaojia Road
Qixia District, Nanjing
Jiangsu Province
PRC
11.92 690,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.10%
Zhang Yi ( 張羿) . . Executive Director,
secretary of our
Board and joint
company secretary
of our Company
Room 304, Unit 2, Building 1
Jinlingjiuyuan Heyuan
No. 56 Dashugen
Xuanwu District, Nanjing
Jiangsu Province
PRC
11.92 190,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.03%
Lu Zhenya ( 呂振亞) Executive Director Room 1005, Unit 3,
Building 5
No. 2 Jinyao Road
Qixia District, Nanjing
Jiangsu Province
PRC
11.92 190,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.03%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 6–


--- page 784 ---
Name
Position or Connected
Relationship Address
Exercise
Price
(RMB per
Share)
Number of A
Shares
Underlying
the
Outstanding
Options Date of Grant Vesting Periods Exercise Periods
Approximate %
of Share Capital
of Our Company
Immediately after
Completion of the
Global Offering (1)
Q i nJ i a n( 秦建) . . Executive Director
and deputy
manager of our
Company
Room 604, Unit 2, Building 6
Zuoyou Yangguang
Community
Qixia District, Nanjing
Jiangsu Province
PRC
11.92 180,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.03%
Chen Li ( 陳麗). . . Supervisor of Jiangsu
Ruilifeng and
Zhangjiagang
TEEC
(4)
Room 912, Unit 3, Building
30, Block 12, Tianruncheng,
N o .2 ,T i a n h u aN o r t h
Road, Pukou District, Nanjing
Jiangsu Province
PRC
11.92 105,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.02%
Gao Qilin ( 高啓林) Assistant to the
director of
engineering
construction center
of our Company
Nephew of Mr. Shi
No.31, Group 25,
Changping Village
Daqiao County
Jiangdu District, Yangzhou
Jiangsu Province
PRC
11.92 90,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.01%
Sun Liyuan
(孫麗媛) .....
Supervisor of
Changzhou Liyuan,
Jiangsu Beiterui
Nano and Tianjin
Beiterui Nano
(5)
Room 302, Unit 1,
Building 73
1–4 Block of Tianrun Cheng
Jiangbei New District, Nanjing
Jiangsu Province
PRC
11.92 80,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.01%
Lu Congjiang
(呂從江) .....
Supervisor of
Shandong Liyuan
(6)
Room 802, Building 27,
Shunwangfu, Juancheng
County, Heze City, Shandong
Province, PRC
11.92 70,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.01%
Xie Yichao ( 解一超) Executive general
manager of Lopal
Times
Room 906, Building 52, R&F
City Phase II, Jiangning
District, Nanjing
Jiangsu Province
PRC
11.92 70,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.01%
Zhang Bingying
(張炳英) .....
Supervisor of
Shandong Kelas
(7)
Room 703, Unit 2, Building 2,
No. 8 Wenzong Road, Qixia
District, Nanjing
Jiangsu Province
PRC
11.92 50,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.01%
Shi Baoshan
(石寶山) .....
Technical consultant
of Jiangsu Kelas
Elder brother of
Mr. Shi
4–3–101,
Shangcheng Fengjing
Nanyuan
Yaohua Street, Qixia
District, Nanjing
Jiangsu Province
PRC
11.92 40,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.01%
Zhu Lei ( 朱磊). . . General manager of
Jiangsu Ruilifeng
12–201,
Yangzi Shiqi Village
Liuhe District, Nanjing
Jiangsu Province
PRC
11.92 40,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.01%
Chen Xiaomin
(陳小民) .....
Supervisor of
Changzhou
Liyuan
(8)
Area A, Huizhi Science and
Technology Park
No.8 Hengtai Road
Qixia District, Nanjing
Jiangsu Province
PRC
11.92 30,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.00%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 7–


--- page 785 ---
Name
Position or Connected
Relationship Address
Exercise
Price
(RMB per
Share)
Number of A
Shares
Underlying
the
Outstanding
Options Date of Grant Vesting Periods Exercise Periods
Approximate %
of Share Capital
of Our Company
Immediately after
Completion of the
Global Offering (1)
Yu Xiang ( 于翔). . Supervisor and head
of human resources
department of
Changzhou
Liyuan
(9)
Room 608, Building 15
Dongcheng Shijia
No. 3 Yaochen Road
Qixia District, Nanjing
Jiangsu Province
PRC
11.92 20,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.00%
Wu Jiansheng
(吳建生) .....
Manager of
administration
department of
Lopal Times
Brother-in-law of
Ms. Zhu
No.15 of Wuzhuang 2 Group,
Nansha Village
Huangqiao County, Taixing
Jiangsu Province
PRC
11.92 15,000 September 22, 2023 See Note (2)
below
See Note (3)
below
0.00%
Notes:
(1) The calculation is based on 665,078,903 Shares in issu e immediately after the Global Offering (assuming
the Over-allotment Option is not exercised and th e options granted under the 2023 Share Option Scheme
are not exercised).
(2) The vesting periods are 12 months and 24 months commencing from the grant date of the 2023 Share
Option Scheme, i.e. September 22, 2023.
(3) The exercise periods for the relevant options are as f ollows: 50% of the options shall be exercisable from
September 22, 2024 to September 21, 2025, and 50% of th e options shall be exercisable from September
22, 2025 to September 21, 2026.
(4) Ms. Chen Li is a mid-level management member of our Group and is not an independent Director or
Supervisor. Ms. Chen Li is thus a 2023 Eligible Participant.
(5) Ms. Sun Liyuan is a mid-level management member of our Company and is not an independent Director
or Supervisor. Ms. Sun Liyuan is thus a 2023 Eligible Participant.
(6) Mr. Lu Congjiang is a mid-level management member of our Group and is not an independent Director or
Supervisor. Mr. Lu Congjiang is thus a 2023 Eligible Participant.
(7) Mr. Zhang Bingying is a mid-level management member of our Group and is not an independent Director
or Supervisor. Mr. Zhang Bingying is thus a 2023 Eligible Participant.
(8) Mr. Chen Xiaomin is a mid-level management member of our Company and is not an independent
Director or Supervisor. Mr. Chen Xiaomi n is thus a 2023 Eligible Participant.
(9) Mr. Yu Xiang is a mid-level management member of the Group and is not an independent Director or
Supervisor. Mr. Yu Xiang is thus a 2023 Eligible Participant.
As of the Latest Practicable Date, oth er than the sixteen individuals who
were our Directors, senior management members and/or other connected persons
of our Company disclosed above, no options were granted to any Directors,
senior management members and/or other connected persons of our Company
under the 2023 Share Option Scheme.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 8–


--- page 786 ---
Save for the sixteen grantees disclosed above, the remaining 146 grantees who
were not our Directors, senior management members or other connected persons
of our Company held an aggregate of 2,645,000 options that were still outstanding
and unexercised under the 2023 Share Option Scheme as of the Latest Practicable
Date, representing 0.40% of the total issued Shares immediately after the
completion of the Global Offering (assu ming the Over-allotment Option is not
exercised and the options granted under the 2023 Share Option Scheme are not
exercised). The table below set out the details of the outstanding options granted
to such remaining grantees under the 2023 Share Option Scheme as of the Latest
Practicable Date:
Range of Outstanding Shares
under Options Granted
Total Number of
Grantees
Total Number of
Outstanding
Shares under
Options Granted
Exercise price
(RMB per Share) Date of Grant Vesting Periods Exercise Periods
Approximate %
of Share Capital
of Our Company
Immediately after
Completion of the
Global Offering (1)
1t o1 0 , 0 0 0S h a r e s .............. 6 6 6 6 0 , 0 0 0 1 1 . 9 2 S e p t e m b e r2 2 ,2 0 2 3 S e eN o t e( 2 )b e l o w S e eN o t e( 3 )b e l o w 0 . 1 0 %
10,001 to 100,000 Shares ........... 7 9 1 , 8 2 5 , 0 0 0 1 1 . 9 2 S e p t e m b e r2 2 ,2 0 2 3 S e eN o t e( 2 )b e l o w S e eN o t e( 3 )b e l o w 0 . 2 7 %
100,001 to 160,000 Shares .......... 1 1 6 0 , 0 0 0 1 1 . 9 2 S e p t e m b e r2 2 ,2 0 2 3 S e eN o t e( 2 )b e l o w S e eN o t e( 3 )b e l o w 0 . 0 2 %Notes:
(1) The calculation is based on 665,078,903 Shares in issu e immediately after the Global Offering (assuming
the Over-allotment Option is not exercised and th e options granted under the 2023 Share Option Scheme
are not exercised).
(2) The vesting periods are 12 months and 24 months commencing from the grant date of the 2023 Share
Option Scheme, i.e. September 22, 2023.
(3) 50% of the options shall be exercisable from September 22, 2024 to September 21, 2025, and 50% of the
options shall be exercisable from Sept ember 22, 2025 to September 21, 2026.
We have applied to the Stock Exchange and SFC, respectively for (i) a waiver
from strict compliance with the disclosure requirements under Rule 17.02(1)(b) of,
and paragraph 27 of Appendix D1A to, the Listing Rules; and (ii) a certificate of
exemption under Section 342A of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance exempting the Co mpany from strict compliance with the
disclosure requirements under paragraph 10(d) of Part I of the Third Schedule to
the Companies (Winding Up and Miscellaneous Provisions) Ordinance. See
‘‘Waivers from Strict Compliance w ith the Hong Kong Listing Rules and
Exemptions from Compliance wit h the Companies (Winding Up and
Miscellaneous Provisions) Ordinanc e — Waiver and Exemption in Relation to
the 2023 Share Option Scheme.’’
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 9–


--- page 787 ---
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of Material Contracts
The following contracts (not being contracts entered into in the ordinary course of
business) were entered into by our Company or its subsidiaries within the two years
preceding the date of this prospectus and are or may be material:
(a) the Hong Kong Underwriting Agreement;
(b) a cornerstone investment agreement ( 基石投資協議) dated October 16, 2024,
entered into among our Company, Har vest International Premium Value
(Secondary Market) Fund SPC acting on behalf of and for the account of
Harvest Oriental SP (the ‘‘ Investor ’’), Guotai Junan Capital Limited, Guotai
Junan Securities (Hong Kong) Limited, Halcyon Capital Limited and
Halcyon Securities Limited, pursu ant to which, the Investor agreed to
subscribe for 20,000,000 Offer Shares at the Offer Price;
(c) the capital increase agreement in re lation to Changzhou Liyuan New Energy
Technology Co., Ltd. ( 關於常州鋰源新能源科技有限公司之增資協議)d a t e d
May 13, 2024 entered into by and amon g Kunlun Gongrong Green (Beijing)
New Industry Investment Fund Part nership (Limited Partnership) ( 昆侖工融
綠色（北京）新興產業投資基金合夥企業（有限合夥）)( ‘ ‘ Kunlun Gongrong ’’),
Jianxin Financial Asset Investment Co., Ltd. ( 建信金融資產投資有限公司)
(‘‘Jianxin Investment ’’), Ningbo Meishan Baoshuigang District Wending
Investment Co., Ltd. ( 寧波梅山
保稅港區問鼎投資有限公司), Fujian Times
Mindong New Energy Industry Equity Investment Partnership (Limited
Partnership) ( 福建時代閩東新能源產業股權投資合夥企業（有限合夥）), our
Company, BTR New Material Group Co., Ltd. ( 貝特瑞新材料集團股份有
限公司), Changzhou Youbeili Venture Capital Center (Limited Partnership)
(常州優貝利創業投資中心（有限合夥）), Nanjing Jinbeili Venture Capital
Center (Limited Partnership) ( 南京金貝利創業投資中心（有限合夥）),
C h a n g z h o uJ i n t a nH o n g y u a nV e n t ure Capital Partnership (Limited
Partnership) ( 常州金壇泓遠
創業投資合夥企業（有限合夥）), Nanjing Chaoli
Venture Capital Center (Limited Partnership) ( 南京超利創業投資中心（有限
合夥）) and Changzhou Liyuan New Energy Technology Co., Ltd. ( 常州鋰源
新能源科技有限公司)( ‘ ‘Changzhou Liyuan ’’), pursuant to which (i) the
capital injection by Jianxin Investment was modified to the effect that
Jianxin Investment will subscribe registered capital of RMB15,015,440
(instead of RMB14,329,878) in Changzhou Liyuan at the same
consideration of RMB100,000,000 and (ii) Kunlun Gongrong agreed to
subscribe registered capital of RMB42,858,091 in Changzhou Liyuan by way
of capital increase at a consideration of RMB285,426,805.77;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 0–


--- page 788 ---
(d) the supplemental agreement to the equity transfer agreement in relation to
Shandong Meiduo Technology Co., Ltd. ( 關於山東美多科技有限公司之股權
轉讓協議之補充協議) dated March 7, 2024 entered into by and among Lopal
International Holdings Co., Ltd. ( 龍蟠國際控股有限公司), our Company and
Shandong Meiduo Technology Co., Ltd. ( 山東美多科技有限公司)t oa m e n d
the completion date of the transfer of all equity interest in Shandong Meiduo
Technology Co., Ltd. ( 山東美多科技有限公司) from Lopal International
Holdings Co., Ltd. ( 龍蟠國際控股有限公司) to our Company;
(e) the equity transfer agreement in re lation to Shandong Meiduo Technology
Co., Ltd. ( 關於山東美多科技有限公司之股權轉讓協議) dated March 6, 2024
entered into by and among Lopal International Holdings Co., Ltd. ( 龍蟠
國際
控股有限公司), our Company and Shandong Meiduo Technology Co., Ltd.
(山東美多科技有限公司), pursuant to which Lopal International Holdings
Co., Ltd. ( 龍蟠國際控股有限公司) agreed to sell, and our Company agreed to
purchase, 100% equity interest in Shandong Meiduo Technology Co., Ltd.
(山東美多科技有限公司) at the consideration of RMB100,539,200;
(f) the capital increase agreement in relation to Changzhou Liyuan New Energy
Technology Co., Ltd. ( 關於常州鋰源新能源科技有限公司之增資協議)d a t e d
December 31, 2023 entered into by and among Jianxin Financial Asset
Investment Co., Ltd. ( 建信金融資產投資有限公司), Ningbo Meishan
Baoshuigang District Wending Investment Co., Ltd. ( 寧波梅山保稅港區問
鼎投資有限公司), Fujian Times Mindong New Energy Industry Equity
Investment Partnership ( Limited Partnership) (
福建時代閩東新能源產業股
權投資合夥企業（有限合夥）), our Company, BTR New Material Group Co.,
Ltd. ( 貝特瑞新材料集團股份有限公司), Changzhou Youbeili Venture Capital
Center (Limited Partnership) ( 常州優貝利創業投資中心（有限合夥）), Nanjing
Jinbeili Venture Capital Center (Limited Partnership) ( 南京金貝利創業投資
中心（有限合夥）), Changzhou Jintan Hongyuan Venture Capital Partnership
(Limited Partnership) ( 常州金壇泓遠創業投資合夥企業（有限合夥）), Nanjing
Chaoli Venture Capital Center (Limited Partnership) ( 南京超利創業投資中心
（有限合夥）) and Changzhou Liyuan New Energy Technology Co., Ltd. ( 常州
鋰源新能源科技有限公司), pursuant to which Jianxin Financial Asset
Investment Co., Ltd. ( 建信金融資產投資有限公司) agreed to subscribe
registered capital of RMB14,329,878 at the consideration of
RMB100,000,000 and the registered capital of Changzhou Liyuan New
Energy Technology Co., Ltd. ( 常州鋰源新能源科技有限公司)w a si n c r e a s e d
from RMB720,741,131 to RMB735,071,009;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 1–


--- page 789 ---
(g) the equity transfer agreement in r elation to Sichuan Yingda Lithium New
Material Co., Ltd. ( 四川省盈達鋰電新材料有限公司股權轉讓協議)d a t e d
February 21, 2023 entered into between Sichuan Liyuan New Material Co.,
Ltd. ( 四川鋰源新材料有限公司) and Sichuan Langcheng New Energy
Technology Co., Ltd. ( 四川朗晟新能源科技有限公司), pursuant to which
Sichuan Liyuan New Material Co., Ltd. ( 四川鋰源新材料有限公司)a g r e e dt o
sell, and Sichuan Langcheng New Energy Technology Co., Ltd. ( 四川朗晟新
能源科技有限公司) agreed to buy equity interests representing
RMB23,000,000 paid-up capital of Sichuan Yingda Lithium New Material
Co., Ltd. ( 四川省盈達鋰電新材料有限公司) at an aggregate consideration of
RMB38,186,900; and
(h) the equity transfer agreement in relation to Yifeng Times New Energy
M a t e r i a l sC o . ,L t d .( 關於
宜豐時代新能源材料有限公司之股權轉讓協議)
dated October 28, 2022 entered into by and among our Company, Yichun
Times New Energy Resources Co., Ltd. ( 宜春時代新能源資源有限公司)a n d
Yifeng Times New Energy Materials Co., Ltd. ( 宜豐時代新能源材料有限公
司) (formerly known as Yifeng Times Yo ngxing New Energy Materials Co.,
Ltd. ( 宜豐時代永興新能源材料有限公司) and now known as Yichun Lopal
Times Lithium Industry Technology Co., Ltd. ( 宜春龍蟠時代鋰業科技有限公
司)), pursuant to which Yichun Times New Energy Resources Co., Ltd. ( 宜春
時代新能源資源有限公司) agreed to sell, and our Company agreed to
purchase, 70% equity interest in Yifeng Times New Energy Materials Co.,
Ltd. ( 宜豐
時代新能源材料有限公司) (formerly known as Yifeng Times
Yongxing New Energy Materials Co., Ltd. ( 宜豐時代永興新能源材料有限公
司) and now known as Yichun Lopal Times Lithium Industry Technology
Co., Ltd. ( 宜春龍蟠時代鋰業科技有限公司)) at the consideration of RMB1.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 2–


--- page 790 ---
2. Our Material Intellectual Property Rights
As of the Latest Practicable Date, we had registered or had applied for the
registration of the following intellectual property rights which are material in relation
to our business.
(a) Registered Trademarks
As of the Latest Practicable Date, we had registered the following
trademarks which are material to our business:
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
1.
 4 The Company PRC 5579704 October 20, 2029
2.
 1 The Company PRC 5579705 July 20, 2025
3.
 1 The Company PRC 5811140 December 13, 2029
4.
 4 The Company PRC 5811137 December 6, 2029
5.
 35 The Company PRC 5811054 March 27, 2030
6.
 37 The Company PRC 5811071 February 6, 2030
7.
 4 The Company PRC 6142123 February 13, 2030
8.
 1 The Company PRC 6142124 February 20, 2030
9.
 1 The Company PRC 6142139 February 20, 2030
10.
 4 The Company PRC 7080092 August 6, 2030
11.
 4 The Company PRC 7255821 August 27, 2030
12.
 4 The Company PRC 7793435 December 27, 2030
13.
 1 The Company PRC 9609031 September 6, 2032
14.
 4 The Company PRC 10812317 July 20, 2033
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 3–


--- page 791 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
15.
 1 The Company PRC 12224540 August 13, 2034
16.
 4 The Company PRC 12635845 October 13, 2034
17.
 1 The Company PRC 14134328 April 13, 2025
18.
 1 The Company PRC 14134417 August 27, 2025
19.
 4 The Company PRC 14134245 April 13, 2025
20.
 1, 4 The Company PRC 14724563 May 6, 2027
21.
 4 The Company PRC 14724161 October 13, 2025
22.
 4 The Company PRC 17627902 September 27, 2026
23.
 4 The Company PRC 20129792 July 20, 2027
24.
 1 The Company PRC 28431093 November 27, 2028
25.
 1 The Company PRC 28512645 December 6, 2028
26.
 4 The Company PRC 28506576 December 6, 2028
27.
 4 The Company PRC 29022919 December 20, 2028
28.
 1 The Company PRC 21293726 November 13, 2027
29.
 1 The Company PRC 30967851 August 13, 2029
30.
 37 The Company PRC 31475467 March 20, 2029
31.
 1 The Company PRC 33676457 May 27, 2029
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 4–


--- page 792 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
32.
 4 The Company PRC 33676482 May 27, 2029
33.
 1 The Company PRC 38939314 February 20, 2030
34.
 4 The Company PRC 38933360 February 6, 2030
35.
 35 The Company PRC 38934849 February 6, 2030
36.
 1 The Company PRC 43598792 October 20, 2030
37.
 1 The Company PRC 44826918 December 13, 2030
38.
 4 The Company PRC 43603981 October 20, 2030
39.
 35 The Company PRC 43609193 October 20, 2030
40.
 37 The Company PRC 44825345 December 13, 2030
41.
 1 The Company PRC 43610229 February 20, 2031
42.
 37 The Company PRC 43357965 November 27, 2030
43.
 1 The Company PRC 44829994 February 27, 2031
44.
 37 The Company PRC 44828446 February 6, 2031
45.
 4 The Company PRC 44832012 January 13, 2031
46.
 3 The Company PRC 52073441 August 13, 2031
47.
 4 The Company PRC 32383602 July 13, 2030
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 5–


--- page 793 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
48.
 35 The Company PRC 44817887 December 6, 2030
49.
 1 The Company PRC 44819430 December 6, 2030
50.
 37 The Company PRC 44829982 January 13, 2031
51.
 4 The Company PRC 53391376 September 6, 2031
52.
 1 The Company PRC 53645264 September 27, 2031
53.
 1 The Company PRC 53645292 September 27, 2031
54.
 1 The Company PRC 44830034 October 27, 2031
55.
 1 The Company PRC 58060801 January 27, 2031
56.
 1 The Company PRC 53637091 September 20, 2032
57.
 4 The Company PRC 38485186 January 13, 2033
58.
 4 The Company PRC 8046208 September 6, 2032
59.
 1 The Company PRC 76136811 June 27, 2034
60.
 1 The Company PRC 67730870 March 6, 2034
61.
 4 The Company PRC 76151164 June 27, 2034
62.
 1 Jiangsu Kelas PRC 7559030 November 20, 2030
63.
 1 Jiangsu Kelas PRC 17989613 November 6, 2026
64.
 3 Jiangsu Kelas PRC 17989884 November 6, 2026
65.
 4 Jiangsu Kelas PRC 13583770 February 20, 2025
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 6–


--- page 794 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
66.
 4 Jiangsu Kelas PRC 17995621 December 6, 2026
67.
 5 Jiangsu Kelas PRC 14005913 March 13, 2025
68.
 35 Jiangsu Kelas PRC 14008779 March 13, 2025
69.
 37 Jiangsu Kelas PRC 12224818 August 13, 2034
70.
 37 Jiangsu Kelas PRC 17995766 November 13, 2026
71.
 1 Jiangsu Kelas PRC 13584528 February 13, 2025
72.
 1 Jiangsu Kelas PRC 17989827 January 13, 2027
73.
 4 Jiangsu Kelas PRC 13584541 February 13, 2025
74.
 4 Jiangsu Kelas PRC 17995628 November 13, 2026
75.
 5 Jiangsu Kelas PRC 17995813 January 13, 2027
76.
 37 Jiangsu Kelas PRC 13584581 February 13, 2025
77.
 37 Jiangsu Kelas PRC 17995652 November 13, 2026
78.
 1 Jiangsu Kelas PRC 13618158 February 27, 2025
79.
 4 Jiangsu Kelas PRC 13618302 August 27, 2025
80.
 5 Jiangsu Kelas PRC 15975178 October 27, 2026
81.
 35 Jiangsu Kelas PRC 15989247 May 20, 2026
82.
 37 Jiangsu Kelas PRC 17990365 January 13, 2027
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 7–


--- page 795 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
83.
 1 Jiangsu Kelas PRC 14012803 March 13, 2025
84.
 1 Jiangsu Kelas PRC 14012810 June 6, 2025
85.
 1 Jiangsu Kelas PRC 14012799 March 13, 2025
86.
 4 Jiangsu Kelas PRC 14012746 March 13, 2025
87.
 4 Jiangsu Kelas PRC 14012782 March 13, 2025
88.
 4 Jiangsu Kelas PRC 14012789 June 6, 2025
89.
 1 Jiangsu Kelas PRC 14706793 June 27, 2025
90.
 1 Jiangsu Kelas PRC 14804329 October 13, 2025
91.
 1 Jiangsu Kelas PRC 15318275 October 27, 2025
92.
 1 Jiangsu Kelas PRC 15452249 November 20, 2025
93.
 1 Jiangsu Kelas PRC 15644772 December 27, 2025
94.
 1 Jiangsu Kelas PRC 17215685 August 27, 2026
95.
 4 Jiangsu Kelas PRC 17215770 August 27, 2026
96.
 1 Jiangsu Kelas PRC 16028236 February 27, 2026
97.
 4 Jiangsu Kelas PRC 16028427 March 6, 2026
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 8–


--- page 796 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
98.
 7 Jiangsu Kelas PRC 16028512 March 6, 2026
99.
 37 Jiangsu Kelas PRC 16029017 March 6, 2026
100.
 1 Jiangsu Kelas PRC 22261673 January 27, 2028
101.
 4 Jiangsu Kelas PRC 22262568 January 27, 2028
102.
 1 Jiangsu Kelas PRC 27810172 December 6, 2028
103.
 1 Jiangsu Kelas PRC 28008409 November 20, 2028
104.
 1 Jiangsu Kelas PRC 28020406 November 20, 2028
105.
 1 Jiangsu Kelas PRC 28560046 December 27, 2028
106.
 1 Jiangsu Kelas PRC 31307025 March 6, 2029
107.
 7 Jiangsu Kelas PRC 52237757 August 13, 2031
108.
 1 Jiangsu Kelas PRC 60667291 May 13, 2032
109.
 1 Jiangsu Kelas PRC 60666806 May 13, 2032
110.
 1 Jiangsu Kelas PRC 60657212 May 20, 2032
111.
 1 Jiangsu Kelas PRC 54233325 March 6, 2032
112.
 1 Jiangsu Kelas PRC 60121315 December 27, 2032
113.
 1 Jiangsu Kelas PRC 61844490 November 20, 2032
114.
 1 Jiangsu Kelas PRC 65259630 January 20, 2033
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 9–


--- page 797 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
115.
 1 Shandong Kelas PRC 10433151 March 20, 2033
116.
 5 Shandong Kelas PRC 12264953 March 20, 2025
117.
 1 Shandong Kelas PRC 12265170 August 20, 2034
118.
 1 Shandong Kelas PRC 20134485 July 20, 2027
119.
 3 Shandong Kelas PRC 15281707 February 13, 2026
120.
 35 Nanjing Shangyi
Environmental
Protection
Technology Co.,
Ltd. ( 南京尚易環保
科技有限公司)
PRC 15283885 December 20, 2025
121.
5 Shandong Kelas PRC 15281789 February 13, 2026
122.
 3 Shandong Kelas PRC 20134772 October 13, 2027
123.
 5 Shandong Kelas PRC 20134824 July 20, 2027
124.
 1 Hubei Green Melon PRC 16318036 August 13, 2026
125.
 5 Hubei Green Melon PRC 48168558 May 20, 2031
126.
 5 Hubei Green Melon PRC 53642451 August 13, 2032
127.
 5 Hubei Green Melon PRC 49440975 August 13, 2032
128.
 3 Hubei Green Melon PRC 43165120 October 20, 2030
129.
 1 Zhangjiagang TEEC PRC 39149730 April 6, 2030
130.
 4 Zhangjiagang TEEC PRC 34620000 October 13, 2029
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 0–


--- page 798 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
131.
 1 Zhangjiagang TEEC PRC 34616438 March 27, 2030
132.
 1 Zhangjiagang TEEC PRC 34608764 March 27, 2030
133.
 4 Zhangjiagang TEEC PRC 34601836 October 20, 2029
134.
 4 Zhangjiagang TEEC PRC 33450776 May 27, 2029
135.
 1 Zhangjiagang TEEC PRC 33442302 May 20, 2029
136.
 4 Zhangjiagang TEEC PRC 39573748 May 6, 2030
137.
 4 Zhangjiagang TEEC PRC 9162741 March 6, 2032
138.
 1 Zhangjiagang TEEC PRC 54050028 October 6, 2031
139.
 4 Zhangjiagang TEEC PRC 54039422 October 6, 2031
140.
 1 Changzhou Liyuan PRC 57077566 March 27, 2032
141.
 1 Changzhou Liyuan PRC 50277349 May 27, 2032
142.
 1 Changzhou Liyuan PRC 66478087 March 27, 2033
143.
 1 Changzhou Liyuan PRC 66488033 February 6, 2033
144.
 1, 4 The Company Hong Kong 304646827 August 23, 2028
145.
 1, 4 The Company Hong Kong 304682557 September 26, 2028
146.
 1, 4 The Company Hong Kong 305473837 December 8, 2030
147.
 1 The Company Hong Kong 305068882 September 25, 2029
148.
 4 The Company Hong Kong 305068873 September 25, 2029
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 1–


--- page 799 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
149.
 1 Jiangsu Kelas Hong Kong 304457502 March 12, 2028
150.
 1, 4 The Company Hong Kong 306309603 July 30, 2033
151.
 1, 4 The Company Hong Kong 306309612 July 30, 2033
152.
 1, 4 The Company Hong Kong 306309621 July 30, 2033
153.
 1 The Company Macau N/144702(889) March 22, 2026
154.
 4 The Company Macau N/144703(886) March 22, 2026
155.
 1 The Company Macau N/158542(641) January 22, 2027
156.
 4 The Company Macau N/158543(434) January 22, 2027
157.
 1 The Company Macau N/160252(002) February 27, 2027
158.
 4 The Company Macau N/160253(642) February 27, 2027
159.
 1 Jiangsu Kelas Macau N/135775(312) September 10, 2025
160.
 1 The Company Taiwan 01977472 March 31, 2029
161.
 4 The Company Taiwan 01977703 March 31, 2029
162.
 1 The Company Taiwan 02046723 March 15, 2030
163.
 4 The Company Taiwan 02046867 March 15, 2030
164.
 1 The Company Taiwan 02152906 July 15, 2031
165.
 4 The Company Taiwan 02153218 July 15, 2031
166.
 1 Jiangsu Kelas Taiwan 01953865 November 30, 2028
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 2–


--- page 800 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
167.
 1 The Company the United
States
5945462 September 21, 2028
168.
 4 The Company the United
States
5881300 September 21, 2028
169.
 1 Jiangsu Kelas the United
States
5911300 December 28, 2028
170.
 1, 4 The Company Singapore 40201905655T December 28, 2028
171.
 1, 4 The Company Singapore 40201820695X October 11, 2028
172.
 4 The Company Singapore 40201901477Q January 23, 2029
173.
 4 The Company Singapore 40201901476P January 23, 2029
174.
 4 The Company Singapore 40201901475R January 23, 2029
175.
 4 The Company Singapore 40201906448Y March 25, 2029
176.
 1 Jiangsu Kelas Singapore 40201602134W November 30, 2025
177.
 1 The Company Australia 1958538 September 27, 2028
178.
 4 The Company Australia 1958539 September 27, 2028
179.
 1 Jiangsu Kelas Australia 1750107 November 30, 2025
180.
 1 The Company New Zealand 1103645 September 27, 2028
181.
 4 The Company New Zealand 1103646 September 27, 2028
182.
 1 Jiangsu Kelas New Zealand 1106823 August 2, 2028
183.
 1, 4 The Company Philippines 1455842 December 28, 2028
184.
 1, 4 The Company Philippines 4/2018/00016836 April 4, 2029
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 3–


--- page 801 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
185.
 1 Jiangsu Kelas Philippines 1433028 August 2, 2028
186.
 1, 4 The Company India 4118859 December 28, 2028
187.
 1, 4 The Company India 3960400 September 29, 2028
188.
 1 Jiangsu Kelas India 1457716 December 28, 2028
189.
 1, 4 The Company Japan 6195787 November 8, 2029
190.
 1 Jiangsu Kelas Japan 1457716 December 28, 2028
191.
 1 The Company South Korea 40–1501121 July 17, 2029
192.
 4 The Company South Korea 40–1501122 July 17, 2029
193.
 1 Jiangsu Kelas South Korea 1285624 November 30, 2025
194.
 4 The Company Indonesia IDM000861221 January 24, 2029
195.
 4 The Company Indonesia IDM000824331 January 24, 2029
196.
 4 The Company Indonesia IDM000826132 March 19, 2029
197.
 1 Jiangsu Kelas Indonesia 1457716 December 28, 2028
198.
 1 The Company Indonesia IDM000745071 October 1, 2028
199.
 4 The Company Indonesia IDM000745064 October 1, 2028
200.
 1, 4 The Company Vietnam 1455842 December 28, 2028
201.
 1 Jiangsu Kelas Vietnam 1457716 December 28, 2028
202.
 1, 4 The Company Vietnam 375253 September 24, 2028
203.
 4 The Company Vietnam 379567 January 23, 2029
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 4–


--- page 802 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
204.
 4 The Company Vietnam 379568 January 23, 2029
205.
 4 The Company Vietnam 380925 January 23, 2029
206.
 4 The Company Vietnam 383581 March 15, 2029
207.
 1, 4 The Company Laos 1455842 December 28, 2028
208.
 1, 4 The Company Laos 45469 January 24, 2029
209.
 4 The Company Laos 45466 January 24, 2029
210.
 4 The Company Laos 45468 January 24, 2029
211.
 4 The Company Laos 45467 January 24, 2029
212.
 4 The Company Laos 45811 March 18, 2029
213.
 1 Jiangsu Kelas Laos 1457716 December 28, 2028
214.
 1, 4 The Company Cambodia 1455842 December 28, 2028
215.
 1, 4 The Company Cambodia KH/79848/20 September 25, 2028
216.
 4 The Company Cambodia KH/79756/20 January 24, 2029
217.
 4 The Company Cambodia KH/76010/20 January 24, 2029
218.
 1 Jiangsu Kelas Cambodia 1457716 December 28, 2028
219.
 4 The Company Thailand 211104295 February 3, 2029
220.
 4 The Company Thailand 201115277 February 3, 2029
221.
 4 The Company Thailand 201126780 March 19, 2029
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 5–


--- page 803 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
222.
 1 The Company South Africa 2018/23244 August 14, 2028
223.
 4 The Company South Africa 2018/23245 August 14, 2028
224.
 1 Jiangsu Kelas South Africa 2018/24115 August 22, 2028
225.
 1, 4 The Company Canada TMA1094614 March 1, 2031
226.
 1 Jiangsu Kelas Canada TMA1096817 March 24, 2031
227.
 1 The Company Malaysia 2018068627 September 10, 2028
228.
 4 The Company Malaysia 2018068628 September 10, 2028
229.
 4 The Company Malaysia TM2019002443 January 23, 2029
230.
 4 The Company Malaysia TM2019002435 January 23, 2029
231.
 4 The Company Malaysia TM2019010472 March 25, 2029
232.
 1 Jiangsu Kelas Malaysia 2018068635 September 11, 2028
233.
 1 The Company Pakistan 508821 September 28, 2028
234.
 4 The Company Pakistan 508822 September 28, 2028
235.
 1 The Company Mexico 1953801 September 27, 2028
236.
 4 The Company Mexico 1953802 September 27, 2028
237.
 1, 4 The Company German 1529619 December 11, 2029
238.
 1 Jiangsu Kelas German 1285624 November 30, 2025
239.
 1 Jiangsu Kelas France 1285624 November 30, 2025
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 6–


--- page 804 ---
No. Trademark Class Note Registered Owner
Place of
Registration Registration Number Expiry Date
240.
 1, 4 The Company France 1529619 December 11, 2029
241.
 1, 4 The Company United
Kingdom
WO000000152619 December 11, 2029
242.
 1 Jiangsu Kelas United
Kingdom
WO0000001285624 November 30, 2025
243.
 1, 4 The Company Italy 1529619 December 11, 2029
244.
 1 Jiangsu Kelas Italy 1285624 November 30, 2025
245.
 1, 4 The Company Turkey 1529619 December 11, 2029
246.
 1, 4 The Company Egypt 1529619 December 11, 2029
247.
 1, 4 The Company Cyprus 1529619 December 11, 2029
248.
 1, 4 The Company Morocco 1529619 December 11, 2029
249.
 1, 4 The Company Algeria 1529619 December 11, 2029
250.
 1, 4 The Company Israel 1529619 December 11, 2029
251.
 1, 4 The Company Tunisia 1529619 December 11, 2029
252.
 1, 4 The Company Oman 1529619 December 11, 2029
253.
 1 Jiangsu Kelas Colombia 1285624 November 30, 2025
Note:
Class 1 : Chemicals for use in industry, science and phot ography, as well as in agriculture, horticulture and
forestry; unprocessed artificial resins, unprocessed plastic s; fire extinguishing and fire prevention compositions;
tempering and soldering preparations; substances for t anning animal skins and hides; adhesives for use in
industry; putties and other paste fillers ; compost, manures, fertilizers; biolog ical preparations for use in industry
and science.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 7–


--- page 805 ---
Class 3 : Non-medicated cosmetics and t oiletry preparations; non-medicated d entifrices; perfumery, essential
oils; bleaching preparations and other substances for l aundry use; cleaning, polishing, scouring and abrasive
preparations.
Class 4 : Industrial oils and greases, wax; lubricants; dus t absorbing, wetting and bi nding compositions; fuels
and illuminants; candles and wicks for lighting.
Class 5 : Pharmaceuticals, medical and veterinary pre parations; sanitary preparations for medical purposes;
dietetic food and substances adapted for medical or vet erinary use, food for babies; dietary supplements for
human beings and animals; plasters, materials for dressings; materi al for stopping teeth, dental wax;
disinfectants; preparati ons for destroying vermin; fungicides, herbicides.
Class 7 : Machines, machine tools, power-operated tools; motors and engines, except for land vehicles; machine
coupling and transmission components, except for land vehicles; agricultural implements, other than
hand-operated hand tools; incubators for eggs; automatic vending machines.
Class 35 : Advertising; business management, business administrati on; office functions.
Class 37 : Construction serv ices; installation and repair services; m ining extraction, oil and gas drilling.
(b) Patents
As of the Latest Practicable Date, we had registered the following patents
which are material to our business:
No. Patent Name Registered Owner
Place of
Registration Patent Number Application Date Expiry Date
1. A method of regeneration of
waste lithium iron phosphate
to prepare rate lithium iron
phosphate ( 一種廢舊磷酸鐵鋰
再生製備倍率型磷酸鐵鋰的方
法) .................
Shandong Liyuan PRC 2022112457883 October 12, 2022 October 11, 2042
2. A method of preparing iron
orthophosphate for lithium
ion battery by using iron
containing extraction raffinate
(一種利用含鐵萃餘液製備鋰離
子電池用正磷酸鐵的方法) ...
Changzhou Liyuan PRC 2015104548310 July 29, 2015 July 28, 2035
3. An electrode material for
high-temperature electrolytes
and its preparation method
(一種用於高溫電解液的電極材
料及其製備方法)........
Jiangsu Kelas PRC 2020106703947 July 13, 2020 July 12, 2040
4. A cleaning and regeneration
agent for diesel engine DPF
and its application ( 一種柴油
機DPF 清洗再生劑及其
應用).
Jiangsu Kelas PRC 2017114636779 December 28, 2017 December 27, 2037
5. A solid reducing agent for SCR
system and its preparation
method ( 一種用於SCR 系統的
固載還原劑及其製備方法) ...
Jiangsu Kelas PRC 2017100856241 February 17, 2017 February 16, 2037
6. A cleaning and regeneration
agent for diesel engine DOC/
POC and its application ( 一種
柴油機DOC/POC 清洗再生劑
及其應用) ............
Jiangsu Kelas PRC 2016107924230 August 31, 2016 August 30, 2036
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 8–


--- page 806 ---
No. Patent Name Registered Owner
Place of
Registration Patent Number Application Date Expiry Date
7. A cleaning and regenerating
agent for removing sediment
from the diesel engine SCR
post-treatment system ( 一種用
於清除柴油機SCR 後處理系統
沉積物的清洗再生劑) .....
Jiangsu Kelas PRC 2016107957592 August 31, 2016 August 30, 2036
8. A growth interfering agent for
comb shaped polyacrylamide
type crystal, the catalytic
reducing agent for
anti-crystalline tail gas
prepared with the interfering
agent, and their preparation
methods ( 梳狀聚丙烯醯胺類晶
體增長干擾劑、利用該干擾劑
製備的抗結晶型尾氣催化還原
劑及制法) ............
Jiangsu Kelas PRC 201610130302X March 8, 2016 March 7, 2036
9. A preparation method and
application of an in-situ
grown Lithium iron
phosphate whisker ( 一種原位
生長磷酸鐵鋰晶須的製備方法
及用途) ..............
Tianjin Beiterui
Nano
PRC 2019113282263 December 20, 2019 December 19, 2039
10. A kind of lithium iron phosphate
material, its preparation
method and use ( 一種磷酸鐵鋰
材料、及其製備方法和用途).
Tianjin Beiterui
Nano
PRC 2019101602006 March 4, 2019 March 3, 2039
11. A kind of lithium iron
phosphate/silicon carbide
composite material and its
preparation method ( 一種磷酸
鐵鋰/碳化矽複合型材料及其製
備方法) ..............
Tianjin Beiterui
Nano
PRC 2018114978060 December 7, 2018 December 6, 2038
12. A kind of lithium hexafluoro
zirconate and carbon
co-coated lithium iron
phosphate composite material,
its preparation method and
use ( 一種六氟鋯酸鋰和碳共包
覆磷酸鐵鋰複合材料、其製備
方法和用途) ...........
Tianjin Beiterui
Nano
PRC 2018106353221 June 20, 2018 June 19, 2038
13. A kind of lithium iron
phosphate-based composite
material, its preparation
method and use ( 一種磷酸鐵鋰
基複合材料、其製備方法及用
途) .................
Tianjin Beiterui
Nano
PRC 2018105218398 May 28, 2018 May 27, 2038
14. A kind of LiFePO 4-LiMPO 4
composite cathode material
and its preparation method
(一種複合LiFePO
4-LiMPO 4正
極材料及其製備方法) .....
Tianjin Beiterui
Nano
PRC 2017111405857 November 16, 2017 November 15, 2037
15. A multi-ion doped battery-grade
iron phosphate material and
its preparation method ( 一種
多離子摻雜電池級磷酸鐵材料
及其製備方法) ..........
Tianjin Beiterui
Nano
PRC 2022104303065 April 22, 2022 April 21, 2042
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2 9–


--- page 807 ---
No. Patent Name Registered Owner
Place of
Registration Patent Number Application Date Expiry Date
16. A kind of nanometer iron
phosphate material introduced
with high conductivity carbon
material and its preparation
method ( 一種引入高導電性碳
材料的納米化磷酸鐵材料及製
備方法) ..............
Tianjin Beiterui
Nano
PRC 2022100769920 January 24, 2022 January 23, 2042
17. A kind of gear oil for wind
turbine and its preparation
method ( 一種風力發電機組齒
輪油及其製備方法) .......
Lopal Lubrication PRC 2019101182118 February 16, 2019 February 15, 2039
18. A wear-resistant and
energy-saving diesel engine oil
composition ( 一種抗磨節能型
柴油機油組合物)........
Lopal Lubrication PRC 2016107859231 August 31, 2016 August 30, 2036
19. Gear oil composition for
heavy-duty vehicle under
ultra-low temperature ( 超低溫
重負荷車輛齒輪油組合物) ...
The Company,
Lopal
Lubrication
PRC 2020100316298 January 13, 2020 January 12, 2040
20. Energy saving, long life, low ash
diesel engine oil composition
(節能型長壽命低灰分柴油機油
組合物) ..............
The Company,
Lopal
Lubrication
PRC 2020100351588 January 13, 2020 January 12, 2040
21. Gear oil composition for heavy
duty vehicle with excellent
shear stability and its
preparation method ( 剪切穩定
性優異的重負荷車輛齒輪油組
合物及其製備方法) .......
The Company,
Lopal
Lubrication
PRC 2018112948499 November 1, 2018 October 31, 2038
22. An energy-saving lubricating oil
with low ash content and high
compatibility ( 一種低灰分高兼
容性的節能型潤滑油) .....
The Company PRC 2020110049787 September 22, 2020 September 21, 2040
23. A lubricating grease for robot
RV reducer and its
preparation method ( 一種機器
人RV減速器潤滑脂及其製備方
法) .................
The Company PRC 2020103574821 April 29, 2020 April 28, 2040
24. A single component water-based
polyurethane adhesive for
automotive ceilings and its
preparation method ( 一種
汽車
頂棚用單組份水性聚氨酯膠黏
劑及其製備方法)........
The Company PRC 2019107962217 August 27, 2019 August 26, 2039
25. A solvent for removing cured
silicone rubber and its
preparation method ( 一種用於
去除固化硅橡膠的溶解劑及其
製備方法) ............
The Company PRC 2019107289180 August 8, 2019 August 7, 2039
26. Preparation method of liquid
ethylene propylene rubber ( 一
種液體乙丙橡膠的製備方法).
The Company PRC 2019102749455 April 8, 2019 April 7, 2039
27. A low friction coefficient
assembly lubricant and its
preparation method ( 一種低摩
擦系數裝配潤滑膏及製備方法)
The Company PRC 2019101698210 March 6, 2019 March 5, 2039
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 0–


--- page 808 ---
No. Patent Name Registered Owner
Place of
Registration Patent Number Application Date Expiry Date
28. A high-performance synthetic
power steering oil
composition and its
preparation method ( 一種高性
能合成型助力轉向油組合物及
其製備方法) ...........
The Company PRC 2017110337814 October 30, 2017 October 29, 2037
29. A high and low temperature
resistant long life extreme
pressure lubricating grease
and its preparation method
(一種耐高低溫長壽命極壓潤滑
脂及其製備方法)........
The Company PRC 2017110350363 October 30, 2017 October 29, 2037
30. A lubricating oil composition for
electric vehicle transmission
and its preparation method
(一種電動汽車變速箱用潤滑油
組合物及其製備方法) .....
The Company PRC 2017110389626 October 30, 2017 October 29, 2037
31. A coolant for constant
temperature control of
batteries and its preparation
method ( 一種用於電池恒溫控
制的冷卻液及
其製備方法) ...
The Company PRC 2017100856379 February 17, 2017 February 16, 2037
32. A high-temperature and extreme
pressure resistant lubricating
grease and its preparation
method ( 一種耐高溫極壓潤滑
脂及其製備方法)........
The Company PRC 2016107852088 August 31, 2016 August 30, 2036
33. An emulsifier and its preparation
method and application ( 一種
乳化劑及其製備方法與應用).
The Company PRC 2016107895990 August 31, 2016 August 30, 2036
34. A lubricating oil composition for
turbocharged direct injection
engines ( 一種渦輪增壓直噴發
動機用潤滑油組合物) .....
The Company PRC 2016106541378 August 11, 2016 August 10, 2036
35. A consumption of diesel engine
oil for reducing oil
consumption ( 一種降低機油消
耗量的柴油機油組合物)....
The Company PRC 2016106583991 August 11, 2016 August 10, 2036
36. A lubricating grease for wheel
flange of locomotive and its
preparation method ( 一種鐵路
機車輪緣用
潤滑脂及其製備方
法) .................
The Company PRC 2016102845552 April 29, 2016 April 28, 2036
37. An environmentally friendly and
easily degradable advanced
knitting oil and its
preparation method ( 一種環保
易降解型高級針織機油及其製
備方法) ..............
The Company PRC 2016100812395 February 4, 2016 February 3, 2036
38. An environmentally friendly
demolding agent for concrete
components and its
preparation method ( 一種環保
型混凝土構件脫模劑及其製備
方法)...............
The Company PRC 2014100268617 January 21, 2014 January 20, 2034
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 1–


--- page 809 ---
No. Patent Name Registered Owner
Place of
Registration Patent Number Application Date Expiry Date
39. A composition of food grade
lubricating grease and its
preparation method ( 一種食品
級潤滑脂的組合物及其製備方
法) .................
The Company PRC 2014100269253 January 21, 2014 January 20, 2034
40. A biodegradable dust inhibitor
and its preparation method
(一種生物降解型揚塵抑制劑及
製備方法) ............
The Company PRC 2014100269906 January 21, 2014 January 20, 2034
41. Biodegradable snow and ice
melting agents and their
preparation methods ( 生物降
解型融雪化冰劑及其製備方法)
The Company PRC 2014100270509 January 21, 2014 January 20, 2034
42. A water-resistant extreme
pressure lithium-based
lubricating grease and its
preparation method ( 一種耐水
型極壓鋰基潤滑脂及其製備方
法) .................
The Company PRC 2013104014494 September 5, 2013 September 4, 2033
43. A composite lithium
calcium-based lubricating
grease and its preparation
method ( 一種複合鋰鈣基潤滑
脂及其製備方法)........
The Company PRC 2012105473341 December 17, 2012 December 16, 2032
44. A method for preparing high
dropping point monolithium
soap grease ( 一種高滴點單鋰
皂潤滑脂的製備方法) .....
The Company PRC 202211403693X November 10, 2022 November 9, 2042
45. An anhydrous calcium-based
lubricating grease and its
preparation method ( 一種無水
鈣基潤滑脂及其製備方法) ...
The Company PRC 2012102590894 July 25, 2012 July 24, 2032
46. A refueling gun for improving
t h ee n v i r o n m e n to fg a s
stations ( 一種改善加油站環境
的加油槍) ............
Jiangsu Tianlan
Intelligent
Equipment Co.,
Ltd. ( 江蘇天藍
智能裝備有限公
司)
PRC 2018107661215 July 12, 2018 July 11, 2038
47. Dehydrating agent for diesel fuel
(用於柴油的除水劑) ......
Shandong Kelas PRC 2017111457368 November 17, 2017 November 16, 2037
48. A MnO
2-ACF material for
removing indoor
formaldehyde and its
preparation method ( 一種用於
去除室內甲醛的MnO 2-ACF 材
料及其製備方法)........
Hubei Green Melon PRC 2016107895971 August 31, 2016 August 30, 2036
49. Gradient doped Iron (III)
phosphate precursor and its
preparation method and
application ( 梯度摻雜磷酸鐵前
驅體及其製備方法和應用) ...
Jiangsu Beiterui
Nano
PRC 2022112274897 October 9, 2022 October 8, 2042
50. A method for preparing high
compaction manganese iron
lithium phosphate by
explosion ( 一種爆炸法製備高
壓實磷酸錳鐵鋰的方法)....
Jiangsu Beiterui
Nano
PRC 2021116566372 December 31, 2021 December 30, 2041
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 2–


--- page 810 ---
No. Patent Name Registered Owner
Place of
Registration Patent Number Application Date Expiry Date
51. Equipment of producing lithium
iron phosphate and its
preparation method ( 一種磷酸
鐵鋰生產設備及其製備方法).
Jiangsu Beiterui
Nano
PRC 2021116761303 December 31, 2021 December 30, 2041
52. High conductivity
graphene-based spherical
lithium iron phosphate
composite, its preparation
method and lithium-ion
battery containing such
composite ( 高電導石墨烯基磷
酸鐵鋰球形複合材料、其製備
方法及包含其的鋰離子電池).
Jiangsu Beiterui
Nano
PRC 201710579932X July 17, 2017 July 16, 2037
53. A kind of high-density spherical
nanometer lithium iron
phosphate material, its
preparation method and
lithium-ion battery ( 一種高密
度球形納米磷酸鐵鋰材料及其
製備方法和包含其的鋰離子電
池) .................
Jiangsu Beiterui
Nano
PRC 2016106811184 August 17, 2016 August 16, 2036
54. A method for preparing a
composite phosphate
iron-based sodium ion battery
layered positive electrode
material precursor ( 一種複合
磷酸鹽的鐵基鈉離子電池層狀
正極材料前驅體的製備方法).
Jiangsu Beiterui
Nano
PRC 2022116758413 December 26, 2022 December 25, 2042
55. Lithium iron phosphate cathode
material in thin plate shape
and its hydrothermal
preparation method ( 薄片狀磷
酸鐵鋰正極材料及其水熱法製
備方法) ..............
Liyuan (Shenzhen)
Scientific
Research Co.,
Ltd. ( 鋰源（深
圳）科學研究有限
公司)
PRC 2022110933512 September 8, 2022 September 7, 2042
56. Selective oxidation-reduction
regeneration method of waste
lithium iron phosphate,
regeneration of lithium iron
phosphate and lithium-ion
battery ( 廢舊磷酸鐵鋰選擇性
氧化-還
原再生的方法、再生磷
酸鐵鋰和鋰離子電池) .....
Liyuan (Shenzhen)
Scientific
Research Co.,
Ltd. ( 鋰源（深
圳）科學研究有限
公司)
PRC 2019112519214 December 9, 2019 December 8, 2039
57. The recycling method of positive
electrode materials, the
obtained positive electrode
materials, and their uses ( 正極
材料的回收方法、得到的正極
材料及其用途) ..........
Liyuan (Shenzhen)
Scientific
Research Co.,
Ltd. ( 鋰源（深
圳）科學研究有限
公司)
PRC 201910280546X April 9, 2019 April 8, 2039
58. Preparation method of lithium
iron phosphate, lithium iron
phosphate material and
lithium-ion battery ( 磷酸鐵鋰
的製備方法、磷酸鐵鋰材料及
鋰離子電池) ...........
Liyuan (Shenzhen)
Scientific
Research Co.,
Ltd. ( 鋰源
（深圳）科學研究
有限公司)
PRC 2021101789734 February 9, 2021 February 8, 2041
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 3–


--- page 811 ---
No. Patent Name Registered Owner
Place of
Registration Patent Number Application Date Expiry Date
59. A polyimide film and its
preparation method ( 一種聚醯
亞胺薄膜及其製備方法)....
Nanjing Seiko New
Material Co.,
Ltd. ( 南京精工
新材料有限公司)
PRC 2020115959346 December 29, 2020 December 28, 2040
60. A novel linear low-density
polyethylene for urea tank
and its preparation method
(一種新型尿素箱用線性低密度
聚乙烯及其製備方法) .....
Nanjing Seiko New
Material Co.,
Ltd. ( 南京精工
新材料有限公司)
PRC 2018101783098 March 5, 2018 March 4, 2038
61. A car window cleaning fluid ( 一
種車窗清洗液) ..........
Zhangjiagang
TEEC, Suzhou
University
PRC 2017112811330 December 7, 2017 December 6, 2037
62. A DOT6 borate ester type brake
fluid ( 一種DOT6 硼酸酯型制動
液) .................
Zhangjiagang
TEEC
PRC 2017108972221 September 28, 2017 September 27, 2037
63. Car windshield washer fluid ( 汽車
風窗洗滌液) ...........
Zhangjiagang
TEEC
PRC 2013103394119 August 6, 2013 August 5, 2033
64. Automobile air-conditioning
condenser and radiator
cleaning agent and
preparation method and
application ( 汽車空調冷凝器和
散熱器清洗劑及其製備方法和
應用)...............
Zhangjiagang
TEEC
PRC 2021115546437 December 27, 2021 December 26, 2041
65. Packaging bottle (2023001) ( 包裝
瓶( 2 0 2 3 0 0 1 ) ) ..........
Zhangjiagang
TEEC
PRC 2023306437178 October 7, 2023 October 6, 2038
66. Packaging bottle (2023002) ( 包裝
瓶( 2 0 2 3 0 0 2 ) ) ..........
Zhangjiagang
TEEC
PRC 2023306437248 October 7, 2023 October 6, 2038
67. Solid cleaning liquid concentrate
and its preparation method
and application ( 固態清洗液濃
縮劑及其製備方法和應用) ...
Zhangjiagang
TEEC
PRC 201911374823X December 27, 2019 December 26, 2039
68. A water electrolysis hydrogen
production system coupled
with a hazardous waste
incineration waste heat system
(一種耦合危險廢物焚燒餘熱系
統
的電解水製氫系統) .....
Jiangsu Boyuan,
Lopal Tech.
Research and
Development
(Jiangsu) Co.,
Ltd. ( 龍蟠科技
研發（江蘇）有限
公司)( n o w
known as
Jiangsu Lopal
Green Energy
Co., Ltd. ( 江蘇
龍蟠綠色能源有
限公司))
PRC 2023215760100 June 20, 2023 June 19, 2033
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 4–


--- page 812 ---
No. Patent Name Registered Owner
Place of
Registration Patent Number Application Date Expiry Date
69. A gas-liquid separator suitable
for alkaline electrolyzed water
(一種適用於鹼性電解水的氣液
分離器) ..............
Jiangsu Boyuan,
Lopal Tech.
Research and
Development
(Jiangsu) Co.,
Ltd. ( 龍蟠科技
研發（江蘇）有限
公司)( n o w
known as
Jiangsu Lopal
Green Energy
Co., Ltd. ( 江蘇
龍蟠綠色能源有
限公司))
PRC 2023215760420 June 20, 2023 June 19, 2033
70. A packaging device specifically
u s e df o rp o w d e rm a t e r i a l s(一
種專用於粉末物料的包裝設備)
Lopal Times PRC 2021104600705 June 6, 2019 June 5, 2039
71. A kind of polymer crystal plastic
powder ultrafine grinding
equipment and grinding
method ( 一種高分子晶體塑粉
超細研磨設備及研磨方法) ...
Lopal Times PRC 2022102662805 March 17, 2022 March 16, 2042
72. Preparation method of positive
electrode material for sodium
ion battery ( 鈉離子電池正極材
料的製備方法) ..........
Sichuan Liyuan,
Liyuan
(Shenzhen)
Scientific
Research Co.,
Ltd. ( 鋰源
（深圳）科學研究
有限公司)
PRC 2022113529037 November 1, 2022 October 31, 2042
73. Energy-saving DPF cleaning
device and method for trucks
(一種卡車用節能DPF 清洗裝置
及其方法) ............
Jiangsu Tianlan
Intelligent
Equipment
Co., Ltd. ( 江蘇
天藍智能裝備
有限公司)
PRC 2023107419782 June 21, 2023 June 20, 2043
74. A drying device for high nickel
precursor processing ( 一種高
鎳前驅體加工用乾燥裝置) ...
Jiangsu Sanjin
Lithium
Technology
Co., Ltd. ( 江蘇
三金鋰電
科技
有限公司)
PRC 2023218391324 July 13, 2023 July 12, 2033
75. A kind of high nickel precursor
concentration machine
(一種高鎳前驅體提濃機) ...
Jiangsu Sanjin
Lithium
Technology
Co., Ltd.
(江蘇三金鋰電
科技有限公司)
PRC 2023221070386 August 7, 2023 August 6, 2033
76. A device and method for
producing ternary cathode
material precursor for lithium
batteries ( 一種用於生產鋰電池
三元正極材料前驅體的裝置及
其方法) ..............
Jiangsu Sanjin
Lithium
Technology Co.,
Ltd. ( 江蘇三金
鋰電科技有限
公司)
PRC 2023112248810 September 21, 2023 September 20, 2043
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 5–


--- page 813 ---
(c) Copyrights
As of the Latest Practicable Date, we had registered the following copyrights
which are material to our business:
(i) Works ( 作品)
No. Copyright Owner Registration Number Registration Date Place of Registration
1. Lopal Erosion Resistance C05 4KG
(龍蟠拒蝕C 0 54 K G ) ................
The Company Qianzuodengzi-2020-F-00113058 August 18, 2020 PRC
2. Lopal Erosion Resistance C08 1.5KG
(龍蟠拒蝕C 0 81 . 5 K G ) ...............
The Company Qianzuodengzi-2020-F-00113056 August 18, 2020 PRC
3. Lopal Erosion Resistance C08 2KG
(龍蟠拒蝕C 0 82 K G ) ................
The Company Qianzuodengzi-2020-F-00113059 August 18, 2020 PRC
4. Lopal Erosion Resistance C31 2KG
(龍蟠拒蝕C 3 12 K G ) ................
The Company Qianzuodengzi-2020-F-00113057 August 18, 2020 PRC
5. Lopal Erosion Resistance C31 4KG
(龍蟠拒蝕C 3 14 K G ) ................
The Company Qianzuodengzi-2020-F-00113055 August 18, 2020 PRC
6. Lopal Mosheng 6000 1.5L-01
(龍蟠摩聖6 0 0 01 . 5 L - 0 1 ) ..............
The Company Qianzuodengzi-2020-F-00112866 August 18, 2020 PRC
7. Lopal Mosheng 8000 1L-01 ( 龍蟠摩聖8000 1L-01) The Company Qianzuodengzi-2020-F-00113021 August 18, 2020 PRC
8. Lopal Youbang V5 1L-01 ( 龍蟠友邦V5 1L-01) . . The Company Qianzuodeng zi-2020-F-00112877 August 18, 2020 PRC
9. Lopal SPEED 1L-01 ( 龍蟠SPEED 1L-01) . . . . . The Company Qianzuodengzi-2020-F-00112870 August 18, 2020 PRC
10. Lopal Mosheng 5000 1L-01 ( 龍蟠摩聖5000 1L-01) The Company Qianzuodengzi-2020-F-00113005 August 18, 2020 PRC
11. Sijitong_V7000 4L ( 四季通_V7000 4L) . . . . . . . The Company Qianzuodengzi-2020-F-00112878 August 18, 2020 PRC
12. Xiya Label_P500 15W-40
(喜壓標籤_ P 5 0 01 5 W - 4 0 ) .............
The Company Qianzuodengzi-2020-F-00113111 August 18, 2020 PRC
13. Brake Fluid_DIT 4 Label 350g
(制動液_DIT 4 標籤 350g) . . . . . . . . . . . .
The Company Qianzuodengzi-2020-F-00113116 August 18, 2020 PRC
14. Brake Fluid_DOT 4 Label 500g
(制動液_DOT 4 標籤 500g) . . . . . . . . . . . .
The Company Qianzuodengzi-2020-F-00113019 August 18, 2020 PRC
15. Brake Fluid_DOT 5.1 Label 500g
(制動液_DOT 5.1 標籤 5 0 0 g ) ...........
The Company Qianzuodengzi-2020-F-00112876 August 18, 2020 PRC
16. Zhizun_A2 020 4L ( 智尊_A2 020 4L) . . . . . . . . The Company Qianzuodengzi-2020-F-00113022 August 18, 2020 PRC
17. Zhizun_Engine Flushing Oil 4L
(智尊_發動機衝洗油 4 L )..............
The Company Qianzuodengzi-2020-F-00113118 August 18, 2020 PRC
18. Zhizun_A2 020 1L ( 智尊_A2 020 1L) . . . . . . . . The Company Qianzuodengzi-2020-F-00112880 August 18, 2020 PRC
19. Lantian Tiny Guard ( 蘭天小衛士) . . . . . . . . . . Jiangsu Kelas Guozuodengzi-2016-F-00263504 March 29, 2016 PRC
20. Transmission Oil_MIF ( 變速箱油_MIF) . . . . . . The Company Qianzuodengzi-2020-F-00112872 August 18, 2020 PRC
21. Xiya Label_P600 15W-40
(喜壓標籤_ P 6 0 01 5 W - 4 0 ) .............
The Company Qianzuodengzi-2020-F-00113015 August 18, 2020 PRC
22. Transmission Oil_ATF 7150
(變速箱油_ATF 7150) . . . . . . . . . . . . . . .
The Company Qianzuodengzi-2020-F-00113012 August 18, 2020 PRC
23. Transmission Oil_Manual Transmission Oil 2L
(變速箱油_手動變速箱油2 L ) ............
The Company Qianzuodengzi-2020-F-00113110 August 18, 2020 PRC
24. Transmission Oil_ATF 9 ( 變速箱油_ATF 9). . . . The Company Qianzuodengzi-2020-F-00113004 August 18, 2020 PRC
25. Chishen Label_G500 4L ( 齒神標籤_G500 4L) . . . The Company Qianzuodengzi-2020-F-00112862 August 18, 2020 PRC
26. Sijitong_V9000 1040 4L ( 四季通_V9000 1040 4L) The Company Qianzuodengzi-2020-F-00113114 August 18, 2020 PRC
27. Sijitong_V8000 4L ( 四季通_V8000 4L) . . . . . . . The Company Qianzuodengzi-2020-F-00113113 August 18, 2020 PRC
28. Xiya Label_P700 20W-50 Silver Printing
(喜壓標籤_P700 20W-50 印銀)..........
The Company Qianzuodengzi-2020-F-00112882 August 18, 2020 PRC
29. Xiya Label_P760 15W-40 Silver Printing
(喜壓標籤_P760 15W-40 印銀)..........
The Company Qianzuodengzi-2020-F-00113020 August 18, 2020 PRC
30. Zhizun_H2 530 1L ( 智尊_H2 530 1L). . . . . . . . The Company Qianzuodengzi-2020-F-00112875 August 18, 2020 PRC
31. Zhizun_H2 530 4L ( 智尊_H2 530 4L). . . . . . . . The Company Qianzuodengzi-2020-F-00113017 August 18, 2020 PRC
32. 2021 Lineng 15KG-01 (2021 鋰能15KG-01). . . . . The Company Qianzuodengzi-2020-F-00113011 August 18, 2020 PRC
33. Transmission Oil_ATF 6 ( 變速箱油_ATF 6). . . . The Company Qianzuodengzi-2020-F-00113009 August 18, 2020 PRC
34. Transmission Oil_ATF 300 ( 變速箱油_ATF 300) . The Company Qianzuodengzi-2020-F-00112869 August 18, 2020 PRC
35. Transmission Oil_ATF 6140
(變速箱油_ATF 6140) . . . . . . . . . . . . . . .
The Company Qianzuodengzi-2020-F-00112868 August 18, 2020 PRC
36. Transmission Oil_ATF 8100
(變速箱油_ATF 8100) . . . . . . . . . . . . . . .
The Company Qianzuodengzi-2020-F-00112874 August 18, 2020 PRC
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 6–


--- page 814 ---
No. Copyright Owner Registration Number Registration Date Place of Registration
37. Transmission Oil_ATF 9170 ( 變速箱油_ATF
9170) . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company Qianzuodengzi-2020-F-00113014 August 18, 2020 PRC
38. Transmission Oil_CVTF ( 變速箱油_CVTF) . . . . The Company Qianzuodengzi-2020-F-00113108 August 18, 2020 PRC
39. Transmission Oil_CVTF 300s ( 變速箱油_CVTF
300s) . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company Qianzuodengzi-2020-F-00113002 August 18, 2020 PRC
40. Transmission Oil_DCTF ( 變速箱油_DCTF) . . . . The Company Qianzuodeng zi-2020-F-00112867 August 18, 2020 PRC
41. Chishen Label_G600 4L ( 齒神標籤_G600 4L) . . . The Company Qianzuodengzi-2020-F-00113109 August 18, 2020 PRC
42. Chishen Label_G700 4L ( 齒神標籤_G700 4L) . . . The Company Qianzuodengzi-2020-F-00113007 August 18, 2020 PRC
43. Chishen Label_G500 3.5L ( 齒神標籤_G500 3.5L) The Company Qianzuodengzi-2020-F-00112864 August 18, 2020 PRC
44. 001 Lopal Jingwei_K9 5W-30 4L-07
(001 龍蟠淨威_ K 95 W - 3 04 L - 0 7 ) ........
The Company Qianzuodengzi-2020-F-00113000 August 18, 2020 PRC
45. Lopal Jingwei_K20 5W-30 4L
(龍蟠淨威_ K 2 05 W - 3 04 L ) ............
The Company Qianzuodengzi-2020-F-00113025 August 18, 2020 PRC
46. 001 Lopal Jingwei_A1 5W-30 4L
(001 龍蟠淨威_ A 15 W - 3 04 L ) ..........
The Company Qianzuodengzi-2020-F-00113024 August 18, 2020 PRC
47. 001 Lopal Jingwei_A1 5W-30 1L
(001 龍蟠淨威_ A 15 W - 3 01 L ) ..........
The Company Qianzuodengzi-2020-F-00113121 August 18, 2020 PRC
48. 001 Lopal Jingwei_H1 5W-30 1L
(001 龍蟠淨威_ H 15 W - 3 01 L ) ..........
The Company Qianzuodengzi-2020-F-00112883 August 18, 2020 PRC
49. 001 Lopal Jingwei_H1 5W-30 4L
(001 龍蟠淨威_ H 15 W - 3 04 L ) ..........
The Company Qianzuodengzi-2020-F-00113123 August 18, 2020 PRC
50. Lopal Jingwei_K8 5W-30 4L ( 龍蟠淨威_K8
5 W - 3 04 L ) ......................
The Company Qianzuodengzi-2020-F-00113124 August 18, 2020 PRC
51. Lopal Erosion Resistance C08 2KG
(龍蟠拒蝕C 0 82 K G ) ................
The Company Qianzuodengzi-2020-F-00113160 August 18, 2020 PRC
52. Lopal Erosion Resistance C05 1.5KG
(龍蟠拒蝕C 0 51 . 5 K G ) ...............
The Company Qianzuodengzi-2020-F-00113161 August 18, 2020 PRC
53. Lopal Erosion Resistance C05 2KG
(龍蟠拒蝕C 0 52 K G ) ................
The Company Qianzuodengzi-2020-F-00112906 August 18, 2020 PRC
54. Zhizun2Label ( 智尊2標貼) . . . . . . . . . . . . . . . The Company Suzuodengzi -2021-F-00034583 February 4, 2021 PRC
55. Blank Bucket 2 ( 空白小桶2) . . . . . . . . . . . . . . The Company Suzuodengzi -2021-F-00031457 February 2, 2021 PRC
56. Xiya jpg Middle Barrel Label ( 喜壓 jpg 中桶標貼) The Company Suzuodengzi-2021-F-00031456 February 2, 2021 PRC
57. Blank Middle Barrel ( 空白中桶) . . . . . . . . . . . The Company Suzuodengzi- 2021-F-00031454 February 2, 2021 PRC
58. Blank Bucket 1 ( 空白小桶1) . . . . . . . . . . . . . . The Company Suzuodengzi -2021-F-00031450 February 2, 2021 PRC
59. Zengcheng 2 Middle Barrel Surface Label ( 贈程2
中桶表標貼) ......................
The Company Suzuodengzi-2021-F -00031445 February 2, 2021 PRC
60. Anti-wear Hydraulic Oi l Hydraulic Transmission
Oil ( 抗磨液壓油液力傳動油) ............
The Company Suzuodengzi-2020-F-00146028 August 3, 2020 PRC
61. Anti-wear Hydraulic Oi l Hydraulic Transmission
Oil Hydraulic Transmission Oil 2L Label
(抗磨液壓油液
力傳動油液力傳動油2L標貼) ...
The Company Suzuodengzi-2020-F-00145955 July 31, 2020 PRC
62. Brake Fluid Circular Label ( 制動液圓標貼) . . . . The Company Suzuodengzi-2020-F-00139341 July 21, 2020 PRC
63. Lopal Jingwei Package Label ( 龍蟠淨威包裝帖). . The Company Suzuodengzi-2020-F-00139264 July 21, 2020 PRC
64. Lopal Four Oil Drops ATF Package Label Series
(龍蟠四滴油ATF 包裝標貼系列) ..........
The Company Suzuodengzi-2020-F-00139263 July 21, 2020 PRC
65. Xiya jpg Small Barrel Label ( 喜壓 jpg 小桶瓶貼) . The Company Suzuodengzi-2020-F-00139254 July 21, 2020 PRC
66. Trisonic Gasoline Engine Oil Package Label
(Trisonic 汽油機油包裝帖) .............
The Company Suzuodengzi-2020-F-00139252 July 21, 2020 PRC
67. Sijitong Middle Barrel Label ( 四季通中桶標貼) . . The Company Suzuodengzi-2020-F-00139247 July 21, 2020 PRC
68. Sijitong Label ( 四季通標貼) . . . . . . . . . . . . . . The Company Suzuodengzi-2020-F-00139246 July 21, 2020 PRC
69. Erosion Resistance Label ( 拒蝕標籤) . . . . . . . . The Company Suzuodengzi-2020-F-00139245 July 21, 2020 PRC
70. eps Middle Barrel Package (eps 中桶包裝) . . . . . The Company Suzuodengzi-2020-F-00139244 July 21, 2020 PRC
71. eps Label (eps 標籤) . . . . . . . . . . . . . . . . . . . The Company Suzuodengzi-2020-F-00139242 July 21, 2020 PRC
72. eps General Carton Box Design
(eps 通用紙箱設計) ..................
The Company Suzuodengzi-2020-F-00139241 July 21, 2020 PRC
73. Brake Fluid jpg Label ( 制動液 jpg 標貼) . . . . . . The Company Suzuodengzi-2020-F-00139296 July 21, 2020 PRC
74. Erosion Resistance Middle Barrel ( 拒蝕中桶) . . . The Company Suzuodengzi-2020-F-00139293 July 21, 2020 PRC
75. Kelas Elements That Make the Sky Blue
(可蘭素可以讓天空變蘭的元素)..........
Jiangsu Kelas Suzuodengzi-2021-F-00104765 April 29, 2021 PRC
76. Label-Shengchang 1000L Tianjin Lishui
(標貼-省暢1000L 天津溧水) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00203652 February 9, 2021 PRC
77. Label-Shengchang 1000KG Guangdong Huizhou
(標貼-省暢1000KG 廣東惠州) ...........
Jiangsu Kelas Qianzuodengzi-2021-F-00203651 February 9, 2021 PRC
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 7–


--- page 815 ---
No. Copyright Owner Registration Number Registration Date Place of Registration
78. Label Zhejiang Highway-Jiejin 20kg V2002
(Lishui)-01 ( 標貼 浙江高速-潔勁20kg V2002
(溧水)–01) . . . . . . . . . . . . . . . . . . . . . . .
Jiangsu Kelas Qianzuodengzi-2021-F-00203650 February 9, 2021 PRC
79. Label-Jingxin 1000KG Tianjin Lishui
(標貼-淨芯1000KG 天津溧水) ...........
Jiangsu Kelas Qianzuodengzi-2021-F-00203649 February 9, 2021 PRC
80. Label-Jingxin 1000L Guangdong Huizhou
(標貼-淨芯1000L 廣東惠州) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00203648 February 9, 2021 PRC
81. Label-Zhilan 10kg_Luzhou ( 標貼-智藍10kg_ 瀘州) Jiangsu Kelas Qianzuodengzi-20 21-F-00203647 February 9, 2021 PRC
82. Label-Shengchang 1000KG Tianjin Lishui
(標貼-省暢1000KG 天津溧水) ...........
Jiangsu Kelas Qianzuodengzi-2021-F-00203640 February 9, 2021 PRC
83. Label-Shengchang 1000L Sichuan Luzhou
(標貼-省暢1000L 四川瀘州) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00203637 February 9, 2021 PRC
84. Label Bingchang PE 10kg_Nanjing-Tianjin Lishui
(標貼 冰暢 PE 10kg_ 南京-天津) .........
Jiangsu Kelas Qianzuodengzi-2021-F-00203661 February 9, 2021 PRC
85. Label-Jiejin No.1 10kg pet_Lishui Tianjin
(標貼-潔勁1號 10kg pet_ 溧水天津) ........
Jiangsu Kelas Qianzuodengzi-2021-F-00203659 February 9, 2021 PRC
86. Label Jiexiao PE 10kg_Luzhou
(標貼 傑效 PE 10kg_ 瀘州) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00203658 February 9, 2021 PRC
87. Label Jiexiao PE 10kg_Huizhou
(標貼 傑效 PE 10kg_ 惠州) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00203657 February 9, 2021 PRC
88. Label Shengchang pro PE 10kg_Nanjing-Tianjin
(標貼 省暢pro PE 10kg_ 南京-天津).......
Jiangsu Kelas Qianzuodengzi-2021-F-00203656 February 9, 2021 PRC
89. Label-Jingxin 1000L Sichuan Luzhou
(標貼-淨芯1000L 四川瀘州) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00203655 February 9, 2021 PRC
90. Label-Jiejin No.1 pet_Huizhou
(標貼-潔勁1號 10kg pet_ 惠州) ..........
Jiangsu Kelas Qianzuodengzi-2021-F-00203654 February 9, 2021 PRC
91. Label-Zhilan No.1 10kg_Label Zhilan No.1 10kg
Lishui Tianjin ( 標貼-智藍1號10kg_ 標貼 智藍1
號10kg 溧水天津)..................
Jiangsu Kelas Qianzuodengzi-2021-F-00203653 February 9, 2021 PRC
92. Label-Jiejin No.1 PE 10kg_Label Jiejin No.1 PE
10kg Luzhou ( 標貼 潔勁1號 PE 10kg_ 標貼
潔勁1號 PE 10kg 瀘州) ..............
Jiangsu Kelas Qianzuodengzi-2021-F-00202912 February 9, 2021 PRC
93. Label-Jingxin 1000KG Sichuan Luzhou
(標貼-淨芯1000KG 四川瀘州) ...........
Jiangsu Kelas Qianzuodengzi-2021-F-00202911 February 9, 2021 PRC
94. Label-Zhilan No.1 10kg_Label Zhilan No.1 10kg
Luzhou ( 標貼-智藍1號10kg_ 標貼 智藍1號10kg
瀘州) ..........................
Jiangsu Kelas Qianzuodengzi-2021-F-00202910 February 9, 2021 PRC
95. Label Jiejin No.1 PE 10kg_Label Jiejin No.1 PE
10kg Lishui Tianjin ( 標貼 潔勁1號 PE 10kg_
標貼 潔勁1號 PE 10kg 溧水天津) ........
Jiangsu Kelas Qianzuodengzi-2021-F-00202909 February 9, 2021 PRC
96. Label Shengchang 10kg PE_Nanjing-Tianjin ( 標貼
省暢 10kg PE_ 南京-天津).............
Jiangsu Kelas Qianzuodengzi-2021-F-00202908 February 9, 2021 PRC
97. Label-Zhilan No.1 10kg_Label Zhilan No.1 10kg
Huizhou ( 標貼-智藍1號10kg_ 標貼 智藍1號
10kg 惠州) ......................
Jiangsu Kelas Qianzuodengzi-2021-F-00202907 February 9, 2021 PRC
98. Label-Zhilan 10kg_Tianjin Lishui
(標貼-智藍10kg_ 天津溧水) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00202906 February 9, 2021 PRC
99. Label-Zhilan 10kg_Huizhou
(標貼-智藍10kg_ 惠州) ................
Jiangsu Kelas Qianzuodengzi-2021-F-00202903 February 9, 2021 PRC
100. Label Jiexiao PE 10kg_Lishui Tianjin
(標貼 傑效 PE 10kg_ 溧水天津) ..........
Jiangsu Kelas Qianzuodengzi-2021-F-00202748 February 9, 2021 PRC
101. Label Jingxin No.1 PE 10KG_ Lishui Tianjin
(標貼 淨芯1號 PE 10KG_ 溧水天津) .......
Jiangsu Kelas Qianzuodengzi-2021-F-00202747 February 9, 2021 PRC
102. Label-Jingxin No.1 10kg pet_ Huizhou
(標貼-淨芯1號10kg pet_ 惠州)...........
Jiangsu Kelas Qianzuodengzi-2021-F-00202745 February 9, 2021 PRC
103. Label Jiejin No.1 PE 10kg_Label Jiejin No.1 PE
10kg Huizhou ( 標貼 潔勁1號 PE 10kg_ 標貼
潔勁1號 PE 10kg 惠州) ..............
Jiangsu Kelas Qianzuodengzi-2021-F-00202744 February 9, 2021 PRC
104. Label-Shengchang 1000L Guangdong Huizhou
(標貼-省暢1000L 廣東惠州) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00202891 February 9, 2021 PRC
105. Label Jingxin No.1 PE 10kg_ Luzhou
(標貼 淨芯1號 PE 10kg_ 瀘州) ..........
Jiangsu Kelas Qianzuodengzi-2021-F-00202742 February 9, 2021 PRC
106. Label-Jiejin No.1 10kg pet_Luzhou
(標貼-潔勁1號 10kg pet_ 瀘州) ..........
Jiangsu Kelas Qianzuodengzi-2021-F-00202741 February 9, 2021 PRC
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 8–


--- page 816 ---
No. Copyright Owner Registration Number Registration Date Place of Registration
107. Label Jiejin PE 10kg Lishui_Nanjing
(標貼 潔勁 PE 10kg 溧水_南京).........
Jiangsu Kelas Qianzuodengzi-2021-F-00202740 February 9, 2021 PRC
108. Label-Jingxin No.1 10kg pet_ Luzhou
(標貼-淨芯1號10kg pet_ 瀘州)...........
Jiangsu Kelas Qianzuodengzi-2021-F-00202739 February 9, 2021 PRC
109. Label Jingxin No.1 PE 10kg_ Huizhou
(標貼 淨芯1號 PE 10kg_ 惠州) ..........
Jiangsu Kelas Qianzuodengzi-2021-F-00202738 February 9, 2021 PRC
110. Label-Shengchang 1000KG Sichuan Luzhou
(標貼-省暢1000KG 四川瀘州) ...........
Jiangsu Kelas Qianzuodengzi-2021-F-00202737 February 9, 2021 PRC
111. Label-Jingxin No.1 10kg pet_ Lishui Tianjin
(標貼-淨芯1號10kg pet_ 溧水天津)........
Jiangsu Kelas Qianzuodengzi-2021-F-00202736 February 9, 2021 PRC
112. Label Chichang PE 10kg _Nanjing-Tianjin
(標貼 持暢 PE 10kg_ 南京-天津) .........
Jiangsu Kelas Qianzuodengzi-2021-F-00202735 February 9, 2021 PRC
113. Label-Jingxin 1000L Tianjin Lishui
(標貼-淨芯1000L 天津溧水) .............
Jiangsu Kelas Qianzuodengzi-2021-F-00202734 February 9, 2021 PRC
114. Label-Jingxin 1000KG Guangdong Huizhou
(標貼-淨芯1000KG 廣東惠州) ...........
Jiangsu Kelas Qianzuodengzi-2021-F-00202731 February 9, 2021 PRC
115. Use Kelas Trucks with More Power
(用可蘭素 卡車更有勁)...............
Jiangsu Kelas Suzuodengzi-2020-F-00260936 December 14, 2020 PRC
116. Green Melon LVGAL ( 綠瓜LVGAL) . . . . . . . . Jiangsu Green Melon Suzuode ngzi-2021-F-00038658 February 18, 2021 PRC
117. Jiangsu Sanjin Lithium Foreign Objects
Prevention Management Handbook ( 江蘇三金
鋰電異物防控管理手冊) ...............
Jiangsu Sanjin
Lithium
Technology Co.,
Ltd.
Guozuodengzi-2023-L-00315067 December 27, 2023 PRC
(ii) Software copyrights ( 軟件著作權)
As of the Latest Practicable Date, we had registered the following
copyrights which are material to our business:
No. Copyright Owner
Registration
Number
Registration
Date
Place of
Registration
1. Lopal Car Maintenance Big V Android
Software [Abbreviation: Car
Maintenance Big V]V1.0 ( 龍蟠養車大V
安卓端軟件[簡稱：養車大V] V1.0) . . . .
The Company 2019SR0396289 April 15, 2019 PRC
2. Lopal Shopkeeper Distributor
Management System V1.0 ( 龍蟠掌櫃經
銷商管理系統V 1 . 0 )..............
The Company 2021SR0178446 October 15,
2020
PRC
3. Compass Software V1.0 ( 指南針軟件V1.0) The Company 2015SR210309 September 11,
2014
PRC
4. Lopal Car Maintenance Big V pro
Software [Abbreviation: Car
Maintenance Big V pro]V1.0 ( 龍蟠養車
大Vp r o 軟件[簡稱：養車大V pro]V1.0) .
The Company 2021SR1417854 July 8, 2021 PRC
5. U-MAX Industrial Internet Platform
System V1.0 (U-MAX 工業互聯網平台系
統V 1 . 0 ) ......................
The Company 2021SR0185859 October 10,
2020
PRC
6. ‘‘Intelligent Innovation’’ Innovation and
Improvement Application Platform V1.0
(‘‘慧創新’’創新與改善應用平台V1.0) . . .
Lopal
Lubrication
2019SR1091883 August 9, 2018 PRC
7. ‘‘Tiny U Customize’’ Personalized
Customization System for Lubricating
Oil V1.0 (‘‘小U定制’’潤滑油個性化定制
系統V 1 . 0 )....................
Lopal
Lubrication
2019SR1091199 August 9, 2018 PRC
8. ‘‘ATF Oil Selection Guide’’ Transmission
Oil Selection System V1.0 (‘‘ATF 選油指
南’’變速箱油選油系统V 1 . 0 ).........
Lopal
Lubrication
2019SR1091880 August 9, 2018 PRC
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3 9–


--- page 817 ---
(d) Domain Names
As of the Latest Practicable Date, we had registered the following domain
names which are material to our business:
No. Domain name Registrant Registration Date Expiry Date
1. feiyue2014.com . . . . . . The Company November 1, 2013 November 1, 2026
2. lopal.cn . . . . . . . . . . . The Company June 27, 2007 June 27, 2029
3. lopal.com.cn . . . . . . . . The Company June 27, 2007 June 27, 2029
4. lopalvip.cn . . . . . . . . . The Company October 17, 2014 October 17, 2026
5. lopalvip.com . . . . . . . . The Company October 17, 2014 October 17, 2026
6. tlo2o.com.cn . . . . . . . . The Company July 20, 2015 July 20, 2026
7. kalas.com.cn . . . . . . . . Jiangsu Kelas November 15, 2013 November 15, 2026
8. kelas.cn . . . . . . . . . . . Jiangsu Kelas December 16, 2013 December 16, 2026
9. kelas.cc . . . . . . . . . . . Jiangsu Kelas November 18, 2013 November 18, 2026
10. liyuane.cn . . . . . . . . . . Changzhou Liyuan May 19, 2021 May 19, 2026
11. liyuanen.com . . . . . . . . Changzhou Liyuan September 15, 2022 September 15, 2025
12. china-teec.com. . . . . . . Zhangjiagang TEEC January 16, 2000 January 16, 2026
1 3 . g - h 2 . c c ............ J i a n g s uT i a n l a nI n t e l l i g e n tE q u i p m e n t
Co., Ltd. ( 江蘇天藍智能裝備有限
公司)
March 27, 2023 March 27, 2026
1 4 . g - h 2 . c n ............ J i a n g s uT i a n l a nI n t e l l i g e n tE q u i p m e n t
Co., Ltd. ( 江蘇天藍智能裝備有限
公司)
March 27, 2023 March 27, 2026
15. lvgal.cn . . . . . . . . . . . Hubei Green Melon March 15, 2024 March 15, 2025
Save as aforesaid, as of the Latest Practicable Date, there were no other
intellectual property rights which were material to our Group’s business.
C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL
SHAREHOLDERS
1. Disclosure of Interests
(a) Interests of our Directors, Supervisors and the chief executive of our Company
Immediately following the completion of the Global Offering (assuming the
Over-allotment Option is not exercised and the options granted under the 2023
Share Option Scheme are not exercised), the interests and/or short positions (as
applicable) of the Directors, Supervisors and the chief executive of the Company
in the Shares, underlying Shares and debentures of our Company and any
interests and/or short positions (as applicable) in shares, underlying Shares or
debentures of any of our Company’s associated corporations (within the meaning
of Part XV of the SFO) which (i) will have to be notified to our Company and the
Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and/or short positions (as applicable) which they are taken or
deemed to have under such provisions of the SFO), (ii) will be required, pursuant
to Section 352 of the SFO, to be entered in the register referred to therein or (iii)
will be required, pursuant to the Model Code for Securities Transactions by
Directors of Listed Issuers as set out i n Appendix C3 to the Hong Kong Listing
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 0–


--- page 818 ---
Rules, to be notified to our Company and the Hong Kong Stock Exchange, in
each case once the H Shares are listed on the Hong Kong Stock Exchange, will be
as follows:
(i) Interest in our Company
Name of Director,
Supervisor or chief executive Nature of interest
Description
of Shares
Number
of Shares (1)
Approximate
percentage
of interest in
our Company
as of the Latest
Practicable Date
and immediately
prior to the Global
Offering (2)
Approximate percentage
of shareholding in the total
issued and outstanding
share capital of our
Company immediately
following the completion
of the Global Offering (3)
Mr. Shi (4)(6) ............ B e n e f i c i a lo w n e r AS h a r e s 2 1 2 , 6 6 2 , 1 9 5 3 7 . 6 3 % 3 1 . 9 8 %
Interest held
by controlled corporation A Shares 1,901,208 0.34% 0.29%
Interest of spouse A Shares 23,618,649 4.18% 3.55%
Ms. Zhu (5) ............. B e n e f i c i a lo w n e r AS h a r e s 2 3 , 6 1 8 , 6 4 9 4 . 1 8 % 3 . 5 5 %
Interest of spouse A Shares 214,563,403 37.97% 32.26%
Mr. Lu Zhenya (7) ........ B e n e f i c i a lo w n e r AS h a r e s 4 3 1 , 9 8 8 0 . 0 8 % 0 . 0 6 %
Mr. Qin Jian (8) .......... B e n e f i c i a lo w n e r AS h a r e s 4 1 0 , 8 3 2 0 . 0 7 % 0 . 0 6 %
Interest of spouse A Shares 33,056 0.01% 0.00%
Mr. Shen Zhiyong (9) ...... B e n e f i c i a lo w n e r AS h a r e s 9 0 8 , 1 1 2 0 . 1 6 % 0 . 1 4 %
Mr. Zhang Yi (10) ........ B e n e f i c i a lo w n e r AS h a r e s 3 8 5 , 7 9 2 0 . 0 7 % 0 . 0 6 %
Notes:
(1) All interests stated are long positions.
(2) The calculation is based on the total number of 565,078,903 Shares in issue as of the Latest Practicable
Date.
(3) The calculation is based on the total number of 665, 078,903 Shares in issue immediately following the
completion of the Global Offering and without taking into account any Shares which may be issued
pursuant to the exercise of the Over-allotment Opt ion or the options granted under the 2023 Share Option
Scheme.
(4) Mr. Shi is the spouse of Ms. Zhu. By virtue of the SFO, Mr. Shi is deemed to be interested in the Shares in
which Ms. Zhu is deemed to be interested upon the Listing. In addition, Mr. Shi and Ms. Zhu may be
taken to have an interest in those treasury shares hel d by the Company as shareholders controlling more
than one-third or more voting power in the Company . As of the Latest Practicable Date, the Company
held 2,082,400 A Shares as treasury shares. See als o ‘‘Substantial Shareholder — Share Pledges by Mr.
Shi.’’
(5) Ms. Zhu is the spouse of Mr. Shi. By virtue of the SFO, Ms. Zhu is deemed to be interested in the Shares in
which Mr. Shi is deemed to be interested upon the Listing. In addition, Mr. Shi and Ms. Zhu may be taken
to have an interest in those treasury shares held by t he Company as shareholders controlling more than
one-third or more voting power in the Company. As o f the Latest Practicable Date, the Company held
2,082,400 A Shares as treasury shares.
(6) Nanjing Bailey is a limited partnership establishe di nt h eP R C ,w h i c hi sm a n a g e db yL o p a lI n t e r n a t i o n a l
as its general partner. Lopal International is a limi ted company established in the PRC, which is owned as
to 90% by Mr. Shi and 10% by Ms. Zhu. Accordingly, Mr. Shi is deemed to be interested in the Shares
held by Nanjing Bailey.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 1–


--- page 819 ---
(7) As of the Latest Practicable Date, Mr. Lu Zheny a held 241,988 A Shares and was granted outstanding
options to subscribe for 190,000 A Shares under the 2023 Share Option Scheme. Therefore, Mr. Lu
Zhenya will be interested in 431,988 A Shares upon the Listing.
(8) As of the Latest Practicable Date, Mr. Qin Ji an held 230,832 A Shares and was granted outstanding
options to subscribe for 180,000 A Shares under the 202 3 Share Option Scheme. Therefore, Mr. Qin Jian
will be interested in 410,832 A Shares upon the Listing.
Ms. Xu Suxia ( 徐素蝦) is the spouse of Mr. Qin Jian. As of the Latest Practicable Date, Ms. Xu Suxia held
33,056 A Shares. By virtue of the SFO, Mr. Qin Jian i s deemed to be interested in the Shares in which Ms.
Xu Suxia is deemed to be interested upon the Listing.
(9) As of the Latest Practicable Date, Mr. Shen Zhiy ong held 218,112 A Shares and was granted outstanding
options to subscribe for 690,000 A Shares in aggregate under the 2023 Share Option Scheme. Therefore,
Mr. Shen Zhiyong will be interested in 908,112 A Shares upon the Listing.
(10) As of the Latest Practicable Date, Mr. Zhang Y i held 195,792 A Shares and was granted outstanding
options to subscribe for 190,000 A Shares under the 2023 Share Option Scheme. Therefore, Mr. Zhang Yi
will be interested in 385,792 A Shares upon the Listing.
(ii) Interest in associated corporations
Name of Director,
chief executive or Supervisor Nature of interests (1) Associated corporations
Approximate
percentage of
holding in
associated
corporations
M r .S h i........... I n t e r e s th e l db y
controlled
corporation
Changzhou Liyuan 68.52%
(2)
Mr. Shen Zhiyong. . . . Interest held by
controlled
corporation
Changzhou Liyuan 2.25%
(3)
M r .X u eJ i e........ I n t e r e s th e l db y
controlled
corporation
Changzhou Liyuan 0.9%
(4)
Notes:
(1) All the interests st ated are long positions.
(2) As of the Latest Practicable Date, Changzhou Liyuan was owned as to approximately 64.03% by our
Company in which Mr. Shi controlled more than one -third of voting power and approximately 4.49% by
Changzhou Youbeili Venture Capital Center (Limited Partnership) ( 常州優貝利創業投資中心（有限合
夥）), in which Mr. Shi served as the general partner and ow ned 99.9% interest, respectively. Therefore Mr.
Shi is deemed to be interested in the shares in Changzhou Liyuan held by Changzhou Youbeili Venture
Capital Center (Limited Partnership) ( 常州優貝利創業投資中心（有限合夥）) and the shares in Changzhou
Liyuan held by our Company under the SFO.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 2–


--- page 820 ---
(3) As of the Latest Practicable Date, Changzhou Liyu an was owned as to approximately 2.25% by Nanjing
Jinbeili Venture Capital Center (Limited Partnership) ( 南京金貝利創業投資中心（有限合夥）)i nw h i c hM r .
Shen served as the general partner and owned 99% interest. Therefore Mr. Shen is deemed to be interested
in the shares in Changzhou Liyuan held by Nanjing Jinbe ili Venture Capital Center (Limited Partnership)
(南京金貝利創業投資中心（有限合夥）) under the SFO.
(4) As of the Latest Practicable Date, Changzhou Li yuan was owned as to approximately 0.9% by Nanjing
Chaoli Venture Capital Center (Limited Partnership) ( 南京超利創業投資中心（有限合夥）)i nw h i c hM r .
Xue served as the general partner and owned 80% int erest. Therefore Mr. Xue is deemed to be interested
in the shares in Nanjing Chaoli Venture Ca pital Center (Limited Partnership) ( 南京超利創業投資中心（有
限合夥）) under the SFO.
(b) Interests of the Substantial Shareholders
(i) Interests in the Shares of our Company
For information on the persons who will, immediately following the
completion of the Global Offering without taking into account any Shares
which may be issued pursuant to the exe rcise of the Over-allotment Option or
the options granted under the 2023 Share Option Scheme, have interests or
short positions in our Shares or under lying Shares which would be required
to be disclosed to us and the Hong Kong Stock Exchange under the
provisions of Divisions 2 and 3 of Part XV of the SFO, or who will directly
and/or indirectly, be interested in 10% or more of the nominal value of any
class of share capital carrying the rights to vote in all circumstances at
general meetings of our Company, see ‘‘Substantial Shareholders.’’
Save as disclosed in ‘‘Substantial S hareholders’’, our Directors,
Supervisors and the chief executive of our Company are not aware of any
person, not being a Director, Supervisor or chief executive of our Company,
who has an interest or short position in our Shares, underlying Shares or
debentures of our Company which, once our H Shares are listed, would have
to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of
the SFO, or who is, directly or indirec tly, interested in 10% or more of the
nominal value of any class of share capital carrying rights to vote in all
circumstances at general meetings of our Company.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 3–


--- page 821 ---
(ii) Interests in our Company’s subsidiaries
Immediately following the completion of the Global Offering, without
taking into account any Shares which may be issued pursuant to the exercise
of the Over-allotment Option or the options granted under the 2023 Share
Option Scheme, no person (other than our Company) will be interested,
directly or indirectly, in 10% or more in any share class with the right to, in
any event, vote at the general meeting of any other member (other than our
Company) of our Group, save as disclosed below:
Subsidiary
Person with 10% or more interest
(other than our Company)
Percentage of the
interest in the
subsidiary
Jiangsu Ruilifeng . . . . ........ Z h a n g j i a g a n gZ h a o r u iE n t e r p r i s e
Management Partnership
(Limited Partnership)
(1)
(張家港兆瑞企業管理合夥企業
（有限合夥）)
20%
Qian Xuefen 21%
L o p a lT i m e s ................ Y i c h u nT i m e s (2) 30%
Z h a n g j i a g a n gT E E C.......... E t h y l e n eC h e m i c a lC o . ,L t d . (3)
(乙烯化學株式會社)
25%
Notes:
(1) As of the Latest Practicable Date, Zhangjiagang Z haorui Enterprise Management Partnership (Limited
Partnership) ( 張家港兆瑞企業管理合夥企業（有限合夥）) was owned (i) as to 15.5% by Wang Zhaoyin ( 王
兆銀), (ii) as to 12.5% by Qian Xuefen ( 錢雪芬) who also served as the general partner, (iii) as to 12.0% by
Shi Hanliang ( 施漢良); (iv) as to 4.5% by Zhang Jinlong ( 張金龍); (v) as to 4.5% by Zhang Bingsheng ( 張
丙生); (vi) as to 4.5% by Cao Yunlong ( 曹雲龍); (vii) as to 4.5% by Li Haishan ( 李海山); (viii) as to 4.5%
by Jiao Zhongqiu ( 焦中秋); (ix) as to 4.5% by Wang Zhaocai ( 王兆才); (x) as to 3.5% by Tao Dianbin ( 陶
佃彬); (xi) as to 3.0% by Xu Yan ( 徐艷); (xii) as to 3.0% by Gao Chongyi ( 高崇怡); (xiii) as to 3.0% by Yu
Shenghui ( 俞勝慧); (xiv) as to 3.0% by Zhang Chengxin ( 張成新); (xv) as to 2.5% by Shan Meng ( 單猛);
(xvi) as to 2.5% by Zhao Rudong ( 趙汝東); (xvii) as to 1.5% by Zhang Dajin ( 張大金); (xviii) as to 1.5%
by Wu Bei ( 武北); (xix) as to 1.0% by Tong Xiufeng ( 童秀鳳); (xx) as to 1.0% by Gong Haigang ( 龔海港);
(xxi) as to 1.0% by Shi Lei ( 時磊); (xxii) as to 1.0% by Zhou Jie ( 周潔); (xxiii) as to 1.0% by Zhu Ligang
(朱麗剛); (xxiv) as to 1.0% by Zhang Chunxiao ( 張春曉); (xxv) as to 1.0% by Cai Yingchun ( 蔡迎春);
(xxvi) as to 0.8% by Zou Mi ( 鄒密); (xxvii) as to 0.8% by Huang Zhangbo ( 黃章波); (xxviii) as to 0.6% by
Jiang Weiwei ( 江衛衛); and (xxix) as to 0.3% by Wang Shaohua ( 王少華).
(2) As of the Latest Practicable Date, Yichun Times was wholly owned by CATL.
(3) As of the Latest Practicable Date, Ethylene Chemical Co., Ltd. ( 乙烯化學株式會社)w a so w n e da st o
60.9% of the voting rights by MORE SCO Corporation, a joint stock c ompany established in Japan in
October 27, 1958, the shares of which are listed on the Tokyo Stock Exchange Prime Market (stock code:
5018).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 4–


--- page 822 ---
2. Directors’ and Supervisors’ Service Contracts and Letters of Appointment
We have entered into a service contract or letter of appointment with each of our
Directors and Supervisors. The principal particulars of these service contracts and
letters of appointment include (i) the term of service, and (ii) are subject to termination
in accordance with their respective term. The service contracts and letters of
appointment may be renewed in accordance with our Articles of Association and the
applicable Listing Rules.
Save as disclosed above, none of the Directors or Supervisors has entered into any
service contracts or letters of appointment 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)).
3. Remuneration of Directors and Supervisors
The aggregate remuneration (including fees, salaries, retirement benefits scheme
contributions, other social security costs, housing benefits and other employee
benefits, share based compensation, allowances and other benefits in kind) paid to
our Directors and Supervisors for the years ended December 31, 2021, 2022 and 2023
and the six months ended June 30, 2024 was approximately RMB6.3 million, RMB6.5
million, RMB5.4 million and RMB4.9 million, respectively.
Save as disclosed above, no other payments have been made or are payable, in
respect of the years ended December 31, 2 021, 2022 and 2023 and the six months ended
June 30, 2024, by any of member of the Group to any of our Directors or Supervisors.
Under the arrangements currently in force, we estimate the aggregate
remuneration, excluding discretionary bonus, of our Directors and Supervisors for
the year ending December 31, 2024 to be approximately RMB7.0 million.
4. Directors’ Competing Interests
Saved as disclosed in this prospectus, none of our Directors is interested in any
business apart from our Group’s business which competes or is likely to compete,
directly or indirectly, with the business of our Group.
5. Disclaimers
Save as disclosed in this prospectus:
(a) none of our Directors or chief executive of our Company has any interests or
short positions in the shares, underlying shares and debentures of our
Company or our associated corporations (within the meaning of Part XV of
the SFO) which will be required to be notified to our Company and the Hong
Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests or short positions which he is taken or deemed to have
taken under such provisions of the SFO) or which will be required, pursuant
to Section 352 of the SFO, to be entered in the register referred to in that
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 5–


--- page 823 ---
section, or which will be required, pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers, to be notified to our Company
and the Hong Kong Stock Exchange, once the Shares are listed on the Hong
Kong Stock Exchange;
(b) so far as is known to any Director or chief executive of our Company, no
person has an interest or short position in the Shares and underlying Shares
which would fall to be disclosed to our Company and the Hong Kong Stock
Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO,
or is, directly or indirectly, intereste d in 10% or more of the nominal value of
any class of share capital carrying rights to vote in all circumstances at
general meetings of any other member of our Group;
(c) none of our Directors, Supervisors, nor any of the persons listed in ‘‘— D.
Other Information — 5. Qualification of Experts’’ below is interested in the
promotion of, or in any assets which have been, within the two years
immediately preceding the issue 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;
(d) none of our Directors, Supervisors, nor any of the persons listed in ‘‘— D.
Other Information — 5. Qualificatio n of Experts’’ below is materially
interested in any contract or arrangem ent with our Group subsisting at the
date of this prospectus which is unusual in its nature or conditions or which
is significant in relation to the business of our Group as a whole;
(e) save in connection with the Underwriting Agreements, none of the persons
listed in ‘‘— D. Other Information — 5. Qualification of Experts’’ below has
any shareholding in any member of ou r Group or the right (whether legally
enforceable or not) to subscribe for or to nominate persons to subscribe for
securities in any member of our Group;
(f) none of our Directors has entered or has proposed to enter into any service
agreements with our Company or any member of our Group (other than
contracts expiring or determinable by the employer within one year without
payment of compensation other than statutory compensation); and
(g) save as contemplated under the Underwriting Agreements, none of our
Directors, their respective associ ates (as defined under the Hong Kong
Listing Rules), or Shareholders who are interested in more than 5% of the
issued share capital of our Company has any interest in our Company’s five
largest customers and five largest suppliers.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 6–


--- page 824 ---
D. OTHER INFORMATION
1. Estate duty
Our Directors have been advised that no material liability for estate duty is likely
to fall on our Group.
2. Litigation
As of the Latest Practicable Date, no member of our Group was engaged in any
litigation, arbitration or claim of material im portance, and no litigation, arbitration or
claim of material importance was known to our Directors to be pending or threatened
by or against our Group, that would have a material adverse effect on its business,
financial condition or results of operations.
3. Joint Sponsors
Halcyon Capital Limited satisfies the ind ependence criteria applicable to sponsors
as set out in Rule 3A.07 of the Listing Rules.
Guotai Junan Capital Limited does not satisfy the independence criteria
applicable to sponsors as set out in Rule 3A.07 of the Listing Rules, since Guotai
Junan Securities Co., Ltd, which is a contro lling shareholder of the indirect holding
company of Guotai Junan Capital Limited, has been providing continuous supervisory
services to the Company, which might reasonably give rise to a perception that the
sponsor’s independence would be affected and such relationship does not arise under
the sponsor’s engagement to provide sponsorship services. Guotai Junan Securities
C o . ,L t da l s oa c t sa sp l e d g e eo fc e r t a i nAS h a r e so fM r .S h i .
The Joint Sponsors will receive an aggre gate fee of approximately HK$6.0 million
for acting as the sponsors for the Listing.
4. Material Adverse Change
Our Directors confirm that, up to the date of this prospectus and other than
disclosed in ‘‘Summary — Recen t Developments and Adverse Material Change’’, there
has been no material adverse change in the financial or trading position or prospects of
our Group since June 30, 2024 (being the date to which the latest audited consolidated
financial statements of our Group were prepared).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 7–


--- page 825 ---
5. Qualification of Experts
The following are the qualifications of the experts (as defined under the Hong
Kong Listing Rules and the Companies (Winding Up and Miscellaneous Provisions)
Ordinance) who have given opinions or advice which are contained in this prospectus:
Name Qualification
Guotai Junan Capital
L i m i t e d .............
Licensed corporation under the SFO to conduct type 6
(advising on corporate finance) regulated activity as defined
under the SFO
Halcyon Capital Limited . . Licensed corporation under the SFO to conduct type 6
(advising on corporate finance) regulated activity as defined
under the SFO
Moore CPA Limited . . . . . Certified Public Accountants and Registered Public Interest
Entity Auditor
Grandall Law Firm
( S h a n g h a i ) ...........
Legal advisor as to PRC Law
Hanafiah Ponggawa &
P a r t n e r s ............
Legal advisor as to Indonesia law
Frost & Sullivan (Beijing)
Inc., Shanghai Branch Co.
Industry consultant
6. Consents of Experts
Each of the experts as referred to in ‘‘— D. Other Information — 5. Qualification
of Experts’’ has given and has not withdrawn their respective written consents to the
issue of this prospectus with the inclusion o f their reports and/or letters and/or legal
opinion (as the case may be) and references to their names included in the form and
context in which it respectively appears.
None of the experts named above has any shareholding interests 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 our Company or any of our
subsidiaries.
7. Promoters
Our promoters at the time of our Company’s conversion into a joint stock
company are Mr. Shi, Ms. Zhu, Jiantou Jiachi (Shanghai) Investment Co., Ltd. ( 建投
嘉馳（上海）投資有限公司) and Nanjing Bailey.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 8–


--- page 826 ---
Within the two years immediately preceding the date of this prospectus, no cash,
securities or other benefit has been paid, allotted or given nor are any proposed to be
paid, allotted or given to any promoters in connection with the Global Offering and
the related transactions described in this prospectus.
8. Preliminary Expenses
We have not incurred any material preliminary expense.
9. Binding Effect
This prospectus shall have the effect, if an application is made in pursuance of this
prospectus, of rendering all persons concerned bound by all of the provisions (other
than the penal provisions) of Sections 44A and 44B of the Companies (Winding Up
and Miscellaneous Provisions) Ordinance insofar as applicable.
10. 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).
This prospectus is written in the English language and contains a Chinese
translation for information purpose only. Should there be any discrepancy between the
English language of this prospectus and the Chinese translation, the English language
version of this prospectus shall prevail.
11. Miscellaneous
Save as disclosed in this prospectus,
(a) within the two years immediately preceding the date of this prospectus,
neither we nor any of our subsidiaries has issued or agreed to issue any share
or loan capital fully or partly paid up either for cash or for a consideration
other than cash;
(b) 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;
(c) within the two years immediately preceding the date of this prospectus, no
commissions, discounts, brokerage or other special terms have been granted
in connection with the issue or sale of any shares or loan capital of any
member of our Group;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4 9–


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(d) within the two years immediately preceding the date of this prospectus, no
commission has been paid or payable (except commission to
sub-underwriters) to any persons for subscription, agreeing to subscribe,
procuring subscription or agreeing to p rocure subscription of any shares of
our Company or any of our subsidiaries;
(e) no founder, management or deferred shares of our Company or any of our
subsidiaries have been issued or agreed to be issued;
(f) there is no arrangement under which future dividends are waived or agreed to
be waived;
(g) since June 30, 2024 (being the date on which the latest audited consolidated
financial statements of our Group wer em a d eu p ) ,t h e r eh a sb e e nn om a t e r i a l
adverse change in our financial or trading position or prospects;
(h) there has not been any interruption in the business of our Company which
may have or have had a material adverse effect on the financial position of
our Company in the 12 months immediately preceding the date of this
prospectus; and
(i) our Company has no outstanding convertible debt securities or debentures.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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A. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to a copy of this pro spectus and delivered to the Registrar of
Companies in Hong Kong for registration were:
( a ) c o p i e so fe a c ho ft h em a t e r i a lc o n t r a c ts referred to in ‘‘Statutory and General
Information — B. Further Information about Our Business — 1. Summary of
Material Contracts’’ in Appendix IV (subject, in case of Lopal Times Transfer
Agreement, to the omission of the Sensitive Commercial Information); and
(b) the written consents referred to in ‘‘S tatutory and General Information — D.
Other Information — 6. Consents of Experts’’ in Appendix IV.
B. DOCUMENTS AVAILABLE ON DISPLAY
Copies of the following documents will be published on the website of the Hong Kong
Stock Exchange at
www.hkexnews.hk and our website at www.lopal.com.cn up to and
including the date which is 14 days from the date of this prospectus:
(a) the Articles of Association;
(b) the Accountants’ Report prepared by Moore CPA Limited, the text of which is set
forth in Appendix IA;
(c) the Accountants’ Report of Tianjin Beiterui Nano prepared by Moore CPA
Limited, the text of which is set forth in Appendix IB;
(d) the Accountants’ Report of Jiangsu Beiterui Nano prepared by Moore CPA
Limited, the text of which is set forth in Appendix IC;
(e) the Accountants’ Report of Shandong Meiduo prepared by Moore CPA Limited,
the text of which is set forth in Appendix ID;
(f) the report on the unaudited pro forma financial information prepared by Moore
CPA Limited, the text of which is set forth in Appendix II;
(g) the audited consolidated financial statements of our Company for the Track
Record Period;
(h) the PRC legal opinion issued by Grandall Law Firm (Shanghai), our PRC legal
advisor, in respect of certain aspects of our Group in the PRC;
(i) the legal opinion issued by Hanafiah Ponggawa & Partners, our Indonesia legal
advisor, in respect of the subsidiary of our Company incorporated in Indonesia;
(j) the Frost & Sullivan Report;
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE ON DISPLAY
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(k) the PRC Company Law, the PRC Securities Law, the Trial Administrative
Measures for Overseas Securities Offering and Listing by Domestic Companies
(《境內企業境外發行證券和上市管理試行辦法》), together with an unofficial
English translation;
(l) the Shanghai Stock Exchange Listing Rules, together with an unofficial English
translation;
(m) the material contracts referred to in ‘ ‘Statutory and General Information — B.
Further Information about Our Business — 1. Summary of Material Contracts’’
in Appendix IV in the form delivered to the Registrar of Companies for
registration;
(n) the written consents referred to in ‘‘S tatutory and General Information — D.
Other Information — 6. Consents of Experts’’ in Appendix IV;
(o) service contracts and letters of appointment referred to in ‘‘Statutory and General
Information — C. Further Information about Our Directors and Substantial
Shareholders — 2. Directors’ and Supervi sors’ Service Contracts and Letters of
Appointment’’ in Appendix IV; and
(p) the terms of the 2023 Share Option Scheme.
C. DOCUMENT AVAILABLE FOR INSPECTION
A list of all grantees under the 2023 Share Option Scheme, containing all details as
required under Rule 17.02(1)(b) of, and paragraph 27 of Appendix D1A to, the Listing
Rules and paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance will be available for inspection at the office of Han
Kun Law Offices LLP at Rooms 4301–10, 43/F, Gloucester Tower, The Landmark, 15
Queen’s Road Central, Hong Kong during normal business hours from 9 : 00 a.m. to 5 : 00
p.m. up to and including the date which is 14 days from the date of this prospectus.
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE ON DISPLAY
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GLOBAL
OFFERING
Joint Sponsors
Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
ʮ̡
JIANGSU LOPAL TECH. CO., LTD.
(a joint stock company incorporated in the People’s Republic of China with limited liability)
Stock code: 2465
Joint Bookrunners and Joint Lead Managers
ʮ̡
JIANGSU LOPAL TECH. CO., LTD.
ʮ̡
JIANGSU LOPAL TECH. CO., LTD.
