[年报]晨光文具:上海晨光文具股份有限公司2020年年度报告（英文版）
原标题:晨光文具:上海晨光文具股份有限公司2020年年度报告（英文版） Stock Code: 603899 Short Name: M&G Stationery SHANGHAI M&G STATIONERY INC. Annual Report 2020 Going Forward with our Mission Dear shareholders, partners and friends, The year 2020 was an extraordinary year. Since the beginning of the year, the sudden outbreak of the COVID-19 pandemic has brought tremendous impacts to various industries. Due to such macroeconomic climate and the delay in school return date, many stationery shops faced grave challenges to resume operation. Among such uncertainties, what M&G can do is do "things with certainty". The Company acted quickly to fight against the pandemic. On the one hand, we adopted pandemic prevention and control measures to protect our employees, provided PPE for front-line workers and donated money and materials. On the other hand, the Company took resolute steps to restart factories to resume production. In the first half of the year, the Company recorded a decrease in results. With our strenuous efforts, we achieved satisfactory performance in the second half. One of the most important things we learned in 2020 is that if you truly aspire something , you can always work out a way and if you persist enough, you can make the seemingly impossible come true. In 2020, the Company recorded revenue of RMB13 billion, an increase of 17.9%, and net profit of RMB1.2 billion, an increase of 18.4%. For the past years since going public, M&G has maintained health growth and sound asset condition. The year 2020 was of great significance to M&G. Exploring with the spirit of a startup company, M&G has been founded for three decades, and it launched a new round of a five-year strategy plan. The year 2021 is the beginning of China's 14th Five-Year Plan, and also the start of M&G's new five-year strategy. M&G will adhere to the new development thinking of growth with emphasis on quality and efficiency. Our new five-year strategy is formulated in line with the direction of the previous strategy, and reflects China’s population trend and consumption upgrade in the new era. The new strategy calls for product mix upgrade and on-line business expansion, supported by digitalization, MBS, and merger and acquisition. The Company’s mission is to "make study and work more joyful and effective", and the Company’s vision is to become a "world-class M&G". We believe that good stationery has vitality, as a good book and stationery is temperate and can make a positive difference. In China, we see great potential in the stationery and creative culture products industry. Every year, M&G launches thousands of new products based on consumer insights. To deliver a better experience for consumers, we hope to include new features in our products, incorporating functionality and a sense of beauty and humor. According to the vision to become "world-class M&G" as set out in our new five-year strategy, M&G devotes to providing better products for China and the world, aiming to become a pioneer in global stationery industry when it comes to products and technology. From stationery to creative culture products, M&G must have a more open mindset. M&G Colipu is committed to making work more joyful and effective, and becoming a leader in China’s office supplies 2B industry with about one trillion RMB market. While promoting international business and carrying out Dual Circulation, we will break various bottlenecks and strive for higher goals. Dear shareholders and partners, we will go forward with our mission in mind! M&G is inspired by grand national rejuvenation, yet we also take clue from ordinary people. We believe the best way to help us successfully is by helping related others successful, we believe that the success of individuals and companies depends on their “energy, will and spirit”. We believe in long-termism, choosing to do harder but right things, and doing daily work with excellence. "The new era belongs to those who strive. Striving leads to happiness and striving in itself is a happiness." We would like to express our heartfelt thanks to our customers and partners, for your care and support for the development of the Company. M&G is willing to work together with all of you, remain true to our original aspiration, and forge ahead to promote a sustainable, sound and high-quality development, and create better value for all shareholders. Strive towards a "world-class M&G". We look forward to working with you towards a bright future! Chairman: Chen Huwen 26 March 2021 Important Notice I. The Board of Directors, Supervisory Committee, directors, supervisors and senior management of the Company warrant that the contents of this report are true, accurate and complete, without any misrepresentation, misleading statements or material omissions, and severally and jointly bear the legal responsibilities thereof. II. All directors of the Company attended the Board meeting. III. BDO China Shu Lun Pan Certified Public Accounts LLP has issued the audit report with unqualified opinions to the Company. IV. Chen Huwen, the chairman of the Company, Quan Qiang, CFO of the Company and Zhai Yu, the head of the accounting department (person in charge of accounting), warrant the truthfulness, accuracy and completeness of the financial report in this annual report. V. Profit distribution plan or plan to convert surplus reserves into share capital approved by the Board of Directors during the Reporting Period The Company proposes to distribute cash dividend of RMB5.00 (tax inclusive) per 10 shares based on the Company’s total share capital registered as at the registration date for the implementation of dividend distribution. The profit distribution plan is subject to being submitted the Company's 2020 annual general meeting of shareholders for deliberation. VI. Risks statement of the forward-looking statements "√ Applicable" "□ Not applicable" Forward-looking statements including future plans and development strategies involved in this annual report do not constitute the Company’s substantive commitments to investors. The investors are advised to pay attention to investment risks. VII. Is there any non-operating misappropriation of funds of the Company by any controlling shareholders and their related parties No VIII. Has the Company provided any external guarantees in violation of the decision-making procedures No IX. Are there more than half of the directors who cannot warrant the truthfulness, accuracy and completeness of the annual report disclosed by the Company No X. Warning on significant risks The Company has illustrated various risks and corresponding measures that the Company might face in the production and operation. Please refer to the “Potential Challenges and Risks” set out in the “Discussion and Analysis of Operation” under Chapter IV. Investors are advised to pay attention to risk of investment. XI. Others "□ Applicable" "√ Not applicable" 本报告分别以中、英文编制，在对中外文文本的理解上发生歧义时，以中文文本为 准。 This English version is converted from the Chinese version. In case of any discrepancy between the Chinese version and the English version, the Chinese version shall prevail. Contents Pressing Forward with Mission in Mind ................................ ................................ ................................ ..... 2 Chapter I Definition ................................ ................................ ................................ ............................ 7 Chapter II Company Profile and Key Financial Indicators ................................ ................................ .. 8 Chapter III Business Overview ................................ ................................ ................................ ............ 13 Chapter IV Discussion and Analysis of Operation................................ ................................ ............... 18 Chapter V Major Events ................................ ................................ ................................ ..................... 39 Chapter VI Changes in Ordinary Shares and Shareholders ................................ ................................ . 66 Chapter VII Preference Shares ................................ ................................ ................................ .............. 76 Chapter VIII Directors, Supervisors, Senior Management and Employees ................................ ........... 77 Chapter IX Corporate Governance................................ ................................ ................................ ....... 84 Chapter X Corporate Bonds ................................ ................................ ................................ ................ 88 Chapter XI Financial Report ................................ ................................ ................................ ................ 89 Chapter XII References ................................ ................................ ................................ ....................... 244 Chapter I Definition I. Definition In this report, unless the content requires otherwise, the following terms shall have the following meanings: Definition of common terms The Report Annual Report 2020 Company, the Company, M&G Stationery SHANGHAI M&G STATIONERY INC. M&G Group M&G Holdings (Group) Co., Ltd. M&G Colipu Shanghai M&G Colipu Office Supplies Co., Ltd. M&G Life（晨光生活馆） M&G Life Enterprise Management Co., Ltd.（晨光生活馆企 业管理有限公司）/Large retail store of the Company M&G Technologies Shanghai M&G Information Technology Co., Ltd.（上海晨光 信息科技有限公司） Jiekui Investment Shanghai Jiekui Investment Management Firm (L.P.) Keying Investment Shanghai Keying Investment Management Office (L.P.) Chenguang Venture Capital Center（晨光创投） Shanghai Chenguang Venture Capital Center (L.P.) Chenguang Sanmei（晨光三美） Shanghai Chenguang Sanmei Property Investment Co., Ltd. Jiumu Store（九木杂物社） Jiumu M&G Store Enterprise Management Co., Ltd.（九木杂 物社企业管理有限公司）/Large retail store of the Company M&G Office Supplies（晨光办 公） Shanghai M&G Office Supplies Co., Ltd. Office Depot Office Depot Network Technology Co., Ltd. Axus Stationery Axus Stationery (Shanghai) Company Ltd. KA Key Account, usually referring to large cross-regional retailers with large operating space and dense customer flow, including RT-MART, Walmart, Carrefour, Hualian Supermarket. Reporting Period Year 2020, from 1 January 2020 to 31 December 2020 Yuan, ten thousand Yuan, hundred million Yuan RMB, RMB10,000, RMB100 million Chapter II Company Profile and Key Financial Indicators I. Company Information Chinese name of the Company 上海晨光文具股份有限公司 Short name of the Company in Chinese 晨光文具 English name of the Company SHANGHAI M&G STATIONERY INC. Abbreviation of English name of the Company M&G Stationery Legal representative of the Company Chen Huwen II. Contact Information Board Secretary Securities Affairs Representative Name Quan Qiang Bai Kai Office address Building C, Hanqiao Culture Science & Technology Park, No. 455 Yanzhan Road, Songjiang District, Shanghai Building C, Hanqiao Culture Science & Technology Park, No. 455 Yanzhan Road, Songjiang District, Shanghai Telephone 021-57475621 021-57475621 Fax 021-57475621 021-57475621 [email protected] [email protected] III. Introduction to General Information Registered address Building 3, No. 3469 Jinqian Road, Fengxian District, Shanghai Postal code of registered address 201406 Office address Building C, Hanqiao Culture Science & Technology Park, No. 455 Yanzhan Road, Songjiang District, Shanghai Postal code of office address 201612 Website of the Company http://www.mg-pen.com [email protected] IV. Information Disclosure and Place for Obtaining the Report Media for the Company’s information disclosure Shanghai Securities News, China Securities Journal, Securities Daily, Securities Times CSRC's designated website for the Company’s Annual Report disclosure www.sse.com.cn the Company’s Annual Report may be obtained at Board of Director’s Office V. Stock Information Stock Information Share class Exchanges on which the stocks are listed Stock short name Stock code Stock short name before change A share Shanghai Stock Exchange M&G 603899 / VI. Other Relevant Information Auditor of the Company (domestic) Name BDO China Shu Lun Pan Certified Public Accounts LLP Office address 4F No. 61 Nanjing East Road, Shanghai Name of the signing accountant Gu Xuefeng, Wang Aijia VII. Major Accounting Data and Financial Indicators for the Past Three Years 1) Major accounting data Unit: Yuan Currency: RMB Major accounting data 2020 2019 Year-on- year change (%) 2018 Revenue 13,137,745,727.18 11,141,101,364.44 17.92 8,534,988,597.55 Net profit attributable to shareholders of the listed company 1,255,426,655.27 1,060,083,625.03 18.43 806,847,308.41 Net profit attributable to shareholders of the listed company, net of non-recurring gains and losses 1,102,712,281.50 1,005,187,834.38 9.70 749,412,457.07 Net cash flow generated from operating activities 1,271,697,892.28 1,081,941,383.68 17.54 827,940,565.51 End of 2020 End of 2019 Year-on- year change (%) End of 2018 Net assets attributable to shareholders of the listed company 5,193,568,712.05 4,201,500,384.99 23.61 3,410,808,445.41 Total asset 9,709,908,436.32 7,565,115,311.74 28.35 5,677,500,049.71 2) Key financial indicators Key financial indicators 2020 2019 Year-on-year change (%) 2018 Basic earnings per share (Yuan/share) 1.3558 1.1523 17.66 0.8770 Diluted earnings per share (Yuan/share) 1.3558 1.1523 17.66 0.8770 Basic earnings per share， net of non-recurring gains and losses (Yuan/share) 1.1908 1.0926 8.99 0.8146 Weighted average ROE (%) 26.91 28.17 Decrease by 1.26 percentage points 26.16 Weighted average ROE, net of non-recurring gains and losses (%) 23.63 26.71 Decrease by 3.08 percentage points 24.30 Explanation of major accounting data and financial indicators for the past three years by the end of the Reporting Period "□ Applicable" "√ Not applicable" VIII. Difference in the Accounting Information under the PRC Accounting Standards for Business Enterprise (“PRC GAAP”) and Overseas Accounting Standards 1) Difference in net profit and net asset attributable to shareholders of the listed company in financial reports disclosed under International Accounting Standards and PRC GAAP "□ Applicable" "√ Not applicable" 2) Differences in net profit and net assets attributable to shareholders of the listed company in financial reports disclosed under overseas accounting standards and PRC GAAP "□ Applicable" "√ Not applicable" 3) Explanation on the differences between PRC GAAP and Overseas Accounting Standards: "□ Applicable" "√ Not applicable" IX. Key Financial Data for the Year of 2020 by Quarter Unit: Yuan Currency: RMB 1st Quarter (January - March) 2nd Quarter (April - June) 3rd Quarter (July - September) 4th Quarter (October - December) Revenue 2,083,587,295.14 2,677,836,377.15 3,776,378,538.71 4,599,943,516.18 Net profit attributable to shareholders of the listed company 230,373,494.44 234,127,325.67 448,408,007.50 342,517,827.66 Net profit attributable to shareholders of the listed company after non-recurring profit or loss 173,986,745.54 213,134,322.82 405,711,591.63 309,879,621.51 Net cash flow generated from operating activities -258,692,211.83 385,237,644.11 767,509,677.24 377,642,782.76 Explanation on difference between information by quarter and information disclosed in periodical reports "□ Applicable" "√ Not applicable" X. Items and Amounts of Non-recurring Gains or Losses "√ Applicable" "□ Not applicable" Unit: Yuan Currency: RMB Items of Non-recurring Gains or Losses Amounts in 2020 Notes (if applicable) Amounts in 2019 Amounts in 2018 Gains or losses on disposal of non-current assets 169,704.92 Mainly due to the Company's renewal of some old equipment 6,081,606.95 -69,195.83 Government subsidies included in profits and losses for the current period, excluding those closely related to the normal business and of fixed amount or fixed quantity granted on an on-going basis in accordance with certain standards and in compliance with the State policies 135,222,930.01 Mainly including government subsidies received during the Reporting Period and government subsidies transferred from deferred income 42,747,681.46 42,122,713.66 Gains or losses on entrusted investment or asset management 35,517,479.65 Investment income arising from changes in fair values held-for-trading financial assets, derivative financial assets, held-for-trading financial liabilities and derivative financial liabilities, and investment gains on the disposal of held-for-trading financial assets, derivative financial assets, held-for-trading financial liabilities, derivative financial liabilities and other debt investment, except the Company normal operations related to effective hedging business 37,743,018.95 Revenue generated from purchase of wealth management products 29,184,868.54 Reversal of provision for impairment of receivables and contractual assets which are individually tested for impairment 8,958,818.94 Mainly due to the provision reversal of bad debts on individual receivables of the Company 1,803,027.63 Other net non-operating income and expenses, other than the above items 18,746,671.42 Mainly including the non-operating income transferred from the proceeds from the merger and acquisition of Office Depot, and the expenditure of charity donations. -5,743,388.02 -7,936,377.76 Effect of minority equity -18,957,557.36 -4,764,697.27 -2,192,444.11 Effect of income tax -29,169,213.11 -14,413,308.64 -10,007,324.27 Total 152,714,373.77 54,895,790.65 57,434,851.34 XI. Items Measured at Fair Values "√ Applicable" "□ Not applicable" Unit: Yuan Currency: RMB Items Opening balance Closing balance Changes in the Period Effect on profit for the Period Held-for-trading financial assets 661,878,587.24 1,428,277,848.33 766,399,261.09 32,281,250.23 Receivables financing 29,549,924.83 61,412,976.46 31,863,051.63 Derivative financial assets Other debt investments (including other current assets) Other non-current financial assets Investments in other equity instruments 3,909,179.93 5,476,577.42 1,567,397.49 Held-for-trading financial liabilities Derivative financial liabilities Total 695,337,692.00 1,495,167,402.21 799,829,710.21 32,281,250.23 XII. Others "□ Applicable" "√ Not applicable" Chapter III Business Overview I. Description of the Company’s principal business, operation model and industry condition during the Reporting Period 1) Principal business and operation model 1. Principal business M&G Stationery is a comprehensive stationery supplier and an office servicer. The Company integrates the value of creativity into its products and service advantages, advocates fashionable stationery lifestyle, and provides solutions for study and work. Its traditional core businesses include designing, developing, manufacturing and selling writing instruments, student stationery, office supplies and other products under brands, and also the e-commerce business M&G Technologies; its New businesses mainly comprise of own-operated retail stores - Jiumu Store and M&G Life, and direct office supplies service - M&G Colipu. During the Reporting Period, there were no significant changes in the Company's principal business and operation model. 2. Principal operation model The Company has an independent and complete operation from design and development of brands and products, procurement of raw materials and accessories, product manufacturing, supply chain management and warehouse and logistics, to distribution network management. The Company is capable of performing independent operation of business in the market. For R&D and new products development model, the Company has an “entire design system” covering the whole process starting from customer value proposition to product design, product mold to brand image design, incorporating trend-, theme and experience-oriented development model to develop new products with a comprehensive categories approach based on consumer insight. For manufacturing model, the Company uses the brand manufacturing model that features sales-driven production, in-house and OEM outsourcing. The Company has an independent system from raw material procurement to manufacturing and selling, and has established its brands in the market. We have the advantages from participating in the whole value chain from design, research and developing, manufacturing and selling stationery. For sales model, based on features of stationery products and current situations of domestic stationery consumption, the Company has developed its sales model that relies on regional distributors, complemented by direct sales to offices 2B customers, direct-sale store, KA sales, online sales, as well as international distribution. We are the one of leading companies in China’s stationery business that engage in large-scale brand sales management and franchise management. M&G Technologies mainly comprises of online businesses in Tmall and JD. Tmall business is M&G Technologies’ Tmall flagship store where customers can place orders. For the business on JD platform, it takes purchase order monthly based on inventory and shelf sales ratio, and responds to purchase order according to M&G Technologies’ actual inventory condition; after the order is confirmed, it will then be forwarded to the warehouse system where it then delivers goods to JD according to the confirmed purchase order. M&G Technologies is also responsible for online full platform marketing and management of authorized online stores. M&G retail store businesses include two store types: Jiumu stores and M&G Life stores. Targeting female consumers aged 15-29, Jiumu Stores primarily sell stationery, cultural and recreative products, educational and entertainment products, and daily household and home products. Jiumu stores are mostly located in high-quality shopping malls in prime urban districts. Jiumu stores represent the Company’s ongoing exploration in new retail model in lifestyle products with a distinct cultural element. Jiumu Store started franchising in July 2018, where franchisees pay contract deposit and decoration fee according to contracts, and store rent, store staff salary, utilities and other costs incurred in franchising stores. M&G Life stores mainly target students aged 8-15, primarily selling stationery products. M&G Life stores mostly locate in Xinhua Bookstore and compound bookstores, M&G Life stores represent the Company’s efforts to move beyond the dominant traditional channels of retail stationery shops nearby schools. In the direct office supplies service business，M&G Colipu provides governments, public institutions, Fortune Global 500 companies and other SMEs with cost-effective one-stop office supplies procurement service. M&G Colipu has a rich product offering, covering office supplies, MRO industrial products, marketing gifts, employee benefits and corporate services, more than one million products including office paper, office stationery, office supplies, office equipment, computers and accessories, digital and communications, office appliances, daily necessities, labor protection industrial supplies, food and beverages, business gifts and office furniture. By shortening the supply chain, M&G Colipu provides customers with cost-effective procurement and customized value-added services. With changing demographics of China in particular the decreasing birth rate, it becomes increasingly difficult to achieve revenue growth from unit volume growth in the future, and stationery industry growth is increasingly driven by consumption upgrade and product upgrade. The Company’s traditional core businesses are challenged with changing demands from more individualized population born after 1990 and 2000. Stationery consumption in China is becoming more brand conscious, innovative, individualized and more premium. There is a clear growth in demand for better cultural and creative products, which accelerates industry transformation towards one with more cultural and creative elements. M&G Technologies reflects channel diversification trend and helps the Company's omni-channel strategy by expansion of online business. Jiumu stores and M&G Life stores both serve as the Company’s bridgehead to continue products and channels upgrading of its traditional core businesses, and they play an important role in promoting the Company’s brands and products upgrade. M&G Colipu’s direct office supplies service business meets demands for purchasing office supplies from large corporations and institutions, which helps boosting the sales of writing instruments and office stationery of the Company’s traditional core business. 3. Major driver for revenue growth (1) Social transformation and consumption upgrade; (2) State investment in education; (3) Favorable policy environment for culture industry development; (4) Continued growth in household income; (5) Second-child policy; (6) Fragmented industry with low concentration. 2) Situations and features of industry where the Company operates, and industry status of the Company 1. Situations of industry where the Company operates According to Guidelines for the Industry Classification of Listed Companies (revised in 2012) issued by China Securities Regulatory Commission, and results of industry classification of listed companies released by China Securities Regulatory Commission, the Company is classified to stationery, arts, sports and entertainment products industry. The Company is a member of China Stationery & Sporting Goods Association, and China Writing Instrument Association. During January-November 2020, revenue of China’s stationery and office supplies industry amounted to RMB136.7 billion, representing a decline of 1% from the previous year, and total profits amounted to RMB7.9 billion, representing a fall of 11% from the previous year. There were 1,033 enterprises above designated size in China’s stationery and office supplies industry (Source: China Stationery & Sporting Goods Association). In 2020, 212 member enterprises of China Writing Instrument Association recorded revenue from principal business of RMB14.5 billion, representing a decrease of 11% from the previous year, and realized profits of RMB0.7 billion, representing a decline of 20% from the previous year. In 2020, writing instrument industry exports amounted to USD2.4 billion, down 16% from previous year. Affected by the pandemic, the demand for writing instruments decreased across the world, and export was severely hit in 2020, reaching the lowest point in the past ten years. The writing instrument industry imports amounted to USD800 million, up 1% from the previous year. (Source: China Writing Instrument Association) 2. Features of the industry (1) Periodicity Writing instruments, student stationery and office supplies are less affected by economic fluctuations. With low unit price, writing instruments and student stationery are more of necessity goods with relatively low income elasticity, relatively less sensitive to economic fluctuations. (2) Seasonality There is seasonality in the demand for student stationery. Months before a new semester (summer and winter vacation) is what the stationery industry calls “schooling peak season”, during which sales of student stationery usually peaks. 3. Development trend of the industry With the changes in the way of life and consumption habit of consumers, China’s retail industry entered a new stage of redevelopment and innovation. Stationery industry faces challenges with uncertainty of external environment, diversification of retail channels, and more individualized demands from main customers group (now being the post-90s and post-00s). With the changing demographics of China in particular the decreasing birth rate, stationery industry revenue growth comes less from by unit volume growth, and more from consumption upgrade and product upgrade. Domestic market demand for mid- to high-end stationery products keeps increasing, reshaping market structure dominated by low-end products. This provides opportunities for mid- to high-end stationery products with better quality and higher price. China’s population of 1.4 billion accounts for about 18% of global population, while leading stationery companies in China can continue to mostly rely on the huge domestic market, they also have room for international expansion in international markets, which could reinforce each other under favorable conditions. Traditional retail stationery shops nearby school are still the dominant channel for China’s stationery industry, and shares of other retail formats are increasing faster. Sales terminals and channels of the industry are becoming more diversified, upgrading and competition in channels becomes more obvious. Domestic consumption for stationery in China becomes more brand conscious, innovative, individualized and more premium. There is a growing demand for premium cultural and creative products, stationery products are moving from those primarily focus on functionality towards those with more cultural and creative elements catering to customers. There are around thousands of stationery manufacturers in China’s domestic stationery industry and the industry is quite decentralized. There are a few leading companies for most sub-category stationery products, with continued development in the stationery industry, there could be higher industry consolidation, and leading companies could gain larger market shares. The market of the direct office supplies service has been growing fast in China. According to industry research report, the scale of the market of broad office supplies (including office furniture, equipment and other office supplies) in China reached more than RMB1 trillion. Regulation on the Implementation of the Government Procurement Law of the People's Republic of China in 2015 explicitly requires that the state shall promote the utilization of information networks for carrying out digital government procurement. In 2019, the Notice on Promoting Fair Competition and Optimizing the Business Environment in Government Procurement clearly proposed to accelerate the promotion of electronic government procurement. With strong national policy supports, B2B office supplies procurement in China got a unique opportunity for rapid development. At present days, driven by favorable policies and leading large and medium-sized enterprises, various digital procurement service providers are entering the market, accelerating development of e-procurement with public purchasing. The continuous integration and development of public procurement and high technology has also promoted the development of public procurement towards more professional, intelligent market-oriented and international. During the pandemic, offline consumption was hindered, and consumption towards online accelerated. According to the National Bureau of Statistics, online retail sales across the country recorded RMB12 trillion in 2020, a year-on-year increase of 11%. Leading consumer products companies seized opportunities of online consumption and achieved sustained growth through online and offline integration. China's digital economy accounts for 36% of the total economy (source: China Academy of Information and Communications Technology). Data has become a new factor of production. Industrial digitization is becoming the main pillar of the digital economy. Traditional industries have gained growth momentum in the digital age. With smart technology and products upgrade, promotion of national education informatization and the development of the online education market, smart stationery products have developed rapidly in the past few years. Technology-empowered smart pens and smart books are widely adopted in online education, providing an increasingly better user experience. 4. Company position in the industry As a leader of “own brand + domestic demand” in China’s stationery industry, the Company has a strong first-mover and leading advantage, with a wide and deep distribution network coverage in China’s stationery market. At the end of the Reporting Period, the Company has a national distribution network covering over 80,000 retail stationery shops using the store sign “M&G Stationery” across China, enabling the Company to establish market leading position for its own brand products amidst competitions. The Company ranked first in “Top Ten Enterprises in China’s Light Industry and Writing Instrument” for nine consecutive years. II. Explanation on substantial changes in major assets of the Company during the Reporting Period "√ Applicable" "□ Not applicable" Please refer to 2 (3) Analysis on Assets and Liabilities set out in Discussion and Analysis of Operation under Chapter IV for more details. III. Analysis on core competitiveness during the Reporting Period "√ Applicable" "□ Not applicable" 1. Brand advantage As a leader of “own brand + domestic demand” in China’s stationery industry, the Company has established a leading position for its own brand products amidst competitions of domestic market. The Company ranked the first in “Top Ten Enterprises in China’s Light Industry and Writing Instrument” for nine consecutive years. M&G brand has sound brand recognition among consumers, and served as the designated stationery brand for Boao Forum for Asia for many years. During the Reporting Period, the Company won the "Shanghai Brand" certification. 2. Channel advantage The Company has a strong first-mover and leading advantage with a wide and deep coverage of distribution network across China. The Company has established an efficient distribution management system and a domestic terminal network with deep penetration. At the end of the Reporting Period, the Company has 36 tier-one distributor partners, and about 1,200 tier-two and tier-three distributor partners across China, covering over 80,000 retail stationery shops with “M&G Stationery” logo across China. 3. Design and R&D advantage The Company has the capability to respond timely to market and strong R&D capacity for new products. The Company conducts market research for new product development and identifies market trends. The Company launches about one thousand new products each year to meet consumer needs, covering writing instruments, writing pads, art materials, office supplies and other categories. Through innovation, the Company has developed a variety of products such as quick-drying series, heat erasable series, and professional painting materials. The Company was awarded high profile industrial design awards including German iF Award, Red Dot Design Award, G-mark, and IDEA, also product design awards such as Gold Ideas Medal and Red Star Medal, reflecting the Company’s design capabilities. The Company pioneered application of antibacterial, high-density, spray-free, and biodegradable materials, broadened stationery materials, helped the environmental protection and green development of the industry. 4. Technology advantage The Company has raw material formula and production process with intellectual property rights. The Company was recognized as a national high-tech enterprise since 2010. The Company hosts the “national industry design center”, “China key laboratory of light industry and writing instrument engineering technology”, “Shanghai research center of writing instrument engineering technology” and other national, provincial and ministerial level technology centers. The testing laboratory of the Company obtained CNAS certification qualification and testing results are recognized by over 100 countries. The Company has undertaken a number of national, provincial and ministerial-level and independent research and development projects. The Company won two First Prizes for State Science and Technology Progress Award issued by China National Light Industry Council. 5. Manufacturing advantage The Company benefits from experience of large-scale manufacturing accumulated from past years, in-house mold capability, reliable supply chain, sound quality control system and adoption of information management systems. The Company has the capability of large-scale manufacturing with high quality control standard. Its product quality has won general recognition and favorable comments from consumers. The Company promotes the application of intelligent manufacturing technology in the production and inspection, and applies machine vision technology in various key links to improve the efficiency. The Company sets itself as a model for transforming the stationery industry towards a leaner manufacturing model. 6. Supply chain advantage With the idea of partnership in its business operation, the Company has strived to build a high standard supply chain ecosystem. The Company keeps upgrading the management for supply chain, and has information collaboration, inventory optimization, financial support, quality and order management, performance optimization to help supply chain partners to be stronger, improve consistency and operation capability of our supply chain partners. Chapter IV Discussion and Analysis of Operation （未完）  |