[年报]巨星科技(002444):2023年年度报告(英文版)
原标题:巨星科技:2023年年度报告(英文版) 2023 Annual Report 2024-008 [April 2024] Introduction In 2023, GreatStar delivered record-setting results by adhering to the development philosophy of "remaining devoted to perfection while keeping the grand vision in mind" in the face of the most severe challenges in 30 years due to the active destocking and declining demand in the European and American markets that began in H2 2022. In 2023, GreatStar achieved a total operating revenue of RMB 10.929 billion, a net profit attributable to the parent Company of RMB 1.691 billion, and a net cash flow from operating activities exceeding RMB 2.1 billion. Thanks to all GreatStar employees for their hard work that has allowed GreatStar to keep pushing forward. Despite the vicissitudes, GreatStar persisted in enhancing its comprehensive strengths and providing long-term returns to shareholders. Our journey will be as vast and enduring as the starry sky and the boundless sea. Thanks to the shareholders for their Company and perseverance. About 30 years ago, GreatStar started in an office building in downtown Hangzhou with a 20-square-meter office, a desk, and an employee. After over a decade of effort, in 2010, GreatStar successfully went public. In the subsequent decade or so, GreatStar has steadily grown and rewarded shareholders, achieving compound annual growth rates (CAGR) of 14.49%, 15.23% and 14.32% in the operating revenues, net profit attributable to the parent Company, and net assets, respectively. GreatStar has continuously rewarded investors through dividends, share buybacks, and other means. We will persistently adhere to the principle that the cash generated from GreatStar's operating activities will either be used for acquiring renowned international brands to develop our main business segments or for distributing dividends and share buybacks to reward shareholders. GreatStar has achieved a number of notable achievements and milestones in its journey. By reflecting on this journey, it is a valuable exercise to re-examine the ever-changing global industrial landscape. As Wang Yangming said, "Life is like a spiritual practice, just like the lotus that can grow in the mud. All the difficulties and tribulations in the world are opportunities to hone and improve myself." Whatever does not defeat us will ultimately make us stronger. From 2010 to 2016, although China's annual GDP growth rate declined from 10% to 7%, it was still far higher than the average GDP growth rate of 2% in GreatStar's main market, the United States. The substantial cash reserves and excellent business model that GreatStar possessed during this period paradoxically presented a "resource curse," as the Chinese market seemed replete with investment opportunities that promised growth far exceeding the original 10%. GreatStar made numerous equity investments in non-core business segments. However, GreatStar's compound annual growth rate (CAGR) during those six years turned out to be only slightly above 11%. At the end of 2016 and the beginning of 2017, under the leadership of the chairman, GreatStar's Board of Directors and Management team profoundly reflected on and summarized the past course of diversification. They ultimately determined to focus on consumer goods in Europe and the United States as the core business for future development and have consistently implemented this strategy. However, the Company and the industry were set to be buffeted by dramatic challenges in 2017. Coinciding with GreatStar's refocusing on its core business in 2017, with a strong emphasis on developing its original brands (OBM business) and acquiring overseas brands for expansion, China introduced a series of important new policies and measures for environmental protection aimed at strengthening environmental protection and ecological civilization development. These policies have objectively led to the elimination of outdated production capacity in the tooling industry, causing a short-term supply-demand imbalance. In 2018, the United States government released a list of goods subject to increased tariffs, imposing an additional 10% to 25% tariff on certain Chinese exports to the United States. This marked the beginning of the ongoing US-China trade dispute that has persisted until today, drastically increasing GreatStar's operating costs. GreatStar was compelled to commence the global expansion and integration of its industrial and supply chains. In May 2019, the United States government raised the tariff rate from 10% to 25% on USD 200 billion worth of Chinese goods exported to the United States, affecting most of GreatStar products exported to the United States. To address this adverse situation, GreatStar accelerated the construction of three major manufacturing bases in Vietnam, Cambodia, and Thailand to mitigate operational risks to the greatest extent possible. In 2020, the sudden global black swan events first led to a sharp decrease in orders, necessitating a pivot to the production and sale of personal protective equipment. Later, an abrupt surge in global orders resulted in insufficient production capacity, requiring all employees to work overtime. In 2021, although end-market demand was robust, the simultaneous substantial increases in the RMB exchange rate, China-US shipping costs, and raw material prices resonated together, exceeding the Company's short-term adjustment threshold and causing a significant decline in the overall gross profit margin. In 2022, just as the cost impact had been alleviated, demand in Europe and America declined in the second half of the year due to interest rate hikes by the United States Federal Reserve. Clients with overstocked inventories initiated a wave of destocking, with orders rapidly plummeting to a freezing point. All these events posed tremendous challenges for GreatStar, representing profound changes that disrupted the existing industry landscape. We are like a ship navigating the vast ocean. Every wave could potentially capsize the vessel or provide the impetus for acceleration. These external changes demanded that GreatStar actively optimize its business model, adjust its governance system, and rapidly and appropriately respond to the ever-changing global rules. Over the past 6 years, GreatStar has achieved a compound annual growth rate (CAGR) of 17% in operating revenues and 20% in net profits attributable to the parent Company, marking a notable improvement compared to previous periods. We have also made substantial progress in the product portfolio, original brands, business models, and industrial upgrades. Product profile: At the time of its initial public offering, GreatStar only offered four major categories of hand tools, namely rotary, cutting, measuring, and lighting tools, along with a limited number of handheld power tools in just a few thousand SKUs. As HuaDa KeJie, LISTA Geelong and SHOPVAC joined GreatStar, accompanied by investments in market and R&D resources, GreatStar's non-hand tool categories accounted for nearly 40% of its offerings in 2023. Moreover, GreatStar has become the world's second-largest manufacturer of laser measurement instruments and tool storage cabinets, with over 30,000 SKUs. By steadily expanding its product range and adding new categories, GreatStar has shown a strong ability to consistently grow in the European and American consumer goods tool markets. This is like a long, gradual climb that has laid a solid foundation for GreatStar to keep accelerating its growth in the coming decade. Original brands: GreatStar has successively acquired ARROW, LISTA, BEA and some other leading brands in European niche markets and emerging brands such as WORKPRO, DURATECH and SHEFFIELD. The revenues contributed by original brands have risen from less than 10% in 2016 to nearly 50% in 2023. This transformation has not only further broken GreatStar's gross profit margin ceiling but will also play a role in stabilizing performance during industry fluctuations as severe as those experienced in 2023. Business models: Through three parallel measures – direct cross-border e-commerce operations, acquisition of European and American distribution channels, and establishment of Asia-Pacific distribution channels, GreatStar has effectively increased the proportion of direct-to-customer (DTC) business, prioritizing retail customer needs and directly reaching end retail customers. This has not only effectively enhanced the value proposition of individual products but has also provided firsthand client feedback to feed directly into R&D. Industrial upgrade: As a Company that originated from foreign trade, GreatStar has consistently derived over 90% of its revenues from regions outside of China. Prior to 2017, GreatStar had no overseas manufacturing or large-scale warehousing and logistics bases. Over the past 6 years, GreatStar has acquired or built 10 production bases in China, 3 production bases in Southeast Asia, 5 production bases in Europe, and 3 production bases in the United States through acquisitions of European and American factories as well as establishment of its own manufacturing bases in Southeast Asia. Currently, GreatStar has established multiple large logistics distribution centers and sales and after-sales teams in Europe and the United States, achieving truly localized service in these markets. GreatStar has actively introduced μ-class high-precision measurement instrument and equipment production capacity from the TESA brand to optimize the product range manufactured in China. The future can't be predicted with certainty, but it fills us with both awe and hope. No one can predict GreatStar's future, just as it was impossible to foresee in 2017 that GreatStar would be as it is in 2023. We follow "The Grand Way" or the great trends of the times with patriotic sentiments. We remain devoted to perfection to being meticulously focused and specialized. In 2024, GreatStar will continue to adhere to the development philosophy of "remaining devoted to perfection while keeping the grand vision in mind," striving towards the goal of becoming the world's largest tool Company. The Board of Directors of Hangzhou GreatStar Industrial Co., Ltd. April 24, 2024 2023 Annual Report Section I Important Notice, Table of contents and Definitions The Board of Directors and the Board of Supervisors of the Company and its directors, supervisors and senior Management hereby warrant that the information contained in this annual report is true, accurate and complete without any fictitious records, misleading statements or material omissions, and severally and jointly assume legal responsibility thereof. Qiu Jianping, person in charge of the Company, and Ni Shuyi, person in charge of accounting and person in charge of the accounting department (Accounting Officer), have declared that they warrant the truthfulness, accuracy and completeness of the financial statements set out in this annual report. All directors of the Company were present in person at the Board of Directors' meeting for the review of this Report. Forward-looking statements including future plans involved in this Report do not constitute the Company's substantive commitments to investors. The investors and those who are interested are advised to pay attention to relevant risks and understand the difference between plans, projections and commitments. The Report has described the Company's risk factors that may exist in its operations in detail in "Section III Discussion and Analysis of the Management, (XI) Prospects for the Company's Future Development: Potential Risks". Please pay attention to the relevant contents. The profit distribution proposal of the Company considered and approved by the meeting of the Board of Directors is to distribute a cash dividend of RMB 0 (including tax) and issue 0 bonus shares (including tax) for every 10 shares based on a total of 1,202,501,992 shares. No capital reserve is to be transferred into the share capital. Table of Contents Section I Important Notice, Table of contents and Definitions ........................................................................................ 3 Section II Company Profile and Key Financial Indicators ............................................................................................... 7 Section III Discussion and Analysis of the Management .................................................................................................. 13 Section IV Corporate Governance ........................................................................................................................................... 54 Section V Environmental and Social Responsibility .......................................................................................................... 76 Section VI Significant Matters .................................................................................................................................................. 78 Section VII Changes in Shares and Information about Shareholders ...................................................................... 111 Section VIII Preferred Shares ................................................................................................................................................ 120 Section IX Securities .................................................................................................................................................................. 121 Section X Financial Report ..................................................................................................................................................... 122 Documents Available for Inspection I. Financial Statements with the signatures and seals of the person in charge of the Company, person in charge of accounting and person in charge of the accounting department of the Company. II. Original Audit Report bearing the seal of the accounting firm and signatures of the CPAs who have performed the audit. III. All of the originals of the Company's documents and original drafts of the Company's announcements as disclosed in the newspaper designated by China Securities Regulatory Commission (CSRC) in the reporting period. Definitions
Section II Company Profile and Key Financial Indicators I. Company Information
Accounting firm engaged by the Company
□ Applicable √ Not Applicable Financial consultant engaged by the Company for providing continuous supervision and guidance during the reporting period □ Applicable √ Not Applicable VI. Major Accounting Data and Financial Indicators Whether the Company needs to make retrospective adjustment or restatement of the accounting data for prior years ?Yes □ No Reasons for retrospective adjustment or restatement Changes in accounting policies
of Initial Recognition Exemption to Deferred Income Tax Related to Assets and Liabilities from Individual Transactions" in the Interpretation No. 16 of Accounting Standards for Business Enterprises issued by the Ministry of Finance and made adjustments to individual transactions to which the provision applies from the beginning of the earliest reporting period appearing on the financial statements to which the provision applies to the first date on which the provision was applied. For lease liabilities and right-of-use assets recognized from individual transactions to which the provision applies to at the beginning of the earliest reporting period appearing on the financial statements to which the provision applies, and the estimated liabilities related to asset retirement obligations and corresponding related assets, the Company has made adjustment to the opening retained earnings and other relevant financial statement items of the earliest reporting period appearing on the financial statements to which the provision applies with the cumulative effects in the case of occurrence of taxable and deductible temporary differences in accordance with the provision and the Accounting Standards for Business Enterprises No. 18 - Income Taxes. The lower of the Company's net profit before and after deducting non-recurring gains and losses for the most last three fiscal years was negative, and the most recent audit report indicated uncertainty regarding the Company's ability to continue as a going concern □ Yes √? No The lower of net profit before and after deducting non-recurring gains and losses □ Yes √? No VII. Difference in Accounting Data under Domestic and Overseas Accounting Standards 1. Differences of net profit and net assets disclosed under International Accounting Standards (IFRS) and Chinese Accounting Standards (CAS) in the financial reports □ Applicable √ Not Applicable There were no differences of net profit and net assets disclosed under International Accounting Standards (IFRS) and Chinese Accounting Standards (CAS) in the financial reports of the Company during the reporting period. 2. Differences of net profit and net assets disclosed under overseas accounting standards and Chinese Accounting Standards (CAS) in the financial reports □ Applicable √ Not Applicable There were no differences of net profit and net assets disclosed under overseas accounting standards and Chinese Accounting Standards (CAS) in the financial reports of the Company during the reporting period. VIII. Key Financial Indicators by Quarter Unit: RMB
disclosed in the Company's previously released quarterly or interim reports? □ Yes √? No IX. Items and Amounts of Non-recurring Gains and Losses ?√ Applicable □ Not Applicable Unit: RMB
The Company has no other gain or loss items that fall into the category of non-recurring gains and losses. Notes for the situation that the non-recurring gain or loss items as illustrated in the Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public – Non-recurring Profits or losses are defined as recurring profits or losses □ Applicable √ Not Applicable None of non-recurring gain or loss items as illustrated in the Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public – Non-recurring Profits or losses are defined by the Company as its recurring profits or losses during the reporting period. Section III Discussion and Analysis of the Management I. Industry Overview during the Reporting Period The Company has been engaged in the TOOLS & storage industry. Its products mainly include hand tools & storage as well as power tools & laser measurement, which are mainly used in the fields of home maintenance, construction engineering, vehicle maintenance, surveying and mapping, etc. The home building, repair, and maintenance industry is the most important application channel with the highest proportion. By the group of clients, the industry may be divided into consumer tools & storage and industrial tools & equipment. In North America and much of the Europe, due to the extensive use of detached houses and the large square footage per inhabitant, the repairing and maintenance cost of residential houses is high. Given the high cost of labor, residents in the Europe and North America prefer to repair and maintain houses and outbuildings on their own, giving rising to the popular DIY style in western culture. Considering the large number of cars held by European and American families, the routine repair and maintenance tasks, including parts inspection and replacement, also play an important role in the DIY of the families. Various tools, as repair and maintenance necessities, are highly needed by families in North America and Europe for professional and DIY purposes, which makes the Europe and North America the most important market with the highest share of tools in the globe. Tool industry, the oldest industry, has been growing with the human society. For the past century, with the increasing industrialization, tools have been improved and refined steadily as a requisite support to manufacture supplies and commodities. Thanks to the rigid demand and stable replacement cycle, the sector of industrial tools has been growing steadily. Regardless of the financial crisis in 2008, the industry maintained stable upward momentum aligned with GDP growth after short-term fluctuations. In 2023, the high interest rate in Europe and the United States suppressed real estate trading and industrial development, which forced the end consumption of the tool industry to continue the downward trend in the second half of 2022. More fatally, as the global shipping system went normal in 2022, massive commodities stuck on the road finally arrive at the channel retailers, including large superstores, which lifted the inventory-to-sales ratio, hence the commencement of extensive destocking in 2023. The overreaction in consequence resulted in a sharp drop of orders, and thus to the Company suffered from the least year-on-year growth for 18 months, the worst record for the past 30 years. In 2024, considering the uncertainty about the Fed's cutting interest rate, the terminal demand of the industry will continue to fluctuate at a low level. However, as the inventories of channel retailers fall to a historical low, it is expected to see demand recovery and restocking in the second half of 2024 or in early 2025. II. Principal Business of the Company during the Reporting Period During the reporting period, the Company continued the development of its main business in consumer tools & storage in Europe and the United States and also industrial tools & equipment, and vigorously promoted the improvement of product structure and business models. In the face of the sharp decline of ODM business, the Company made every effort to develop its OBM business where we logged an increase in market share against the downward trend (except the storage) and maintained the growth of hand tools and power tools. During the reporting period, the Company registered an operating revenue of RMB10,929,992,802, a year-on-year decrease of 13.32%. In 2023, the net profit attributable to shareholders of the listed Company amounted to RMB 1,691,612,756, with a year-on-year increase of 19.14%, and the net profit attributable to shareholders of the listed Company after deducing non-recurring gains and losses amounted to RMB 1,697,490,987, with a year-on-year increase of 16.67%. III. Core Competencies 1. Innovation advantage Innovation has always been the core of the Company, while variety enrichment been the key driver for the growth. The Company has an experienced R&D team for professional tools and non-tool consumer goods, which has been committed to developing and innovating new products, upholding the concept that it's the details that make the difference in refining products in terms of functionality and added value, and working to ensure the long-term core competitiveness of the Company. During the reporting period, with an investment of RMB 323 million in R&D, the Company designed 1,828 new products, applied for more than 200 new patents and granted more than 200 new patents; its subsidiary, HDKJ, was rated as a "Small Giant" by the Ministry of Industry and Information Technology of the People's Republic of China. The Company developed a variety of new products including knives and pliers, cordless lithium battery power tools and related spare parts, laser level rulers, and folding knives, all of which are highly recognized in the market. During the reporting period, the Company continued extensive innovation in power tools, especially lithium battery power tools. Based on scores of cost-effective and innovative products, the Company obtained orders for cordless lithium battery power tools and related spare parts from large retailers in the United States. Thanks to its innovation advantage, the Company has responded to and seized market opportunities in a timely manner, continued to gain market share and maintained long-term and stable development in the changeable global tool industry. 2. Brand advantages The Company specializes in residential durable consumer goods for households and industrial products for professionals. Brand is the most compelling guarantee for the Company to provide consumers with products and services over the long term, so the Company has been committed to acquiring global leading brands and building and developing its original brands. During the reporting period, the Company acquired TESA (Swiss) and SCRUFFS (UK) for the purpose of developing high-precision measuring instruments and personal tooling products. Meanwhile, the Company spared no effort in developing its original brands and enhancing their brand influence and brand advantage. Its original brands have achieved stable growth. The sales revenues of brands such as WORKPRO, DuraTech, Everbrite, and Prexiso have achieved significant YoY growth. In addition, the sales revenue of the Company's original brands accounted for approximately 50% in general. The brand advantage not only further enhances the international competitiveness of the Company's products, but also effectively improves the Company's gross profit margin and business stability, thus ensuring the long-term healthy development of the Company. 3. Channel advantages The sales channels and the trust of clients are the basis for the continuous development of the Company. The Company's diversified product mix and sustained innovation capability can not only satisfy the one-stop shopping demand of channel clients to the greatest extent possible, but also constantly reduce its procurement and Management costs and improve the loyalty of its channel clients. The Company has been one of the largest suppliers of tools and storage to many large supermarket chains such as The Home Depot, Walmart and Lowe's in the United States, Kingfisher in Europe and CTC in Canada. It has also expanded its product categories based on these clients. There are now more than 20,000 large supermarket chains worldwide that sell a wide range of the Company's products, including those for hardware, building materials and automotive parts. These channels effectively contribute to the rapid development of various innovative products of the Company. Through three parallel measures – direct cross-border e-commerce operations, acquisition of European and American distribution channels, and establishment of Asia-Pacific distribution channels, GreatStar has effectively increased the proportion of direct-to- customer (DTC) business, prioritizing retail customer needs and directly reaching end retail customers. This has not only effectively enhanced the value proposition of individual products but has also provided firsthand client feedback to directly inform R&D. With the above-mentioned channel advantage, the Company is on track to continuously develop new products and expand product categories with good market prospects. It has achieved breakthroughs in some major product categories such as laser measurement, storage and power tools. 4. Internationalization advantages After years of development, the Company has initially developed and improved its global supply chain Management system and established solid cooperation with thousands of suppliers worldwide. It can ensure that its rapid response to market demand and timely delivery of all kinds of large orders will not be affected by its production capacity. Backed up by the perfect warehousing and distribution system in China, the United States, and Europe and 21 manufacturing bases worldwide, the Company is capable of procurement, manufacturing, and distribution around the globe. The perfect distributed manufacturing and processing system of the Company can greatly reduce the costs of manufacturing and purchase, enhance the competitiveness of its products in the end market, meet various （未完）  |