Sunfonda : 2023 Annual Report

Sunfonda Group Holdings Limited

新豐泰集團控股有限公司

2023 ANNUAL REPORT

CONTENTS

Corporate Information	2
Financial Highlights	4
Chairman's Statement	6
Management Discussion and Analysis	9
Biographies of Directors, Senior Management and Company Secretary	34
Corporate Governance Report	39
Report of the Directors	62
Environmental, Social and Governance Report	78
Independent Auditors' Report	105
Consolidated Statement of Profit or Loss	111
Consolidated Statement of Comprehensive Income	112
Consolidated Statement of Financial Position	113
Consolidated Statement of Changes in Equity	115
Consolidated Statement of Cash Flows	116
Notes to Financial Statements	118
Financial Summary	200

Annual Report 2023Sunfonda Group Holdings Limited

1

CORPORATE INFORMATION

CHINESE NAME OF THE COMPANY

新豐泰集團控股有限公司

ENGLISH NAME OF THE COMPANY

Sunfonda Group Holdings Limited

NOMINATION COMMITTEE

Mr. Wu Tak Lam (Chairman)

Mr. Song Tao

Dr. Liu Xiaofeng

Dr. Han Qinchun (appointed on 18 May 2023) Mr. Liu Jie (resigned on 12 June 2023)

INVESTOR INQUIRIES	REMUNERATION COMMITTEE
Tel: [phone]	Mr. Song Tao (Chairman)
Fax: [phone]	Dr. Liu Xiaofeng
Website: www.sunfonda.com.cn	Dr. Han Qinchun (appointed on 18 May 2023)
E-mail: [e-mail]	Mr. Liu Jie (resigned on 12 June 2023)

BOARD OF DIRECTORS

Executive Directors

Mr. Wu Tak Lam (Chairman of the Board) Ms. Chiu Man (Chief Executive Officer)

Ms. Chen Wei

Mr. Deng Ning

FINANCE AND INVESTMENT COMMITTEE

Mr. Wu Tak Lam (Chairman)

Ms. Chiu Man

Dr. Han Qinchun (appointed on 18 May 2023) Mr. Liu Jie (resigned on 12 June 2023)

Independent Non-executive Directors

Mr. Song Tao

Dr. Liu Xiaofeng

Dr. Han Qinchun (appointed on 18 May 2023) Mr. Liu Jie (resigned on 12 June 2023)

AUDIT COMMITTEE

Dr. Han Qinchun (Chairman) (appointed on 18 May 2023) Mr. Song Tao

Dr. Liu Xiaofeng

Mr. Liu Jie (former Chairman) (re-designated from Chairman of the Audit Committee to a member of the Audit Committee on 18 May 2023 and resigned on 12 June 2023)

AUTHORISED REPRESENTATIVES

Mr. Wu Tak Lam

Ms. Chan Sze Ting

COMPANY SECRETARY

Ms. Chan Sze Ting (FCG, HKFCG)

HEADQUARTERS

Sunfonda Automobile Center

No. 1555 Ouya 1st Road

Beichen Avenue

Chanba Ecological District

Xi'an City, Shaanxi Province

PRC

2	Sunfonda Group Holdings Limited  Annual Report 2023

CORPORATE INFORMATION

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Suite 3, 22/F, Sino Plaza

255-257 Gloucester Road

Causeway Bay, Hong Kong

REGISTERED OFFICE

Grand Pavilion, Hibiscus Way

802 West Bay Road

P.O. Box 31119, KY1-1205

Cayman Islands

HONG KONG SHARE REGISTRAR

Computershare Hong Kong Investor Services Limited

Shops 1712-1716

17/F, Hopewell Centre

183 Queen's Road East

Wanchai, Hong Kong

LEGAL ADVISORS

PRC Law

Jingtian & Gongcheng

34/F, Tower 3, China Central Place

77 Jianguo Road

Chaoyang District, Beijing

PRC

Hong Kong Law

Jingtian & Gongcheng LLP

Suites 3203-3207, 32nd Floor

Edinburgh Tower

The Landmark

15 Queen's Road Central

Central, Hong Kong

AUDITORS

Ernst & Young

Certified Public Accountant

Registered Public Interest Entity Auditor

27/F, One Taikoo Place

979 King's Road

Quarry Bay, Hong Kong

PRINCIPAL BANKERS

Nanyang Commercial Bank, Limited

151 Des Voeux Road Central

Central, Hong Kong

China CITIC Bank Corporation Limited, Xi'an Branch

No. 1, Zhuque Avenue

Xi'an City, Shaanxi Province

PRC

Bank of China Limited, Shaanxi Branch

No. 18, North Section of Tangyan Road

Xi'an City, Shaanxi Province

PRC

STOCK CODE

01771

WEBSITE

www.sunfonda.com.cn

Annual Report 2023Sunfonda Group Holdings Limited

3

FINANCIAL HIGHLIGHTS

HIGHLIGHTS FOR THE YEAR ENDED 31 DECEMBER 2023

During the year ended 31 December 2023, the Group has recorded:

•	Operating revenue of RMB10,977.8 million, which was up by 0.5% from the same period in 2022, including:
	•	Sales volume of new vehicles up by 0.8% to 32,204 units, and revenue from the sales of new vehicles
		down by 1.3% to RMB9,295.6 million;
	•	Revenue from after-sales services up by 10.4% to RMB1,260.5 million; and
	•	Revenue from the sales of used cars up by 15.8% to RMB421.7 million.
•	Gross profit of RMB420.1 million, which was down by 41.3% from the same period in 2022.
•	Gross profit margin was 3.8% (2022: 6.6%).
•	Profit before tax for the Period decreased by 86.1% to RMB18.0 million (2022: RMB129.4 million).

Profit attributable to owners of the parent for the Period was down by 85.4% to RMB11.9 million (2022: RMB81.3 million).

Basic and diluted earnings per share attributable to ordinary equity holders of the parent amounted to RMB0.02 for the Period (2022: RMB0.14).

4	Sunfonda Group Holdings Limited  Annual Report 2023

FINANCIAL HIGHLIGHTS

Sales volume of new vehicles		Revenue
Sales volume of									RMB in millions
new vehicles (unit)
36,000						YOY growth		12,000		11,639	YOY growth	YOY growth
							rate: 0.5%
	32,208YOY growth	31,949	rate: 0.8%	32,204				rate: -6.1% 10,924				10,978
33,000		rate: -0.8%
30,000										10,000
27,000
24,000										8,000
21,000
18,000										6,000
15,000
12,000										4,000
9,000
6,000										2,000
3,000
0										0
										2021	2022				2023
2021				2022				2023

Gross prot and gross prot margin				Equity attributable to owners of the parent
RMB in millions								Percentage	RMB in millions
1,000		993							20	400
900			YOY growth		18	346
800			rate: -27.9%		16
				716				300
700								14
600					YOY growth		12
					rate: -41.3%
500		8.5%						420	10	200		YOY growth
400			6.6%				8			rate: -76.5%
300									6
						3.8%	100		81	YOY growth
200								4
													rate: -85.4%
100									2
0										0	0							12
	2021	2022			2023
						2021	2022	2023

Note: "YOY" refers to year-on-year.

Annual Report 2023Sunfonda Group Holdings Limited

5

CHAIRMAN'S STATEMENT

DEAR SHAREHOLDERS,

On behalf of the board of directors (the "Board") of Sunfonda Group Holdings Limited (the "Company"), I am pleased to present the annual report of the Company and its subsidiaries (the "Group" or "Sunfonda") for the year ended 31 December 2023 (the "Period").

In 2023, being the first year of the post-pandemic recovery, the Chinese economy showed a clear positive trend. Along with the recovery of economic activities, automobile consumption embraced a new turn in 2023, presenting more opportunities and challenges. The opening of China's automobile export corridor, making China the world's largest automobile exporter, has built up confidence in the development of Chinese automobile brands. The domestic automobile market has witnessed a continuous price war, which has gradually expanded from new energy vehicles to fuel vehicles. Price cuts have not brought about the sustained sales increase as expected, but have plunged the automobile industry into even more intense competition. At the same time, the pace of the expansion intelligent driving of electric vehicle brands in cities in 2023, and commercial applications gradually support higher-level self- driving functions, which has propelled more automobile enterprises to carry out iterative upgrading of the intelligent driving system.

In order to support the development of the automotive industry, some local governments launched a series of support policies in 2023, including the distribution of automotive consumption vouchers and tax subsidies. However, the overall demand showed signs of a pullback as compared with the previous year. As automobile manufacturers attach great importance to market competition and operating conditions of dealerships, the major automobile manufacturers of the brands represented by the Group provided support and encouragement to the dealerships during the Period to ensure the overall supply of new vehicles of the brands and the scale of sales, so that we were able to sustain growth in the sales of new vehicles throughout the year. The restoration of order in social life after the pandemic and the expanded demand for vehicles in our daily activities saw a return to normal maintenance frequency, which was also demonstrated in our after-sales service business.

The new energy vehicle market maintained a rapid growth in 2023, with new energy vehicle enterprises and traditional fuel vehicle brands actively embracing electrification and intelligence, and various brands launching a number of new energy vehicle models one after another to capture market share. During the Period, the proportion of new energy vehicles sold by the Group has also increased significantly in line with the increase in sales volume. The Group's sales of new energy vehicles increased by 33% year-on-year and accounted for 6.6% of total new vehicle sales. We expect to see a steady increase in the number of new energy vehicle consumers we serve in the coming years.

6	Sunfonda Group Holdings Limited  Annual Report 2023

CHAIRMAN'S STATEMENT

During the Period, we made breakthroughs in both luxury car and new energy vehicle brand outlets, with the opening of the Chanba Porsche Center in Xi'an, Shaanxi Province, further consolidating the dominance of ultra-luxury brands represented by the Group in Shaanxi Province, and the launch of the Xiaopeng Automobile, being the first brand that the Group represents to co-operate with new vehicle manufacturers, which offers an additional choice for Sunfonda Group's customers and provides the Group with experience in the expansion of new energy brands in the future.

In terms of business development, the Group placed stability at the core of its business and ensured the stability of the foundation of our automotive principal business through internal organisational optimisation and energy efficiency enhancement. While our position in the luxury car market has been steadily improving, we have also introduced new new energy vehicle brands in a timely manner to keep pace with the transformation of various brands into electric vehicles and changes in customer demand, so as to adapt to the market changes through various measures and to consolidate the Group's leading position in key markets. In terms of the used car business, the Group will continue to strengthen the development of new vehicle replacement and in-use vehicles for retained customers, while taking into account the expansion of intranet auctions and external sourcing channels to massively expand high-quality vehicle sources, and fully leveraging on the regional strengths of the nationwide dealer group. Through the integration of advantageous resources, the Group will maximise the profitability of the sales of vehicles of the same type and achieve efficient turnaround.

We expect that with the continuous optimisation and adjustment of the national macro policy, market consumption power and confidence will continue to recover. In this recovery process, the good reputation of our Sunfonda brand among customers is particularly important. For example, last year, we began to further strengthen our customer management centre function and develop customised products to meet individual needs. We continued to strengthen our after-sales and extended services to enhance customer loyalty and attract lost customers back, thereby achieving a 15% year-on-year increase in the number of after-sales fundamental customers.

Notably, the Group has further optimised the structure of its finance business and provided customers with a wide range of purchase options and more flexible payment methods, contributing to the more than doubling of revenue from its finance agency business year-on-year.

Annual Report 2023Sunfonda Group Holdings Limited

7

CHAIRMAN'S STATEMENT

From the unusual struggles back to the normal life, various changes and challenges over the past year have brought a lot of tests to our team. I would like to express our gratitude and appreciation to the management and staff for their dedication and hard work over the past year, which has enabled the Group to grow steadily in a complex and volatile environment. I am also grateful to shareholders and investors for their trust and support. The Group will strive for excellence in the coming year.

Wu Tak Lam

Chairman of the Board

28 March 2024

8	Sunfonda Group Holdings Limited  Annual Report 2023

MANAGEMENT DISCUSSION AND ANALYSIS

MARKET REVIEW

In 2023, the National Economy Rebounded and Improved, with High-quality Development Solidly Promoted.

In 2023, in the face of the complicated and severe international environment and the arduous and challenging task of domestic reform, development and stabilisation, under the strong leadership of the Party Central Committee with Comrade Xi Jinping at its core, China's economy rebounded to a positive trend, supply and demand steadily improved, restructuring and upgrading were actively promoted, employment and prices were generally stable, people's livelihood was strongly and effectively safeguarded, and high-quality development was solidly pushed forward, with the major expected goals being successfully accomplished.

According to the data released by the National Bureau of Statistics, the annual gross domestic product of China for the year amounted to RMB126,058.2 billion, representing a year-on-year increase of 5.2% at constant prices calculation. The total national value added of the industrial enterprises above the designated size for the year recorded a year-on- year increase of 4.6%. The total retail sales of consumer goods for the year amounted to approximately RMB47,149.5 billion, representing a year-on-year increase of 7.2%. By consumption type, retail sales of commodities amounted to RMB41,860.5 billion, representing a year-on-year increase of 5.8%; and retail sales of automobiles amounted to RMB4,861.4 billion, representing a year-on-year increase of 5.9%; online retail sales amounted to RMB15,426.4 billion, representing a year-on-year increase of 11.0%. Consumer price inflation (CPI) recorded a year-on-year increase of 0.2%. The national per capita disposable income for the year was RMB39,218, representing a year-on-year nominal growth of 6.3%, or an actual growth of 6.1% if price factors were excluded.

In addition, it should also be noted that the external environment has become more complicated, severe and uncertain, and economic development is still facing some difficulties and challenges.

In 2023, Shaanxi Province, a place where the Group's principal business is located, achieved a GDP of approximately RMB3,378,607 million, representing a year-on-year increase of 4.3% at constant prices calculation. In 2023, the value added of the industrial enterprises above the designated size of Shaanxi Province recorded a year-on-year increase of 5.0%. Among them, the automobile manufacturing industry recorded growth of 39.8%. The total retail sales of social consumer goods in Shaanxi Province recorded a year-on-year increase of 3.4% in 2023. With consumer demand for upgraded goods being continuously unleashed, retail sales of automobile commodities above the quota increased by 14.6%, among which new energy vehicles increased by 1.0 time.

Annual Report 2023Sunfonda Group Holdings Limited

9