Stock Code: 600057 Stock Abbreviation: Xiamen Xiangyu
Xiamen Xiangyu Co., Ltd.
2022 ANNUAL REPORT (Summary)
To ShareholdersIn 2022, which marks the 10th year of the new era, China is full of oscillation and flowering. In thecontext of the high-quality development of China’s economy, Xiangyu ushered a crucial year of"the 6th Five-Year Plan”. In this year, the total revenue target of 500 billion yuan was achievedahead of schedule, with a net profit exceeding 3.7 billion yuan, and a net profit attributable toparent shareholders beyond 2.6 billion yuan, and a ROE was over 18%. We have achieved adevelopment 'acceleration', and also demonstrated to the market the vigorous and youthful imageof Xiangyu.
”Different paths may converge at the same goal”. We firmly believe that investment is a two-wayrush between enterprise and the investors and that partners who believe in long-term value willeventually meet unexpectedly at the peak. Therefore, we are grateful for the long-term supportand trust of our shareholders. To return gratitude, we have been continuously issue bonus to ourshareholders for many years, and this year a new record breaking amount of over 1.3 billion yuanwill be allocated for cash dividends. This not only represents our willingness to share growthdividends with investors, but also demonstrates that the Young Xiangyu has always been sincereand unwavering.
The current of the age is magnificent with hard challenges and severe risks. At present, momentouschanges unseen in a century are accelerating across the world. China's development has entereda period where strategic opportunities and risks coexist. The era has given bulk commodity supplychain enterprises a new historical mission since the " Industrial and Supply Chains " concernednational interests and security. Service manufacturing enterprises are moving towards the goal ofhigh-quality development. Xiangyu should think about how to understand and meet the changingservice needs more deeply. This represents a crucial competitive advantage for industry leaders,as well as a reflection of the intellectual capabilities and innovative ideas of Xiangyu's personnel.
Just as water retains no constant shape, so in warfare there are no constant conditions. Whilebenchmarking the leading foreign supply chain enterprises, we also emphasize on forging ourunique advantages and taking the path of " logistics and trade linkage, industry and finance linkage"
with Xiangyu unique characteristics. The industry-leading logistics infrastructures enable us to havemore scenarios to adapt the application of digitalization and intelligence technology in the supplychain service field, thus evolving advanced service models such as the "Yu Lian Tong Service" and"Industry-level Agricultural Service", allowing customers from different fields and industries toreceive high-quality and high-efficiency responses within the Xiangyu service system.
Only in hard times can courage and perseverance be manifested, and only after polishing can apiece of jade be finer. On the new journey filled with glories and dreams, all Xiangyu people willfirmly anchor the new direction of China’s own development, with a strong spiritual power ofmomentum, forging ahead with enterprise and fortitude, and strive towards the vision of"Become the leader of the bulk supply chain industry and the world class supply chain serviceenterprise", to create greater values and benefits for all shareholders!
Xiamen Xiangyu Co., Ltd.
Qidong DengApril 29, 2023
I. Key Accounting Data and Financial Indicators
1.Key Accounting Data and Financial Indicators over the Past Three Years
Unit: 10K, RMB
| 2022 | 2021 | Change （%） | 2020 | |||
| After Adjustment | Before Adjustment | After Adjustment | Before Adjustment | |||
| Revenue | 53,814,806.41 | 46,251,623.01 | 46,251,623.01 | 16.35 | 36,021,478.35 | 36,021,478.35 |
| Net Profit Attributable to the Company’s Shareholders | 263,690.20 | 219,418.69 | 216,026.82 | 20.18 | 132,244.85 | 129,966.68 |
| Net profits Attributable to the Company’s Shareholders before Nonrecurring Gains and Losses | 265,599.34 | 218,020.51 | 214,628.64 | 21.82 | 132,762.37 | 130,484.20 |
| Net Cash Generated from Operating Activities | 622,299.28 | 542,000.06 | 542,000.06 | 14.82 | 127,950.55 | 127,950.55 |
| The End of 2022 | The End of 2021 | Change （%） | The End of 2020 | |||
| After Adjustment | Before Adjustment | After Adjustment | Before Adjustment | |||
| Owners' Equity Attributable to the Company's Shareholders | 1,709,156.57 | 1,721,425.75 | 1,721,425.75 | -0.71 | 1,496,468.80 | 1,496,468.80 |
| Total Assets | 11,505,640.89 | 9,583,422.06 | 9,583,422.06 | 20.06 | 8,736,465.96 | 8,736,465.96 |
2.Major Financial Indicators
| 2022 | 2021 | Change （%） | 2020 | |||
| After Adjustment | Before Adjustment | After Adjustment | Before Adjustment | |||
| Basic Earnings Per Share (EPS) (RMB/share) | 1.10 | 0.93 | 0.93 | 18.28 | 0.54 | 0.54 |
| Diluted Earnings Per Share (EPS) (RMB/share) | 1.10 | 0.91 | 0.91 | 20.88 | 0.54 | 0.54 |
| Basic Earnings Per Share (EPS) Excluding Non-Recurring Items (RMB/share) | 1.10 | 0.92 | 0.92 | 19.57 | 0.54 | 0.54 |
| Weighted Average Return on Net Assets (%) | 18.06 | 17.14 | 17.14 | Increased 0.92 percentage points | 10.76 | 10.76 |
| Weighted Average Return on Net Assets Excluding Non-Recurring Items (%) | 18.20 | 17.02 | 17.02 | Increased 1.18 percentage points | 10.80 | 10.80 |
Explanation of the Company's Major Accounting Data and Financial Indicators over the last threeyears at the end of the reporting period
□√ Applicable □ Not applicable
The net profit attributable to the shareholders of the listed Company in this reporting periodincludes interest of RMB 170 million attributable to perpetual bond holders. After deducting thisamount, the net profit attributable to the shareholders of the listed company in this reportingperiod was RMB 2.47 billion. Basic earnings per share, diluted earnings per share, basic earningsper share after deducting non-recurring gains and losses, weighted average return on net assets,and weighted average return on net assets after deducting non-recurring gains and losses were allcalculated after deducting perpetual bonds and interest.
The non-public offering of A shares by the Company in 2022 will not have a dilutive effect on theearnings per share of the company before the completion of the share registration for the project.
The Company implemented the accounting treatment related to income tax effects on financialinstruments classified as equity instruments by the issuer according to Interpretation No. 16 of theEnterprise Accounting Standards, and retrospectively adjusted the profit and loss items of theincome statement for 2021 and 2020.
The decrease in net assets attributable to the shareholders of the listed Company at the end of thisreporting period compared to the same period last year was mainly due to the Company's decisionnot to exercise the renewal option and proactively redeem the perpetual bonds.
II. Bulk Supply Chain Market Development History and Future Trends Analysis
1.Industry Development History
Since the emergence of modern business civilization, the exploration of how to solve the problemof temporal and spatial allocation of resources to better match, stabilize and timely meet demandsand supplies has been an ongoing endeavor. Different enterprises from different eras haveprovided different solutions, which have not only created a group of great enterprises but alsopromoted the progress of modern business civilization. Essentially, bulk supply chain servicesoptimize the temporal and spatial allocation of various resources to help all partners improveefficiency, reduce costs, create value, and thus share benefits.
In the early stages of China's reform and opening-up, major supply chain enterprises primarilyengaged in agent services such as freight forwarding, customs clearance, and simple trading toexpand their market presence. However, with China's accession to the WTO in 2001, itsmanufacturing industry became one of the main driving forces behind the world's economicdevelopment. As a result, the scale of the major supply chain market rapidly expanded, and thebusiness model quickly iterated, gradually developing into a group of major supply chainenterprises with nationwide and even global influence.
Through benchmarking with overseas leading bulk supply chain companies, we have found that:
(1) The concentration of China's bulk supply chain industry is showing an accelerating trend, withthe top enterprises' business scale continuously expanding.
The concentration of overseas bulk supply chain market is much higher than that of the domesticmarket, and an oligopoly competition pattern has basically taken shape. Among them, the top fivecomprehensive trading companies in Japan accounted for 31% of Japan's total external tradevolume in 2021, and the four major international grain traders have controlled 80% of the globalgrain trade. The four major crude oil and mineral traders had a revenue scale of over trillions of USdollars in 2022. In the past five years, the scale of China's bulk supply chain market has remainedrelatively stable at around 40-50 trillion yuan, however, the combined revenue scale of the top four
companies in the industry (CR4) has rapidly increased from around 900 billion yuan in 2018 to 2.3trillion yuan in 2022, corresponding to a rapid growth in market share from 2.19% to 4.19% withan accelerating upward trend.
| Chart1: China's Bulk Supply Chain Market Scale and CR4 Market Share | Chart2:the Total Operating Revenue and Market Share of the Company |
(2) China’s bulk supply chain industry is upgrading from traditional trade to industrial chainservices and operations, leaving significant room for improvement in profit margins.
In terms of business models, overseas large-scale supply chain giants have a high degree ofintegration and involvement in the industrial chain. To illustrate, ADM has established an industrialchain operation model of "Farm-Storage-Processing-Transportation-Sales", while Glencore andTrafigura Group have taken "Upstream Mining Rights Resource Control" and "Industrial Chain +International Logistics Resource Integration" as the development main line, with the profit marginabove 2%, significantly higher than that of domestic supply chain leading enterprises. China’s bulksupply chain industry experienced events such as the "Financial Crisis" and " Steel Trade Incident",which unveiled systemic risks in the traditional trade model. As a result, leading supply chainenterprises have begun to transform from traditional "single-point services" to "comprehensiveservices" and then to "full-industry chain services", and have practiced the "industrial chainoperation" model in some areas, with significant marginal improvement room for profit margins.
(3) Internationalization brings new opportunities to China's bulk supply chain industry
In terms of internationalization, overseas bulk supply chain giants mainly operate in the form of
| 41414051552.19%2.73%3.59%4.06%4.18%0%2%4%6%01020304050607020182019202020212022Market Size of China's Bulk Supply Chain (RMB trillion)CR4 Market Shares of China's Bulk Supply Chain | 2342723604635380.57%0.67%0.91%0.91%0.98%0.0%0.5%1.0%1.5%2.0%2.5%3.0%010020030040050060020182019202020212022XIANGYU's Revenue (RMB bn)XIANGYU's Market Shares |
multinational corporations and global resource deployment, while domestic bulk supply chainenterprises are accelerating their international presence and expanding their import and exportbusiness on the basis of deepening the domestic market. With the continuous deepening of the"Belt and Road" initiative and the deepening trend of global supply chain restructuring, theinternationalization of China's bulk supply chain is ushering new opportunities.
(4) China's bulk supply chain industry is building its own distinctive competitive advantages.
Based on specific historical foundations and national differences, overseas leading companies inthe bulk supply chain industry improve their market competitiveness through global resourceintegration, upstream resource control, and industrial chain operations. In contrast, China's leadingcompanies in the bulk supply chain industry rely on the huge demand from China's manufacturingindustry and build their own distinctive competitive advantages through integrated servicecapabilities (such as multimodal transport solutions, supply chain finance, secure logistics, and costmanagement) and technological applications.
2.Industry Development Trends
Over the past few years, the bulk supply chain industry in China has been influenced by variousfactors, including global geopolitical situations and changes in the macro environment. As a result,we predict that the industry will rely more heavily on technology-driven models in the future, witha greater focus on supply chain security and stability, in response to the evolving demands ofmanufacturing enterprises.
(1）The importance of bulk supply chain security and stability will be further highlighted
Given the unpredictable nature of the international situation and the growing complexity of theglobal economic environment, the security and stability of bulk supply chains are becomingincreasingly crucial for economic growth. Both the 20th National Congress of the Communist Partyof China and the "14th Five-Year Plan" for the development of modern logistics have outlined theneed for more resilient and secure industrial and supply chains, with an emphasis on thedevelopment of a bulk supply chain service platform that can seamlessly connect production,
logistics, and trade. With the leading state-owned bulk supply chain industry playing a crucial rolein ensuring resource acquisition and logistics security, its importance will continue to behighlighted going forward.
(2) The elevation of customer demands in the manufacturing enterprise will upgrade the supplychain industry to a new level
As China's economy growth shifts from high-speed growth to high-quality development,manufacturing enterprises are becoming more specialized and large-scale. Consequently, they areplacing greater emphasis on the safety and efficiency of supply chains, demanding higher standardsin the integration of raw and auxiliary material supplies, efficient distribution of finished products,optimized logistics costs, convenient financing channels, inventory safety, and improved turnoverefficiency. Evolving customer demands have propelled supply chain enterprises to upgrade theirservice models from "single-category, single-link services" to "multi-category combination, linkintegration, chain extension, regional coordination, and other diversified services". This has led todiversified product combinations and logistics infrastructure becoming crucial factors, and "trade-logistics linkage" combining diverse commodity operations with multimodal transportationservices has emerged as a core capability.`Against this backdrop, supply chain enterprises with supply chain solution design and integratedcomprehensive service capabilities based on "trade-logistics linkage" have the opportunity tointervene in more service links of the industrial chain, and deepen customer stickiness, enhancemarket share and profitability levels through efficient resource allocation and networked logisticsservice capabilities.
| Chart3: Changes in Customer Demand and the Evolution of Service Providers |
(3) Digital intelligence has the power to drive innovation in domestic bulk supply chain models.
In recent years, digital technologies such as cloud computing, big data, artificial intelligence,blockchain, and others have been rapidly expanding and infiltrating the bulk supply chain serviceindustry. By incorporating online supply chain solution design with digital capabilities at its core,and offline integrated service capabilities, it can effectively enhance the collaborative efficiency ofvarious links in the bulk supply chain. This will result in a platform-based sharing of logistics,commercial, information, and capital flows, and greatly expand the service space of the supplychain industry.
III. Business Model
The Company places emphasis on fulfilling the fundamental requirements of its manufacturingenterprise clients, consistently refining its product mix, enhancing its business approach, andbolstering its profitability framework, with the ultimate aim of becoming a frontrunner in theindustry through model leadership.
1. Commodity Mix
To cater to both market demand and its own business philosophy, the company applies threecriteria in selecting commodities. Firstly, the product must have high liquidity. Secondly, it must behighly standardized, with facilities for easy storage. Lastly, the product must experience highdemand and there must be long supply chains within the industry, enabling comprehensiveservices across multiple levels.
Currently, the company mainly participates in bulk commodities market, forming four majorcategories under operations: metallic minerals, agricultural products, energy and chemicals, andnew energy, including six core products - ferrous metals, aluminum, stainless steel, grains, coal,and new energy, which reflect the company's diversified business scope.
The Company is continuously expanding its range of products, and building its ability to provide adiversified portfolio of bulk commodities. It also actively adjusts its product mix in response toindustry fluctuations, with better growth potential and cycle hedging capabilities.
Grains12%Chemical &Oil6%Steam Coal12%
Metal
Minerals61%AgriculturalProducts16%Energy &Chemical
18%
Aluminum12%
Ferrous27%
StainlessSteel19%
| Chart4: 2022 Gross Profit Breakdown (Considering Effect of Hedging on Gross Profit with Usage of Future) |
The Company has been strategically concentrating on key product categories, establishing acompetitive edge in scale and market influence. The market shares for our core commodities withinthe supply chain is as follows:"
| Chart 5: 2022 Supply Chain Core Product Market Share (Volume-Based) |
Note:
① Market share is calculated as the company's operating volume divided by the total domestic production andimport volume. The company’s operating volume excludes entrecote trade.
② The market size of stainless steel is estimated by the sum of crude stainless steel production and import volume.
| Ferrous Supply Chain Stainless Steel Supply ChainAluminum Supply ChainCoal Supply ChainGrain Supply ChainNew Energy Supply Chain |
2. Customer Structure
Leveraging its brand reputation and top-notch service, the Company has successfully broadenedits customer base through a dedicated sales team. As of December 31, 2022, the Company boastsover 14,000 loyal customers, reflecting a CAGR of 13% over the last three years. Of these customers,more than 400 are medium to large-sized businesses with annual business scale exceeding 300million yuan, showing impressive expansion with a CAGR of over 30% across the same period.
| Chart6: Number of Medium to Large-sized Customers of the Company in the Last Three Years |
Notes: The medium to large-scale customers referred to in this report are those whose annual business scaleexceeds 300 million yuan.
In recent years, the Company has been consistently optimizing our customer structure by elevatingthe percentage of manufacturing enterprise customers and scaling up our service offerings. As of2022, manufacturing enterprise customers make up more than 50% of our customer base andcontribute 60% of our commodity business. Notably, the proportion of manufacturing enterprisecustomers in the new energy supply chain surpasses 90%, and this figure is over 60% in the blackmetal, stainless steel, aluminum, and coal supply chains. In addition, service provision to grain andraw materials supply chain customers surpasses 50%.
| An Increase CAGR of +30% |
3. Operating Mode
In stage 1.0, the Company transitioned from a "Single-point Service" model to an "IntegratedService" approach, offering one-stop comprehensive services such as raw material procurement,finished product distribution, inventory management, warehousing and logistics, and supply chainfinance. Through customizing and providing procurement and sales plans, cross-regionaltransportation, and other comprehensive services, the company successfully resolved the issue ofspatial and temporal disparities for bulk commodities.
A prime illustration of this model is the virtual factory initiative, wherein the Company plays a full-fledged role in the critical manufacturing supply chain, furnishing customers with raw materialprocurement and supply, product distribution, as well as ancillary services such as logistics, finance,consulting, among others, thereby generating profit from the services we provide..
In stage 2.0, the Company had established customer loyalty and channel advantages by offering"Integrated Services" in a specific industrial chain segment. Building on this success, the Companyextended its "Integrated Services" upstream and downstream along the industry chain, andinitiated "Full-industry Chain Service Model". The model expands range of goods and growthpotential.
In stage 3.0, after forming service and advantages of industry research throughout the full industrychain, the Company capitalized on the opportunity to enter the productive manufacturing linkswith value-adding potential, forming an industrial chain operation mode of "Supply Chain Services+ Production Manufacturing", further improving the profitability of comprehensive revenue andsmoothing cyclical fluctuations.
Producer AProducer BProducer CProducer DProcurementTransportWarehousingFinancingDistributionSupplier ASupplier BSupplier CSupper DSupper E
XIANGYU Supply Chain Comprehensive ServiceTransportStoreFinanceDistributeConsultProcure
Procure
Link 1Link 2Link 3Link NProducer A
Supply Chain ServiceClients amid Chain
Supply ChainServices ProvidersSupply ChainServicesRaw Material
CirculationManufacturing
Process with
empowered
value
Manufactured
Goods
Circulation
XIANGYU
Leading Area
XiangyuCut-in Area
XIANGYU
Leading Area
Traditional Supply Chain Service Model
Connecting multi-party, while serving single link
XIANGYU Service ModelPhase1.0: Integrate needs, and provide
comprehensive services
XIANGYU Service Model
Phase3.0: Industry Chain Operation
XIANGYU Service ModelPhase2.0: Complete Industry Chain Services
XIANGYU Service ModelPhase4.0: Digital Intelligence ServicesLink 1Link 2Link 3......Producer AProducer BProducer C......
Clients amidChain
算法策略模块
数据平台模块算法策略模块
Customized Supply Chain Services Solutions
CombosQualityProcessCredit mgt.LogisticsRisk mgt.Inv. mgt.……Needs Integration
RegionReplacement
QualityReplacement
IntegrationOptimization……optimization
XIANGYU Digital IntelligenceServices System
AI Tech ModuleAlgorithm ModuleData Platform Module
Raw Material
Production
Raw Material
Producer AProducer BProducer CProducer DProduction
TransportStore
DistributeConsultFinance
Producer BProducer C……
Producer BProducer C……Producer A
Producer BProducer C……Producer A
Producer BProducer C……Producer ASupply ChainServices ProvidersSupply ChainServicesSupply ChainServices
Producer AProducer BProducer C......
Producer A
Producer B
Producer C
......
Supplier BSupplier CSupplier ASupplier DSupplier BSupplier CSupplier ASupplier D
| Chart7: The Evolution of the Company's Operating Mode |
In the 4.0 phase, the Company has established a diverse range of comprehensive servicecapabilities, full-industry chain service capabilities, and industrial chain operation capabilities inthe previous three phases. These services are provided either separately or in combination to caterto the needs of customers from various industries, regions, scales, and business natures.
In order to cater to the needs of our customers, the Company has established a range of servicecapabilities, including networked logistics, digital supply chain, risk management, global resourceintegration, as well as multidimensional industrial research capabilities and dedicated promotionservice teams. These capabilities are interwoven, connected, and integrated onto a platform, whichis continuously evolving into the "Xiangyu Smart Supply Chain Comprehensive Service Platform".Through leveraging a vast array of service cases and data gathered from specific business scenarios,our platform gains a profound understanding of the demands and needs of manufacturingenterprise customers. This enables us to swiftly analyze and integrate this information torecommend suitable products and services. By tailoring and customizing our output to eachindividual client, we deliver personalized supply chain solutions that are perfectly attuned to theirunique requirements.
The "Xiangyu Smart Supply Chain Comprehensive Service Platform" has a core advantage in that itcombines diverse commodity supply with efficient logistics services through its unique "trade-logistics linkage" system. By seamlessly integrating with the purchasing and sales systems ofmanufacturing enterprises, the Company utilizes multimodal transportation logistics capabilities,multi-channel commodity supply and sales channels, and big data mining and analysis to accuratelypredict customer inventory levels, match supply channels to products, and achieve seamlessregional warehouse cross-region distribution and cross-period replenishment. This enables us toaccurately and efficiently resolve all kinds of "time and space mismatch" issues, making us a leaderin the industry.
4. Profit Model
The Company's profit model is centered on generating revenue from services and scale aggregation.This provides a solid foundation for stable profitability. By expanding into new regions, customer
segments, and commodity categories, as well as stacking services, the Company is able toconsistently grow their business performance. Additionally, the Company leverage pricedifferences to maximize profitability during commodity price fluctuations.
Table 1 Profit Structure and Definitions
| Source of Revenue | Interpretation | the Correlation with Commodity Prices | Proportion | ||
| Service Revenues | By leveraging the benefits of platformization and scaling our operations, the Company offer customers comprehensive services across the entire industry chain. The Company offerings include agency procurement and sales, processing, logistics and distribution, supply chain finance, and information consulting, for which the Company earn service fees (including Financial Service Revenue). Through the "Yuliantong" digital supply chain service platform, the Company upgrade supply chain finance service model, charging customers stable service fees without assuming guarantee responsibilities. By procuring directly from upstream sources and integrating services throughout the chain, the Company enhance circulation efficiency between links, reduce operating costs, and boost revenue levels. | Weak Correlation | ＞70% | ||
| Transaction Revenue | Scale Collective Bargaining Profit | Leveraging our extensive business volume, we strive to achieve cost advantage through centralized procurement and specialized operation, thereby reducing operational costs across all segments and contributing to trading revenue. As the Company continue to enhance our scale advantage and professional expertise, the sensitivity of | Weak Correlation | ＜30% | |
| Source of Revenue | Interpretation | the Correlation with Commodity Prices | Proportion | ||
| the Company‘s trading revenue to price fluctuations in commodities has also decreased. The Company strive for consistent and sturdy growth, improving revenue levels through physical-commerce and trade-trade linkage. | |||||
| Profiting from Price Disparities | By leveraging the Company‘s expertise in professional analysis and judgment, the Company conduct trades by studying the trends of commodity price changes over time and the spatial differences in pricing across different regions to generate profitability. With a vast customer network and robust logistics infrastructure, the Company enhances its capabilities in industry research and supply-demand analysis, strategically managing positions to maximize returns. | Strong Correlation | |||
5. Innovation and Dimension Ascending
The Company focuses on the needs of manufacturing enterprises and leverages the "Xiangyu SmartSupply Chain Comprehensive Service Platform" to participate in more service processes, whileaddressing the long-standing pain points in the supply chain field. To address the difficulties facedby manufacturing enterprise clients in seeking financial support, such as difficulty in financing, highfinancing costs, and slow financing, the Company have introduced an external financial ecosystemand created the "Yuliangtong" Digital Supply Chain Service Platform, solving the problem of credittransmission within the bulk supply chain financial industry. Additionally, to address the long-standing problem of information asymmetry, multiple circulation links, and low efficiency in theagricultural sector, the Company have introduced information technology for internettransformation and built the Xiangyu Industry-level Agricultural Internet Platform.
(1) “Yu Lian Tong” Digital Supply Chain Service Platform
The “Yu Lian Tong” service platform leverages cutting-edge technologies like blockchain, artificialintelligence to establish a secure logistics ecosystem. It ensures complete visibility intotransportation and warehousing operations, providing continuous tracking of goods on-the-wayand within storage facilities, along with tamper-proof digital asset credentials. By bridging thecredit gap between fund suppliers and demand side, the platform ensures the safety of goods andthe reliability of transactions. The company could charge customers a stable service fee withoutassuming any guarantee responsibility.
| Chart8: Operating Mode of the "Yu Lian Tong" Service Platform |
| Chart9: Business Value of "Yu Lian Tong" Service Platform |
As of the end of 2022, the "Yu Lian Tong" service platform has obtained special credit of nearly 9billion yuan for its clients, with a cumulative credit usage of over 11 billion yuan. With the rapiddevelopment of "Yu Lian Tong" service platform business, the Company's asset-liability structureand overall income level are expected to continually improve, and the supply chain is anticipatedto bring significant changes to the existing supply chain finance industry ecosystem.
（2）Industry-level Agriculture Internet Platform
The digital transformation journey of China's agricultural sector has faced significant hurdles interms of information asymmetry, numerous intermediaries along the food supply chain, andoverall inefficiencies. To address these challenges, the Company has joined forces with top-tierfirms such as Alibaba to develop the "Xiangyu Industry Level Agriculture Internet Platform " Thisgroundbreaking platform has enabled end-to-end digitalization of all key phases in the process,including planting, warehousing, transportation, and processing. As a result, the Company hasestablished an integrated service framework that encompasses critical offerings such as advice onplanting, financial support, storage options. By achieving differentiated competitive advantages inareas such as primary grain acquisition, diversified grain operations, proprietary logisticsinfrastructure, and complete end-to-end industrial chain management, our company haspositioned itself at the forefront of the industry.
In the front section, the Company has formed a grain planting industry alliance and launched the"XingXing XiangNong" app to offer farmers an array of crucial services, including agriculturalmaterial procurement and sales, agricultural technology consulting, and product storage solutions.This move aims to address the industry's common problems such as primitive channels, multipletrade links, and information asymmetry, thereby strengthening our ability to control first-handsources of grain and expand our variety.
In the middle section, the Company has strategically built a grain warehouse point alliance in themidstream, consolidating various third-party storage nodes in other regions. This approach hassignificantly increased the Company's grain procurement network density, expanded coverage, andfurther penetrated deep into the industry. Moreover, with the resolution of the long-standingproblems of selling and warehousing difficulties in the industry, the alliance is poised to
successfully serve a wider clientele, stretching from Heilongjiang to Jilin, Liaoning, and beyond.
In the later phase, the Company successfully established a highly efficient grain distributionindustry alliance, which, in turn, enabled us to establish an extensive North-South transportationlogistics service system, allowing us to achieve seamless cross-regional adjustments of diversifiedquality raw materials - effectively meeting the needs of feed, breeding, and deep processingenterprises within various regions. Our company supplies over ten million tons of raw materialsannually to clients such as Wen's Foodstuff Group Co., Ltd., Shuangbaotai Group Co., Ltd., HaidaGroup Co., Ltd., and Yihaikerry Group Co., Ltd., making us the largest corn industry chain serviceprovider in the A-share market.
Upon establishing a comprehensive service and channel infrastructure spanning the entireindustrial chain, the Company decisively delved into the production manufacturing arena, settingup soybean crushing facilities and enhancing our operational competence throughout theindustrial chain.
| Chart10: Industry-level Agriculture Internet Platform |
IV Analysis of Core Competitiveness in Reporting Period
1.Networked Logistics Service Capability
Ranking 3rd among China's top 100 warehousing enterprises, the Company holds a coveted 5Arating as a national logistics powerhouse. The Company’s three logistics entities, Xiangyu Express,Xiangdao Logistics, and Xiangyu Agricultural Produce, are bolstered by a highly competent andmarket-savvy logistics service team of over a thousand professionals.
The Company have pioneered a networked logistics service system that centers on "highway,railway, waterway, and warehouse" and links domestic and overseas markets. This systemcomprises a railway transportation network that spans the east-west and north-south axes, anationwide road transportation network, an ocean-bound water transportation networkconnecting to major domestic ports and countries along the "Belt and Road" initiative, awarehousing cluster that blankets the coastal areas in the east and the commodity hubs in thecentral and western regions, and logistics service capabilities in international chartering and blocktrain services that bridge to overseas markets. Our customers can expect high-quality, customized,and full-process bulk commodity logistics services and multimodal transportation solutions.
The Company have also elevated its logistics service system's operational efficiency and marketcompetitiveness by creating multiple multimodal transportation routes, like the "cross-provincecirculation of aluminum products," "north-to-south grain transportation," "west-to-east coaltransportation," and "north-to-south coal transportation."
Table2 Logistics Resources and Capabilities
| Category | Resources Capability |
| Railway | The Company boasts 14 state-of-the-art railway freight terminals, comprising 11 that are self-owned, two of which are leased, and one managed facility. These terminals are strategically located in central and western regions, and serve as pivotal distribution hubs for bulk commodities. The Company’s infrastructure is further enhanced by its comprehensive network of 47 railway dedicated lines, a vast expanse of container yards and warehouses close to 2.2 million square meters, and an impressive fleet of more than 25,000 self-owned containers. With annual shipping capacity exceeding 35 million tons, |
| Category | Resources Capability |
we are the undisputed industry leaders in this domain, paving the way for high-qualitycoal and aluminum product transportation routes such as "Shandong/Henan-Xinjiang"and "Shaanxi-Yunnan/Guizhou/Sichuan".
| we are the undisputed industry leaders in this domain, paving the way for high-quality coal and aluminum product transportation routes such as "Shandong/Henan-Xinjiang" and "Shaanxi-Yunnan/Guizhou/Sichuan". | |
| Highway | The Company currently boasts an impressive fleet of over 1,300 self-owned transportation vehicles, which are utilized to ensure seamless and efficient transportation of goods. In addition to its self-owned vehicles, the Company have also employed a state-of-the-art freight online platform, which seamlessly integrates with over 56,000 social vehicles to deliver exceptional transportation services. Through these combined efforts, the Company have achieved a remarkable transportation volume exceeding 9 million tons in 2022, further solidifying its position as industry leaders in the domain of logistics and transportation. |
| Waterway | To further enhance our capabilities in the maritime shipping sector, the Company has forged strategic partnerships with renowned port enterprises such as China Merchants Port Group Co., Ltd., Shandong Port Group Co., Ltd., COSCO, Qingdao Port Group Co., Ltd., Lianyungang Port Group Co., Ltd.,, Rizhao Port Group Co., Ltd., and others. By integrating shipping capacity and leveraging the strengths of its partners, the Company have achieved an impressive annual shipping volume of approximately 25 million tons along the domestic coast and the Yangtze River basin. As part of its efforts to bolster its maritime logistics capabilities, the Company have also invested in one self-owned ship for collection and distribution. Furthermore, in 2022, the Company unveiled a new online waterway platform that integrates more than 80 social vessels, with a commissioned volume of 1.3 million tons. Through this strategic combination of self-owned vessels and cooperative partnerships, the Company have established a robust waterway capacity configuration that is second to none. |
| Warehousing | In the area of grain procurement, our company has established a strong presence with 10 highly efficient procurement platforms that rank among the top in the industry. We also boast a significant self-owned storage capacity that exceeds 13 million tons, with the support of advanced equipment that includes 9 railway dedicated lines. In addition, we have built a network of 45 self-owned and leased warehouses, spanning close to 1.5 million square meters, providing ample storage space for our clients. To further enhance our storage capabilities, we have also established 8 storage yards, covering an area of nearly 450,000 square meters. Through these investments, we are well-equipped to support our clients' grain procurement, storage, and transportation needs, and to provide them with end-to-end supply chain solutions. |
| International Logistics | By relying on the global international chartering capacity for bulk dry cargo and the service capabilities of international train logistics channels, the Company have established channels such as the "China-Indonesia Logistics Channel," "China-Vietnam & Thailand Logistics Channel," and the "China-Europe Train" to develop international multimodal transportation capabilities and strengthen its overseas logistics localization capabilities. |
| Chart11: The Company's Networked Logistics Services System Connects Domestic and Overseas Markets |
Establishing a networked logistics service system is a key competence of the Company in servingclients within the manufacturing industry, while also representing a vital foundation for theCompany's ability to exercise control over cargo rights, and to upgrade their business dimensionsthrough digital empowerment.
2.Digitalized Supply Chain Service Capability
The Company's primary focus revolves around three core principles: expanding incrementalmarkets, improving service efficiency, and upgrading maintenance business models. This isachieved through the utilization of extensive business data, an abundance of customer resources,and various applicable scenarios to construct an intelligent information technology system. Thedigitalization and implementation of intelligent systems within the Company is divided into threeprimary categories:
One of the critical aspects of the Company's digitalization and intelligence construction is themodernization of logistics infrastructure. This involves the transformation of warehouses intointelligent facilities, the establishment of a smart logistics service platform, the optimization of
logistics management processes to improve efficiency, the strengthening of cargo ownershipcontrol capabilities, and the development of multi-link series integration for multimodaltransportation systems. The Company is committed to utilizing cutting-edge technology andadvanced systems to ensure that its logistics operations are streamlined, efficient, and fullyoptimized.
Another crucial aspect of the Company's digitalization and intelligence efforts is the drive towardsbusiness model innovation. Leveraging its intelligent logistics platform, the Company hasdeveloped the "Yu Lian Tong" Digital Supply Chain Service Platform, which facilitates efficientconnections between capital and customer needs. Additionally, in collaboration with the Alibabateam, the Company has established an " Industrial-level Agricultural Internet Platform" to promoteintegration and connectivity across the entire grain industry value chain, comprising the corealliances of the Grain Planting Industry, Grain Warehouse, and Grain Circulation Industry. Throughthese innovative business models, the Company is actively driving digitalization and intelligence-powered growth and fostering the development of an ecosystem that benefits all industrystakeholders.
Furthermore, the Company's information technology system provides robust functional protectionand enhances management efficiency. A comprehensive guarantee system has been establishedto cover vital modules such as financial control, human resource management, customerrelationship management, risk management, equipment and asset management, and others, thusproviding all-round support for business operations. Additionally, through the utilization ofenterprise operation analysis systems, customer analysis tools, and big data operations systems,the Company is able to sort, analyze, and strategically utilize vast amounts of business data andcustomer resources, to better serve its operational policies. In summary, the Company'ssophisticated information technology systems empower it to achieve functional protection,streamline its operations, and capitalize on valuable data insights in a proactive and effectivemanner.
3.Systematic Risk management Capability
The Company has established a strong foundation for its risk control system by targeting extensivemanufacturing enterprises as its main customers, and focusing on highly liquid and easilyconvertible bulk commodities as its primary products. Through the use of a multi-dimensionalcommodity portfolio, the Company is able to effectively mitigate systemic risks.
The Company has implemented a comprehensive three-line risk management approach, consistingof the first-line business department, headquarters risk control department, and headquartersaudit department. To ensure stable operation, the Company focuses on pre-control systemconstruction, in-process management, post-summary and system optimization, and creates riskmanagement maps for major identified risks. These risks are then classified, layered, and managedthrough a hierarchical approach, with particular emphasis on areas such as credit risk and pricerisk. By leveraging digitalization, the Company also strengthens its approach to business modelinnovation.
In recent years, the Company has demonstrated a strong financial performance, with creditimpairment losses as a proportion of total operating profits remaining below the industry average.Additionally, the Company has effectively controlled non-recurring gains and losses, resulting in asteadily increasing net profit attributable to parent shareholders and a continuously improvingreturn on equity (ROE) level. These positive trends have led to a significant enhancement of profitstability, and the Company's risk management effectiveness has been demonstrated sustainably.
4.Global Channels and Resource Integration Capabilities
The Company has strategically partnered with a select group of high-quality industry leaders inmetal minerals, agricultural products, energy and chemical, new energy, and other sectors,creating a sophisticated and stable global distribution network. Through close collaboration withupstream and downstream clients, fund providers, technical support, and logistics serviceproviders - both domestically and internationally - the Company has accumulated a wealth ofindustry experience, information, logistics, and financial resources. The Company's resource
advantages are steadily strengthening, and its business model continues to mature, as evidencedby its increasing bargaining power upstream, improved distribution power downstream, andcomprehensive supply chain service capabilities.
5. Multidimensional Industrial Research Capabilities
The Company has instituted a cutting-edge research framework, which includes a "headquartersresearch institute," dedicated subsidiary research departments, and frontline business entityresearch teams. These accomplished researchers provide insights on macroeconomic trends,industry sectors, and segmented products. Additionally, the Company has established a strategicpartnership with the renowned investment research institution, Kaifeng Investment, creating arobust collective of research talent. To support its operations, finance, logistics, risk control, andhuman resources, the Company has meticulously constructed a comprehensive supply chaindatabase, amassing massive data and empowering data processing models. The Company has alsocontinuously strengthened its data mining capabilities to proactively prevent industry risk events,successfully navigate market price fluctuations, and ensure the smooth and efficient operation ofthe Company. The Company's industry research capabilities are fundamental to maintaining itscompetitive edge and fulfilling its operational objectives.
6.Professional Supply Chain Service Team
With a strong focus on talent cultivation and team building, the Company has established a seriesof market-oriented and highly specialized supply chain service teams. These teams possess richoperational experience, formidable market development abilities, and a high degree ofprofessional expertise, granting them the capacity to design customized and professional supplychain solutions in response to clients' requirements. The Company's team management andincentives are keenly adapted to the market, with the launch of Stock Incentive Plan in 2020 and2022, refining the company's long-term incentive structure to reward and motivate key talents.The total incentive grants amounted to almost 8% of the total share capital and are tilted towardscore management personnel and frontline business teams, serving to attract and retain top-tiertalent, and fully stimulating the enthusiasm of core personnel in the Company.
V. Management Discussion and Analysis
1.Business Performance in 2022
In 2022, in the face of the complex and challenging domestic and foreign environment, as well asthe unexpected impact of multiple factors, the Company adhered to the principles of prioritizingthe supply chain, fostering a service industry chain, and generating value through the creationchain. Through adherence to the guiding tenets of the "6th Five-Year Plan," the Company persistedin pursuing innovation and transformation, relentlessly expanding the boundaries of its serviceofferings, extending its reach across multiple service chains, augmenting its capabilities to delivertop-tier service, and sustaining a robust operating environment.
The company's brand influence continues to grow, as evidenced by its inclusion in the FortuneChina 500 list for 11 consecutive years, with its ranking rising to 28th place. Additionally, theCompany has been awarded several prestigious honors, including the 2022 National Supply ChainInnovation and Application Demonstration Enterprise, 5A-level Supply Chain Service Enterprise,Pioneer Award of Industrial Internet Digital Intelligence, and GoldenBee 2022 CSR China Honor RollESG Competitiveness Responsible Procurement Award List. In addition, the Company's main creditrating has been maintained at the AAA level.
(1) Major Financial Data
In 2022, the company achieved a business revenue of 538 billion yuan, an increase of 16.35% YoY;a net profit of 3.78 billion yuan, an increase of 37.18% YoY; a sales net profit margin of 0.70%, anincrease of 0.10 percentage points YoY; a net profit attributable to shareholders of the parentcompany of 2.64 billion yuan, an increase of 20.18% YoY; and a net asset return rate of 18.06%, anincrease of 0.92 percentage points YoY. At the end of 2022, the company's asset-liability ratio was
68.37%, an increase of 1.06 percentage points YoY.
In the past three years, the Company's business revenue, net profit, and net profit attributable toshareholders of the parent company have maintained a steady growth momentum, with acompound growth rate of 22.23%, 51.30%, and 41.21% respectively. Additionally, the net asset
return rate and sales net profit margin have continued to improve, achieving a reasonable growthin quantity and a steady improvement in quality.
| Chart12：Three-Year Total Operating Revenue: A Detailed Overview | Chart13: Three-Year Net Profit and Net Profit Attributable to Parent Shareholders: A Detailed Overview | |
| Chart14: Three-Year ROE: A Detailed Overview | Chart15: Three-Year Gross Profit Margin: A Detailed Overview |
Notes: In order to drive growth, the Company sought new business opportunities and strategic partnerships withother leading companies within the industry. By doing so, the Company was able to access high-quality resourcesand expand their business channels. However, due to the formation of minority shareholders' rights and interestsresulting from those partnerships, net profit attributable to parent shareholders was impacted, resulting
(2) Primary Business Data
The Company has entered into a Blanket Purchase Agreement with its customers to furnish themwith a comprehensive range of supply chain services encompassing procurement and distribution,logistics, supply chain finance, information consulting, processing, and so forth. In line withindustry norms and practices, all aforesaid services were dependent on the bulk commodity supply
| 360 463 538 202020212022 |
| Operating Revenue (RMB bn) |
1.7
2.8
3.8
1.3
2.2
2.6
202020212022
Net Profit (RMB bn)Net Profit attributed to Parent Company (RMB bn)
1.7
2.8
3.8
1.3
2.2
2.6
202020212022
Net Profit (RMB bn)Net Profit attributed to Parent Company (RMB bn)
10.76%
17.14%
18.06%
202020212022
| 10.76%17.14%18.06%202020212022 | 0.46%0.60%0.70%202020212022 |
as the primary carrier, and their corresponding revenue and profits were manifested in theoperating performance of core commodities, as articulated below:
Unit: 100M, RMB
| Category | Total Operating Traded Volume | Total Operating Revenue | Gross Profit (Considered hedging impact of future) | Gross Profit Margin (Considered hedging impact of future) | |||||
| Number (10K tons) | YOY | Amount | YOY | Amount | YOY | Value | YOY | ||
| Metallic Mineral | 11,665 | -5.65% | 3,491 | 8.02% | 54.90 | 30.85% | 1.57% | Increase 0.27 percentage points | |
Among: Ferrous Metal
| Among: Ferrous Metal | 7,675 | -10.40% | 1,171 | -14.17% | 24.21 | 19.85% | 2.07% | Increase 0.59 percentage points | |
| Stainless Steel | 1,606 | 19.07% | 1,122 | 44.61% | 17.29 | 15.47% | 1.54% | Decrease 0.39 percentage points | |
| Aluminum | 2,174 | -8.18% | 1,033 | 4.89% | 10.96 | 102.12% | 1.06% | Increase 0.51 percentage points | |
| Agricultural Products | 1,764 | 19.39% | 520 | 12.45% | 14.12 | -22.19% | 2.72% | Decrease 1.21 percentage points | |
| Among: Raw Grains | 1,446 | 29.44% | 341 | 26.87% | 10.13 | 3.34% | 2.97% | Decrease 0.68 percentage points | |
| Energy and Chemical | 6,345 | 19.56% | 919 | 34.87% | 16.25 | 13.60% | 1.77% | Decrease 0.33 percentage points | |
| Among：Coal | 5,396 | 24.00% | 467 | 68.98% | 11.15 | 14.04% | 2.39% | Decrease 1.15 percentage points | |
| New Energy | 21 | 22.21% | 251 | 176.23% | 4.76 | 162.65% | 1.90% | Decrease 0.10 percentage points | |
| Others | - | - | 27 | 18.25% | - | - | - | - | |
| Total | 19,795 | 3.29% | 5,207 | 16.00% | 90.13 | 16.87% | 1.73% | Increase 0.01 percentage points |
Notes: ①The recategorization of coking coal and coke, which are supplementary materials for steelmaking, fromthe energy and chemical supply chain to the ferrous metal supply chain, has led to their inclusion in the black metalsupply chain. Consequently, last year's data has been adjusted accordingly. ②The company hedges commodityprice fluctuations with futures instruments, which may lead to gains or losses from fair value changes and disposals.By combining futures and spot profits and margins, the overall profit margin is determined, and gains and lossesfrom hedging activities are factored in. This adjusted data represents the period's profits and profit margins.
Despite a decline in operating volume and revenue, the black metal supply chain achieved asignificant increase in overall gross profit and gross profit margin by optimizing procurementchannels and gradually increasing the proportion of coking coal and coke. After hedging on futurescontracts, the aluminum supply chain doubled its gross profit, however, changes in product mixled to a decline in overall operating volume. Due to the increased proportion of market-orientedprocurement of raw materials and a decrease in the proportion of competitive bidding, theagricultural supply chain experienced a slight decrease in gross profit and gross profit margin. Thecoal supply chain aggressively expanded domestic and international customer resources to
increase market share, resulting in a slight decrease in gross profit margin but a significant increasein operating volume and revenue.
In addition to fulfilling the needs of internal supply chain operations, our company's logisticssystem also offers market-driven services to external clients. This segment's financial performanceis accounted for separately and includes the following services:
Unit: 100M, RMB
| Category | Operating Revenue | Gross Profit | Gross Profit Margin | ||||
| Amount | YOY | Amount | YOY | Value | YOY | ||
| Integrated Logistics | 63.97 | 9.79% | 6.38 | 21.78% | 9.97% | Increase 0.98 percentage points | |
| Agricultural Products Logistics | 3.12 | -16.08% | 1.89 | -0.08% | 60.76% | Increase 9.73 percentage points | |
| Railway Logistics | 9.79 | -15.33% | 0.81 | 10.60% | 8.31% | Increase 1.95 percentage points | |
| Total | 76.88 | 4.53% | 9.08 | 15.47% | 11.81% | Increase 1.12 percentage points | |
Notes: Integrated logistics, agricultural logistics, and railway logistics refer to the market-oriented logistics servicesprovided by three subsidiaries of Xiangyu, namely Xiangyu Express, Xiangyu Farming, and Xiangdao Logistics.Integrated logistics mainly includes international routes, international trains, inland water transportation, roadtransportation, domestic and overseas warehousing, while agricultural logistics mainly includes grain national andprovincial storage services.
The sector of agricultural product logistics has experienced a decline in operating volume andrevenue, triggered by the decrease of the national grain storage business. However, the rapidexpansion of higher gross margin provincial grain storage and futures delivery storage businesseshas offset some of the revenue loss, leading to an increase in gross profit margins. On the otherhand, railway logistics have suffered a significant revenue decline due to reduced demand in theconstruction material market and congestion in the domestic logistics. Nonetheless, theoptimization of the business structure has resulted in remarkable growth in gross profit and grossprofit margins.
2.Key Operating Results Overview for 2022
In 2022, the Company made ongoing efforts to optimize its customer structure and enhance itscore competitiveness in comprehensive supply chain services through the elevation of its level of"Platformization, Internationalization, And Digitization".
(1) Optimization of Customer Structure
The Company is dedicated to targeting manufacturing enterprises as its primary customer, with theproportion of manufacturing enterprise clients and service volumes increasing to over 50% and 60%respectively. Furthermore, it also places special emphasis on securing strategic clients in theresources and industry sectors, having recently secured long-term agreements with majorcompanies such as China Huadian, ADM, Rio Tinto Group, and Cargill, among others.
(2) Improvement of Platform Capabilities
The company emphasized on the construction of integrated platform capabilities, providingcustomers with a better comprehensive and one-stop supply chain service experience through thecapacity building of channel, logistics, risk control and other aspects.
①Channel Resource Capability
In the field of metal mineral supply chain, the Company‘s full-service supply chain managementproject (virtual factory) has promoted quality and efficiency. With its channel advantage, thestainless steel supply chain has enriched the Company‘s product structure and maintained high-quality growth in its operations. The aluminum supply chain has maintained its market advantagein mature products like alumina and electrolytic aluminum while continuously exploring newproducts and new markets, with petroleum coke and alumina ranking among the top five importsin the industry. The Company‘s aluminum products' export value has also surpassed $100 millionfor the first time, expanding its business to North America, the Middle East, Europe, and SoutheastAsia.
In terms of agricultural product supply chain, the business layout has been accelerated throughthe asset-light cooperation model, and the number of peripheral warehouses increased by 50% tomore than 160, covering many provinces in Northeast, North, Northwest and East China. For thefirst time, the purchase of summer grain wheat in North China was launched, and the purchasevolume jumped to the third place in Henan Province, achieving a double breakthrough in regionsand varieties, gradually forming a bipolar storage pattern in Northeast China and North China, andthe total purchase volume of autumn grain in the 2021-2022 season reached 12 million tons. TheCompany has signed reserve agreements with Guangdong Provincial Reserve and Fujian ProvincialReserve to extend business space. The soybean crushing business capacity has been improved,with a production utilization rate of 94% and an annual processing capacity of more than 750ktons, increased by more than 90% YoY.
The Company’s bold ventures into energy and chemical supply chains have taken us upstream anddownstream, where the Company leverage an innovative and agile operating structure tomaximize profitability. The Company’s coal supply chain commands a 8% share of the nationalmarket, with a staggering year-on-year growth rate exceeding 115%. The Company have alsoincreased the business contribution from non-electricity customers to 45%, solidifying theCompany’s position as the leading first-tier coal supplier in China, as recognized by the Chinesegovernment. In the plastic supply chain, the Company have expanded its trans-continental andcross-oceanic channels, resulting in a remarkable 60% year-on-year increase in export volume.
In terms of new energy supply chains, the Company continue to specialize in the lithium-ionbattery and photovoltaic supply chains. In the lithium-ion battery and nickel-cobalt plate segments,the Company have achieved full coverage of cooperation with mainstream producers of lithiumiron phosphate cathode materials. The Company’s market share of lithium carbonate ranks amongthe top five in the country, and its lithium salt operation volume is the third largest in China. TheCompany’s cobalt import volume also occupies over 10% of the national market. In thephotovoltaic segment, the Company provide multi-variety auxiliary materials for the entireindustry chain. Using multi-link and full-product services, the Company have formed a multi-
dimensional business ecosystem covering domestic and international procurement and sales, EPCchannels, power station development, and logistics services.
②Logistics Service Capability
The Company has taken the lead in the industry by building a networked logistics service systemcentered around " highway, railway, waterway, and warehouse ", and accelerating its globallogistics layout to provide strong support for building a global supply chain service system.
In domestic logistics, the Company’s achievements include integrating 57,000 social vehicles forroad transport, with a transportation volume surging more than 160% year on year. In terms ofrail transport, the Company completed a shipment volume of 5.5 million tons with a year-on-yeargrowth of 8%, and an arrival volume of 8.87 million tons with an annual growth of 15%. TheCompany have also established new stations in Xinjiang and Inner Mongolia and built stableoutbound business for coal. For water transport, the Company have made progress in buildinginland waterway transport capacity, forming core domestic transport routes around the YangtzeRiver basin and the Beijing-Hangzhou canal. The Company’s annual transport volume in coastaland Yangtze river basin exceeds 25 million tons, including a 90% year-on-year increase in thecarrying capacity of Yangtze bulk shipping. In addition, the Company have launched an onlinewater transport platform, combining self-owned and cooperation-based water transport capacityconfiguration. In warehousing development, the Company have introduced new approveddesignated delivery warehouses for pulp, industrial silica, and corn starch, with a total of 16futures/commodity delivery warehouses, with an overall capacity exceeding one million tons.
In terms of international logistics, the Company have improved the capabilities of its internationalair routes and international train operations. The Company’s international routes and trainsinclude "China-Vietnam," "China-Thailand," and "China-Indonesia," with an annual volumeexceeding 27,000 TEUs, 4.6 million tons, and a year-on-year growth of around 150% in exportshipment volume of the "China-Europe" train route. The Company have also expanded new trans-oceanic routes to Northern Europe, North America, and West Africa, as well as several newinternational train routes, including "China-Europe" and "China-Laos."
③Risk Control Capability
In 2022, the Company operated in a challenging domestic and foreign economic environment,marked by significant industry events such as the failure of aluminum ingot futures deliverywarehouses and defaults on Qinhuangdao copper concentrate. These incidents created negativepressure on the bulk supply chain industry. Additionally, major political and economic changes,including geopolitical conflicts, international economic sanctions, and temporary export bans onIndonesian coal, had a profound impact on global commodity prices and supply-demand patterns.
Despite these circumstances, the Company was able to navigate these complex economicconditions successfully. This achievement was largely due to the comprehensive risk control systemand rapid response capabilities that have been established over the years. These measures enabledthe Company to weather the challenges and operate smoothly, with only minimal impact on thebusiness.
(3) Expansion of Regional Layout
By focusing on core industry chains and expanding its presence in domestic and internationalmarkets, the Company has continued to enhance its supply chain network and service capabilities.
Firstly, the Company’s multifaceted approach includes spearheading regional platforms, such asthe establishment of its premium Hubei Chuxiang Supply Chain Group, as well as nurturing andoptimizing its Southwest and Northwest headquarters platforms, and harnessing the potential ofits American and Vietnamese platforms by leveraging the Company’s overseas business incubationfunctionalities.
Secondly, the Company remain committed to delving deep into its stainless steel supply chain,leveraging the 2.5 million-ton stainless steel smelting project of the Xiangyu Group to cement itslong-term contracts for raw materials with a stellar supply capacity of exceeding 23.3 million tonsand burgeoning the Compay’s distributive channels with more profound efficiency.
Thirdly, having successfully expanded its international business with total international businessvolume of nearly USD 24.7 billion, the Company have emerged as a key player exporting to over100 countries and regions with export business volume scaling a whopping 56%, with its aluminumsupply chain exports witnessing a phenomenal year-on-year surge of more than 360%, while itsblack metal supply chain exports proliferated by 67%, plastic supply chain exports escalated by 60%,and its agricultural product supply chain imports surged twofold.
(4) Breakthroughs in Digital Innovation
The Company has been committed to implementing digital innovation from a strategic perspective,systematically promoting a series of digital projects, and establishing a supportive digitaltransformation system to empower enterprise development.
The Company's innovative use of cutting-edge technologies to establish a comprehensive grainplanting industry alliance is a testament to its forward-thinking vision and strategic agility. TheHuiNong Mall, Order System, Insurance, and Grain Chain Communication System represent agame-changing development for the industry. The success of the "Xing Xing Xiang Nong" app, withits registration of 38,000 planting households and input of 6.894 million acres of land, hasreinforced the Company's position as a leader in the agricultural technology sector. Additionally,the WaaS system has proven to be an outstanding solution for data management, quality tracking,risk control, and on-site operation efficiency improvement, achieving remarkable results inenhancing harvesting efficiency in pilot areas such as Fujin and Suihua.
The second area of focus for the Company has embarked on a strategic trajectory with the launchof the cutting-edge "YuLianTong" app, which has significantly augmented the already diverseproduct matrix of "Yu Cang Rong", "Yu Cai Rong", and "Yu Tu Rong". This exceptional andinnovative move has greatly accelerated the pace of the Company's business expansion,cementing its position as a leader in logistics and supply chain finance. As a result, the Companyhas obtained special credit of nearly 9 billion yuan for its esteemed customers. Ultimately, theircommitment to providing top-notch services and unparalleled customer satisfaction has beenrecognized and rewarded, as evidenced by the prestigious recognition from the China Federation
of Logistics and Purchasing, who awarded the platform the title of "Excellent Case of China'sLogistics and Supply Chain Finance in 2022".
The Company's third focal area has centered on the incessant refinement of its intelligent logisticsservice platform, coupled with an expeditious upgrading of its logistics stations to an intelligentmode. By integrating stations located in Shaanxi and Anyang into the intelligent logistics system,the Company has attained greater cargo management and control, resulting in significantlyreduced costs and enhanced efficiency. The Company has also accomplished the transformationof 16 warehouses into intelligent facilities, causing the total number of digitally-optimizedwarehouses to surge to 34. Intrinsic to this is the augmentation of the firm's cargo managementability and customer experience.
Likewise, in the Company's focus area, the implementation of its 4A-grade network freightplatform has taken center phase, complete with payment, risk control, location services, and anelectronic fencing feature. Operating on a centralized technology architecture, this innovativeplatform has provided the Company with an overarching view of the entire logistics transportationprocess, as well as comprehensive monitoring and early warnings for its business operations. Thishas served to address the shortcomings of traditional freight markets in terms of information lag,cargo safety and risk control punctuality. Additionally, the Company has introduced a networkwater transport platform which has realized more than 90 successful transactions thus far.
3.Business Plan for 2023
In 2023, it is expected that international commodity prices will experience high volatility, andinflationary pressures from imports will continue to exist. However, the Company’s country'seconomy has a solid foundation for steady growth. The Company will continue to adhere to thesteady improvement of quality and reasonable growth in quantity, striving to achieve a revenue of
612.4 billion yuan, while controlling costs within 606.2 billion yuan. the Company will focus on thefollowing key tasks:
In terms of digital transformation, the Company will establish a technology subsidiary responsible
for the research and operation of the "Yulian Tong" Digital Supply Chain Service Platform. TheCompany will set up a professional sales team and vigorously expand customer and financialinstitutions, seeking to achieve exponential growth in customer loan volume. Drawing fromexperience in operating Industry-level Agricultural Internet Platforms, the Company will acceleratethe construction of an industrial alliance ecosystem on the basis of a stable profit model. theCompany will make the food planting and warehouse alliance a reality in Suihua, the surroundingareas of Yian and Fujin, and promote the landing of the grain circulation alliance platform.
With respect to international expansion, on the one hand, the Company will closely focus onpolicies and situations related to the "Belt and Road," "BRICS," and "RCEP" initiatives to expandoverseas channels and the scale of international business. On the other hand, the Company willdeepen the full supply chain service of the "Xiangyu Group's Indonesia 2.5 million-ton stainlesssteel smelting-integrated project." The Company will upstream build stable overseas procurementchannels for nickel, chromium, and coal, and downstream further expand overseas incrementalcustomers. In addition, the Company will enhance international logistics channel construction andpromote overseas warehouse layout expansion, thereby enhancing comprehensive servicecapabilities.
With regards to capital operations, the Company aim to strengthen its reserves by conducting aprivate placement of A-share stocks, while enhancing the contribution of its net profit attributableto shareholders to the Company‘s overall net profit figures.
In order to elevate its abilities, the Company intend to refine its systems for cultivating project-based businesses, driving productivity gains and value optimization. Furthermore, the Companyplan to develop specialized, all-in-one supply chain logistics platforms, drawing upon bothdomestic and international logistics resources. In this vein, the Company will also shore up its riskmanagement capabilities by advancing its digital risk control apparatus, embedding procedures forrisk control, and establishing automated risk alerts.
Xiamen Xiangyu Co., Ltd.
April 27, 2023