On March 18, Gelonghui Auto (01268.HK) announced that the company expects the profit accrued by the company's equity shareholders in 2023 to fall compared to the previous year.

The board of directors believes that the decline in profit attributable to the company's equity shareholders in 2023 is mainly due to the following reasons: (1) the Group's business was affected by weak consumption power due to macroeconomics, and in 2023, gross profit fell by no more than 18% compared to 2022; (2) considering continued changes in the macroeconomic environment in the second half of 2023, increasingly fierce competition in the automobile dealership industry, and recent developments in customer demand in the Chinese automobile market after the COVID pandemic, the company carried out impairment assessments with the assistance of external valuers. The cash generation account confirmed the impairment of goodwill and dealer rights of approximately RMB 25 million in the second half of 2023. In addition to the impairment of approximately RMB 37 million in the first half of 2023, the total impairment of goodwill and dealer rights was approximately RMB 62 million in the full year of 2023; (3) With respect to Star Chase Auto Sales Group Co., Ltd., which was acquired by the company on April 29, 2022, the amortization expenses of related dealer rights increased to approximately RMB 153 million compared to 2022. The increase in expenses was mainly due to the completion of the merger and acquisition at the end of April 2022, so compared to the full year of 2023, 2022 only involved about eight months of corresponding expenses; (4) the cost of litigation in 2023 to resolve legal disputes involving certain investments made by some of the company's subsidiaries before 2022 was approximately RMB 59 million; (5) withholding income tax on dividends from mainland subsidiaries to overseas holding companies in the current year and the foreseeable future of about RMB 80 million (compared to 2022) Approximately RMB 43 million for the year); and (6) the additional costs of HK$2,750,000,000 zero-interest guaranteed convertible bonds issued by SailVantageLimited, a wholly-owned subsidiary of the company and due in 2027, related issuance costs (such as intermediary fees) and amortization of part of the debt in 2023 using the effective interest rate method (compared to approximately RMB 96 million in 2022).

Mainly affected by the above factors, the profit accruing to the company's equity shareholders in 2023 is expected to drop by about 73% compared to 2022. The Board of Directors believes that the Group's overall financial position is sound and sound. The Group will continue to maintain a prudent and sound financial strategy.