Securities Code: 002126 Securities Abbr.: YINLUN Public Announcement No.: 2021-022
ZHEJIANG YINLUN MACHINERY CO.,LTD.
Annual Report 2020 (Abstract)
I. Important NotesThis Abstract is extracted from 2020 Annual Report of Zhejiang Yinlun Machinery Co., Ltd. (“theCompany). In order to have a full understanding of the operating results, financial status andfuture development plan of the Company, investors are suggested to read the full report carefullyon the media designated by the China Securities Regulatory Commission (the “CSRC”).
Indicate by check mark if independent auditor issues Non-standard Audit Opinions
□ Applicable √ Not applicable
Indicate by check mark if there is a pre-arranged plan of profit distribution or transferring capitalreserve into common stock for the report period which has been reviewed and approved by theBoard of Directors
√ Applicable □ Not applicable
Indicate by check mark if transferring capital reserve into common stock
□Applicable √Not applicable
Pre-arranged profit distribution plan reviewed and approved by the Board of Directors：with792,095,104 shares as the base ,distribute 0.8 Yuan cash dividends per 10 common stocks (taxinclusive)，send bonus of 0 shares (tax inclusive), do not transfer to increase capital stock withaccumulation fund.
Indicate by check mark if preplan for preferred stocks profit distribution to shareholders for thereport period which has been reviewed and approved by the Board of Directors
□ Applicable √ Not applicable
II. Company Profile
1. Stock profile
| Stock abbr. | YINLUN | Stock code | 002126 | |
| Stock exchange | Shenzhen Stock Exchange | |||
| Contact Information | Board Secretary | Securities Representative | ||
| Name | Min Chen | Lifen Xu | ||
| Office add. | No.8,East Shifeng Road, Fuxi District, Tiantai, Zhejiang, China | No.8,East Shifeng Road, Fuxi District, Tiantai, Zhejiang, China | ||
| Tel. | 0576-83938250 | 0576-83938250 | ||
| 002126@yinlun.cn | 002126@yinlun.cn | |||
2. Brief introduction to main business or products in the report period
（一）Main business and main products
1.Main Business
The company based on four main product development directions in "energy saving,emission reduction, intelligence, and safety" focused on the development, production and sales forproducts of heat exchangers of oil, water, gas, and refrigerants, automobile air conditioners andvehicle thermal management, and related products in emission control system. The main productsare divided into two product categories, thermal management and exhaust gas treatment, Whilethe thermal management can be further divided into heat exchangers and automotiveair-conditioning. The company’s products are also divided by application fields, which mainlyinclude commercial vehicles, passenger cars, construction machinery and other fields.
The company is a national high-tech enterprise and the lead unit in China InternalCombustion Engine Standardization Technical Committee in heat exchanger industrial standard. Ithas established a national-level enterprise technology center, a post-doctoral scientific researchstation, a Zhejiang Provincial Key Enterprise Research Institute, a Zhejiang Engineering ResearchCenter and a Zhejiang Provincial Double Creation base. In the recent years, the company hascontinued to carry out an international strategic layout and has established production facilitiesand R&D sub-centers in Zhejiang, Shanghai, Hubei, Shandong and other locations, as well asNorth America, Europe and other location.
2.Company main products
The company's products are divided by applications and mainly include commercial vehicles,construction machinery, passenger cars, new energy vehicles and other fields. The position of theproducts in each vehicle is shown in the figure below:
(1) new energy vehicles
(2) passenger cars
（3）commercial vehicles
（4）construction machinery
（5）Exhaust Treatment
（6）other fields
（二）Main Customers
The main customers in the new energy vehicles include Volvo, Porsche, NIO, Xiaopeng,Weimar, GM, Ford, CATL, Geely, GAC, BYD, Yutong, Jiangling, etc.;The main customers in the fuel cell field include Yihuatong, SAIC Maxus, etc.;The main customers in the passenger cars include Ford, GM, BMW, Renault,MANN+HUMMEL, Jaguar Land Rover, GAC Mitsubishi, Dongfeng Nissan, Toyota, Geely, GAC,Great Wall, Changan, BYD, SAIC, etc.;
The main customers in the super sports cars include Ferrari, Audi, Mercedes-Benz,Lamborghini, Bentley, BMW, McLaren, Ford, etc.;
The main customers in the commercial vehicle include Daimler, Cummins, Navistar, Scania,FAW Jiefang, Dongfeng Motor, Sinotruk, Beiqi Foton, Yuchai, Xichai, Weichai, etc.;
The main customers in the construction machinery include Caterpillar, John Deere,Sumitomo, XCMG, Lonking, Sany Heavy Industries, Kubota, etc.
The main customers in the civil air-conditioning include Gree, Midea, Haier, Hisense,Samsung, LG, Tianshu, etc.
（三）Business Model
The company is a national high-tech enterprise with the integration of R&D, production andsales.
1、R&D model
As a national high-tech enterprise, the company has always paid great attention to the reserveand output of technological development, continuously strengthened technological innovation andthe investment in new product development, introducing high-quality talents, improved theresearch and development system, created a good innovation atmosphere, stimulated theinnovation motivation of the employee, and further enhanced the competitiveness of thecompany's products.
In the second take-off stage, the company implemented a technology-leading strategy,formulated product and technology strategic planning and implementation paths, focused onproduct, technology research and development and process improvement, built a global R&Dstructure, system and process. A complete system of research, development and testing forverification has been established, to strengthen the basic capabilities of R&D and its infrastructurefor better the overall R&D capabilities. At present, the company has established R&D centers inShanghai, Europe, and North America. Some subsidiaries are also actively carrying out R&Dworks and have achieved good R&D results.
With the experiences from more than ten years of production and R&D, a number ofinternationally first-class and domestic leading core technologies have been achieved, whichmakes the company's products to have the advantages of leading technology, low cost, and highquality in each same product category.
2、Production Model
The company has established an order-driven pulling-type production method, productionbased on sales requests, for rapid and timely response. The company develops products according
to the customer's technical, quality, development cycle, cost and other requirements, and arrangesthe purchase according to the order quantity and production plan. The company's cycle fromreceiving customer orders, purchasing the raw materials, organizing the production to deliveringthe product is generally about 15-25 days. The company uses agile, lean, informatization,automation, intelligent logistics and error-proofing technologies, also adapts to local conditions,by using the world’s advanced manufacturing technology and management methods tocontinuously improve product quality, reduce costs, and shorten delivery times, to raise thecompany’s manufacturing practice to the world leading level.In terms of product manufacturing, the company focuses on the three major productplatforms: thermal management for passenger cars and new energy vehicles, thermal managementfor commercial vehicles and off-roads, and exhaust gas after treatment. The product lines drive thebusiness divisions and subsidiaries to work together, while the territories are based on customerneeds. In 2020, the company added a new business division to the original passenger car and newenergy thermal management division, commercial vehicle and non-road division, and exhaust gasafter-treatment division. For the new energy products, the company will mainly develop andmanufacture air-conditioning systems and air-conditioning boxes. The company has subsidiariesand production base in Zhejiang, Shanghai, Shandong, Hubei, Jiangsu, Guangdong, Guangxi,Jiangxi and other locations. And it has established R&D sub-centers and production base in theUnited States, Sweden, and Poland. In accordance with the principles of economics scale,comparative cost and closeness to the customers, the company rationally plans the productionlayout on a global base and meets the needs of global customers with global supply capabilities.
3、Sales Model
The company mainly adopts direct sales model, which is point-to-point sales. As a tier onesupporting supplier of major vehicle and engine manufacturers, it directly sells products to OEMs.The company has established a rapid response system that integrates technology, productionand service, and continuously strengthens expansion of local markets and technical and after-salesservice capabilities globally. The company has set up a "Golden Triangle" of self-operated teamwhich includes account managers, project managers, and technical managers. It has also set up athree-dimensional sales network and service system combining point, line and surface to providecustomers with end-to-end services. The company implements three simultaneous (synchronousdevelopment, simultaneous development, and simultaneous planning) and three corporations(asset cooperation, territorial cooperation, and strategic cooperation) to continuously increase themarket share at strategies and key customers. By focusing on domestic and foreign strategic
customers, the company has established individual strategic plan for each customer.
（四）Industry development status and the company's industry status
The company mainly produces thermal management products such as heat exchangers,automotive air conditioners, and exhaust gas treatment products in the automotive partsmanufacturing industry. The company's business development is mainly affected by thedevelopment of the automotive industry. At the beginning of 2020, due to the impact of thepandemic, the sales volume of automobile industry has dropped significantly. As the domesticpandemic prevention and the control of the situation continue being improved, the overallChina?s economic status was continuously recovered, and the manufacturing industry wascontinuously improved at both supply and demand ends. And the market for the customerscontinues to be improved, and the construction projects of major infrastructure was accelerated,and the polices to promote automobile consumption in various regions continues to driveautomobile production and sales, which shows a picking up momentum and supports a gooddevelopment trend. According to data released by the China Association of AutomobileManufacturers, the production and sales volume of automobiles in 2020 was 25.225 million and
25.311 million, which was just 2% and 1.9% lower than last year.
In the automotive supply chain, the company has developed and became a leadingenterprise in the domestic automotive thermal management industry. It has top heat exchangermass production capacity and systematic automotive heat exchanger technology reserve. It isone of the largest suppliers for commercial and mechanical heat exchanger products. A strongcompetitive advantage in the thermal management of traditional commercial vehicles, passengercars, and construction machinery has been established. It has also much experience in theexhaust gas treatment industry with certain competitiveness. It is now gradually expanding intothermal management area for new energy passenger car.
The company will continue to persist in the three strategic directions of "acceleratinginternational development, achieving technology leadership, and enhancing overallcompetitiveness", and is committed to provide heat exchange solutions in the field of automotiveheat exchange, and strives to build the company to be a global outstanding enterprise inproviding system solutions in efficient heat exchange and exhaust system.
（五） Development trend and performance driving factors of automotive supplier
1. The trend of parts localization is conducive to the development of local auto partsmanufacturing enterprises.
Based on analysis on the supply side, as continuously developing in China's automobile
industry and upgrading in industrial technology, some domestic manufacturing enterprises ownthe technologies in manufacturing of precision auto parts and build up the capacity of massproduction. Replacement by domestic parts is gradually extending from the interior and exteriordecoration parts to functional parts of engine system, air conditioning system as well as safetyparts of chassis. Some international firms may take the initiative to exit because of industrialtransformation and shrinking of their competitive advantages.Based on the analysis on the demand side, under the pressure for cost reduction andefficiency increase, auto enterprises are motivated for parts localization. Comparing to biginternational parts suppliers, domestic parts manufacturers have the advantages of low cost.Short distance and rapid response in synchronous development are expected to benefit to thelocal parts manufacturers for more market share. At the same time, for automobile enterprises,cooperation with local parts manufacturers can also avoid the unexpected risks caused by thecomplexity and unpredictable international situations.
2. The future development potential of new energy vehicles is huge, and the value of newenergy thermal management system is highIn November 2020, the general office of the State Council issued the new energy vehicleindustry development plan (2021-2035), which proposed that we must seize the strategicopportunity, consolidate the good momentum, fully utilize the advantages of the infrastructure,information and communication, continuously improve the core competitiveness of the industry,and promote the high-quality and sustainable development in the new energy vehicle industry.By 2025, the market competitiveness of China's new energy vehicles will be significantlyenhanced, and major breakthroughs will be made in key technologies such as power battery,driving motor and vehicle operating system, and the safety level will be comprehensivelyimproved. The sales of new energy vehicles will reach 20% of the total sales volume of newautomobiles. There is still a huge development space for new energy vehicles.Comparing to traditional vehicles, new energy vehicles has the different power source,which also leads to more complex functions of thermal management system in new energyvehicles. Comparing to the traditional vehicle thermal management system, the value of newenergy vehicle thermal management system in single vehicle is significantly higher, which is about2-3 times of what in the traditional passenger car.
3. The commercial vehicle market will maintain a high momentum driven by factors such asthe elimination of the China III, infrastructure investment and overload control
In June 2018, the State Council issued the "three year action plan for protecting blue sky",
which requires key regions to vigorously promote the elimination and renewal of diesel truckswith China III emission standard or lowers in advance, and accelerate the elimination of old gasengine vehicles using lean burn technology and "oil to gas". By 2020, in Beijing, Tianjin, Hebei andthe surrounding areas, and the Fen Wei plain, more than 1 million medium and heavy dieseltrucks with China III emission standard or lowers will have to be eliminated. Due to the aging ofthe existing heavy diesel trucks with China III, combined with other factors, the centralizedscrapping and replacement of this type trucks will happen in the short term.Secondly, through the implementation of various macro policies, China has moderatelyincreased the intensity of counter-cycle adjustment. Jiangsu, Beijing and other provinces andcities have issued large-scale investment plans, in which various types of infrastructureconstruction are still an important part. With the continuous start of infrastructure projects invarious regions, the demand for heavy trucks in construction will further increase.In addition, overloading is very common in the commercial vehicle market. On September18, 2018, the Ministry of transportation issued the notice on strictly implementing the nationaloverload and overrun identification standards to strengthen the management in highwayoverload control and law enforcement. Illegally overload and overrun vehicles will be refused toenter the highway. Since viaduct rollover accident occurred in the Wuxi in October 2019,overloading has been more strictly controlled in all the cities.. On May 21, 2019, the incident of"large ton weight but small ton license certificated" broke out in the light truck industry. Sincethen, the vehicle management offices across the country have strengthened the registration andweighing management, strictly prohibited the registration for overweight vehicles and alsostrengthened the management of production source of the overweight vehicles. On April 21,2020, the safety committee of the State Council issued the national three year action plan forspecial rectification of work safety’, established the information supervision system for overloadcontrol, strictly implemented the measures of "one overload for four penalties" for overloadcontrol, deepened the special rectification of "100 ton", and basically eliminate the illegalmodification of truck and "large ton and small ton license " by 2022. In recent years, the relevantoverload control measures can fully reflect the determination of the state to deal with theoverload problem of the trucks. Strict enforcement of the law has significantly reduced the singlevehicle capacity and significantly increased the market demand for more commercial vehiclesalong with the steady increase in total transport volume.
4. National emission standards continue to upgrade iteratively, creating new demand forvehicle exhaust treatment
In 2016 and 2018, "emission limits and measurement methods for light vehicles (Chinaphase VI)" and "emission limits and measurement methods for heavy diesel vehicles (Chinaphase VI)" were released one after another, with the specification in the emission requirementsand implementation time of the China VI standards. With the gradual implementation ofemission policy, the demand for exhaust gas treatment products will be greatly increased.
5. Regional localization development of automobile supply chain
Due to the influence of epidemic situation, trade friction and other factors, developedcountries rethink the global industrial value chain model at the national strategic level, interveneand shrink the global industrial value chain through certain non market measures, andappropriately reduce the dependence on external single supply chain. At the same time, in orderto avoid the risk on the supply side to realize the secured production, vehicle manufacturers alsotend to have supply nearby.
Therefore, the existing industrial value chain pattern with division of labor and cooperationin the automobile industry will be challenged to a certain extent, and the regional localizedvertical supply chain pattern and the mode of tripartite or multilateral strategic cooperation willbe developed rapidly.
3. Selected Financial Data
(1) Key accounting data and financial ratios for the past three yearsIndicate by check mark if there is any retrospectively restated accounting data of previous years.
□ Yes √ No
Unit: Yuan
| 2020 | 2019 | Increase/decrease of current year over prior year | 2018 | |
| Revenue | 6,324,186,529.70 | 5,520,743,642.53 | 14.55% | 5,019,241,538.44 |
| Net profit attributable to shareholders | 321,583,085.75 | 317,677,156.02 | 1.23% | 349,122,610.13 |
| Net profit attributable to shareholders excluding non-recurring gains and losses | 260,386,304.06 | 172,855,258.34 | 50.64% | 304,010,155.58 |
| Net cash flows from operating activities | 456,173,578.49 | 688,584,828.23 | -33.75% | 304,839,058.43 |
| Basic EPS (RMB Yuan / share) | 0.41 | 0.40 | 2.50% | 0.44 |
| Diluted EPS (RMB Yuan / share) | 0.41 | 0.40 | 2.50% | 0.44 |
| Weighted average ROE (%) | 8.40% | 8.60% | -0.20% | 10.01% |
| As of Dec.31, 2020 | As of Dec.31, 2019 | Increase/decrease of current year over prior year | As of Dec.31, 2018 | |
| Total assets | 9,856,245,406.68 | 8,424,106,635.59 | 17.00% | 7,858,823,185.48 |
| Net assets attributable to shareholders | 3,937,786,096.18 | 3,729,627,295.93 | 5.58% | 3,605,604,813.61 |
(2) Key accounting data by quarter
Unit: Yuan
| Q1 | Q2 | Q3 | Q4 | |
| Revenue | 1,274,726,672.29 | 1,734,874,643.52 | 1,498,877,044.63 | 1,815,708,169.26 |
| Net profit attributable to shareholders | 93,052,233.55 | 110,537,804.87 | 75,393,745.10 | 42,599,302.23 |
| Net profit attributable to shareholders excluding non-recurring gains and losses | 72,987,849.25 | 106,276,916.16 | 60,922,848.77 | 20,198,689.88 |
| Net cash flows from operating activities | -92,851,643.90 | 11,653,421.15 | 34,275,030.70 | 503,096,770.54 |
Indicate by check mark if any material difference between the above financial indicators or theirsummations and those which have been disclosed in the Company’s Quarterly or Interim report.
□ Yes √ No
4. Capital and Shareholders
(1) Top 10 shareholders of common stock and preferred stock with resumed voting
rights
Unit: Share
| Total number of shareholders of common stocks at the end of the reporting period | 33,652 | Total number of shareholders of common stocks at previous month-end of this report’s disclosure | 40,530 | Total number of shareholders of preferred stock with resumed voting right at the end of the reporting period | 0 | Total number of shareholders of preferred stock with resumed voting rights at previous month-end of this report’s disclosure | 0 | ||||||
| Top 10 shareholders | |||||||||||||
| Name | Nature | Ownership | Quantity of stocks | Quantity of restricted stocks held | Pledged or frozen stocks | ||||||||
| Status | Quantity | ||||||||||||
| Tiantai Yinlun Industrial Development Co., Ltd. | Domestic non-state-owned corporate | 10.16% | 80,444,000 | Pledged | 15,000,000 | ||||||||
| Hong Kong Securities Clearing Company Ltd.(HKSC) | Foreign corporate | 5.62% | 44,512,966 | ||||||||||
| 1003 Portfolio of Basic Endowment Insurance Fund | Other | 4.9% | 38,801,674 | |||
| Xiaomin Xu | Domestic natural person | 4.1% | 32,470,808 | 24,353,106 | ||
| Ningbo Zhengqi Investment Management Center (Limited Partnership) | Domestic non-state-owned corporate | 4.04% | 32,000,000 | |||
| Industrial and Commercial Bank of China Co., Ltd.-Rongtong China Wind No. 1 Flexible Configuration Hybrid Securities Investment Fund | Other | 1.55% | 12,243,352 | |||
| China Construction Bank Co., Ltd. - Invesco Great Wall Environmental Advantage Equity Securities Investment Fund | Other | 1.26% | 9,940,828 | |||
| National First Pension Trust Company - Owned funds | Other | 1.2% | 9,511,989 | |||
| Bank of China - China Securities New Energy Automobile ETF Securities Investment Fund | Other | 1.14% | 9,056,380 | |||
| Bank of China - Invesco Great Wall Preferred Hybrid Securities Investment Fund | Other | 1.13% | 8,914,306 | |||
| Explanation on the above-mentioned shareholders’ affiliated relationship or concerted action | Xiaomin Xu is an executive director of Tiantai Yinlun Industrial Development Co., Ltd. and an executive partner of Ningbo Zhengqi Investment Management Center (Limited Partnership). The Company is not aware of any affiliation relationship between other shareholders. | |||||
| Explanation on the above-mentioned shareholders that are engaged in margin trading business | Not applicable | |||||
(2) Total number of and top 10 shareholders of preferred stocks
□ Applicable √ Not applicable
No shareholders holding preferred stocks noted in the reporting period
(3) The ownership and controlling relationship between the Company and its actualcontroller is in form of diagram
5. Bonds
Does the Company have any corporate bond that is publicly issued and listed on the stockexchange and that is immature or not fully redeemed as of the approved issuance date of theAnnual Report?None
III. Management Discussion and Analysis
1. Business review for the reporting period
In 2020, the sudden new Covid-19 pandemic has had a huge impact on the automotiveindustry. The entire industry has not been afraid of overcome difficulties, steadily promotedresuming of the production inventory, accelerated the transformation of marketing methods,and actively promoted automotive consumption., and the automotive market has be graduallyrecovered, with continuously increase which has been sustained since April. The annualproduction of automobiles has been maintained steadily with slight decrease and the impact ofthe pandemic has been mostly eased. The overall performance demonstrated the great strengthof development and domestic dynamic. The annual production and sales of automobilesreached for the year were 25.225 million and 25.311 million, only down 2% and 1.9%year-on-year, respectively. The rate of decline was narrowed down to 5.5 and 6.3 percentagepoints lower than respectively comparing to the previous year.In this environment, the company responded quickly, focusing on pandemic preventionand control on the one hand, and resuming production on the other hand, firmly committed tothe three strategic directions of "accelerating international development, highlightingtechnology leadership, and building comprehensive competitiveness", also liberated mindsand innovated business models, continuously improve increased research and developmentcapabilities, and improved quality control capabilities and operational efficiency. During the
reporting period, the company achieved operating income of RMB 6,324,186,529.70, anincrease of 14.55% over the same period last year; realized a total profit of RMB418,831,171.00, an increase of 4.77% over the same period of last year; realized a net profitof RMB 320,495,900 attributable to shareholders of listed companies of RMB321,583,085.75, which was an increase of 1.23% over the same period last year.
In terms of technology research and development, 58 R&D projects were approved forthe year, 198 new patent applications were filed, and R&D investment was RMB 269 million,a year-on-year increase of 22.26%. The company continued to improve the company’stechnology and R&D capabilities, enhance product testing capabilities, and improve productperformance reliability; concentrate resources to accelerate the research and development ofin key core technologies, promote major technology research and development projects, andfocus on the market needs of 8+N strategic customers and important customers. Focus on andaim breaking through in the company's strategic customers and major projects.In terms of customer and market expansion, the company focused on strategic majorcustomers and large projects, guided resource allocation according to priority, andimplemented the "one customer, one policy" tactic; and established data accumulation as adatabase to improve inventory, cash, and price management process to reduce salesadministration costs. During the reporting period, the company also successively won 210new projects, such as the North American new energy benchmark car cooling module, Volvonew energy vehicle battery cooling plate and cooling module, Geely Daimler SMARTplatform heat pump air conditioning project, Porsche new energy vehicle battery cooling plate,Geely Automobile PEA battery Cooler and DHT cooling module, Toyota oil cooler, Fastgearoil cooler, Weichai engine filter module assembly, Weichai after treatment system assembly,Mann+Hummel (BMW) water-to-air cooler, etc. of 210 new awarded projects. According tocustomer needs and forecasts, these above projects will add nearly 3.95 billion RMB inannual sales revenue to the company after the completion of all the projects, of which the newenergy vehicle business accounted for about 27%, and the passenger vehicle business(including new energy and fuel vehicles) accounted for about 46.7. %., The company's futurepassenger vehicle business (including new energy and fuel vehicles) will continue to increase,and the business structure will be further optimized, which enhance the stability of growth inperformance growth, and lay a solid foundation for the realization of the goal for the secondentrepreneurial goal.In terms of improving product competitiveness, we the company has gradually
established an operating system with scientific management, clear processes, and strongexecution. The company continuously improved product material technology, and promotedbreakthroughs and improvements in key processes, and achieved no fluxless brazing on CACcooler product. The company also paid attention to the improvement of simulation analysiscapabilities, reduced simulation time, and improved the accuracy of simulation and analysisresults, which results in and has winning major projects from important strategic customersfor the company.In terms of talent training and incentives, with by aiming strategic objectivesachievement as the driving force for training, and customer requirements as a landing theexecution guide, we built a talent training system that combines strategic business + on-the-job capability improvement. During the reporting period, the company planned andorganized 7 special training courses, including project engineer ability improvement class,marketing engineer ability improvement class, and expert lecture hall, with a total of 339hours of training. In terms of the motivation, the company used guidance of follow theperformance + ability orientation, which fully reflects the personal business skills andcontribution to, and stimulate the enthusiasm of employees.
2. Significant changes in main business in the reporting period
□ Applicable √ Not applicable
3. Products contributing to over 10% of the Company’s main business revenue or profit
√ Applicable □ Not applicable
Unit: Yuan
| Product | Revenue | Profit | Gross profit margin (%) | Revenue: +/-% over last year | Profit: +/-% over last year | Gross profit margin +/-% over last year |
| Heat Exchanger | 4,897,522,940.29 | 312,309,870.29 | 23.50% | 7.52% | 3.30% | -1.08% |
| Exhaust Treatment | 794,142,102.66 | 45,475,312.50 | 22.85% | 27.82% | 1,486.20% | 5.44% |
4. Seasonal or periodic characteristics in operating performance that needs specialattention
□ Applicable √ Not applicable
5. Significant changes in revenues, costs and net profit attributable to shareholders withcommon shares or their composition comparing to prior reporting period
□ Applicable √ Not applicable
6. Listing suspension or termination
□ Applicable √ Not applicable
7. Matters related to financial statements
(1) Explanation on changes in accounting policy, accounting estimations and accountingmethods comparing to prior year financial statement
√ Applicable □ Not applicable
（1）Implement the Accounting Standards for Business Enterprises No. 14 -- Revenue (revised in2017) (hereinafter referred to as the "new revenue standards")
The Ministry of Finance revised the Accounting Standards for Business Enterprises No. 14 -Revenue in 2017. The revised standard stipulates that the first implementation of the standardshould adjust the amount of retained earnings and other related items in the financial statements atthe beginning of the year according to the cumulative impact, without adjusting the information forcomparable periods.The company will implement the new revenue standards from January 1, 2020. According tothe standards, the company only adjusts the retained earnings at the beginning of 2020 and theamount of other related items in the financial statements for the cumulative impact of contracts thathave not been completed on the date of first implementation, and the comparative financialstatements do not adjust. The main impacts of the implementation of this standard are as follows:
| The content and reason of accounting policy change | Affected report items | Amount of impact on the balance on January 1, 2020 | |
| consolidation | The parent company | ||
| （1）Reclassification of advance receipts related to the sale of goods to contract liabilities | Advance receipt | -34,032,140.20 | -14,698,045.75 |
| Contract liabilities | 32,445,573.23 | 14,503,740.07 | |
| Other current liabilities | 1,586,566.97 | 194,305.68 | |
| （2）Reclassify the accounts receivable related to the warranty funds that do not meet the unconditional right of collection to contract assets | |||
| Accounts receivable | -60,536,580.79 | -27,537,171.39 | |
| Contract assets | 60,536,580.79 | 27,537,171.39 | |
Compared with the original income standard, the impact of the implementation of the newincome standard on the relevant items of the 2020 financial statements is as follows(increase/decrease)：
| Affected report items | Amount of impact on the balance on January 1, 2020 | |
| consolidation | The parent company | |
| Accounts receivable | -73,900,378.88 | -43,176,097.98 |
| Contract assets | 73,900,378.88 | 43,176,097.98 |
| Contract liabilities | 38,823,521.30 | 20,599,623.83 |
| Advance receipts | -41,460,236.64 | -21,537,385.38 |
| Other current liabilities | 2,636,715.34 | 937,761.55 |
| Affected report items | Amount of impact on the balance on January 1, 2020 | |
| consolidation | The parent company | |
| Operating costs | 93,439,773.57 | 33,319,163.80 |
| Sales expenses | -93,439,773.57 | -33,319,163.80 |
(2)Implementation of Interpretation of Accounting Standards for Business Enterprises No. 13
The Ministry of Finance issued the Interpretation of Accounting Standards for BusinessEnterprises No. 13 (Finance and Accounting [2019] No. 21, hereinafter referred to as "InterpretationNo. 13") on December 10, 2019, which took effect on January 1, 2020 and does not requireretroactive adjustment.
①Determination of related parties
Interpretation No. 13 makes it clear that the following circumstances constitute an affiliatedparty: a joint venture or joint venture between the enterprise and other members of the enterprisegroup (including the parent company and subsidiaries); Joint ventures of an enterprise and otherjoint ventures or associates of an enterprise. In addition, interpretation no. 13 also makes it clear thatonly two or more enterprises that are materially affected by one party do not constitute affiliatedparties, and adds that joint ventures include joint ventures and their subsidiaries, and joint venturesinclude joint ventures and their subsidiaries.
②Definition of business
Interpretation No. 13 improves the three elements of business composition, elaborates thejudgment conditions of business composition, and introduces the choice of "concentration test" tosimplify the judgment of whether a portfolio acquired under different control constitutes business toa certain extent.
The Company has implemented Interpretation No. 13 since January 1, 2020, and thecomparative financial statements have not been adjusted. The Company has not implementedInterpretation No. 13, which has had a significant impact on the Company's financial position andoperating results.
(3)Implementation of the Interim Provisions on Accounting Treatment for Carbon EmissionTrading
The Ministry of Finance issued the Interim Provisions on Accounting Treatment of CarbonEmission Trading ([2019] No. 22) on December 16, 2019, which is applicable to relevantenterprises of key emitters that carry out carbon emission trading business in accordance with theInterim Measures on the Administration of Carbon Emission Trading and other relevant provisions(hereinafter referred to as key emitters). The regulation will take effect on January 1, 2020, and keyemission enterprises should apply the regulation by adopting the future application method.The Company has implemented this provision since January 1, 2020, and the comparativefinancial statements are not adjusted. The implementation of this provision has not had asignificant impact on the Company's financial position and operating results.
(4)Implement the COVID-19 Outbreak Related Rental Concession Accounting Rules
On June 19, 2020, the Ministry of Finance (MOF) issued the Accounting Regulations on theTreatment of Rent Concessions Related to COVID-19 (Finance and Accounting [2020] No. 10),which will come into force on June 19, 2020, allowing enterprises to adjust the relevant rentconcessions that occurred between January 1 solstice, the implementation date of this regulation.According to this regulation, enterprises can choose to adopt a simplified method for accountingtreatment of rent concessions, such as rent remission and deferred payment, which are directlycaused by COVID-19.
(2) Explanation on retrospective restatement due to significant accounting errorcorrection in the reporting period
□ Applicable √ Not applicable
(3) Explanation on changes of consolidation scope comparing to prior year’s financialstatement
√ Applicable □ Not applicable
1.The company acquired 51.058% of Zhenhua Surface in May 2020, which was included inthe scope of consolidated statements in May 2020.
2.The company set up its holding subsidiary Xuzhou Yinlun Environmental ProtectionTechnology Co., Ltd in August 2020 with a registered capital of 50 million yuan, of which thecompany should contribute 27.5 million yuan, accounting for 55% of the registered capital. As ofDecember 31, 2020, the Japanese company has not contributed yet, and it will be included in thescope of consolidated statements from December 2020.
3.Tiantai Yinlun Redongli Exchanger Co. Ltd, a wholly-owned subsidiary, was cancelled inFebruary 2020 and no longer included in the scope of consolidated statements from February2020.
4.During this period, the subsidiary, YINCHANG INC, merged all the assets, liabilities,business and personnel of LHP by means of absorption and merger. Upon completion of thisabsorption and merger, all the assets, liabilities, business, contracts and all other rights andobligations of TDI are enjoyed and undertaken by the subsidiary, YINCHANG INC.