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ZHUZHOU CRRC TIMES ELECTRIC CO., LTD.CORPORATE VALUE AND RETURN ENHANCEMENT ACTION PLAN 2024To uphold the development concept of “investors first” as a listed company and safeguard theinterests of all shareholders of Zhuzhou CRRC Times Electric Co., Ltd. (the “Company” or “TimesElectric”), the controlling shareholders, directors, supervisors, and senior management of theCompany, based on their confidence in the future prospects and value of the Company, will takemeasures to effectively “enhance quality, increase efficiency, and achieve returns” and establish afavorable market image for the Company. The main measures include:
1. PERSIST IN PROFESSIONAL EXPANSION AND FOCUS ON THE MAIN BUSINESS FOR
IN-DEPTH CULTIVATION AND REFINEMENT OF EMERGING BUSINESSTimes Electric adheres to specialization and excellence in two major fields of rail transit equipmentand clean energy equipment. In 2023, we actively pursued our industrial mission of “building astrong transportation nation and supporting it with advanced equipment”, continued to strengthenour core competitiveness in the rail transit equipment sector while simultaneously fostering thedevelopment of strategic emerging industries. Looking ahead to 2024, the Company is determinedto provide enhanced services to support the construction of a modernized industrial ecosystem.By leveraging our independent core technologies in high-speed rail, we will consolidate ourresources and drive the development of strategic emerging industries, expedite the transformationand upgrading of our business while venturing into new domains, securing victories in untappedmarkets, and cultivating new sources of growth. These efforts will bolster our core capabilities andfacilitate high-quality development.
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(1) Continuously maintain the leading advantage in the rail transit industry and consolidate
our market position while expanding our market shareThe Company remains committed to maintaining its prominent position in the rail transitindustry. By leveraging our multifaceted expertise across various systems and disciplines,we aim to become a key provider of comprehensive system solutions, thereby propelling ourcore rail transit business to new heights. In the urban rail sector, we will foster collaborativeefforts to harness market synergies and explore untapped growth opportunities. The railengineering sector will prioritize optimization of our operational structure and enhancingefficiency through multidimensional cooperation to reinforce our core strengths. We willalso expedite market expansion in the signal sector, focusing on cost reduction, efficiencyimprovement and increased profitability. Additionally, our power supply division will deepenits urban operational capabilities and capitalize on the momentum to strengthen systemintegration capability. The door sector will sustain efforts to enhance quality and efficiency,accelerating the reinforcement of our core competitiveness.
(2) Seize development opportunities in emerging equipment industry to rapidly strengthen
and improve our businessFor the emerging equipment industry, we must seize the development opportunities,cultivate the market, strengthen our brand, and strive to rapidly strengthen and improveour business. In the semiconductor sector, it is crucial to capitalize on the prime phase ofgrowth, achieving both substantial scale and superior quality. The vehicle electric drivesector shall put vigorous efforts into expanding its market coverage, aiming to break throughthe million-level production capacity barrier with unwavering commitment. In the newenergy power generation sector, we will accelerate iterative development and quickly launchproducts to the market. In the sensor sector, we will enhance our core advantages, iterateand innovate to seek new development opportunities. In the marine equipment sector, wewill strengthen independent support capabilities and continuously consolidate our industryposition in the world. In the industrial transmission sector, we will consolidate our presencein specific areas and expand the market value of converter resources.
(3) Strengthen industrial layout and build a solid foundation for high-quality development
We will continue to strengthen the industrialization capability in industries such assemiconductor, new energy passenger vehicle electric drive system, and rail engineeringmachinery. Through the allocation of high-quality resources, we aim to enhance thespecialization level and scale of these industries. The low and medium voltage power deviceindustrialisation (Yixing) first-phase construction project has been completed, including thefactory and related facilities, and has commenced production. The low and medium voltagepower device industrialisation (Zhuzhou) construction project has completed its designphase and entered the construction stage, striving to achieve the main structure completion.The production base project for new energy passenger vehicle electric drive systems andkey components has completed all engineering construction and initiated the relocation ofexisting production lines. The construction project for the Changchun automotive motorbase has completed the procurement of line 2 of flat wire motor stator rotor and successfullyconducted production line commissioning and connection.
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Equity investments will continue to focus on strategic emerging industries such assemiconductors, new energy passenger vehicle electrical systems, and sensors. We willimplement mixed-ownership reforms and industrial restructuring to deepen reforms andfacilitate the rapid development of the industry.
2. PERSIST IN INNOVATION-DRIVEN UPGRADES TO BETTER SUPPORT HIGH-LEVEL
OF SELF-RELIANCE AND SELF-IMPROVEMENTWe adhere to self-reliance and strive for self-improvement on technologies, maintain significantinvestment in research and development, strengthen research on key core technologies, seize thecommanding heights of technological innovation, and strive to develop Times Electric into aninnovative enterprise with global competitiveness.
(1) Persist in making substantial investments in research and development to make
breakthrough in key core technologiesIn 2023, the Company’s research and experimental development expenditure reachedRMB2.145 billion, with a research and development investment intensity of 9.84%. In 2024,the Company will continue to maintain significant research and development investmentand further increase its efforts in fundamental research with focus on tackling fundamental,urgent, cutting-edge, and disruptive technologies.For rail transit, the Company will maintain its leading position in the rail transit industry,occupy the technological high ground, and comprehensively enhance the intelligencelevel of rail transit products. In emerging industries, the Company will benchmark againstindustry-leading enterprises, closely align with customer needs, and focus on the industrialproduct demands of power semiconductor devices, new energy vehicle electric drive systems,sensor devices, medium-voltage transmission systems and wind/photovoltaic converters.By addressing weaknesses and capitalizing on strengths, the Company will continuouslytransform research and development innovation results, thereby facilitating the rapiddevelopment of the industry.
(2) Strengthen intellectual property protection to build a solid technology barrier
In 2023, we were granted 229 new invention patents and filed 449 invention patentapplications. Invention patents accounted for over 60% of the total applications. We received1 China Patent Excellence Award and 1 first prize of patent award in Hunan Province. Weled or participated in the development and release of 3 international, national, and industrystandards in the transportation and energy sectors. We also received 2 China StandardInnovation Contribution Awards for the first time. In 2024, we will rigorously initiatescientific research projects, emphasizing the four key elements of “demand, planning,benchmarking, and cost” in project initiation analysis. We will strengthen the linkage withthe production line and market, coordinate the planning of research projects in varioustechnical fields, focus on key areas, and promote a more focused approach to scientificresearch projects. We will emphasize the protection of intellectual property rights andstrengthen the application and management of intellectual property rights overseas.
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(3) Consolidate global resources to build an open innovation platform
In China, we engage in exchanges and explore collaboration with universities and renownedenterprises on cutting-edge technologies such as artificial intelligence and cybersecurity.Internationally, we are advancing our global innovation partners program to continuouslydeepen existing collaborations and strengthen two-way interaction with top internationaluniversities and research institutions to improve scientific research innovation and theapplication of research outcomes.
3. PERSIST IN STRENGTHENING THE MANAGEMENT OF PROCEEDS TO BOOST THE
LEAP AND ADVANCEMENT OF OUR MAIN BUSINESSIn September 2021, Times Electric was listed on the Science and Technology Innovation Board ofShanghai Stock Exchange with total proceeds of RMB7.555 billion. Since its listing, the Companyhas used the proceeds to finance projects such as the “application project of rail transit traction andnetwork technology and system”, the “application project on key technologies and system R&Dof smart railway bureau and smart urban rail transit”, the “advanced technology R&D applicationproject of new industry”, the “R&D and manufacturing platform construction project of new-typerail engineering machinery”, the “Innovative experimental platform construction project” andreplenishment of working capital. As of the end of 2023, over 66% of the IPO proceeds have beenutilized.In 2024, the Company will continue to strengthen the management of projects financed by theproceeds, and the IPO proceeds utilized by the end of 2024 is expected to account for over 80%of the total amount. During the implementation process of these projects, we will strictly adhereto the regulations governing the management of proceeds and cautiously utilize the proceeds. Wewill ensure that the projects financed by the proceeds progress smoothly according to relevantplan, the construction project of the innovative experimental platform will be completed in itsentirety and put into use, and the construction project of the new rail engineering machinerymanufacturing platform will be completed in its entirety and put into production, aiming to promotethe development of the Company’s main business through the successful implementation of theseprojects, achieve expected returns from these projects and enhance the overall profitability of theCompany.
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4. PERSIST IN PROMOTING REFINEMENT TO ENHANCE MANAGEMENT AND DEEPEN
DIGITAL TRANSFORMATION AND UPGRADETo address the pain points of Times Electric’s operations, in 2024, the Company will uphold thebusiness philosophy of “high-quality operation and efficient management”. It will continue toimplement “Times Electric digitalization” and establish a digital transformation path of “identifyinga core focus, leveraging a set of data, and integrating a comprehensive system” to continuouslystimulate the corporate development momentum. Firstly, the Company will focus on “identifyinga core focus”, targeting the enhancement of operational capabilities with transformation. Guidedby the Company’s strategy, and closely aligned with the core focus of “decomposition andimplementation of key business indicators”, based on quality, cost, delivery and other dimensions,the indicators are divided and disintegrated in layers and levels to achieve transparent and effectivemanagement of the entire operational process. Secondly, the Company will “leverage a set ofdata” to foster a shift towards a data-driven management approach. Utilizing existing informationplatforms and harnessing the power of big data technology, the Company will bridge informationgaps and establish a unified data infrastructure to support the efficient implementation of digitaloperations across various business domains. Thirdly, the Company will “integrate a system”,ensuring integration of transformation and digitalization. With the goal of “dual enhancement,” theCompany will optimize its management system and consolidate resources to achieve harmoniousdevelopment of the “Times Electric digitalization” and improvements in all areas of management.
5. PERSIST IN DEEPENING QUALITY IMPROVEMENT AND EFFICIENCY
ENHANCEMENT TO SOLIDIFY THE COMPANY’S SUSTAINED PROFITABILITY.Times Electric has always adhered to the business philosophy of “contributing to the countrythrough industrial development” and continuously enhanced the Company’s profitability. Using2006 as the baseline, the compound annual growth rate of net profit attributable to the parentwas over 10% in 2023. In recent years, the Company has pursued high-quality developmentdriven by digitalization, deepening its refined management practices. It has introduced its digitaloperation “cockpit”, which dynamically monitors key indicators and conducts quantitative andprecise analysis throughout the entire value chain. The Company explores value enhancementopportunities from multiple dimensions, including income source expansion, cost reduction andcontrol, efficiency enhancement and risk management. While contributing to the steady increasein shareholders’ equity, the Company has maintained a return on net assets of over 7%, achievingmutual benefits and win-win outcomes for the Company and its shareholders.
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In 2024, the Company will continue to deepen measures for quality improvement and efficiencyenhancement. It will delve into every link of the entire value chain, refine the construction of anopen and collaborative technological platform, a high-quality and stable supply platform, and anefficient and cost-effective production platform. We will build a digital transformation path guidedby the Company’s strategy and closely aligned with core business indicators. We will systematicallybreak down and analyze these indicators, ensuring transparent and effective management throughoutthe entire operational process. We will comprehensively conduct operational analyses aimingat improving overall productivity, advancing business enhancements from a resource allocationperspective. We will implement measures to improve quality and efficiency, and complete thethird-phase capital increase and share expansion project in Zhuzhou CRRC Times SemiconductorCo., Ltd.* by introducing high-quality strategic investors and an employee stock ownershipplatform to further deepen industrial strategic cooperation and effectively motivate key employees,thereby ensuring a steady increase in the Company’s profitability and continuously strengtheningthe Company’s sustainability capabilities with high-quality and efficient operation.
6. PERSIST IN IMPROVING THE CONSTRUCTION OF THE BOARD OF DIRECTORS TO
ENHANCE MODERN CORPORATE GOVERNANCETimes Electric has established a sound corporate governance system through standardized internalmanagement processes, comprehensive regulations, and strict auditing systems. It has alsoestablished an ESG management, assessment, and disclosure system overseen by the board ofdirectors. On November 24, 2023, the Company was honored with the awards of “Top 100 ESGEnterprises” and “Top 50 ESG Central State-owned Enterprises” at the Guoxin China SecuritiesESG Golden Bull Summit.In 2024, the Company will continue to improve its corporate governance mechanisms and acceleratethe construction of a professional, responsible, standardized and efficient board of directors. Firstly,it will optimize the composition of the board of directors, ensuring that external directors accountfor a majority of the board members, and independent directors account for no less than half ofthe board members. It will actively expand the channels for selecting independent directors andappoint at least one female director to promote gender diversity among board members. Secondly,it will enhance communication with independent directors and establish a supportive system forduty performance by directors. Thirdly, the Company will implement an annual training plan forthe directors, supervisors, senior executives, and other key personnel with a training coverage rateof over 90%. This comprehensive training plan, conducted both online and offline, will enhancetheir knowledge of compliance and equip them with the necessary skills to diligently fulfill theirobligations according to relevant laws, thereby safeguarding the interests of the Company and itsshareholders as a whole.
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7. PERSIST IN STRENGTHENING INVESTOR RELATIONS MANAGEMENT AND
ESTABLISHING A MULTI-LEVEL AND MUTUALLY BENEFICIAL INTERACTIVEMECHANISMTimes Electric strictly complies with the regulatory requirements of the Company Law, theSecurities Law, the Rules Governing the Listing of Stocks on the Science and TechnologyInnovation Board of the Shanghai Stock Exchange and the Rules Governing the Listing of Securitieson the Hong Kong Stock Exchange and other laws, regulations and normative documents infulfilling its information disclosure obligations to ensure that the information is disclosed in a true,accurate, complete, timely and fair manner and all shareholders have fair and equal access to theinformation, and to safeguard the interests of all shareholders, especially the minority shareholders.The Company was recognized with an A-grade rating in the 2022 to 2023 annual assessment ofinformation disclosure for companies listed on the Shanghai Stock Exchange.In 2024, the Company will continue to strengthen investor relations management, maintain closecommunication with investors, and comprehensively establish an efficient and transparent platformfor communication with investors. We will ensure smooth channels of communication withinvestors and actively engage in effective communication and exchanges with them, following theprinciples of being comprehensive, proactive, collaborative, precise, and efficient, to build a solidcommunication bridge between the Company and the capital market. Firstly, we will organize aminimum of three investor receptions or performance briefings, with the participation of seniormanagement, including the chairman and general manager of the Company. These events willprovide an opportunity for the Company’s leadership to directly address investor concerns andeffectively convey the voice of Times Electric through high-standard performance briefings.Secondly, based on the progress of our business, we will invite investors when appropriate toparticipate in investor activities such as reverse roadshows of the Company. Thirdly, we will utilizevarious channels, including listed company public announcements, investor conferences, on-siteexchange and research with investors, SSE interactive platform, telephone and email, to promptly,openly, and transparently communicate the Company’s operating results, financial positions, andother updates to all market participants, ensuring that investors and stakeholders are well-informedabout the Company’s operation and management in a timely manner.
8. PERSIST IN ENHANCING SHAREHOLDER RETURNS AND BOOSTING CONFIDENCE
IN THE SECONDARY MARKETSince its listing on the Hong Kong Stock Exchange in 2006, Times Electric has maintained astable dividend policy, with the annual dividend amount accounting for over 20% of the net profitattributable to the parent company. With the steady development of the Company’s performance,the dividend per share has increased year by year. After the listing of the Company’s A shares onthe Science and Technology Innovation Board in 2021, the dividend ratio has increased to over30%. From 2006 to 2022, the Company has distributed dividends of approximately RMB7.2 billion,representing 64% of the total proceeds from listing on both markets. Taking into account the needsof investors for returns and the long-term development of the Company, the Company proposes todistribute a cash dividend of RMB7.8 per 10 shares (inclusive of tax) to all shareholders for 2023,the total amount of cash dividend to be paid out exceeds RMB1.1 billion, accounting for 35.45%of the net profit attributable to shareholders of the Company in the consolidated statement of 2023.The cash dividend per share represents a year-on-year increase of 41.82% over the last year. Theproposal will be submitted to the Company’s 2023 annual general meeting for consideration.
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Times Electric has always adhered to the concept of better safeguarding shareholders’ rights andinterests and creating greater value for shareholders. Since September 2023, we implemented acombination of measures, including voluntarily extending the lock-up period for restricted sharesheld by the controlling shareholder, increasing holdings, and repurchasing and canceling shares.In 2023, CRRC Corporation Limited and its controlling subsidiaries increased their shareholdingby 1.415 million A Shares and 23.94 million H Shares in aggregate, and the Company repurchased
4.6968 million H Shares in January 2024, and plans to cancel these shares in the future. These
measures demonstrated to the capital market our in-depth recognition of the Company’s operationalstability and growth, expressed our firm confidence in the Company’s stable development in thefuture, and responded to changes in the capital market in real time with practical actions.In the future, the Company will continue to maintain a dynamic balance between corporatedevelopment, performance growth, and shareholder returns. This will be achieved by adhering torelevant laws, regulations, and the profit distribution policy set out in the Articles of Association.We will carefully consider the immediate and long-term interests of our shareholders, andimplement reasonable measures to enhance the satisfaction and benefits of our investors as andwhen appropriate, allow investors to share the fruits of development with the Company.The Company will continue to assess the progress of implementation of the specific measuresset out in the action plan for “enhancing quality, increasing efficiency and achievingreturns” and fulfill its information disclosure obligations, and strive to effectively fulfill itsresponsibilities and obligations as a listed company through solid business performance,standardized corporate governance, and positive investor returns, so as to reward investors’trust, maintain the Company’s image in the market, and jointly promote the smooth operationof the capital market.
Zhuzhou CRRC Times Electric Co., Ltd.
Board of Directors28 March 2024