INTCO Recycling Resources Co., Ltd.Corporate Value and Return Enhancement Action Plan 2024
To adhere to the principle of "investors first" and uphold the interestsof all shareholders, INTCO Recycling Resources Co., Ltd. (hereinafterreferred to as "INTCO Recycling" or "the company") has formulated the"Corporate Value and Return Enhancement Action Plan 2024", which wasapproved by the 10th meeting of the 4th board of directors.Since listing on the Shanghai Stock Exchange's STAR Market in 2021,the company has continuously improved its governance structure, internalcontrol system, and information disclosure system. The company deeplyrealized that improving the quality of listed companies, enhancinginvestors' returns, and enhancing investors' sense of gain is the propermeaning of the development of listed companies and their responsibility toinvestors to form a long-term sustainable benefit sharing mechanism forinvestors, employees, and stakeholders.
Ⅰ Focus on the main business and has a significant position in theindustry
INTCO Recycling is a high-tech manufacturer of recycled products.Utilizing recycled resources has created a full supply chain withrecirculated plastics. INTCO Recycling has established a unique businessmodel by processing recycled plastics into fashionable consumer products.
The company has six production bases worldwide, located in
Shandong, Shanghai, Anhui, Jiangsu, Malaysia, and Vietnam. Our productshave been exported to more than 120 countries and regions in America,Europe, Asia, Africa, and Oceania, providing quality products and servicesto more than 12,000 customers worldwide. As an A-share company with aunique business model in the field of energy conservation andenvironmental protection on the Shanghai Stock Exchange's STAR Market,it has maintained steady growth in its main business in the past three years(2021-2023), with an accumulated operating income of 6.501 billion yuan,a net profit attributable to the listed company of 666 million yuan and a netprofit margin of over 10%.
(1) Main business products
With over 20 years of deep cultivation in the field of renewableplastics, the company has built a global channel advantage, mainly engagedin PS and PET. The company has divided into three business segments:
recycling, reuse, and utilization, forming four main product patterns:
"frame product, decorative mouldings, PET products, and recycled
particles". Among them, high-value products represented by frames anddecorative mouldings account for more than 70% of the company's mainproduct revenue share, and their gross profit margins are more than 30%.
The company's self-developed and designed plastic volume-reducingand density-increasing recycling equipment has helped more than 1,000recycling sites in more than 80 countries at home and abroad to improverecycling efficiency and reduce operating costs significantly. The companyhas the utilization capacity of treating about 100,000 tons of PS foam and50,000 tons of PET bottles every year and further processing them intoexquisite frames (such as picture frames, decorative building materials, andso on.), to finally realize the high-value journey of renewable plastics inbecoming great treasure! The process of "replacing wood with plastic,replacing stone with plastic and replacing metal with plastic" has brokenthe bottleneck of traditional frame production, changed the originalcomplicated production process, significantly improved the productionefficiency, not only greatly saved global natural resources, but also realizedthe repeated recycling of recycled plastic products.
Figure-recycled frame products
(2) Production capacity under construction increases
The under-construction project sites include Shandong, Anhui, andtwo overseas bases in Vietnam and Malaysia. The 6-hectare project ofVietnam INTCO Thanh Hoa (Phase I), which began in June 2022, has beena steady source of growth. Its capacity utilization rate has improvedquarterly, and the project’s operational effectiveness has graduallyemerged. In 2023, this base achieved an operating income of 142,026,100yuan, a year-to-year increase of 411.25%.In 2024, we are excited to announce the start of the construction ofthe second phase of the project. For more details, please refer to the"Announcement of INTCO Recycling Resources Co., Ltd. on Investing inthe Construction of INTCO Recycling (Phase II) Project in Vietnam(Announcement No.: 2024-009) " disclosed on the website of ShanghaiStock Exchange (www.sse.com.cn).The company's "50,000 tons/year PET recycling project" in Malaysia
has formed three product lines of food-grade recycled particles, sheets, andhigh-end fiber-grade recycled particles. During the reporting period, thecompany's management team focused on promoting the building of arecycling system for bottles and bricks, lean improvement ofmanufacturing technology, laying of global marketing channels, and so on.The related products were mainly sold in North America and Europe,achieving a revenue of 260,705,700 yuan, an increase of 227.48% over thesame period of last year, and the gross profit margin of products improvedquarterly.
Figure-Company's production bases in Vietnam and Malaysia
(3) Raised funds to investment projects
During the reporting period, the company steadily promoted theconstruction of investment projects with funds raised from initial publicoffering (IPO) and regulated the use of raised funds in strict accordancewith "The Regulation Guidelines for Listed Companies No.2-RegulatoryRequirements for the Management and Use of Funds Raised by ListedCompanies (revised in 2022)" and "Guidelines No. 1 of the Shanghai StockExchange for Self-regulation of Listed Companies — StandardizedOperation". For more details, please refer to "The Special Report of
INTCO Recycling Resources Co., Ltd. on the Deposit and Actual Use ofRaised Funds" (Announcement No.: 2024-013) disclosed on the website ofShanghai Stock Exchange (www.sse.com.cn).
In June 2024, the "Comprehensive Utilization Project of New ModifiedRecycled Plastics with an Annual Output of 30,000 Tons" will reach thescheduled usable state. As of the disclosure date of this plan, the small-scale and pilot-scale debugging of the project target products have beencompleted.
Ⅱ Adhere to the nature of science and technology and developnew quality productive forces
Scientific and technological innovation is the core driving force of thecompany's development and the foundation of the company as a listedcompany in SSE STAR Market. Adhering to the development keynote ofinnovation, with the help of its own business advantages, the companyconsolidates the innovation foundation and optimizes the R&D mechanism,and continues to deepen the whole industrial chain, making continuousbreakthroughs in R&D and building an efficient and sustainable innovationecology within the company.
Figure-The company's unique business modelIn the field of plastic reducing, the company has innovated equipmentstructures such as "special crushing", "improving compression andconveying efficiency" and "surface cooling structure of molding bin", andthe effective compression ratio can be as high as 50 times or more.In the field of plastic recycling, the company has mastered the keytechnology of high-quality recycling of waste polystyrene foam, includinghigh-efficiency filtration and impurity removal technology, elastomertoughening synergistic composite technology, preparation technology ofmolecular chain regulator and other key technologies, which effectivelyimproved the mechanical properties and processability of recycledparticles; Mastering the "high-quality recycling technology of food-gradePET", realizing the high-value application of 100% post-consumer plastic(PCR) from bottle to bottle, it has become one of the few leadingenterprises in the world and has obtained the certification of US Food andDrug Administration (FDA), European Food Safety Agency (EFSA),
Global Recycling Standard (GRS), HALAL, Ocean Cycle and OEKO-TEX Standard100 eco-textile.
In 2023, the company invested 105,015,900 yuan in R&D expenses,a year-to-year increase of 15.76% ,and obtained 112 patents, including 13invention patents, 94 utility model patents, 5 design patents, 2,357softwarecopyrights and others, with a total of 2,469intellectual property rights.
In 2024, the company will invest no less than 4% of the annualrevenue for R&D expenses, recruit outstanding talents, and focus on keytechnological breakthroughs in the resource recycling industry.
Ⅲ Improve corporate governance and enhance risk controlcapabilities
(1) Implementing the reformation of the independent directorsystem and strengthening the supervision mechanism
During the reporting period, the company actively responded to thereformation of the independent director system and acted quickly, andsuccessively completed the establishment of a special meeting forindependent directors and completed the revision of the following systems:
"The Work System for Independent Directors", "The Rules of Procedure ofthe Board of Directors", "The Detailed Rules for the Implementation of theAudit Committee", "The Detailed Rules for the Implementation of theRemuneration and Assessment Committee”, and "The Detailed Rules forthe Implementation of the Nomination Committee".
In 2024, according to the newly revised "Company Law", "Measuresfor the Administration of Independent Directors of Listed Companies" andother laws and regulations, as well as the latest provisions of "TheCompany's Work System for Independent Directors" and "Articles ofAssociation", the company will continue to improve the corporategovernance structure, improve the standard operation level, give full playto the role of independent directors in decision-making, supervision andchecks and balances, and professional consultation in the operation of theboard of directors. As a service department communicating with theindependent director, the office of the board of directors of the companyprepares the materials needed for the meeting and the materials requestedby the independent director in time and makes good information feedback.The management of the company reports the company's operation andmajor issues to independent directors in a timely manner through workinggroups, so as to give full play to the role of independent directors incorporate governance, promote the sustainable and standardizeddevelopment of the company and protect the legitimate rights and interestsof investors.As a service department communicating with the independent director,the office of the board of directors of the company prepares the materialsneeded for the meeting and the materials requested by the independentdirector in time and provides good information feedback. The management
of the company reports the company's operation and major issues toindependent directors in a timely manner through working groups, so as togive full play to the role of independent directors in corporate governance,promote the sustainable and standardized development of the company andprotect the legitimate rights and interests of investors.
(2) Organizing the training of directors, supervisors, and seniormanagementsIn 2024, the company will organize directors, supervisors and seniormanagements to actively participate in relevant training organized by theCSRC, Shanghai Stock Exchange, learned laws and regulations such as the"Company Law" and the "Securities Law". They are asked continuously tostrengthen the awareness of self-discipline and compliance, and promotethe company's continuous standardized operation.
(3) Lean management
In 2024, the company will continue to promote lean operations,enhance employees' ability to innovate and realize the common growth ofenterprises and employees. We continue to carry out lean training campsand lean improvement week activities to help employees deeplyunderstand the concept and method of lean production and masteradvanced production technology and management experience. Carryingout the Horse Racing incentive mechanism, the company takes the factory
operation index as the traction, realizes the cross-base horse racing ofemployees in the same department and position, and fully stimulates theorganizational vitality.
Ⅳ Improve the quality of information disclosure and strengtheninvestor communication
During the reporting period, the company permanently attached greatimportance to information disclosure and strictly followed "The RulesGoverning the Listing of SSE STAR Market" and "The Company'sInformation Disclosure Management System", earnestly fulfilled itsinformation disclosure obligations, and truthfully, accurately, completely,normatively, timely and fully disclosed the company's periodic reports,temporary announcements, and other important information. The companyhas set up a unique email address for investor relations to communicatewith investors. Moreover, we have maintained close communication withinvestors through the investor relations column on the official website andthe SSE e-interactive platform. In addition, through new tools such as theWeChat official account and social media at home and abroad, thecompany displays relevant information on corporate culture, productquality, technological innovation, and social responsibility to investorsfrom multiple perspectives and dimensions, further improving thetransparency of the company's information, thus protecting the rights and
interests of minority shareholders.
In 2024, the company will hold no less than four performance briefingsessions/investor reception days, and at least three times to show investorsthe company's operation in an all-round way through short videos, a mapreading, and other forms, and continue to strengthen communication withinvestors through announcements, investor exchange meetings,performance briefing sessions, on-site research, e-interactive Q&A,investor relations hotline and other forms. In addition, the company'sWeChat account, "INTCO Recycling" will continue to deliver the latestinformation about the company on the basis of compliance, so as to createa more interesting company for investors.
Ⅴ Improve investor returns and share the fruits of enterprisedevelopment
The company values sharing the achievements of enterprisedevelopment with shareholders, devotes itself to building a long-term andstable shareholder relationship, and attaches importance to responding to
investors' demands. In "The Articles of Association", the company clearlydefines the cash dividend conditions and strictly implements them, fullyconsiders the development stage, profit scale, and cash flow, and deploysa continuous and stable profit distribution policy based on balancing short-term interests and long-term development.In the three years since its listing, the estimated cash dividend amountis 82,106,400 yuan, of which the profit distribution plan for 2023 is 0.15yuan per share. As of December 31, 2023, the company's total share capitalis 187,769,250, so the total cash dividend to be distributed is 28,165,387.5yuan. This plan still needs to be submitted to the company in 2023.On April 15, 2024, the 10th meeting of the 4th Board of Directorsdeliberated and adopted "The Proposal on the Company's Dividend ReturnPlan for the Next Three Years (2023 -2025)" and "The Proposal onRequesting the Shareholders' General Meeting to authorize the Board ofDirectors to formulate the Interim Dividend Plan". The company willmaintain the dynamic balance between performance growth andshareholder returns, provide investors with continuous and stable cashdividends, bring investors long-term investment returns, and activelyexplore schemes such as multiple dividends a year and mid-term dividendsto enhance investors' sense of value acquisition. We constantly cultivatenew growth points, expand new business areas, improve enterprises’competitiveness and anti-risk ability, and ensure the healthy and
sustainable development of the company.
Ⅵ Strengthen the binding of management and shareholders'shared interests and the responsibility of the "key minority"
(1) Strengthen equity incentives and related constraints
The company launched the restricted stock incentive plan in 2022,which fully mobilized the enthusiasm of the company's employees, andeffectively combined the interests of shareholders, the company, andindividuals of the core team so that all parties concerned about the long-term development of the company and promoted the construction andstability of the company's core talent team, thus contributing to thecompany's long-term growth and safeguarding shareholders' rights andinterests.
The above-mentioned appraisal indicators of the company's equityincentive plan are divided into two levels, performance appraisal at thecompany level and the individual level. According to the characteristics ofthe industry and its own business, the company selects the growth rate ofnet profit as the performance index at the company level. The net profitindex is an effective index that reflects the profitability and growth ofenterprises, which can establish a good image of the capital market. Inaddition to the performance appraisal at the company level, the companyhas also set up a strict performance appraisal for the motivated individuals,
which can make a more accurate and comprehensive evaluation of the workperformance of the motivators. According to the performance evaluationresults of the incentive object in the previous year, the company willdetermine whether the individual of the incentive object meets theconditions for lifting the sales restriction. For the company, the setting ofperformance appraisal indicators takes into account the interests of theincentive object, the company, and shareholders, which is conducive toattracting and retaining outstanding talents, improving the company'smarket competitiveness and sustainable development ability, thusachieving the company's phased development goals and medium-and long-term strategic planning. For the incentive object, the achievement of theperformance appraisal goal is realizable and has a good incentive effect.In 2024, the company will continue to improve the executiveperformance evaluation system linked to business indicators, strengthenthe "key minority" responsibility, and use the OKR evaluation system andother tools to continuously optimize and implement the executiveperformance evaluation plan.
(2) The actual controller increases the company’s shares
Mr. Liu Fangyi, the actual controller and chairman, based on hisconfidence in the company’s future development and recognition of thelong-term investment value, increased his holdings of 159,322 shares bycentralized bidding through the trading system of Shanghai Stock
Exchange from March 14, 2024, to March 15, 2024, accounting for 0.085%of the company's total share capital, with a total increase of 4,000,453.84yuan.
Ⅶ Implement the business philosophy of sustainable developmentand actively practice social responsibility
For INTCO Recycling, the ESG concept has been integrated into thecompany's long-term sustainable development strategy. Since itsestablishment, the company has always adhered to the "ESG" concept,actively practiced the values of "love, kindness and truth", and collaboratedwith stakeholders to continuously create sustainable social value.
The company has the ability to recycle about 150,000 tons of plasticsevery year, helping the world to reduce 300,000 tons of carbon emissions,save 450,000 tons of crude oil resources, and reduce the felling of about
3.4 million trees every year. Since its establishment, it has accumulatedabout 10,000 tons of carbon emissions, saved about 5.1 million tons ofcrude oil resources and reduced the felling of about 33 million trees. In2023, the first "ESG Report was released in Chinese and English version,which was highly recognized and concerned by investors, customers, andsuppliers at home and abroad.
In 2023, the company successfully obtained a Blue Loan of US$ 70million or the equivalent of RMB from the International Finance
Corporation (IFC), a member of the World Bank Group, which wasspecially used to expand the production capacity of Malaysia's r-PETproduction line and supplement the company's working capital. The loansmentioned above are the largest international development institutionfocusing on the private sector in emerging markets in the world, usinggreen or social value to raise funds or various financial instruments aimedat sustainability.Based on the company's outstanding ESG performance, the companyhas successively obtained the S&P Global ESG Score, which is above thescore of 91% of enterprises in the chemical industry. We have been selectedas Bloomberg ESG Score, the best and outstanding practice case of ESGof China Association of Listed Companies. Furthermore, we have beenawarded A Class in Wind ESG Rating, won the "Golden Bull Science andTechnology Award" in China Securities Journal, the global zero-carboncity practice pioneer award-Gold Award, Bloomberg Green ESG50 annualattention project, the Zhiyuan Award of Cailian Association-"Environmentally Friendly Pioneer Enterprise Award" and otherheavyweight awards.
In 2024, the company will continue to publish the ESG report forinvestors at home and abroad to enhance investors' understanding of thecompany's long-term value and strengthen the company's reputation.
VIII. Other matters
In 2024, INTCO Recycling will take advantage of its full supply chainintegration in plastic recycling to enlarge its "plastic family" by expandingits business horizontally to PE, PP etc. Driven by proactive innovation,INTCO Recycling will continue its advancement of plastic recyclingtechnologies to become a global leader in resource recycling and contributeto sustainable development in the new global carbon economy!
The company will continue to evaluate the "Corporate Value andReturn Enhancement Action Plan" and promptly fulfill its informationdisclosure obligations. The company will continue to focus on its mainbusiness and enhance its core competitiveness, profitability, and risk
management capabilities. Through good management, standardizedcorporate governance, and positive investor returns, we can effectivelyprotect the interests of investors, earnestly fulfill the responsibilities andobligations of listed companies, repay investors' trust, maintain thecompany's good market image, and promote a stable and healthydevelopment of the capital market. The plans and strategies, such ascompany's plans and development strategies mentioned in this report, areforward-looking statements that have not yet become facts and do notconstitute a substantive commitment from the company to investors.Investors are advised to pay attention to the relevant risks.
INTCO Recycling Resources Co., Ltd.
Board of DirectorsApril 16 2024