Dongfeng Electronic Technology Co., Ltd. (DETC) Business Report FY ended Dec. 2017

Financial Overview

(in million CNY)

	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016	Rate of change	Factors
Sales	6,101.71	5,224.43	16.79%	-Stable orders from current customers; sales increase.
Operating profit	314.43	269.19	16.81%	-
Ordinary profit	315.12	275.04	14.57%
Net profit	277.24	233.64	18.66%

Registration Delete of Subsidiary

-The Company has decided to eliminate a registration of its sub-subsidiary, Chongqing Dezhong Machinery Manufacturing Co., Ltd. The sub-subsidiary was established in 2005 with a registered capital of Chinese yuan (CNY) 8.55 million as a supplier of carburetors for motorcycles and automotive components. It’s a subsidiary of Dongfeng Electronic Technology’s subsidiary, Zhanjiang DENI Vehicle Parts Co., Ltd. The deregistration is necessary for the following two reasons. First of all, there is a need to relocate the company, following the industrial transformation of the industrial park where the company's rental factory is located. Secondly, its sales are severely declining due to the stagnation in the motorcycle industry. Chongqing Dezhong Machinery Manufacturing’s carburetor business will be absorbed into Zhanjiang DENI Vehicle Parts Co., Ltd. (From a corporate announcement on July 13, 2017)

Competitors

Product	Competitors	Market share
Product	Competitors	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016
Sensors	Sensata	-	5.8%（Commercial Vehicle）
Clusters	Continental, Zhejiang Automobile Instrument	5.7%（Commercial Vehicle）	8.1%（Commercial Vehicle）
Automotive interior products	Calsonic Kansei , Faurecia, Mobis, Seoyon E-Hwa , 嘉华	21.7% (instrument panel) 30.9% (door panel) 8.1% (sub-dashboard)	18.9% (instrument panel) 29.6% (door panel) 7.4% (sub-dashboard)
Automotive electronics	Wabco, Zhejiang Vie Technology	20% (Commercial Vehicle)	18% (Commercial Vehicle)
Valve products	Wabco	7.9% (Commercial Vehicle)	8.2% (Commercial Vehicle)
Automotive die-casting products	Guangdong Hongtu Technology	-	-

Business Plan for Next Year

-In 2018, the Company plans to reach CNY 6.285 billion sales.

Awards

-In 2017, Guangzhou Dongfeng Adient Automotive Seating Co., Ltd., a joint venture of the Company, obtained "2017 Excellent Supplier Award" from Dongfeng Nissan.

R&D Expenditure

	FY ended Dec. 31, 2017 (million CNY)	FY ended Dec. 31, 2016 (million CNY)	FY ended Dec. 31, 2015 (million CNY)
R&D Expenditure	190.74	189.97	158.29
Ratio of R&D expenses to operating income	3.13%	3.64%	3.28%

R&D Facility

-The Company has five professional technology centers, namely, Shanghai Technology R&D center, Instrumentation and Body Electronics R&D center, Braking and Chassis Electronics R&D center, Trim Systems R&D center and Die Castings R&D center.

-As of Dec. 31, 2017, the Company has 505 R&D staff, accounting for 10.46% of all staff.

Investment in 2017

(in million CNY)

Project	Budget	Investment in 2017	Project progress
Technical center building	89.00	34.71	100.00%
U-shape production line for combined instrument	2.00	1.72	85.91%
Injection mold for UC back door	2.40	1.44	59.83%
D560 combined instrument assembly of Dongfeng Commercial	1.45	1.25	86.21%
Injection mold	1.44	1.01	70.00%
D320U production line of Dongfeng Commercial	1.14	0.87	76.32%
IPU assembly testing equippment for NEV trial manufacturing	1.44	0.64	44.64%
Injection mold	8.88	1.66	18.72%
Commercial vehicle D320 project	19.98	3.80	19.04%
Commercial vehicle D560 project	9.98	0.60	5.97%
I/795B	15.08	19.65	100.00%
J16	30.00	31.47	100.00%