Xuchang Yuandong Drive Shaft Co., Ltd. Business Report FY ended Dec. 2017

Financial Overiew

(in million CNY)

	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016	Rate of change	Factors
Sales	1,522.61	1,024.27	48.65%	-In 2017, the Company's sales increased due to increase of market needs; efficiency improvement; cost reduction; purchase order increase from major customers; and obtainment of new customers.
Operating profit	220.70	113.91	93.75%	-
Gross profit	218.74	137.67	58.89%
Net profit	187.33	117.05	60.04%

Acquisition

-On June 4, 2018, the Company and Wanxiang Qianchao Co., Ltd. signed a contract regarding a transfer of shares. The Company will acquire a 54.73% stake in Xuchang Qianchao Yuandong Auto Parts Co., Ltd., a joint venture between the two companies, for CNY 14.81 million. After the share transfer, the joint venture will have no capital relationship with Wanxiang Qianchao and become a wholly owned subsidiary of the Company. Xuchang Qianchao Yuandong Auto Parts primarily manufactures and sells universal joints. (From a press release on June 6, 2018)

R&D Facilities

-The Company has the following R&D facilities:

State Enterprise Technology Center
National Postdoctoral Research Station
Henan automotive transmission engineering and technology R&D center
Henan post-doctoral R&D base
Henan provincial-level high-performance lightweight shaft engineering lab
Henan automotive parts intelligent heat treatment technology academician workstation

R&D Expenditure

(in million CNY)

Year	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016	FY ended Dec. 31, 2015
R&D expenditure	78.62	61.21	54.11
Ratio of R&D expenses to sales	5.16%	5.98%	5.84%

R&D Project Expediture

(in million CNY)

Project	R&D Expense
Integrated application research on blanking device of intelligent manufacturing line of heavy truck drive shaft	1.44
Automotive transmission shaft intelligent manufacturing integrated technology application development-sliding fork	2.77
Research on drive shaft assembly of constant velocity universal joint	8.32
Research and development of constant speed drive shaft assembly and automatic assembly technology	2.62
Research and development of comprehensive performance testing for constant speed drive shaft assembly	1.98
Research and development of autonomous assembly technologies for drive shaft	6.24
Research and development of drive shaft assembly for high-end rear-drive (or four-drive) passenger vehicles	4.42
Research and development of drive shaft assembly for buses with long lifecircles and high comfort	4.43
Research and development of 700-series drive shaft assembly	2.71
Industrialization and development of key technologies smart manufacturing for constant drive shaft components	12.16
Research and application of smart tracking and positioning system for automotive drive shaft processing	3.28
Research and development of hot edge cutting technology for sliding forks of light drive shafts	0.61
Research and development of extruding process for M299 differentials	1.03
Research and development of joint forging process for sliding forks of light drive shafts	0.83
Research and development of key technologies for smart pricise forging of drive shaft components	1.13
Research on new structures of universal fork forgings of drive shafts	0.82

Patent

-By the end of 2017, the Company has 252 patents, including 21 invention patents and 207 utility model patents.

Investment Activities

(in million CNY)

Project	Budget	Investment in 2017 (in million CNY)	Project status
200 mu light electric screw pressure production workshop	3.55	-	100%
Project to generate annual output of 1.8 million sets of high-end lightweight commercial vehicle and construction machinery transmission shafts at Liuzhou Yuanteng plant	66.52	1.03	41%
Project to generate annual output of 1.5 million sets of drive shafts for commercial vehicles	132.29	0.86	-