Securities Code: 002126 Securities Abbr.: YINLUN Public Announcement No.: 2021-022
ZHEJIANG YINLUN MACHINERY CO.,LTD.
Annual Report 2020 (Abstract)
I. Important Notes
This Abstract is extracted from 2020 Annual Report of Zhejiang Yinlun Machinery Co., Ltd. (“the
Company). In order to have a full understanding of the operating results, financial status and
future development plan of the Company, investors are suggested to read the full report carefully
on 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 capital
reserve into common stock for the report period which has been reviewed and approved by the
Board 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：with
792,095,104 shares as the base ,distribute 0.8 Yuan cash dividends per 10 common stocks (tax
inclusive)，send bonus of 0 shares (tax inclusive), do not transfer to increase capital stock with
accumulation fund.
Indicate by check mark if preplan for preferred stocks profit distribution to shareholders for the
report 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
No.8,East Shifeng Road, Fuxi District, No.8,East Shifeng Road, Fuxi District,
Office add.
Tiantai, Zhejiang, China Tiantai, Zhejiang, China
Tel. 0576-83938250 0576-83938250
E-mail 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 for
products of heat exchangers of oil, water, gas, and refrigerants, automobile air conditioners and
vehicle thermal management, and related products in emission control system. The main products
are divided into two product categories, thermal management and exhaust gas treatment, While
the thermal management can be further divided into heat exchangers and automotive
air-conditioning. The company’s products are also divided by application fields, which mainly
include commercial vehicles, passenger cars, construction machinery and other fields.
The company is a national high-tech enterprise and the lead unit in China Internal
Combustion Engine Standardization Technical Committee in heat exchanger industrial standard. It
has established a national-level enterprise technology center, a post-doctoral scientific research
station, a Zhejiang Provincial Key Enterprise Research Institute, a Zhejiang Engineering Research
Center and a Zhejiang Provincial Double Creation base. In the recent years, the company has
continued to carry out an international strategic layout and has established production facilities
and R&D sub-centers in Zhejiang, Shanghai, Hubei, Shandong and other locations, as well as
North 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 the
products 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 and
sales.
1、R&D model
As a national high-tech enterprise, the company has always paid great attention to the reserve
and output of technological development, continuously strengthened technological innovation and
the investment in new product development, introducing high-quality talents, improved the
research and development system, created a good innovation atmosphere, stimulated the
innovation motivation of the employee, and further enhanced the competitiveness of the
company'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 on
product, technology research and development and process improvement, built a global R&D
structure, system and process. A complete system of research, development and testing for
verification has been established, to strengthen the basic capabilities of R&D and its infrastructure
for better the overall R&D capabilities. At present, the company has established R&D centers in
Shanghai, Europe, and North America. Some subsidiaries are also actively carrying out R&D
works and have achieved good R&D results.
With the experiences from more than ten years of production and R&D, a number of
internationally first-class and domestic leading core technologies have been achieved, which
makes the company's products to have the advantages of leading technology, low cost, and high
quality in each same product category.
2、Production Model
The company has established an order-driven pulling-type production method, production
based 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 arranges
the purchase according to the order quantity and production plan. The company's cycle from
receiving customer orders, purchasing the raw materials, organizing the production to delivering
the 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 to
continuously improve product quality, reduce costs, and shorten delivery times, to raise the
company’s manufacturing practice to the world leading level.
In terms of product manufacturing, the company focuses on the three major product
platforms: thermal management for passenger cars and new energy vehicles, thermal management
for commercial vehicles and off-roads, and exhaust gas after treatment. The product lines drive the
business divisions and subsidiaries to work together, while the territories are based on customer
needs. In 2020, the company added a new business division to the original passenger car and new
energy thermal management division, commercial vehicle and non-road division, and exhaust gas
after-treatment division. For the new energy products, the company will mainly develop and
manufacture air-conditioning systems and air-conditioning boxes. The company has subsidiaries
and 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 the
United States, Sweden, and Poland. In accordance with the principles of economics scale,
comparative cost and closeness to the customers, the company rationally plans the production
layout 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 one
supporting supplier of major vehicle and engine manufacturers, it directly sells products to OEMs.
The company has established a rapid response system that integrates technology, production
and service, and continuously strengthens expansion of local markets and technical and after-sales
service capabilities globally. The company has set up a "Golden Triangle" of self-operated team
which includes account managers, project managers, and technical managers. It has also set up a
three-dimensional sales network and service system combining point, line and surface to provide
customers with end-to-end services. The company implements three simultaneous (synchronous
development, simultaneous development, and simultaneous planning) and three corporations
(asset cooperation, territorial cooperation, and strategic cooperation) to continuously increase the
market 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 parts
manufacturing industry. The company's business development is mainly affected by the
development of the automotive industry. At the beginning of 2020, due to the impact of the
pandemic, the sales volume of automobile industry has dropped significantly. As the domestic
pandemic prevention and the control of the situation continue being improved, the overall
Chinas economic status was continuously recovered, and the manufacturing industry was
continuously improved at both supply and demand ends. And the market for the customers
continues to be improved, and the construction projects of major infrastructure was accelerated,
and the polices to promote automobile consumption in various regions continues to drive
automobile production and sales, which shows a picking up momentum and supports a good
development trend. According to data released by the China Association of Automobile
Manufacturers, 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 leading
enterprise in the domestic automotive thermal management industry. It has top heat exchanger
mass production capacity and systematic automotive heat exchanger technology reserve. It is
one of the largest suppliers for commercial and mechanical heat exchanger products. A strong
competitive advantage in the thermal management of traditional commercial vehicles, passenger
cars, and construction machinery has been established. It has also much experience in the
exhaust gas treatment industry with certain competitiveness. It is now gradually expanding into
thermal management area for new energy passenger car.
The company will continue to persist in the three strategic directions of "accelerating
international development, achieving technology leadership, and enhancing overall
competitiveness", and is committed to provide heat exchange solutions in the field of automotive
heat exchange, and strives to build the company to be a global outstanding enterprise in
providing 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 parts
manufacturing 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 own
the technologies in manufacturing of precision auto parts and build up the capacity of mass
production. Replacement by domestic parts is gradually extending from the interior and exterior
decoration parts to functional parts of engine system, air conditioning system as well as safety
parts of chassis. Some international firms may take the initiative to exit because of industrial
transformation and shrinking of their competitive advantages.
Based on the analysis on the demand side, under the pressure for cost reduction and
efficiency increase, auto enterprises are motivated for parts localization. Comparing to big
international parts suppliers, domestic parts manufacturers have the advantages of low cost.
Short distance and rapid response in synchronous development are expected to benefit to the
local 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 the
complexity and unpredictable international situations.
2. The future development potential of new energy vehicles is huge, and the value of new
energy thermal management system is high
In November 2020, the general office of the State Council issued the new energy vehicle
industry development plan (2021-2035), which proposed that we must seize the strategic
opportunity, 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 significantly
enhanced, 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 comprehensively
improved. The sales of new energy vehicles will reach 20% of the total sales volume of new
automobiles. 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 energy
vehicles. Comparing to the traditional vehicle thermal management system, the value of new
energy vehicle thermal management system in single vehicle is significantly higher, which is about
2-3 times of what in the traditional passenger car.
3. The commercial vehicle market will maintain a high momentum driven by factors such as
the 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 trucks
with China III emission standard or lowers in advance, and accelerate the elimination of old gas
engine vehicles using lean burn technology and "oil to gas". By 2020, in Beijing, Tianjin, Hebei and
the surrounding areas, and the Fen Wei plain, more than 1 million medium and heavy diesel
trucks with China III emission standard or lowers will have to be eliminated. Due to the aging of
the existing heavy diesel trucks with China III, combined with other factors, the centralized
scrapping and replacement of this type trucks will happen in the short term.
Secondly, through the implementation of various macro policies, China has moderately
increased the intensity of counter-cycle adjustment. Jiangsu, Beijing and other provinces and
cities have issued large-scale investment plans, in which various types of infrastructure
construction are still an important part. With the continuous start of infrastructure projects in
various regions, the demand for heavy trucks in construction will further increase.
In addition, overloading is very common in the commercial vehicle market. On September
18, 2018, the Ministry of transportation issued the notice on strictly implementing the national
overload and overrun identification standards to strengthen the management in highway
overload control and law enforcement. Illegally overload and overrun vehicles will be refused to
enter 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. Since
then, the vehicle management offices across the country have strengthened the registration and
weighing management, strictly prohibited the registration for overweight vehicles and also
strengthened 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 for
special rectification of work safety’, established the information supervision system for overload
control, strictly implemented the measures of "one overload for four penalties" for overload
control, deepened the special rectification of "100 ton", and basically eliminate the illegal
modification of truck and "large ton and small ton license " by 2022. In recent years, the relevant
overload control measures can fully reflect the determination of the state to deal with the
overload problem of the trucks. Strict enforcement of the law has significantly reduced the single
vehicle capacity and significantly increased the market demand for more commercial vehicles
along with the steady increase in total transport volume.
4. National emission standards continue to upgrade iteratively, creating new demand for
vehicle exhaust treatment
In 2016 and 2018, "emission limits and measurement methods for light vehicles (China
phase VI)" and "emission limits and measurement methods for heavy diesel vehicles (China
phase VI)" were released one after another, with the specification in the emission requirements
and implementation time of the China VI standards. With the gradual implementation of
emission 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, developed
countries rethink the global industrial value chain model at the national strategic level, intervene
and shrink the global industrial value chain through certain non market measures, and
appropriately reduce the dependence on external single supply chain. At the same time, in order
to avoid the risk on the supply side to realize the secured production, vehicle manufacturers also
tend to have supply nearby.
Therefore, the existing industrial value chain pattern with division of labor and cooperation
in the automobile industry will be challenged to a certain extent, and the regional localized
vertical supply chain pattern and the mode of tripartite or multilateral strategic cooperation will
be developed rapidly.
3. Selected Financial Data
(1) Key accounting data and financial ratios for the past three years
Indicate by check mark if there is any retrospectively restated accounting data of previous years.
□ Yes √ No
Unit: Yuan
Increase/decrease
2020 2019 of current year 2018
over prior year
Revenue 6,324,186,529.70 5,520,743,642.53 14.55% 5,019,241,538.44
Net profit attributable to
321,583,085.75 317,677,156.02 1.23% 349,122,610.13
shareholders
Net profit attributable to
shareholders excluding 260,386,304.06 172,855,258.34 50.64% 304,010,155.58
non-recurring gains and losses
Net cash flows from operating
456,173,578.49 688,584,828.23 -33.75% 304,839,058.43
activities
Basic EPS (RMB Yuan /
0.41 0.40 2.50% 0.44
share)
Diluted EPS (RMB Yuan /
0.41 0.40 2.50% 0.44
share)
Weighted average ROE (%) 8.40% 8.60% -0.20% 10.01%
Increase/decrease
As of Dec.31, As of Dec.31, As of Dec.31, 2018
of current year
2020 2019
over prior year
Total assets 9,856,245,406.68 8,424,106,635.59 17.00% 7,858,823,185.48
Net assets attributable to
3,937,786,096.18 3,729,627,295.93 5.58% 3,605,604,813.61
shareholders
(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
93,052,233.55 110,537,804.87 75,393,745.10 42,599,302.23
shareholders
Net profit attributable to
shareholders excluding 72,987,849.25 106,276,916.16 60,922,848.77 20,198,689.88
non-recurring gains and losses
Net cash flows from operating
-92,851,643.90 11,653,421.15 34,275,030.70 503,096,770.54
activities
Indicate by check mark if any material difference between the above financial indicators or their
summations 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 Total number of Total number of
Total number of shareholders of shareholders of shareholders of
shareholders of common stocks at preferred stock preferred stock with
common stocks at 33,652 previous 40,530 with resumed 0 resumed voting 0
the end of the month-end of this voting right at rights at previous
reporting period report’s the end of the month-end of this
disclosure reporting period report’s disclosure
Top 10 shareholders
Quantity of Pledged or frozen
Quantity of stocks
Name Nature Ownership restricted
stocks
stocks held Status Quantity
Domestic
Tiantai Yinlun Industrial
non-state-owned 10.16% 80,444,000 Pledged 15,000,000
Development Co., Ltd.
corporate
Hong Kong Securities
Clearing Company Foreign corporate 5.62% 44,512,966
Ltd.(HKSC)
1003 Portfolio of Basic
Other 4.9% 38,801,674
Endowment Insurance Fund
Domestic natural
Xiaomin Xu 4.1% 32,470,808 24,353,106
person
Ningbo Zhengqi Investment Domestic
Management Center (Limited non-state-owned 4.04% 32,000,000
Partnership) corporate
Industrial and Commercial
Bank of China Co.,
Ltd.-Rongtong China Wind
Other 1.55% 12,243,352
No. 1 Flexible Configuration
Hybrid Securities Investment
Fund
China Construction Bank
Co., Ltd. - Invesco Great
Wall Environmental Other 1.26% 9,940,828
Advantage Equity Securities
Investment Fund
National First Pension Trust
Other 1.2% 9,511,989
Company - Owned funds
Bank of China - China
Securities New Energy
Other 1.14% 9,056,380
Automobile ETF Securities
Investment Fund
Bank of China - Invesco
Great Wall Preferred Hybrid Other 1.13% 8,914,306
Securities Investment Fund
Xiaomin Xu is an executive director of Tiantai Yinlun Industrial
Explanation on the above-mentioned Development Co., Ltd. and an executive partner of Ningbo
shareholders’ affiliated relationship or Zhengqi Investment Management Center (Limited Partnership).
concerted action The Company is not aware of any affiliation relationship
between other shareholders.
Explanation on the above-mentioned
shareholders that are engaged in margin trading Not applicable
business
(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 actual
controller is in form of diagram
5. Bonds
Does the Company have any corporate bond that is publicly issued and listed on the stock
exchange and that is immature or not fully redeemed as of the approved issuance date of the
Annual 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 automotive
industry. The entire industry has not been afraid of overcome difficulties, steadily promoted
resuming of the production inventory, accelerated the transformation of marketing methods,
and actively promoted automotive consumption., and the automotive market has be gradually
recovered, with continuously increase which has been sustained since April. The annual
production of automobiles has been maintained steadily with slight decrease and the impact of
the pandemic has been mostly eased. The overall performance demonstrated the great strength
of development and domestic dynamic. The annual production and sales of automobiles
reached 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 percentage
points lower than respectively comparing to the previous year.
In this environment, the company responded quickly, focusing on pandemic prevention
and control on the one hand, and resuming production on the other hand, firmly committed to
the three strategic directions of "accelerating international development, highlighting
technology leadership, and building comprehensive competitiveness", also lib erated minds
and innovated business models, continuously improve increased research and development
capabilities, and improved quality control capabilities and operational efficiency. During the
reporting period, the company achieved operating income of RMB 6,324,186,529.70, an
increase of 14.55% over the same period last year; realized a total profit of RMB
418,831,171.00, an increase of 4.77% over the same period of last year; realized a net profit
of RMB 320,495,900 attributable to shareholders of listed companies of RMB
321,583,085.75, 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 for
the 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’s
technology and R&D capabilities, enhance product testing capabilities, and improve product
performance reliability; concentrate resources to accelerate the research and development of
in key core technologies, promote major technology research and development projects, and
focus on the market needs of 8+N strategic customers and important customers. Focus on and
aim breaking through in the company's strategic customers and major projects.
In terms of customer and market expansion, the company focused on strategic major
customers and large projects, guided resource allocation according to priority, and
implemented the "one customer, one policy" tactic; and established data accumulation as a
database to improve inventory, cash, and price management process to reduce sales
administration costs. During the reporting period, the company also successively won 210
new projects, such as the North American new energy benchmark car cooling module, Volvo
new energy vehicle battery cooling plate and cooling module, Geely Daimler SMART
platform heat pump air conditioning project, Porsche new energy vehicle battery cooling plate,
Geely Automobile PEA battery Cooler and DHT cooling module, Toyota oil cooler, Fastgear
oil 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 to
customer needs and forecasts, these above projects will add nearly 3.95 billion RMB in
annual sales revenue to the company after the completion of all the projects, of which the new
energy 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 future
passenger 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 in
performance growth, and lay a solid foundation for the realization of the goal for the second
entrepreneurial goal.
In terms of improving product competitiveness, we the company has gradually
established an operating system with scientific management, clear processes, and strong
execution. The company continuously improved product material technology, and promoted
breakthroughs and improvements in key processes, and achieved no fluxless brazing on CAC
cooler product. The company also paid attention to the improvement of simulation analysis
capabilities, reduced simulation time, and improved the accuracy of simulation and analysis
results, which results in and has winning major projects from important strategic customers
for the company.
In terms of talent training and incentives, with by aiming strategic objectives
achievement as the driving force for training, and customer requirements as a landin g the
execution guide, we built a talent training system that combines strategic business + on-
the-job capability improvement. During the reporting period, the company planned and
organized 7 special training courses, including project engineer ability improvement class,
marketing engineer ability improvement class, and expert lecture hall, with a total of 339
hours of training. In terms of the motivation, the company used guidance of follow the
performance + ability orientation, which fully reflects the personal business skills and
contribution to, and stimulate the enthusiasm of employees.
2. Significant changes in main business in the repo rting period
□ Applicable √ Not applicable
3. Products contributing to over 10% of the Company’s main business revenue or profit
√ Applicable □ Not applicable
Unit: Yuan
Gross profit
Gross profit Revenue: +/-% Profit: +/-%
Product Revenue Profit margin +/-%
margin (%) over last year over last year
over last year
Heat Exchanger 4,897,522,940.29 312,309,870.29 23.50% 7.52% 3.30% -1.08%
Exhaust
794,142,102.66 45,475,312.50 22.85% 27.82% 1,486.20% 5.44%
Treatment
4. Seasonal or periodic characteristics in operating performance that needs special
attention
□ Applicable √ Not applicable
5. Significant changes in revenues, costs and net profit attributable to shareholders with
common shares or their composition comparing to prior repo rting 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 accounting
methods comparing to prior year financial statement
√ Applicable □ Not applicable
（1）Implement the Accounting Standards for Business Enterprises No. 14 -- Revenue (revised in
2017) (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 standard
should adjust the amount of retained earnings and other related items in the financial statements at
the beginning of the year according to the cumulative impact, without adjusting the information for
comparable periods.
The company will implement the new revenue standards from January 1, 2020. According to
the standards, the company only adjusts the retained earnings at the beginning of 2020 and the
amount of other related items in the financial statements for the cumulative impact of contracts that
have not been completed on the date of first implementation, and the comparative financial
statements do not adjust. The main impacts of the implementation of this standard are as follows:
The content and reason of accounting Affected report items Amount of impact on the balance on
policy change January 1, 2020
consolidation The parent
company
（1）Reclassification of advance Advance receipt -34,032,140.20 -14,698,045.75
receipts related to the sale of goods to
Contract liabilities 32,445,573.23 14,503,740.07
contract liabilities
Other current liabilities 1,586,566.97 194,305.68
（2）Reclassify the accounts Accounts receivable -60,536,580.79 -27,537,171.39
receivable related to the warranty
Contract assets
funds that do not meet the
unconditional right of collection to 60,536,580.79 27,537,171.39
contract assets
Compared with the original income standard, the impact of the implementation of the new
income 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 Business
Enterprises No. 13 (Finance and Accounting [2019] No. 21, hereinafter referred to as "Interpretation
No. 13") on December 10, 2019, which took effect on January 1, 2020 and does not require
retroactive adjustment.
①Determination of related parties
Interpretation No. 13 makes it clear that the following circumstances constitute an affiliated
party: a joint venture or joint venture between the enterprise and other members of the enterprise
group (including the parent company and subsidiaries); Joint ventures of an enterprise and other
joint ventures or associates of an enterprise. In addition, interpretation no. 13 also makes it clear that
only two or more enterprises that are materially affected by one party do not constitute affiliated
parties, and adds that joint ventures include joint ventures and their subsidiaries, and joint ventures
include joint ventures and their subsidiaries.
②Definition of business
Interpretation No. 13 improves the three elements of business composition, elaborates the
judgment conditions of business composition, and introduces the choice of "concentration test" to
simplify the judgment of whether a portfolio acquired under different control constitutes business to
a certain extent.
The Company has implemented Interpretation No. 13 since January 1, 2020, and the
comparative financial statements have not been adjusted. The Company has not implemented
Interpretation No. 13, which has had a significant impact on the Company's financial position and
operating results.
(3)Implementation of the Interim Provisions on Accounting Treatment for Carbon Emission
Trading
The Ministry of Finance issued the Interim Provisions on Accounting Treatment of Carbon
Emission Trading ([2019] No. 22) on December 16, 2019, which is applicable to relevant
enterprises of key emitters that carry out carbon emission trading business in accordance with the
Interim 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 key
emission enterprises should apply the regulation by adopting the future application method.
The Company has implemented this provision since January 1, 2020, and the comparative
financial statements are not adjusted. The implementation of this provision has not had a
significant 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 the
Treatment 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 rent
concessions 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 accounting
treatment of rent concessions, such as rent remission and deferred payment, which are directly
caused by COVID-19.
(2) Explanation on retrospective restatement due to significant accounting erro r
correction in the repo rting period
□ Applicable √ Not applicable
(3) Explanation on changes of consolidation scope comparing to prior year’s financial
statement
√ Applicable □ Not applicable
1.The company acquired 51.058% of Zhenhua Surface in May 2020, which was included in
the scope of consolidated statements in May 2020.
2.The company set up its holding subsidiary Xuzhou Yinlun Environmental Protection
Technology Co., Ltd in August 2020 with a registered capital of 50 million yuan, of which the
company should contribute 27.5 million yuan, accounting for 55% of the registered capital. As of
December 31, 2020, the Japanese company has not contributed yet, and it will be included in the
scope of consolidated statements from December 2020.
3.Tiantai Yinlun Redongli Exchanger Co. Ltd, a wholly-owned subsidiary, was cancelled in
February 2020 and no longer included in the scope of consolidated statements from February
2020.
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 this
absorption and merger, all the assets, liabilities, business, contracts and all other rights and
obligations of TDI are enjoyed and undertaken by the subsidiary, YINCHANG INC.
