HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020 (Abstract) Ⅰ. Important Notes This Abstract is extracted from Annual Report. In order to have a full understanding of the operating results, financial condition and future development planning of the Company, investors are suggested to read the full report carefully on the media designated by the China Securities Regulatory Commission (the “CSRC”). The Company’s 2020 Annual Report is prepared and published in Chinese version, and the English version is for reference only. Should there be any inconsistency between the Chinese version and English version, the Chinese version shall prevail. All directors attended the Board Meeting in person for reviewing of this Report. Indicate by check mark if independent auditor issues non-standard unqualified opinion. □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 by the Board of Directors. √Applicable □Not applicable Indicate by check mark if transferring capital reserve into common stock. □Yes √No The company's common stock profit distribution plan approved by the Board of Directors is as follows: based on 1,022,550,000 shares issued outstanding, the company will pay a cash dividend of 2.00 Yuan (tax included) for every 10 shares to all shareholders, and 0 bonus shares, and no increase of common stock through capital reserve. 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. Basic Situation of the Company 1. Company Profile Stock Abbreviation Boshi Stock Code 002698 Stock Exchange for Stock Listing Shenzhen Stock Exchange Contact Person and Contact Secretary of the Board Securities Affairs Representative Information Name Chen Bo Zhang Junhui 9 Donghu Street, Concentration Zone of 9 Donghu Street, Concentration Zone of Contact Address Yingbin Road, Harbin Development Zone , Yingbin Road, Harbin Development Zone , Heilongjiang province, China Heilongjiang province, China Tel +86-451-84367021 +86-451-84367021 Email ir@boshi.cn zhangjh@boshi.cn 1 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) 2. Company main business during the reporting period (1) Main businesses, main products and applications According to the proportion of revenue during the reporting period, the company's main businesses are shown in the following figure: Post-processing Intelligent Manufacturing Equipment for solid material: it is applied in the post-processing fields for the powder, granular materials or irregular materials of petrochemical, chemical, cereals, building materials, new energy, food, medicine, ports, feed, etc. (such as crushing, screening, bagging, boxing of reduced silicon rods, etc.), providing efficient automatic weighing, packaging and palletizing intelligent manufacturing and production equipment Robot and Complete System Equipment: Intelligent Logistics, Warehousing Systems: Operation robot for submerged arc furnace c onnecting with solid material post-proc essing and complete system solutions of serialized Overall Solution and rubber post-processing intelligent intelligent products are applied for high-risk for Intelligent manufacturing equipment to realize intelligent working environment(high-temperature) as Manufacturing identification, outbound and inbound well as other special robots and complete Equipment and warehousing management, logistics system solutions which can replace high-risk, Intelligent Factory transshipment, Automatic Vehicle Loading, harsh working conditions, and heavy manual etc., and to help users to build smart factory labor. overall solutions Post-processing Intelligent Manufacturing Equipment for rubber: it is intelligent equipment and intelligent plant overall solution, applied in production proc ess of synthetic rubber and natural rubber and in the fields of product refining process, dewatering and drying process (rubber washing, cleaning and impurity removal, dewatering, crushing and drying, etc.) and finished product packaging proc ess (weighing, baling, detecting, conveying, packaging and palletizing, etc.) The industrial services, rooted in the above-mentioned related fields of Intelligent Manufacturing Equipment, are mainly integrated service, equipment maintenance and spare parts sales and the like facing the operation in the application fields of Intelligent Manufacturing Equipment, After-sales Industrial Service, and Supplementary Industrial Service. 2 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) Collection, catalysis, Heat exchange, purification Industrial waste sulfuric acid, Energy saving, emission reduction and sulfur-containing environmental protection process equipment field acid gas Harbin Boao Environmental Technology Co.,Ltd and its wholly-owned subsidiary (P&P Company, registered in Graz, Austria) is currently mainly engaged in the design, production, and sales of energy-saving, emission-reduction and environmental protection process equipment which is represented by industrial waste acid regeneration process and equipment. Industrial waste acid regeneration technology and equipment collect and process industrial waste sulfuric acid and sulfur-containing acid gas which are produced in the customer's chemical production to generate high-purity sulfuric acid for recycling production, and release heat energy for recycling and reusing, realizing the effects of energy saving and emission-reduction, recycling uses, economy and environment protection. High-purity sulfuric acid used for recycling production Realize the effects of energy saving and emission-reduction, recycling uses, economy and environment protection 3 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) (2)Business mode Due to the industry's unique customer groups and their differentiated needs, product sales are usually achieved through bidding and negotiation of bids. The Large-scale Marketing company's products are highly professional, and the sales model is mainly direct sales, supplemented by distribution Intelligent Basing production on sales prospects, according to the product sales contract Production Manufacturing signed with the user, organize the design, procurement, manufacturing, assembly Organization and commissioning, etc. Equipment Delivery The products that pass the inspection are transported to the customer site for and installing and commissioning. After the customer passes the inspection and acceptance acceptance, the company confirms the sales revenue Marketing Sales are usually realized by means of bidding and negotiation of bids. Energy saving, Production Coordinate domestic and overseas resources, organize process design and Emission organization production&installation of environmental protection equipment reduction and Environmental Different from large-scale Intelligent Manufacturing Equipment, Company will work protection with users to conduct full-production and rigorous production tests on key indicators Process Run test of environmental protection process and equipment operation, which will last for a Equipment long time Revenue After the user's acceptance, the Equipment revenue and Process package revenue confirmation are usually confirmed separately These industrial services are mainly integrated service, equipment maintenance service and spare parts sales and the like for the application fields of Intelligent Manufacturing Equipment; By participating in bidding or negotiating bids, the company signs integrated service, Operation equipment maintenance service agreements with users (which may include FFS film and rolls sales matching with production services), equipment maintenance, operation After-sales maintenance and the like to determine the contents and modes of services; type Usually on a monthly or quarterly basis, after the performance of the service or the Industrial phased completion, the operating revenue is confirmed according to the agreement Services or the consistent settlement basis confirmed with the customer; Industrial The sales mode of spare parts is flexible (the company initiates stocking or the Services customer initiates procurement), and the operating revenue is confirmed based on the actual delivery of the product and the time when the revenue confirmation conditions are met Content 1: FFS Film roll production enterprise matching with industrial services Supplementary (Nanjing Green New Material Co., Ltd., Company’s holding subsidiary) separately sells Industrial FFS film rolls, plastic auxiliaries and the like apart from the company's production and Services operation services; and Content2: Other small revenues which don’t have qualification to be classified of Miscellaneous importance Revenue confirmation: usually as per the contract signed with Customer, implement the contract and meet the Revenue conditions, then confirm the Operating Revenue 4 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) (3) Key Performance Driving Factors The Company's Operating revenue and net profit attributable to the parent company’s shareholders in recent years are shown in the figure below: Operating revenue Net profit attributable to the parent company' s shareholders (RMB 0.1 billion Yuan) (RMB 0.1 billion Yuan) 5 20 18.28 4.05 14.60 4 15 3.07 3 9.16 10 7.88 1.82 6.28 2 1.30 1.10 5 1 0 0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 The compound growth rate of the Company's operating revenue and net profit attributable to the parent company in the past three years are 32.37% and 46.27% respectively. The weighted average return on net assets for the year of 2020 is 16.83%, which is the best level in recent years. In recent years, the company's performance continues to grow better and faster. The main driving factors are as follows: ① Benefiting from the strong demand for Intelligent Manufacturing Equipment from the intelligent manufacturing upgrade in China and strong support from the Company’s diversified Products expansion, the Company's Intelligent Manufacturing Equipment business continues to exert strength. Especially manual substitution in the field of high-risk, harsh, and heavy working conditions has promoted the company's overall performance growth; ②The synergy between Industrial Services and Intelligent Manufacturing Equipment and steady growth for service revenue improves the Company's ability to resist risks, and enhance the Company's overall performance; ③ In terms of the new business direction, in mid-2017, the energy saving, emission reduction and environmental protection business was consolidated in financial report, the business and the company's intelligent manufacturing equipment achieved a good synergy in the application field, and entered the payback period in 2019, bringing better performance contributions. As shown in the figure below, technological innovation and new products constant applications help to promote the continuous growth or prolong growth period of the company. 5 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) The company's intelligent manufacturing equipment has undergone continuous technological innovation and an optimization process of continuous application of new technologies and new products. Currently, the Company has ability to provide users with Overall solutions for Smart Factories in the main product application fields, which helps the Company to be in a better business competition pattern in the market, and its comprehensive competitiveness continues to increase. For details, please refer to the part of "Core Competitiveness Analysis" of the third section. 3. Key Financial Information (1) Key accounting data and financial indicato rs in the past three years Indicate by check mark if there is any retrospectively restated accounting data of previous years. □Yes √No Unit: RMB Yuan Increase/decrease of 2020 2020 2019 2018 over 2019 Operating Revenue 1,827,912,892.55 1,459,741,076.77 25.22% 915,574,863.37 Net profit attributable to parent 405,370,652.33 307,106,182.72 32.00% 182,075,842.44 company’s shareholders Net profit attributable to parent company’s shareholders excluding 375,832,168.49 279,151,858.98 34.63% 157,896,604.74 non-recurring gains and losses Net cash flows from operating 147,006,474.65 352,391,698.09 -58.28% 223,747,834.88 activities Basic EPS (RMB Yuan /share) 0.3964 0.3003 32.00% 0.1781 Diluted EPS (RMB Yuan /share) 0.3964 0.3003 32.00% 0.1781 Weighted average ROE 16.83% 14.17% 2.66% 9.15% Increase/decrease of 2020 As of Dec.31, 2020 As of Dec.31, 2019 As of Dec.31, 2018 over 2019 Total assets 4,576,810,168.61 4,041,154,116.28 13.26% 3,443,482,471.16 Net assets attributable to parent 2,568,750,413.53 2,290,352,360.75 12.16% 2,065,055,033.71 company’s shareholder (2) Key accounting data by quarter Unit: RMB Yuan First quarter Second quarter Third quarter Fourth quarter Operating Revenue 486,509,069.88 446,123,605.55 424,421,709.88 470,858,507.24 Net profit attributable to parent company’s 114,809,150.06 111,545,988.44 103,640,405.92 75,375,107.91 shareholders Net profit attributable to parent company’s shareholders excluding non-recurring gains 108,408,672.06 106,604,136.75 102,219,255.26 58,600,104.42 and losses Net cash flows from operating activities -71,169,052.04 98,264,516.12 14,306,905.83 105,604,104.74 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 6 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) 4. Capital and Shareholders (1) Number of common stockholders and preferred stockholders with voting rights restored and the shareholding conditions of the top 10 shareholders Total number of Total number of Total number of Total number of shareholders of shareholders of shareholders of preferred shareholders of common common stocks at preferred stock with stock with resumed voting 27,298 26,887 0 0 stocks at the end of the previous month-end resumed voting rights at previous reporting period of this report’s right at the end of month-end of this report’s disclosure the reporting period disclosure Top 10 shareholders Quantity of Pledged or frozen stocks Quantity of Name Nature Ownership restricted stocks stocks Status Quantity held Harbin Institute of Technology Asset Domestic state-owned 22.11% 226,135,000 Investment Management Co. Ltd corporate Deng Xijun Domestic natural person 9.31% 95,206,362 77,479,772 Zhang Yuchun Domestic natural person 8.09% 82,696,357 65,772,268 Pledged 16,053,400 Wang Chungang Domestic natural person 5.61% 57,394,047 47,695,535 Cai Zhihong Domestic natural person 4.96% 50,677,029 Cai Hegao Domestic natural person 4.89% 50,000,000 37,500,000 Sealand Securities - SPDB - Guohai Securities Lvyuan No. 1058 Others 2.00% 20,450,000 Collective Asset Management Plan Cheng Fang Domestic natural person 1.52% 15,572,985 Tan Jianxun Domestic natural person 1.51% 15,432,533 Li Xianglan Domestic natural person 1.10% 11,254,409 Among the above-mentioned shareholders, Deng Xijun, Zhang Yuchun, Wang Chungang, and Cai Hegao keep concerted action through the Concert Action Agreement and jointly control the company at the end of the reporting period; Cai Zhihong is the son of Cai Hegao, he independently exercised shareholder rights Explanation on the above-mentioned based on his personal wishes, he has not signed concerted action agreement or reached a similar agreement or shareholders’ affiliated relationship or arrangement with Cai Hegao, nor has other concerted action plan, they are not persons acting in concert; concerted action Cheng Fang and Tan Jianxun are the sponsors of shareholders. Cheng Fang is the sister of Wang Chungang 's wife. In addition, the company is not made aware whether there is any affiliated relationship between the above-mentioned shareholders or whether they are persons acting in concert as defined in Administrative Measures for the Acquisition of Listed Companies. Explanation on the shareholders that Li Xianglan holds 10,690,080 shares through Credit account except 564,329 shares through General are engaged in margin trading securities account, holds11,254,409 shares in total. business(In case ) (2) The total number of preferred shareholders and the top 10 preferred shareholders' shareholdings of the Company □Applicable √Not applicable During the reporting period, the Company did not have preferred stockholders holding shares. (3) The ownership and controlling relationship between the Company and its actual controller in fo rm of diagram 7 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) 5. Bonds Does the Company have any corporate bond that are publicly issued and listed on the stock exchange and that are not matured or not fully redeemed as of the approved issuance date of the Annual Report? □Yes √No III. Operating Performance Discussion and Analysis 1.Brief introduction of Business of the Reporting Period In 2020, in the face of the sudden outbreak of the pandemic, China responds well to the pandemic, actively pay equal attention to pandemic prevention and resumption of production, the annual economic performance is brilliant alone in the world. “Made in China” relying on strong resilience and comprehensive competitiveness continues to export commodities and pandemic prevention materials to the world and bring confidence and vitality to the world economy. During the Reporting Period, the Company overcame the adverse effects of the pandemic situation, actively organized production, completed product delivery and service performance, seized the opportunity of strong demand for intelligent equipment made in China and comprehensively promoted the capacity of R&D, design and manufacturability, revenue, profit targets and operating data for the Overall Solution of Intelligent Manufacturing. During the Reporting Period, the Company achieved operating revenue of RMB 1.828 billion Yuan, an increase of 25.22% year on year, and net profit attributable to the parent Company’s shareholders of RMB 405 million Yuan, an increase of 32% year on year. The weighted average return on net assets was 16.83%, the best level in recent years. The profitability of the Company's products and services has been continuously enhanced. From the overall revenue composition, the Company's revenue of Intelligent Manufacturing Equipment, Industrial Services, Environmental Protection Process and Equipment and contribution gross profit structure as shown below. Operating Revenue Contribution Gross Profit (RMB 0.1 billion Yuan) (RMB 0.1 billion Yua n) Note: in the above figure, Contributing Gross profit= Operating revenue of corresponding business – Operating cost Boshi brand and Customer base have a good synergy at the customer’s level for the above business composition. From the revenue-driven level, intelligent equipment demand, industrial service demand and environmental protection standards, emission reduction and efficiency requirements of the revenue-driven are different; the Company's overall business has a good complementarity, of which business risk-resistant ability is improved, and is less affected by the industry boom fluctuations. From the point of view of product structure, following the continuous improvement of the competitiveness of the Company in the Post-processing Intelligent Equipment for powder and granules, the Company applies the related technology to the field of irregular materials such as polysilicon raw materials in the New Energy industry. During the Reporting Period, the revenue of this category of solid material Post-processing 8 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) Intelligent Manufacturing Equipment increased 52.64% year on year, and the revenue scale accounted for about 2/3 of the Company's Intelligent Manufacturing Equipment, accounting for the highest proportion in the overall revenue of the Company. Robot and Complete System Equipment, Environmental Process and Complete Equipment continue to maintain high revenue levels after business explosion in 2019. Affected by less than expected progress in overseas installation and commissioning, Rubber Post-processing Intelligent Manufacturing Equipment increased slightly year on year. Driven by the Automatic Vehicle Loading machine, the revenue of Intelligent Logistics and Warehousing system is growing rapidly and has good potential. In Industrial Services, Operation and After-sales type Industrial Services achieved a year-on-year growth of 18.18%, maintaining the momentum of continuous growth. 2.Core Competitiveness Analysis As a technology-based enterprise, Boshi adheres to a differentiated competitive strategy of leading technology, and relies on a deep understanding of China's automation field and practical experience in industrial applications to maintain a long-term competitive position in the field it is engaged in. Boshi's Intelligent Manufacturing Equipment, Environmental protection Process Equipment, and Industrial Service businesses are effectively synergized and industrially linked. The business scale is growing rapidly, the profitability is enhanced, and the comprehensive competitiveness is stable. (1) Industry status Member of China Robot TOP10 Summit National Vice Chairman enterprise of Intelligent Enterprise Robot Branch of China Technology Mechatronics Technology Application Center Association Complete TOP10 Leading Intelligent Enterprise in intelligent Manufacturing Segmentation manufacturing System Solution field equipment Provider Ranked 18th in 2020 China's top 100 Five star brand intelligent factory non- certification of standard automation integrators Five-star BSCC standard certification of NECAS national product after- sales 9 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) (2) Market Classification of Products and Service Intelligent Manufacturing Equipment In the field of post-processing high-end equipment for powder and granular materials in China it has obvious advantages and a stable competitive position In the field of post-processing high-end equipment for the irregular polysilicon Solid material Post-process Intelligent materials, the original and first equipment’s application has promoted the upgrade of Manufacturing Equipment intelligent manufacturing in the industry Robot and Complete System Equipment Application of (High temperature) Operation Robot for submerged arc furnace and peripheral systems keeps leading position in the field of Calcium carbide in the world Rubber Post-processing Intelligent Complete product line, covering natural rubber and synthetic rubber Manufacturing Equipment it is the only enterprise which can provide complete large-scale systems worldwide Intelligent Logistics and Warehousing System Fully Automatic Vehicle Loading Machine has first-mover advantage, large application potential Industrial Service Holding technical genetic advantages, leading service capabilities and scale in the field Environment protection Process Industrial waste acid and acid gas treatment and recycling reusing process and and Equipment equipment keeps an advanced level in related industries The Company's brand enjoys constant leading in popularity, reputation and customer loyalty in the above-mentioned domestic market (3) Technology and Product R&D Innovation is the first driving force to lead the development of an enterprise and technological leadership is an important core competitiveness of the company. The company continuously improves its technology application level and technology reserve capacity, seizes new opportunities, and expands into new fields. Through R&D investment, technology accumulation and technological innovation, the company has been playing a leading role in the field of product application for a long time, with outstanding technological leadership advantage and a competitive position in the industry. (4) Advantages of the main business structure of "Intelligent Manufacturing Equipment" + "Environmental protection Process Equipment" Through the industrial waste acid and acid gas treatment and recycling projects implemented by the holding subsidiary Harbin Boao Environmental Technology Co.,Ltd and its overseas wholly-owned P&P company, the Company can collect and process industrial waste sulfuric acid and sulfur-containing acid gas in chemical production to generate high-purity sulfuric acid for recycling production, achieving the effects of energy saving, emission reduction, environmental protection and economy. The positive interaction and synergy between the company's "intelligent manufacturing equipment" and "environmental protection process equipment" are significant. In mid-2017, Harbin Boao Environmental Technology Co.,Ltd completed the acquisition of the Austrian P&P company. After the environmental 10 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) protection business achieved financial consolidation, it continues to make important market progress. Since 2019, The Environmental protection Process and Equipment have started the industry payback period. During the reporting period, it achieved sales revenue of RMB 275 million Yuan, contributing considerable profit to the Company. The main business structure of "Intelligent Manufacturing Equipment" + "Environmental protection Process Equipment" broadens the company's business fields, enhances the company's business scale, strengthens the company's ability to resist risks and consolidates the advantage of the company's competition in related business fields. (5) Competitive advantage of two-wheel drive of "Intelligent Equipment" + "Industrial Service" The Company fully integrates product application advantage, technological leading advantage and industrial service, actively promotes the strategy of industrial service integration and achieves rapid development. The company's professional, high-quality and efficient industrial service is the necessary guarantee for customers' continuous production and operation, stable and efficient production, and achieves a win-win situation for the company and customers. During the reporting period, the company's industrial service achieved revenue of RMB 569 million Yuan, of which operating and after-sales industrial services achieved revenue of RMB 415 million Yuan, achieving 18.18% year-on-year growth, which contributes stable profit to the Company. Stable service revenue, smooth product sales fluctuations Product sales drive Grasp user’s product more demand for demand information industrial services through services Intelligent Equipment + Industrial Mutual promotion to Service Industrial service form a moat of advantages promote competitive company product advantage sales Connect with customer more tightly Legend: Schematic diagram, the positive interaction between Intelligent Equipment and Industrial Service (6) The Overall Solution of Intelligent Manufacturing enhances the Company's Competitiveness Throughout the company's technology, product development and industrialization process, the company enters new industries and new fields usually with key single unit equipment ("points"); after breakthrough in solving industry pain points, quickly form an automated production line ("line"); With the accumulation of technology and the in-depth understanding of the industry, the Overall Solution ("surface") of intelligent manufacturing is completed to help users realize the upgrade to Digital and Intelligent Factories. This process of technological progress from "point → line → surface" helps the company to concentrate resources, reduce technology development risks, open the ceiling for industry growth, and comprehensively enhance the company's core competitiveness. As shown in the figure below, compared with a Single Unit Equipment and Automation Production Line, the Overall Solution of Intelligent Manufacturing helps the Company face a more potential product market and 11 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) be in a better competitive environment, which can stimulate the potential contract value of a single customer, which is expected to be multiplied. Legend: Schematic diagram of the competitive environment and potential market opportunities of Single Unit Equipment, Automation Production Line and Overall Solution of Intelligent Manufacturing (7) Social and Economic Benefits The transformation of traditional industries with high technology is the responsibility and mission given to technological innovation enterprises by the era. The company's Automatic Vehicle Loading machine which is widely used in the national economy field and (high temperature) operation robot for submerged arc furnace in the Calcium carbide industry are of great significance to replace manual operations in high-risk or heavy manual working conditions to achieve safe production, improve production efficiency and have a significant economical benefit, which have a transformative impact on the production field of “3D” work scenes (Dangerous, Dirty, Dull). In this successful domestic fight against the COVID-19 pandemic, one of the major problems encountered by enterprises in resuming work and production is difficulty in hiring employees. Continuous anti-epidemic and complex social and psychological factors have restricted the movement of the people. If intelligent manufacturing equipment is applied in production, it will show higher efficiency and save more resources in recovery of production. The company's large-scale intelligent manufacturing equipment can provide one-stop solutions for customers in the product application field, realize safe and efficient production for users, fundamentally solve labor difficulties and promote the improvement of social production efficiency. The application of these high-tech products not only achieves good social benefits, but also brings considerable economic benefits to the enterprise at the same time. 12 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) (8) Brand Competitiveness The Company builds brand with quality, seeks progress with technology, and wins trust with service. Through high-quality products and efficient services, we strive to realize production automation and intelligent manufacturing for customers and achieve win-win cooperation. The Company’s brand enjoys a constant leading in popularity, high reputation and customer loyalty in the main domestic product application fields. The company pursues excellence, leads the development of intelligent equipment in the application industry and builds up a stable and healthy customer network for a long time. At the same time, high-quality customer resources and huge demand for intelligent manufacturing e quipment have become the source of the company's sustainable and rapid development. (9) Achievements in Intellectual Property, Proprietary Technology and Software Copyright During the reporting period, the Company obtained 22 patents approved by the State Intellectual Property Office, including 1 invention patent and 21 utility model patents; 21 Software Copyrights are approved by the National Copyright Administration. In addition to patented technology, the company has a considerable amount of core technical Know-how that exists in the form of Proprietary Technology by relying on confidentiality measures. Through the Patents, Proprietary Technology and Software Copyright owned and mastered by the company, the Company has further consolidated its compe titive advantage in the industry and enhanced its core competitiveness. 3.Other Impo rtant Notes (1)Significant changes in main business during the repo rting period □Yes √No (2)Products contributing to over 10% of the Company’s main business revenue or profit √Applicable □Not applicable Unit: Yuan Operating cost: Operating Gross profit Revenue: +/-% Gross profit margin Product Operating cost +/-% over last Revenue margin (%) over last year +/-% over last year year Post-processing intelligent manufacturing equipment 663,831,653.87 401,083,653.26 39.58% 52.64% 57.65% -1.92% for solid material Robots and complete 242,373,926.57 109,542,307.56 54.80% -1.21% 11.32% -5.09% system equipment Post-processing intelligent manufacturing equipment 40,191,157.73 26,577,137.12 33.87% 5.80% 27.47% -11.25% for rubber Intelligent logistics, 37,497,778.04 21,076,595.29 43.79% 1,647.36% 1,398.93% 9.31% Warehousing systems Environmental Process and 274,945,673.55 94,806,409.14 65.52% -1.53% -43.79% 25.92% Complete Equipment Operation and after-sales 415,058,707.14 274,173,040.31 33.94% 18.18% 23.80% -3.00% type industrial services Supplementary industrial 154,013,995.65 133,246,230.76 13.48% 41.39% 54.59% -7.39% services and others 13 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) (3)Seasonal or periodic characteristics in operating performance that needs special attention □Yes √No (4)Significant changes in revenues, costs and net profit attributable to shareholders with common shares or their composition comparing to prior reporting period □Applicable √Not applicable (5)Listing suspension or termination □Applicable √Not applicable (6)Matters related to financial statements ① Explanation on changes in accounting policies, accounting estimates and accounting methods comparing to prior year’s financial statement Changes in Key Accounting policies The New Revenue standard The Ministry of Finance issued the Accounting Standards for Business Enterprises No.14 – Revenue (Revision) (hereinafter referred to as the “New Revenue Standards”) in 2017, and the domestic listed companies are required to implement from January 1, 2020. The second meeting of the fourth Board of Directors of the company held on April 20, 2020, approved to implement the new revenue standard from January 1, 2020, and adjust the relevant content of the accounting policy. The company recognizes revenue after fulfilling the performance obligations in the contract, that is, when the customer obtains the control of the relevant goods or services. When certain conditions are met, the company is to perform its performance obligations within a certain period; otherwise, it is to perform its performance obligations at a certain point. If the contract includes two or more performance obligations, at contract inception, the company allocates the transaction price to single performance obligation according to relative proportion of the stand-alone selling prices of the goods or services promised by single performance obligation. And the revenue is measured at the transaction price allocated to each individual performance obligation. The company adjusted relevant accounting policies in accordance with the specific provisions of the new revenue standards on specific matters or transactions. Please refer to Note V.26 in Annual Report 2020 for the accounting policy after change. The company adjusted the amount of relevant items in the financial statements at the beginning of 2020 based on the cumulative influence of the first implementation of the new revenue standard, and did not adjust the comparative financial statement data. Unit: Yuan Changes in Accounting policies and reasons Affected statement items Affected amount as of Jan.1, 2020 Advance from customers -1,376,115,092.37 Due to the implementation of the new revenue standard, the company reclassified the advance from customers related to Contract liabilities 1,335,685,772.71 the sales of goods and labor services into contract liabilities. Other current liabilities 40,429,319.66 The influence of the implementation of the new revenue standard on the balance sheet at the end of the period is listed below: 14 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) Unit: Yuan Items Affected amount as of Dec.31, 2020 Inventories 27,314,148.80 Advance from customers -1,470,732,512.43 Contract liabilities 1,414,586,745.15 Other current liabilities 56,145,767.28 ② Explanation on retrospective restatement due to significant accounting error correction in the reporting period □Applicable √Not applicable No correction of material accounting error required to be retrospectively restated in the Company’s reporting period. ③ Explanation on changes of consolidation scope comparing to prior year’s financial statement □Applicable √Not applicable No change in consolidation scope comparing to prior year’s financial statement IV .The Company's Outlook for Future Development 1.Company Key Business Development field The company will actively promote the R&D, application and promotion of new technologies and products in the following areas, improve the level of Intelligent Manufacturing in relevant industries, and promote the coordinated development of various businesses of the company (1)Digital Intelligent Manufacturing Equipment based on 5G and Industrial Internet Technology China is a major manufacturing country and this pandemic highlights the important role of China in the international industrial chain. Despite the anti-globalization ideological trend in the world, the rise of China's manufacturing brands and the huge potential of domestic demand make us full of confidence in the future of China's manufacturing industry With the integration and expansion of 5G and Industrial Internet Technology application scenarios, the process of New Industrialization in China will surely be accelerated. Relying on years of technical accumulation and industrial application practice experience in the field of Large-scale Intelligent Manufacturing Equipment, The Company will focus on expanding the application scenarios of Intelligent Manufacturing Equipment in different industries ① Overall Solution of Post-processing Intelligent Manufacturing Equipment for solid material Legend: Schematic diagram for Overall Solution of Post-processing Intelligent Manufacturing Equipment for solid material Note: this diagram only shows the part of photos and blurred images in this section. Under the premise of technical confidentiality, the relevant content is as easy as possible for investors to understand 15 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) Overall Solution of Post-processing Intelligent Manufacturing Equipment for solid material, can be widely used in the post-processing application scenarios of powdery materials, granular materials and irregular materials (such as polycrystalline silicon raw materials in the New Energy industry), and help the intelligent and efficient production and digital upgrading of relevant industries In the above legend, the Overall Solution of Intelligent Manufacturing is seamlessly connected with the transport vehicle through the Automatic Vehicle Loading System. Automatic Vehicle Loading system can be widely used in many fields of the National economy, which is conducive to the user to concentrate resources, improve production efficiency, release production potential and fully show its advantages in the case of labor shortage, limited personnel and harsh loading environment. ② Overall Solution of Intelligent Factories Legend: Schematic diagram for Overall Solution of Intelligent Factories Based on the deep integration of 5G Industrial Internet Technology and Manufacturing industry, the Company's Overall Solution of Intelligent Factories helps customers produce economically, safely and efficiently, realizes intelligent production decision-making management and improves the level of intelligent manufacturing (2)Manual substitution under high-risk, heavy and harsh working environment Under the environment of high risk, heavy and harsh working conditions, the hidden trouble of safety production is large, the enterprises generally have the pain points of difficulty of recruiting workers, limited production capacity, unstable product quality, high production cost and the low standardization and so on. Through the operation of intelligent robots and peripheral systems, and data-based information management, many problems that cannot be solved by traditional manual production can be complete ly solved, safe production, increased production capacity, and industrial upgrading of Intelligent Manufacturing can be promoted. ① Overall Solution of Intelligent Manufacturing for Arc Furnace Smelting Legend: Photos for Overall Solution of Intelligent Manufacturing for Calcium Carbide furnace field 16 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) The effect of promotion and application of the Company's self-innovation and R&D (high temperature) Operation Robot and its peripheral system in the field of calcium carbide production is remarkable. On this basis, the Company has continued to develop the application of high-temperature Special Robots in the high temperature furnace operation environment of silicon iron, silicon manganese, industrial silicon furnace and other high-temperature furnace, has made progress in succession, please refer to the third section of this Annual Report "III: Core Competitiveness Analysis". ② Overall Solution of Steel Intelligent Manufacturing Boshi and Hunan Hualian Yunchuang Information Technology Co., Ltd .(a wholly owned subsidiary of Valin Group) signed a strategic cooperation agreement (see Announcement 2020-051 for details) to jointly promote the digital transformation of the iron and steel industry. In the early stage, The Company, through its investment enterprise Hunan Boshi Automation Equipment Co., Ltd. cooperate with "Xiangtan Iron & Steel", a subsidiary of Valin Group, carried out many cooperative applications, including ironmaking, steelmaking, hot metal transfer, billet continuous casting, steel plate sampling and other technological links. The Company will actively improve and promote the Iron & Steel Industry Intelligent Manufacturing Solution to be implemented and promote the application of it. Legend: Partial schematic diagram of Overall Solution of Iron&Steel Intelligent Manufacturing ③ Overall Solution of Intelligent Logistics within factory Legend: Partial photos for Automatic Vehicle Loading System The Company's Intelligent Logistics system takes the Automatic Vehicle Loading System as the core unit, with the visual identification system, information technology, data information interface system, logistics dispatching system, transportation system and so on as the auxiliary, carries on the logistic operation of batch 17 HARBIN BOSHI AUTOMATION CO., LTD. Annual Report 2020(Abstract) transportation, the stacking, the split, the combination, the loading and so on to many kinds of bags, boxes, bulk materials and so on. Overall Solution of Intelligent Logistics can be widely used in many fields of national economy, which is helpful for users to concentrate resources, improve their logistics automation ability, improve production efficiency and release production potential. User feedback and market expansion continue to improve. (3)Industrial Service of Intelligent Equipment Facing the company's intelligent equipment user field, the manufacturing enterprise's daily product material post-processing production management, including the equipment operation, repair, maintenance, inbound and outbound of finished products, transshipment, loading and other integrated industrial services, present the outsourcing trend for the professional work. The Company prepared ahead of time, relying on the leading advantage of technology, continuously and vigorously promotes the integration strategy of products and services, professional, economic, high-quality and efficient service has been recognized and complimented by users, the Company's industrial service revenue has increased year after year. During the reporting period, the company's operating and after-sales industrial type services revenue exceeded RMB 400 million Yuan for the first time, reaching RMB 415 million Yuan, an increase of 18.18% over the same period last year. The Company's Integrated Industrial Services and Intelligent Equipment products sales form a positive interaction, promote mutually, enhance customer stickiness, effectively extend the industrial chain. The Company's Industrial Services of Intelligent Equipment, on the one hand, will maintain a steady growth with the growth of product sales and equipment stock, on the other hand, will give a positive response to the customer's deep service demand, the service scale is expected to continue to step up, become an important source of income and profit of the Company. (4) Energy-saving, Emission reduction and Environmental protection industry Industrial waste acid and acidic gas treatment and recycling project, implemented by the Harbin Boao Environmental Technology Co.,Ltd and its wholly-owned Austrian P&P company, a holding subsidiary of the Company, can collect and treat industrial waste sulfuric acid and sulfur-containing acid gases in chemical production to produce high-purity sulfuric acid for recycling production, and to recycle and reuse the heat energy released in the process to achieve energy saving, emission reduction, recycling, environmental protection and economic results. The Company will promote its research and development in the field of industrial waste sulfuric acid, sulfur-containing acid gas in order to apply in more fields, strive to overcome the adverse impact of the Pandemic on the development of overseas market sales, enhance its sustainable development profitability. 2.Business Outlook in 2021 Since 2017, the Company's performance has continued to grow rapidly. In 2020, the Company's operating revenue was RMB 1.828 billion Yuan, 2.91 times of its revenue in 2016, and its net profit attributable to Parent Company's shareholders was RMB 405 million Yuan, 3.69 times of it in 2016. The compound growth rate is 32.37% and 46.27% in the past three years respectively. The Company is confident that its performance will continue to grow in 2021. On the specific profit target, the Company has determined that the net profit attributable to Parent Company's shareholders of listed companies in 2021 will increase compared with the year of 2020, at a range of 10% to 40%. (Special note: The above perfo rmance objectives do not constitute a substantial commitment of the Company to investors, whether it can be achieved depends on the macroeconomic situation, changes in the industry market, progress in the implementation of projects, management measures and other factors, there is uncertainty, investo rs are invited to pay attention to investment risk. ) Board of Directors of HARBIN BOSHI AUTOMATION CO., LTD. April 22, 2021 18