Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
Stock Code: 200771 Stock ID: Hangqilun B Announcement No. 2018-14
Hangzhou Steam Turbine Co., Ltd.
Summary of 2017 annual Report
I. Important Notice
This annual report summary is taken form the full text of the Annual Report. Investors are advised to read
carefully the full text of the Annual Report published on the media designated by China Securities Regulatory
Commission in order to fully understand the company’s operation results, financial position and future
Non-standard auditor’s opinion
Not applicable
Plans for profit distribution on ordinary shares or conversion of capital reserves into share capital
proposed to the Board during the reporting period.
Applicable
Share capital increase from the capital reserve
No
The Board has considered and approved a proposal for profit distribution: Based on the total shares of 754，010，
400, a cash dividend of RMB0.50 (tax inclusive) per 10 shares would be distributed to all the shareholders, with
no stock dividend in any form
Plans for profit distribution on preference shares for the reporting period approved by the Board
Not applicable
II. Basic information about the company
1. Company profile
Stock ID Hangqilun B Stock code 200771
Stock exchange for listing Shenzhen Stock Exchange
Contact person and contact
Board secretary Securities affairs Representative
manner
Name Wang Gang Wang Caihua
Address No. 357 Shiqiao Rd. Hangzhou No. 357 Shiqiao Rd. Hangzhou
Tel 0571-85780433 0571-85780433
Fax 0571-85780198 0571-85780438
E-mail wg@htc.cn wangch@htc.cn
2.Major operations or products during the reporting period
As the leading provider of turbo machinery equipment and relevant service in China, our company is mainly
famous for designing and producing rotating turbo machinery like industrial steam turbines and gas turbines. Our
company, one of the major companies drafting the industrial standard in Chinese domestic industry of industrial
steam turbine, has developed into the biggest base to research, develop and produce industrial steam turbines in
China and ranks first among industrial steam turbine producers in terms of the market occupancy. Holding the
principle “our products should be based on clients’ demands” as our business mode and characteristic, our
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
company designs and produces in accordance with every client’s personal demands so as to meet personalized
needs in engineering projects to the utmost. To realize the fast research and development of our products, our
company has adopted the advanced modular design technique and, on the other hand, introduces information
technique to assist the collaborative production to achieve the resource saving and flexible production. In addition,
our company also provides our clients with relevant service such as engineering programs, general engineering
contracting, operation and maintenance of our products as well as remote control and so on.
Industrial steam turbines use the steam featuring high temperature and high pressure as their working
medium so as to convert the thermal energy into mechanical energy to drive various industrial equipments through
the rotating steam turbines. As for different objects driven by industrial steam turbines, the steam turbines could
be divided into industrial driving steam turbines and industrial power-generation steam turbines. Mainly driving
rotating machines like compressors, air blowers, pumps and squeezers, industrial driving steam turbines, as the
core power part in numerous large-scale industrial equipments, are always introduced into some industries like oil
refining, chemical engineering, chemical fertilizer, building materials, metallurgy, electric power, light industry
and environmental production. The industrial power-generation steam turbines, mainly utilized to drive electric
generators and provide thermal energy, are mainly adopted in private stations, regional projects of combined heat
and power generation, power generation by recycling waste heat in industrial production, urban waster power
plants and gas-steam combined cyclepower stations in various industrial sectors. The gas turbines produced by our
company are mainly used by metallurgical industry to recycle the waste heat from the blast furnace exhaust to
generate power.
In the gas turbine business, the Company has cooperated with Siemens on the advanced natural gas turbine
SGT-800 model-with features of high efficiency, high reliability and low emission, thus to enter the distributed
natural gas field. As the general whole-set maker of SGT-800 in China, the company has launched the gas turbine
business in respect of the project procurement and the integrated implementation. Hangzhou Steam Turbine has
the type selection ability for the distributed energy combined cycle project, has established a complete system of
supporting standard and material system, and it can complete the independent processing or matching work for the
equipment besides the gas turbine body. In the industrial fields including the cogeneration /combined cycle power
plant and the oil & gas project with distributed energy projects that adopt the small and medium gas turbines, the
Company not only can provide gas turbine equipment for customers, but also can provide customers with
complete sets of equipment for gas turbine power plant and the efficient integrated solutions. Especially, it can
provide customers with operational support services throughout the product life, and this service model is
conductive for the establishment of long-term business cooperation relationships between the company and its
customers.
As the major producer of industrial equipments in China during the report period, our company is mainly
benefited from the following factors in terms of the elements driving our business performance:
1. On the basis of market demands. The relevant market demands fluctuate differently due to various business
condition and investment cycles in different industrial fields. The company further made more specified positions
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
toward the market for the products, implemented the differentiated marketing strategy, and integrated the business
sectors and tapped into the potential. During the reporting period, the domestic oil refining and chemical
investment projects started at multiple points and drove the demand for related equipment manufacturing. The
company grasped the growth opportunities in the petrochemical sector, and formulated the flexible price strategies
for the fields of low-end and mid-end drive, ensured the market share and continuously consolidated and
strengthened the existing market advantages. Adhering to the "Go global" strategy, the Company continued to
expand the overseas markets, establish overseas offices and increase its market influence.
2. Innovation and further reform in difficult areas of product technology.
Our company continuously improves product technical performance and tackles hard issues in the scientific
researches of product structure, core parts, basic design, manufacturing technology, material technology, etc. In
addition, basing on clients’ demands, our company launches the study “The Demonstration and Application
Project for Packaging Technology of Steam Turbine” to push forward the intelligence of our products and the
development of the integration technology. Meantime, the company cooperated with universities, scientific
research institutes to build the technological exchange and cooperation platform.
3. Upgrading and transformation of industrial structure transformation.
The company jointed with Siemens to enter the distributed energy market and enhance the development and
utilization of natural gas distributed energy. In the industrial fields including the cogeneration /combined cycle
power plant and the oil & gas project with distributed energy projects that adopt the small and medium gas
turbines, the Company not only can provide gas turbine equipment for customers, but also can provide customers
with complete sets of equipment for gas turbine power plant and the efficient integrated solutions.
4. Brand and market position. The company’s products have a good reputation and extensive brand influence
in the domestic market, The company has maintained a leading market share in the domestic industrial drive. The
company's products have a high reputation and brand influence in the domestic market.
5.Cost controlling level. As domestic labor costs continue to rise and the price of industrial products continue to
decline, the product profitability is facing a severe test. In recent years, the company continuously improves the
level of costs controlling by improving the organizational structure, optimizing business processes, enhancing the
supply chain controlling, strengthening risk management, raising the efficiency of all the staff and so on.
6.Emphasis on quality engineering and services: promote the key project management, meticulously plan key
projects, implement dynamic quality supervision; attach importance to products’ after-sales service market,
integrate existing resources to increase after-sales service initiative, extend product value chain, and promote the
company’s transformation from manufacturing to service.
3.Major accounting data and financial indicators
（1）Major accounting data and financial indicators for the last three years
Indicate by tick mark whether there is any retrospectively restated datum in the table below.
No
In RMB
Changed over last year
2017 2016 2015
（％）
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
Operating Gross income（RMB） 3,447,142,669.49 3,235,303,379.24 6.55% 2,600,072,151.63
Net profit attributable to the
shareholders of the listed company 68,753,250.90 31,955,445.73 115.15% -162,809,311.79
（RMB）
Net profit after deducting of
non-recurring gain/loss attributable
to the shareholders of listed -1,460,504.46 -8,366,688.71 82.54% -196,163,971.66
company（RMB）
Cash flow generated by business
operation, net（RMB） 205,302,791.77 506,159,428.42 -59.44% 355,677,773.05
Basic earning per
share(RMB/Share) 0.09 0.04 125.00% -0.22
Diluted gains per
share(RMB/Share)(RMB/Share) 0.09 0.04 125.00% -0.22
Net asset earning ratio（%） 1.12% 0.60% 0.52% -3.77%
Changed over last year
End of 2017 End of 2016 End of 2015
（％）
Gross assets（RMB） 10,830,597,182.38 10,550,899,708.34 2.65% 7,683,777,005.63
Net assets attributable to
shareholders of the listed company 5,884,816,809.55 6,385,346,243.23 -7.84% 4,219,337,312.80
（RMB）
（2）Main Financial Index by Quarters
In RMB
First quarter Second quarter Third quarter Fourth quarter
Operating income 748,344,237.44 915,380,464.82 925,501,518.37 857,916,448.86
Net profit attributable to the
shareholders of the listed company 16,752,601.64 27,243,202.74 19,997,776.79 4,759,669.73
Net profit after deducting of
non-recurring gain/loss attributable
to the shareholders of listed -15,980,860.17 19,541,078.56 9,699,270.59 -14,719,993.44
company
Net Cash flow generated by
business operation -200,738,208.12 190,427,852.54 210,235,136.96 5,378,010.39
Indicate by tick mark whether any of the financial data in the table above or their summations differs materially
from what have been disclosed in the Company’s quarterly or semi-annual reports.
\No
4.Share capital and shareholders
（1）Number of holders of ordinary shares and preference shares with restored voting right and Top 10
shareholders
In shares
Total
Total number Total
of common shareholders at The total number
preferred sharehold
shareholders at the end of the of preferred shar
ers at the end of the
the end of the 14,748 14,551 eholders voting ri 0
month from the date
0
month from the ghts restored at p
reporting of disclosing the
date of disclosing eriod-end
period annual report
the annual report
Shareholdings of Top 10 shareholders
Shareholders Nature of Proportion of Number of Amount of restricted shares held Number or share
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
shareholder shares held（%） shares held pledged/frozen
at period
-end State of share Amount
Hangzhou
Steam Turbine State-owned
Power Group legal person 63.64% 479,824,800 479,824,800
Co., Ltd.
VANGUARD
EMERGING Foreign
MARKETS 0.63% 4,722,804 0
STOCK INDEX legal person
FUND
NORGES Foreign
BANK 0.57% 4,303,675 0
legal person
VANGUARD
TOTAL Foreign
INTERNATION 0.46% 3,454,046 0
AL STOCK legal person
INDEX FUND
ISHARES
CORE MSCI Foreign
EMERGING 0.36% 2,745,901 0
MARKETS legal person
ETF
Domestic
Zhou Jie Natural 0.35% 2,676,000 0
person
GUOTAI
JUNAN
Foreign
SECURITIES( 0.33% 2,461,880 0
legal person
HONGKONG)
LIMITED
China
Merchants State-owned
0.32% 2,400,149 0
Secutities(HK)C legal person
o., Ltd.
Domestic
Xia Zulin Natural 0.29% 2,190,000 0
person
CREDIT
SUISSE AG Foreign
HONG KONG legal person 0.23% 1,729,759 0
BRANCH
(1) Hangzhou Steam Turbine Power Group Co., Ltd. is the holder of state-shares of the Company,
all other shareholders’ are holders of domestic listed foreign shares (B shares)
Explanation on associated (2) There is no relationship between Hangzhou Steam Turbine Power Group Co., Ltd. and other
shareholders;
relationship among the
(3) Hangzhou Steam Turbine Power Group Co., Ltd. is not an “action-in-concert” party with any of
aforesaid shareholders
other shareholders as described by the “Administration Rules of Informational Disclosure about
Change of Shareholding Statues of PLCs”.
Notes to the shareholders
involved in financing Not applicable
securities
(2)Total preference shareholders and the shares held by the Top 10 Preference shareholders
Not applicable
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
(3)Block diagram of the ownership and control relations between the Company and the actual controller
5. Corporate Bonds Indicate by tick market whether the Company has any corporate bonds publicly offered and
listed on the stock exchange, which were undue before the date of this Report’s approval or were due but could
not be redeemed in full.
Nil
III. Discussion and Analysis of the Management
1. Business Operation summary in the reporting period
Whether the company needs to comply with the disclosure requirements of the particular industry
No
In 2017, the world economy showed a clear momentum of recovery. China’s supply-side structural reforms
continued to deepen, the “Three cuts, one reduction, one subsidy” work was steadily promoted, and the policy
dividends continued to be released, hence the effectiveness of policies gradually became apparent and the Chinese
economy maintained a steady and positive trend.
The company actively seized the development opportunities of the gradual recovery of end demand, and
promoted the implementation of the company's “13th Five-Year Plan” strategy in accordance with the annual
work principle of “steadily advancing, continuous innovation, deeply plowing the market, lean management and
enhancing risk control”: increased technological innovation and enhanced the company's core competitiveness;
actively explored new markets and actively grabbed market orders; promoted the “lean production” and
“integrated management”; strengthened the prevention and control of major risks in key business areas, and
enhanced the business efficiency of enterprises, thus successfully realized the company's annual business goal.
Under the background of the decline in the operating income of the overall domestic steam turbine industry, the
company’s operating income realized the counter-trend growth, with the rank of total profit returned to the
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
forefront.
For the report period, the Company has realized turnover of RMB 3447.1427 million, a increase of 6.55%; Total
profit of RMB132.6561 million , a increase of 71.35%, net profit attributable to owners of the parent company of
RMB68.7533 million, a increase of 115.15%%.
Operating quality was well enhanced. During the reporting period, the company's total profit, net profit
attributable to the shareholders of the listed company, the amount of new orders, the amount of export contract
orders and so forth all showed significant growth. The indicators including the company's main business income,
product output value and product market share increased slightly, and the accounts receivable and finished goods
inventory had been controlled well, showing that the company's sustainable development quality has been further
strengthened. In order to realize the transformation and upgrading of the company, during the reporting period, the
company continued to promote the construction of two projects of steam turbine heavy industry and scientific
research building, creating a good environment for the company's development.
Shengeng market obtained good results. During the reporting period, the company’s major target market was
significantly differentiated. Facing the complicate situation with the strong rebound in investment in refining and
chemical industry, the rapid growth of thermoelectricity industry and some chemical industries and a slow decline
in the power industry, the company has seized the opportunities and has realized the contract of 281sets /3.865
billion yuan (including tax, similarly hereinafter) in the whole year, reached the second highest level in the
company's historical contract amount. Thereinto, the total contract amount of steam turbine was RMB 3.281
billion, which exceeded the RMB 3.269 billion in 2011 and hit the historical high. In particular, the company
competed against the international industry giants at the same price level for the same project, and successfully
obtained two mega-projects-namely Dalian Hengli project and Zhejiang Petrochemical project-with a total of 94
sets and the amount of RMB1.13 billion, and the company obtained a number of orders of excellent projects
including Yantai Wanhua 1 million tons ethylene project, Zhongke Zhanjiang 10 million tons oil refining and 0.8
million tons ethylene project and Changshu Pufa garbage power plant (15MW+30MW), as well as the Company
concluded and signed contract for four sets of SGT-8OO gas turbine unit, which fully demonstrated the excellent
technological ability and good reputation of the company in the high-end market of the industry.
During the reporting period, the company's "going out" strategy took new steps. The 120,000 air-to-air
combined cycle unit of the Iranian Cavi Group smoothly connected to the grid, enabling the company to once
again qualify as a major Iranian supplier to customers; the establishment of an office in Thailand expanded the
company’s influence in the power generation market in Southeast Asia, and played an active market fulcrum.
Features. Strengthen communication with overseas customers in overseas power generation market, closely
contact with domestic general contractors, and expand the company's overseas influence by “borrowing to sea”
The awareness of risk control has increased significantly. During the reporting period, the company further
perfected the “Detailed Rules for Internal Control of Steam Turbine Business Contracts in Foreign Trade” and
“Detailed Rules for Internal Control of Steam Turbine Business Contracts in the Industry-Drive Industry”, and the
working mechanism of accounts receivable regular meetings and risk control regular meetings was effectively
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
operated, which focused on contract review and legal proceedings, key project contract execution, inventory unit
disposal, large parts delivery specifications, compressor project disposal, long aging accounts receivable
processing and other issues, carried out the risk point identification and preplan assessment, and paid attention to
the completeness of contract performance, thus evidently improved the company’s management ability to deal
with business risks.
Continuous breakthroughs in technological innovation. During the reporting period, the company continued to
increase its efforts in scientific research and achieved important breakthroughs in the development of the efficient
blade type and high-efficiency models. The new straight blade T8/T9 type has fully entered the stage of promotion
for popularized use, and the newly-developed high-efficiency GK2.1 and GK1.3 twisted-blade blades have once
again successfully improved the overall performance of the steam turbine, as well as there were a number of new
product development projects such as “Development of NK63 /2.2 Low-Pressure Residual-Heat Efficient
Condensing Steam Turbine and “Development of NK80/2.8 Low-Pressure Residual-Heat Efficient Condensing
Steam Turbine”, thus further ensured the Company's technological superiority in the market competition. Relying
on large projects, the achievement of integrated assemble technology has been further applicated. PLM (Product
Life Cycle Management) Phase II, MES (Production Execution System) Phase I Project, and Smart
Manufacturing Demonstration Project achieved substantive results. The company and its 5 holding subsidiaries
have passed the review for the qualification of national high-tech enterprise. The company's major technology
research project "Key Technology Development and Application of 1000MW Grade Power Station Boiler Feed
Pump Turbine" won the Second Prize of Science and Technology of China Machinery Industry Federation and the
first prize of Zhejiang Science and Technology Progress Award, and the "Key Technology Research and
Application of Low Pressure Long Blade for Industrial Steam Turbine ” won the first prize of Science and
Technology of China Machinery Industry Federation. The company took the lead in setting up the Zhejiang Steam
Turbine & Gas Turbine Machinery Innovation Center. In 2017, the company obtained 12 invention patents, 29
utility model patents and 5 software copyrights; in 2017, it applied for 3 invention patents and 9 utility models.
Steady improvement in manufacturing capabilities. During the reporting period, in the face of new blowout
pressures of new orders in a stage, the company adhered to the concept of market-oriented and customer
supremacy, adopted the lean production and sales routes, coordinated the internal and external resource allocation,
expanded manufacturing capabilities, and spared no efforts to cope with the short product delivery cycle and the
large fluctuations in production capacity demand. The company optimized the production planning management,
rationally allocated the scheduling of unit production, set up safety stocks for key parts, ensured that the key
outsourcing kits and imported parts were put in place in a timely manner, so that there was smooth connection of
production and sales and the company maximumly met the customers’ requirements of delivery dates, product
quality, and service response.
Substantive achievements in management enhancement. During the reporting period, the company, through
optimizing the organization of production line, almost fully established the production mode of steam turbine
heavy industry after relocation and reconstructing. The company launched the implementation of an integrated
management system project to create a process-oriented organization and initiated a lean production project to
create great profitable tools in the meager profit-making era, resulting in a number of outstanding management
innovations and: “Big data platform project for construction process of discrete manufacturing industry” won the
second prize of National Advanced Productivity Outstanding Contribution, and that project and the “Carrying out
craftsman training project to shape the great quality of heavy equipment in the country” respectively won the first
and second prizes of the modernization and innovation of enterprise management in Zhejiang and Hangzhou, and
the three projects namely “The first set of exquisite projects” and “Risk control system construction” and
“Construction of management platform for flexible installation for steam turbines” respectively won the second
and third prizes of the modernization and innovation of Hangzhou Enterprise Management. According to the
requirements of the higher authorities, the company sorts out the "small and weak" holding subsidiaries, reduces
the company's management level, writes off some subsidiaries, and improves asset quality.
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
2. Material Change to Main Business in Reporting Period
□ Yes √ No
3. Products Contributing over 10% of Main Business Revenue or Income
√ Applicable □ Not applicable
In RMB
Increase/decrea
Increase/decrea Increase/decrea
se of gross
se of revenue se of business
profit rate over
Gross profit in the same cost over the
Name Turnover Operation cost the same
rate(%) period of the same period of
period of the
previous previous year
previous year
year(%) (%)
(%)
Industrial steam
turbine 2,692,843,753.69 1,989,579,236.24 26.12% -2.45% 2.69% -3.70%
4. Seasonal or cyclical operations requiring special attention
No
5. Material difference of revenue, operating costs or net profit attributable to holders of ordinary shares of the
Company for the reporting period from the last reporting period
□ Yes √ No
□Applicable √Not applicable
6. Suspension in trading or delisting
□Applicable √Not applicable
7. Events relating to the financial report
(1) Reason for changes in accounting policies, accounting estimates and accounting methods as compared to the
financial report for the prior year
√ Applicable □ Not applicable
1. Since May 28, 2017, the company has implemented the “No. 42 Accounting Standards for Business
Enterprises-Non-current assets for Sale, disposal Group, and termination of operation” formulated by the Ministry
of Finance, and since June 12, 2017, the company has implemented the revised “No. 16 Accounting Standards for
Enterprises-Government Grants”. The change of accounting policy is handled by the future applicable method.
2. The Company implemented the “Notice on the Issuance of the Revised Format of Financial Statements for
General Enterprises (Caihui [2017] No. 30)” in the preparation of the 2017 annual statement, so that the gains and
losses on the disposal of non-current assets and the gains and losses of non-monetary asset exchange previously
stated in "Non-operating income" and "Non-operating expenses" were presented in the “Assets disposal income".
This change in accounting policy adopted the retrospective adjustment method, which reduced the 2016
non-operating income by RMB 387,292.53 and increased the asset disposal income by RMB 387,292.53.
(2) Reason for retrospective restatement to correct major accounting errors during the reporting period
□Applicable √Not applicable
(3) Reason for changes in scope of the consolidated financial statements as compared to the financial report for
the prior year
√ Applicable □ Not applicable
The number of subsidiaries included in the scope of the consolidated financial statements for the reporting
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Hangzhou Steam Turbine Co., Ltd. Summary of 2017 annual Report
year was reduced by five.
In which, 1. Due to the cancellation of Zhejiang Runhong Gas Turbine Engineering Co., Ltd, its holding
equity of its subsidiary Zhejiang Zhongrun Gas Turbine Technology Co., Ltd (10 million yuan) was transferred to
Zhejiang Touping Import & Export Trade Co., Ltd (a wholly-owned subsidiary to the company) and Ningbo
Daxie Development Zone Huashun Industry & Trade Co., Ltd. After the equity disposal was completed, Zhejiang
Turbine Import & Export Co., Ltd. held 32.22% stake of Zhejiang Zhongrun Gas Turbine Technology Co., Ltd, so the
company lost the control right of Zhejiang Zhongrun Gas Turbine Technology Co., Ltd, and thus it was no longer
included in the consolidation scope.
2.The other four subsidiaries were not included because of the liquidation and cancellation.
In RMB
Company Name Way of Equity Time Point of Equity Net Assets on the Net Profits from the
Disposition Disposition Date of Disposition Beginning of the Period to
the Date of Disposition
Xinjiang Taifeng Hangzhou Steam Chearing April 25,2017 17,061,690.18 181,238.78
Turbine Complete Technology
Development Co., Ltd.
Hangzhou Steam Turbine Boiler Chearing April 27,2017 19,665,256.43 1,130,995.08
Co.,Ltd.
Hangzhou Pangtong Chearing December 21,2017 1,086,391.89 -115,873.20
Electromechanical Equipment Co.,
Ltd.
Zhejiang Runhong Gas Turbine Chearing December 22,2017 34,953,788.30 2,813,561.91
Engineering Co., Ltd.
Hangzhou Steam Turbine Co., Ltd.
Chairman of the Board: Zheng Bin
March 28, 2018
10
