Management comments of the board of directors of Yuheng Environmental Protection in 2020.

The business review of the Board of Directors of Yuheng Environmental Protection in 2020 is as follows:

I. Discussion and analysis of operating conditions

In 2020, the macro-environment is complex and changeable, the COVID-19 epidemic broke out and spread, the domestic and global economic growth slowed down, and the international trade environment was further turbulent or deteriorated. During the reporting period, the company closely focused on the development goals and adhered to "scientific and technological innovation, honesty-oriented; Customer first, high quality and high efficiency "business philosophy, focus on the main business, adhere to research and development innovation.

1, main business situation

During the reporting period, the company realized an operating income of 78,758,400 yuan, a decrease of 54,802,900 yuan or 465,438+0.03% compared with 654,388+0,356,5438+0.300 yuan in the same period of last year; The operating profit is 29.8264 million yuan, which is 654.38 million yuan less than 48.265438 million yuan +0.8385438 million yuan+0.03%; The net profit attributable to the owners of the parent company was RMB26,049,654,380, a decrease of RMB65,438,000 or 37.30% compared with RMB465,438,000+RMB546,500 in the same period of last year.

In the first half of 2020, the global COVID-19 epidemic will have a certain impact on most industries in a short time, and the environmental protection industry is no exception. In particular, it has a great impact on the implementation of the company's projects, and it is also affected by the epidemic situation due to different regional distribution. Some projects being implemented by the company at home and abroad have been postponed due to the requirements of local governments, which directly affects the overall construction period of related projects of the company and cannot be realized as scheduled; Where the labor and materials needed for the project are, measures such as stopping production or restricting the flow of personnel and materials will be taken, which will indirectly affect the actual progress of the company's engineering projects. During the epidemic, the company actively tried to keep close contact with customers in a non-contact way for the projects being implemented, and customers also actively cooperated to prepare for the follow-up related work, striving to minimize the impact of the epidemic. At present, the China Municipal Government has formulated development opinions on expanding domestic demand, releasing liquidity and encouraging investment in emerging industries, and comprehensively considered the risks brought by the epidemic to overseas market expansion. This year, the company further strengthened the promotion of the domestic market and signed contracts with customers, and further adjusted the personnel structure and work content arrangement according to the adjustment of the above business strategy.

2. Research and development

During the reporting period, the company increased R&D investment, with R&D expenditure of 4,904,700 yuan, an increase of 65,438+00.92% compared with the same period of last year, and R&D investment accounted for 6.23% of operating income. During the reporting period, the company added 4 patents, and other research projects continued to be implemented as planned.

The application of pyrolysis technology in the field of organic waste treatment has been continuously studied and developed in depth and breadth. The company adheres to the R&D strategy of "taking thermal cracking technology as the core, intensive cultivation, and expanding the application field in depth and horizontally", and carries out R&D planning for core technologies and new products according to the technical problems of thermal cracking of different organic substances.

Second, the risk factors

(A) the risk of core competitiveness

1, the company's core technology is imitated, replaced and iterated.

If companies in the same industry imitate the company's core technology, or develop other better applicable technologies related to cracking technology and cracking equipment, it will have a greater impact on the company's technology and market dominance, and then affect the company's operating performance, so the company has the risk of imitating, replacing and iterating the core technology.

2. Risk of technological innovation

Since its establishment, the company has been focusing on the research and development of organic waste pyrolysis technology. The research and development achievements have extended from the initial treatment of waste tires and waste plastics to the treatment of oily sludge and organic hazardous waste, and successfully realized the development of related equipment and product sales. In the future, if the company can't make forward-looking judgments, respond quickly and accurately grasp the market according to the changes in the industry, competitors master or appear brand-new organic waste cracking technologies, and adopt strategies such as low-price competition to intensify market competition, the company's product research and development capabilities and production process requirements will not meet the iterative needs of customers, and gradually lose market competitiveness, which will have an adverse impact on the company's future sustainable development and operation.

3. Risk of core technology being destroyed

The core technology mastered by the company is the key to win the market. At present, the company has applied for patents for some core technologies and processes, which have been effectively protected by law, and signed confidentiality agreements and non-competition agreements with core technicians, but there are still nuclear problems.

The risk of heart technology being leaked or stolen. Once the company's core technology is breached, it will adversely affect the company's technological advantages in products and services and affect the company's advantages in market competition.

(b) business risks

1, the risk caused by the impact of COVID-19 epidemic.

The epidemic situation in COVID-19 delayed the company's ongoing projects to a certain extent, reducing the business income and profits during the reporting period; The COVID-19 epidemic has had a certain impact on the company's business negotiations and customer visits at home and abroad, prolonged the business development or signing time, increased the uncertainty of customer project promotion, and may further affect the company's business income and profits.

2. Risk of large balance of the company's contract assets.

At the end of the reporting period, the book value of the company's contract assets was 67,079,700 yuan, accounting for 65,438+09.07% of the total assets; The large balance of contract assets is mainly due to the large balance of completed unsettled inventory formed according to the construction contract, which is caused by the difference between the actual progress of the project and the agreed settlement progress. Although the amount of unsettled assets completed by the company matches the company's business model, according to the contract, the above unsettled assets will be settled gradually with the progress of the project. However, due to the relatively high balance of the above-mentioned completed unsettled assets, there is uncertainty in future settlement, and there may be a risk of not being able to settle in full with customers, and the risk of possible price decline in the future is not ruled out.

3. Risk of uncollectible accounts receivable

At the end of the reporting period, the book value of the company's accounts receivable was 97,366,5438 yuan+500,000 yuan, accounting for 27.68% of the total assets. The increase of the book value of the company's accounts receivable is closely related to the expansion of business scale. With the expansion of the company's business scale, the balance of accounts receivable may gradually increase. If the company's accounts receivable are not properly managed in the future or some customers fail to recover the payment in time due to operational problems, it will increase the risk of bad debt losses of the company.

4. Downstream market cracking technology risks are uncertain.

Cracking technology has achieved good market application in the field of waste tire treatment at home and abroad, and has also achieved certain market application in the field of waste plastic treatment, but its application in the field of sewage sludge and organic hazardous waste treatment is still in its infancy. Based on the consistency between the mature cracking technology in the field of waste tires and plastics treatment and the basic technology of cracking technology in the field of organic matter treatment, the technical application of cracking technology in the field of organic matter treatment is relatively mature, and the organic waste cracking equipment manufacturer represented by the company has successful application cases in the field of sewage sludge and organic hazardous waste treatment. However, due to the imperfect garbage collection system, the uncertainty of policy changes and the acceptance process of high-priced safety and environmental protection continuous equipment in the downstream market, there is still some uncertainty in the application of cracking technology in the downstream market.

In addition to the cracking process, the company's cracking equipment related business areas have a variety of treatment technology routes (sewage sludge-chemical hot washing treatment, solvent extraction at room temperature, incineration treatment, etc.). ), waste tires-reclaimed rubber, renovation, heat energy utilization, waste plastics-resource treatment, landfill treatment, incineration treatment, organic hazardous waste-incineration treatment, landfill treatment, cement kiln collaborative disposal, etc. ). And some technologies have matured and been applied on a large scale (for example, using waste tires to produce reclaimed rubber, using plastic recycling plastic granules, etc.). ). However, many factors, such as environmental protection effect and economic benefit, need to be comprehensively considered when choosing different technical routes in the downstream market, so there is some uncertainty in the popularization and application of pyrolysis technology in the downstream market.

5. Customer concentration is high, and there is a risk of single product line customers.

During the reporting period, the operating income of the top five customers of the company accounted for 97.27% of the main business income of the current period, and the customer concentration was high. The main reasons are as follows: ① The company's main products are various industrial continuous cracking production lines, and the value of a single production line is high. The company undertakes key projects and large-scale projects in the industry, and a single project is often composed of multiple production lines, with a large project amount; ② There is a high market concentration in the downstream sewage sludge field, which makes the company's customers more concentrated and single.

In the field of sewage sludge treatment, Shuntong Environmental Protection Company has only 1 customer. During the reporting period, the sales revenue of Shuntong Environmental Protection accounted for 44.46% of the total revenue of the main business in the current period, and customers accounted for a relatively high proportion. At present, Shuntong Environmental Protection Phase I and Phase II projects have been put into production, and Phase III and Southern Xinjiang projects are under construction. Shuntong Environmental Protection Phase I and Phase II projects are running well at present, but cracking technology is a new technology in the field of sewage sludge disposal, and it takes a process for the market to recognize it. Therefore, there is some uncertainty in the market expansion of the company in the field of sewage sludge treatment.

During the reporting period, the sales income of the company's waste tire and waste plastic cracking production lines was 36,072,200 yuan and 3,094,380+000 yuan respectively.

In the field of hazardous waste treatment, only 1 company has applied for environmental protection. At present, environmental protection projects in Shen Lian are under construction and have not yet been put into production. Whether the operation effect of the project can play a demonstration role in the future is still unknown. Whether the company can expand the market in the field of hazardous waste treatment is uncertain.

To sum up, during the reporting period, the company had a small number of customers and a high degree of customer concentration. The company needs to constantly explore new customers and maintain old customers, undertake new business, and ensure the sustained and steady growth of the company's operating performance. If the company opens up new customers in the future

If customers are unfavorable, the business needs of existing old customers will drop significantly, which may have a significant adverse impact on the company's performance and face the risk of a sharp decline in performance.

6, outsourcing production mode is given priority to, production personnel and sales staff risk is small.

The company adopts outsourcing production mode as the main mode, supplemented by independent production mode, and the production links are mainly assembly, installation guidance, operation and debugging. By the end of the reporting period, the company had 30 production personnel, with fewer production personnel. If there are major adverse changes in production personnel or the number of personnel can not meet the production demand, it will limit the company's production capacity and adversely affect production and operation.

7. Risk of adjustment, extension and termination of the project contract

During the reporting period, the company mainly provided customers with various complete sets of equipment such as waste tire cracking production line, waste plastic cracking production line, sewage sludge cracking production line and hazardous waste cracking production line. The product sales business generally includes design, manufacturing, installation/operation and debugging, which has the characteristics of large single contract amount and long project cycle. Whether the project contract can be implemented smoothly will have a great impact on the company's operating conditions.

Influenced by many factors, such as macroeconomic situation, adjustment of relevant policies of the project, customer's own investment plan, capital status, land acquisition progress of the project, administrative license, environmental protection approval, market price expectation of end products, etc., there may be changes and adjustments in contract content and contract amount during the execution of the project contract, and even the risk that the customer requests to extend the delivery date, suspend or terminate the contract. Usually, companies use advance payment and liquidated damages in sales contracts to protect contract performance. However, the adjustment, change or termination of the project contract content and delivery process makes the company need to readjust the production and operation plan and product delivery plan according to the orders on hand, which will affect the company's project management and personnel arrangement and will adversely affect the company's expected operating performance.

(3) Industry risks

1. Policy orientation in the field of environmental protection is an important factor affecting the company's performance.

In recent years, the top-level design of environmental governance in China has been continuously improved, and the government has promulgated many supporting policies and regulations, which has promoted the rapid development of domestic environmental protection equipment manufacturing industry in recent years; At the same time, China has issued a series of policies to support the cracking treatment industry of organic waste, which provides support and guarantee for the sustainable development of cracking technology in the field of organic waste treatment. With the improvement of relevant laws and regulations, the improvement of implementation coverage and enforcement, and the deepening of relevant policy makers' understanding of industry and environmental protection technology, it is bound to promote, guide and standardize the downstream application market more comprehensively and effectively, standardize the behavior of industry participants, and form an orderly, energy-saving and environmental-friendly market driving force.

2. Risks of changes in downstream industries

All kinds of cracking production lines sold by the company mainly come from the fixed assets investment demand of environmental protection industry in the field of organic waste treatment such as sewage sludge, organic hazardous waste, waste plastics and waste tires. The investment scale and growth rate of downstream industries are influenced by macroeconomic prosperity, industrial profitability, industrial development speed and quality. If the price of raw materials, the selling price of end products or the income of disposal fees in downstream industries are adversely changed due to macroeconomic fluctuations or changes in industrial policies, it will indirectly affect the market demand of the environmental protection equipment manufacturing industry where the company is located.

(4) Other risks

Three. Main business during the reporting period

Three. Analysis of core competitiveness during the reporting period

The company has accumulated certain competitive advantages in market, talents, technology and brand, which are as follows:

1, the first advantage in the market

Since its establishment, the company has always focused on the research and development of organic waste pyrolysis technology and the design, production and sales of related equipment. As the application of pyrolysis technology in the field of solid waste treatment in China is still in its infancy, the company, as a pioneer in this field, has done a lot of market and technology promotion work on the basis of a large number of preliminary research and development work of pyrolysis technology, including promoting the establishment of rubber pyrolysis branch of China Tire Recycling Association, as the main drafting unit to formulate relevant national standards for organic waste pyrolysis industry, such as complete sets of production equipment such as waste rubber, waste plastic pyrolysis to oil, waste tire processing and treatment. On this basis, on the one hand, the market application of cracking technology has been expanded, on the other hand, the company has accumulated rich industry resources, thus forming its dominant position in the organic waste cracking equipment industry. With the cracking technology becoming the priority development of solid waste treatment technology recommended by the Ministry of Industry and Information Technology, the National Development and Reform Commission, the Ministry of Commerce, the Ministry of Science and Technology and other government departments, the market demand for cracking equipment is growing rapidly. With rich industry accumulation, the company has achieved market expansion in waste tires, waste plastics, sewage sludge, hazardous waste and other treatment fields.

2. Technical advantages

Technical research and innovation is the key for the company to maintain its competitive advantage in the field of organic waste cracking equipment. Through years of research and development, the company has solved industrial problems such as coking in pyrolysis system, difficulty in dynamic sealing of incoming and outgoing materials, and easy polymerization of output, and has taken the lead in realizing long-term stable industrial continuous operation of pyrolysis equipment under the premise of safety and environmental protection. The company is the only enterprise in the industry that won the National Science and Technology Progress Award, a major environmental protection technology and equipment encouraged by the state (20 17) (complete sets of technologies and equipment for thermal decomposition and resource utilization of sewage sludge), and a "professional and innovative" enterprise in the environmental protection equipment manufacturing industry (the first batch). By the end of the reporting period, the company has owned 69 domestic patented technologies in the field of thermal cracking, including 24 invention patents, and obtained 6 international patents 12 in the United States, Canada, Japan and other countries and regions, effectively ensuring the company's technological advantages.

3. Talent advantage

Organic waste cracking equipment manufacturing industry involves many disciplines, such as thermal energy engineering, fluid mechanics, chemistry (engineering), material science, structural science, electricity, automatic control, mechanical design and so on. Therefore, the industry needs compound talents with the above professional knowledge. By the end of the reporting period, the company has formed a 30-member R&D and design team headed by Chairman Niu Bin, accounting for 365,438+0.965,438+0% of the total number of the company, and formed a reasonable echelon of technical talents, thus ensuring the company's R&D and design have sufficient talent protection.

4. Brand advantage

With strong technical strength and industry accumulation, the company has undertaken and completed a number of landmark projects. The successful delivery of the company's waste tire cracking project in Germany indicates that the company's equipment has met the strict requirements of the European Union and Germany in terms of environmental protection and technical performance. The company's Hungarian waste tire cracking project is a project funded by the European Union, which has passed the testing and certification of the authorized institutions of the European Union at one time. The 20,000-ton/year industrial continuous waste tire cracking production line delivered by Kaiyuan Xiang Rubber & Plastic Co., Ltd. in 20 13 fully meets the access conditions for the comprehensive utilization of waste tires of the Ministry of Industry and Information Technology. Kaiyuan Rubber & Plastic Co., Ltd. is also the only waste tire cracking and processing enterprise listed in the enterprise list by the end of the reporting period. This project is a national demonstration project for comprehensive utilization of waste tires, a key project in Shandong Province on 20 15, and a support project for independent innovation and achievement transformation in Shandong Province. The successful delivery of the above projects further consolidated the company's position in the industry and established a good brand image of the company.