CIT Testing’s 2020 Semi-annual Board of Directors Operation Review

The 2020 semi-annual board of directors’ operating review of CTI Testing (300012) is as follows:

1. Overview

At the beginning of 2020, the COVID-19 epidemic spread globally. The foreign economic situation is facing severe challenges. On the one hand, it has brought difficulties and uncertainties to the company. It requires the company to carefully analyze the trends and rhythm changes brought about by the epidemic and adjust its business strategies in a timely manner. On the other hand, the epidemic is also giving rise to various industries. Changes and new demands have brought new opportunities to the company. During the reporting period, the company continued to maintain strategic focus, adapted to the negative and positive aspects of strategic development, strengthened risk control, deepened refined management, and steadily improved the company's overall operating efficiency and profitability. In the first half of 2020, the total operating income was 1.3388054 million yuan, an increase of 0.6 over the same period last year; the operating profit was 202.7692 million yuan, an increase of 19.56 over the same period last year; the net profit attributable to shareholders of listed companies was 192.2706 million yuan. , an increase of 20.19 compared with the same period last year.

During the reporting period, the main operating conditions are reviewed as follows:

1. Adjust strategies to actively respond to the epidemic and continue to improve the company’s operational efficiency

2. Successfully complete strategic mergers and acquisitions , steadily advancing the internationalization process

The company focuses on improving operational efficiency and laying a solid foundation for organic growth. At the same time, it also adheres to strategic investments and mergers and acquisitions to promote the internationalization process and is committed to developing into a competitive international testing institution. .

During the reporting period, the company signed a strategic cooperation memorandum with Tianjin Eco-City Investment and Development Co., Ltd., Tianjin Nankai University Education Foundation and Nankai University School of Environmental Science and Engineering at the Tianjin Eco-City Service Center. The company became a Tianjin Eco-City Environmental Technology Co., Ltd. is the largest shareholder holding 51% of the shares. This cooperation on the mixed-ownership reform of state-owned enterprises can form complementary resources and give full play to the advantages of both parties, which is of strategic significance.

During the reporting period, the company acquired 100 shares of Maritec Pte Ltd for 54.86 million Singapore dollars in cash. As an important part of the company's transportation strategy, this merger can produce strong synergy with the company's existing ship services. The effect can promote the collaborative growth of the ship product line and Maritec's operating income, net profit, and cash flow. The successful completion of this merger announced that the company has officially taken a solid step towards internationalization.

3. Strengthened service capabilities and achieved significant customer expansion effects

During the reporting period, the company undertook the 2020 national inspection and testing agency proficiency verification work of the State Administration for Market Regulation; undertook the pharmaceutical production in Yunnan Province Enterprise proficiency verification work; the subsidiary Beijing CTI has become the electronic bidding and bidding system trading platform testing agency; the subsidiary CTI has successfully won the bid to be shortlisted for the 2020 energy-saving diagnostic service agency selection list. This winning bid is the bid evaluation committee’s evaluation of the CTI certification in Recognition and trust from our rich experience in the field of energy conservation services. During the reporting period, we won multiple bids for government bidding projects, including the 2020 quantitative inspection and sampling project for edible agricultural products, with a bid amount of 16 million; and the successful bid for the Henan Provincial Environmental Monitoring Center-Henan Provincial Provincial Environmental Air Monitoring Direct Management from 2020-2022 Station operation and maintenance project (Package E), with a winning bid amount of 12.4812 million; successfully won the bid for Nanyang Ecological Environment Bureau Nanyang City's key industry enterprise land sampling analysis and quality control service project (first bid section), with a winning bid amount of 10.044 million. In terms of corporate customers, the company has successfully signed service contracts with outstanding companies such as Tianhong, Yongwang, Sinopec, Tsingtao Brewery (600600), Haidilao, and Daily Youxian.

4. Implement talent development and incentives to enhance the company's sustainable competitiveness

During the reporting period, the company continued to improve the competitiveness of its core team through various channels such as internal training and external introduction.

In terms of internal training, in order to increase the training of all employees, the group launched the E-Learning online learning platform to expand training coverage so that more employees can improve their professional capabilities more conveniently; the company has customized " "Sunshine Plan" project, "Sunshine Plan" is an important part of the company's strategic talent development project. Through various learning methods such as face-to-face teaching, E-Learning, live broadcast, tutoring, etc., 9 department general consultants are arranged for fresh graduates , 103 tutors, 12 internal lecturers, 22 counselors, and 4 class teachers to comprehensively protect the learning and growth of fresh graduates; the company launched the second phase of the "Guanghua LAP Leadership Improvement Training Project" to improve the system Comprehensive management capabilities such as "strategic execution capabilities, problem analysis and problem solving capabilities, subordinate training capabilities, and self-leadership capabilities" of middle and senior managers. In terms of external talent introduction, the company has hired four experts from the expert group of Southwest Jiaotong University Urban Rail Transit Research Institute. In the later stage, the company will establish a close cooperative relationship with the expert group of Southwest Jiaotong University Urban Rail Transit Research Institute. The two parties will strengthen learning and exchanges. Strive to bring more professional and technical breakthroughs to the company.

During the reporting period, the exercise conditions for the first exercise period of the company’s two-phase equity incentive plan were met. In the 2018 equity incentive plan, 38 incentive objects exercised their options independently, and the total number of exercisable options was 6.195 million units. In the 2019 Equity Incentive Plan, 9 incentive objects exercised their options independently, and the total number of exercisable options was 1.41 million.

The smooth implementation of the stock option incentive plan can attract and retain outstanding management talents and business backbones, mobilize the enthusiasm and creativity of employees, and help the company develop sustainably and efficiently.

5. To support the "fight against the epidemic" and fulfill social responsibilities

In the face of the sudden new coronavirus epidemic, the company used its professional advantages to bravely assume social responsibilities. After the outbreak, the company immediately developed testing services related to epidemic prevention, such as new coronavirus nucleic acid testing, mask testing, protective clothing testing, thermometer testing, public places and office disinfection and epidemic prevention services. During the epidemic, the company assisted the market supervision department in providing rapid food testing, catering inspections, rapid inspection assessment and other services, and went to farmers' markets, supermarkets, shopping malls and other business locations to carry out food safety sampling inspections to safeguard the safety of citizens; commissioned by Shenzhen Metro , Shenzhen Environmental Laboratory actively participated in air quality testing in subway stations, sampling and analyzing respirable particles, total bacterial counts and other items in the air to ensure air quality safety; during the epidemic, the company launched a "war epidemic" assistance plan, nucleic acid testing Help small and medium-sized enterprises overcome difficulties, provide public welfare training courses, and help enterprises resume production and work in aspects such as scientific prevention and control, production links and equipment, and product compliance and quality control. After the COVID-19 epidemic broke out in Xinfadi, Beijing, subsidiary CTI Aipu and CTI Food Laboratory provided customers with COVID-19 nucleic acid screening and testing services for food and food-related products, providing animal food production companies and large supermarkets, Fresh food chains and catering companies provide effective control measures in the purchase of raw materials, processing and production, cleaning and disinfection of tableware, etc., proactively identify risk points for customers, and trace the source of problems in a timely manner.

3. Analysis of core competitiveness 1. Advantages of brand and credibility As an independent third-party testing organization, brand and credibility are the keys to the survival and development of enterprises. The company is based in China, facing the world, and is committed to building A globally competitive Chinese testing brand. The company has established a laboratory management system based on ISO/IEC17025 and an inspection agency management system based on ISO/IEC17020. It has CNAS accreditation and metrology certification CMA qualifications from the China National Accreditation Service for Conformity Assessment. It has been authorized by the CQC China Quality Certification Center and is fully qualified to issue third-party testing. Reporting qualifications. In addition, it has also been recognized by many international certification agencies such as the British Royal Accreditation Service UKAS, the US Consumer Product Safety Commission CPSC, Singapore SPRING, and the US aerospace and defense industry Nadcap. The comprehensive qualification accreditation ensures that the company's test reports are more internationally credible.

The company has established the company's quality management system in accordance with ISO/IEC17025, ISO/IEC17020, "Laboratory Qualification Review Guidelines", "Food Inspection Agency Qualification Review Guidelines" and other requirements. The laboratory is guided by the company's quality policy and quality objectives. Continuously improve quality and enhance quality level. In terms of the company's quality requirements assurance, the branch's quality director, branch QHSE department/personnel and each laboratory QA constitute the branch's QA team, which implements the company's various aspects through quality review, special review, internal review, management review, etc. quality management requirements. In terms of laboratory technical capability assurance, the laboratory appoints a group of experienced technical personnel as quality supervisors to regularly supervise the testing/calibration capabilities of laboratory technicians to ensure that personnel capabilities can meet the requirements of method standards. The company uses the world's top laboratory information management system (LIMS) to manage laboratory personnel, equipment, materials, testing methods used and customer samples, achieving systematic management of all aspects of customer samples in the laboratory circulation and testing process. At the same time, the experimental process can be informatized and the laboratory office can be paperless. It can control and comprehensively manage the organization, analysis, processing, query of experimental data and quality activities during the experimental process to ensure the authenticity and reliability of the reports issued.