TECO — Interim / Quarterly Report 2021

Dec 2, 2021

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2021 3[rd] Quarter Earnings Conference

November 12[th] , 2021

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Safe Harbor Statement

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This Presentation contains certain forward looking statements that are based on current expectations and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Except as required by law, we undertake no obligation to update any forward looking statements, whether as a result of new information, future events or otherwise.

Page 2

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Financial Highlights 3Q21

• 2021 Q3 Financials

3Q 2021 2Q 2021 QoQ 3Q 2020 YoY Net Sales-Recurring *** 13,137 12,813 2.5% 11,437 14.9% Gross Margin-Recurring *** 21.1% 23.9% -280bps 22.1% -100bps Operating Margin- Recurring *** 5.7% 8.2% -250bps 6.1% -40bps EPS (TWD)** 0.75 0.68 10.3% 0.41 82.9%

The Three Business Groups Operating Performance

ESG Update

Appendix: Financial Statements

• Excluding gain (loss) on financial assets at fair value through profit or loss

⚫ 2021 Q3 recurring net sales increased by 14.9% YoY and 2.5% QoQ due to continual growth in Taiwan, Europe, China and Australia

• ⚫ The recurring gross margin was 21.1%, less than Q2 level by 2.8%, due to the cost pressure from raw materials and freight expense. Recurring operating margin also lower than Q2 level by 2.5%.

⚫ EPS reached at NT 0.75 in Q3, increased by NT 0.07 versus Q2. An increase of NT 0.34 from the same period last year, mainly due to the impact of the COVID 19 epidemic, the shareholders meetings of the invested companies were postponed to Q3 which resulted in an increase in dividend income.

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Financial Highlights 9M21

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9M 2021 9M 2020 YoY
14.0%
Net Sales-Recurring * 37,490 32,878
Gross Margin-Recurring * 22.8% 23.5% -70bps
Operating Margin- Recurring * 7.0% 6.7% +30bps
EPS (TWD) 1.96 1.41 39.0%
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• Excluding gain (loss) on financial assets at fair value through profit or loss

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• 2021 Q3 Financials

The Three Business Groups Operating Performance

Recurring net sales in the first nine months of 2021 was TWD 37.49 billion, with 14.0% YoY growth, and EPS in the first nine months of 2021 reached at TWD 1.96, an increase of TWD 0.55 over the same period last year

ESG Update

Appendix: Financial Statements

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Recurring Operating Revenue vs. Recurring Gross Margin

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•
Recurring Operating Revenue vs. Recurring Gross Margin 2021 Q3 Financials
TWD Billion
The Three
25.0% 23.5% 23.9% 14
Business
22.1%
21.1%
20.5% Groups
12
Operating
20.0%
Performance
10
15.0%
8 ESG Update
12.5 12.8 13.1 6
10.0% 11.4 11.5 Appendix:
Financial
4
Statements
5.0%
2
0.0% 0
2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3
Recurring Operating Revenue Recurring Gross Margin
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• Recurring Operating Revenue= Operating Revenue- financial assets at fair value through profit or loss

• ** Recurring Gross Margin= Recurring Gross Profit/ Recurring Operating Revenue

• *** Recurring Operating Profit excludes financial assets at fair value through profit or loss

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Recurring Operating Profit vs. Recurring Operating Margin

• 2021 Q3 Financials

TWD Million

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15.0% 1500
10.0% 1000
8.2%
7.2%
6.9%
6.1%
5.7%
5.0% 1051 500
858 827
701 745
0.0% 0
2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3
Recurring Operating Profit Recurring Operating Margin
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The Three Business Groups Operating Performance

ESG Update

Appendix: Financial Statements

• Recurring Operating Profit excludes financial assets at fair value through profit or loss

• ** Recurring Operating Margin= Recurring Operating Profit/Recurring Operating Revenue

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Performance of Business Groups

2021 Q3 Financials

					TWD Billion	•	The Three
10.0 15.0 20.0	17.2 19.3			9.0 10.2			Business Groups Operating Performance
0.0 5.0		3.9 5.1			3.2 4.1		ESG Upda Appendix:
	Green Mechatronic	Intelligence	Energy	Air and Intelligent Life	Others		Financial Statement
	Solution
✓	“Green Mechatronic Solution"	9M2020 revenue increased by		9M2021 12.2% YoY, thanks to strong demand for global industrial
	products, the continuous growth of the motor and automation business in China and				Motovario in Europe.

ESG Update

Appendix: Financial Statements

✓ The revenue growth of "Intelligence Energy" increased by 29.4% YoY, mainly due to the growth of TECO's engineering project revenue (including onshore substation of offshore wind farm and IDC projects, etc.)

• ✓ The YoY revenue growth of "Air and Intelligent”was 12.7%, mainly due to: 1) The revenue growth of TECO's home appliance; 2) Affected by the epidemic, the demand for e-commerce shopping increased, which led to the growth of Taiwan Pelican’s home delivery business; 3. Increase in ITTS’s ERP projects for digital transformation.

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Sales Trend of Business Groups

TWD Billion

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8.0
6.8
6.6
7.0
6.2
5.9
5.9
6.0
5.0
3.6
4.0 3.2 3.3 3.23.4
3.0
2.0 1.9
1.7 1.7
2.0
1.5 1.4 1.4 1.2
1.0
0.8
1.0
0.0
Green Mechatronic Intelligence Energy Air and Intelligent Life Others
Solution
2020Q3 2020Q4 2021Q1 2021Q2 2021Q3
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2021 Q3 Financials

• The Three Business Groups Operating Performance

ESG Update

Appendix: Financial Statements

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2021 Q3 Financials

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Financials
1/2
Revenue Breakdown by Business Group
•
The Three
Business
Consolidated
Groups
revenues of 9M2021
9.5% Operating
10.7%
Performance
16.1% YoY
up
ESG Update
27.1% Appendix:
26.3% Financial
9M2020
9M 2021 Statements
49.9%
51.6%
11.8%
13.1%
Green Mechatronic Solution Air and Intelligent Life
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Intelligence Energy Others
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2021 Q3
Financials
2/2
Revenue Breakdown by Business Group
•
10.1% The Three
8.9%
Business
49.7% Groups
Operating
Performance
23.0%
27.0%
ESG Update
12.0% 2020Q3
2021Q3
Appendix:
Financial
Statements
42.4%
24.5%
14.4% 2021Q2
25.0%
50.0%
Consolidated
revenues of 2021Q3 13.0% Page 10
up 15.7% YoY Green Mechatronic Solution Intelligence Energy
Air and Intelligent Life Others
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2021 Q3 Financials

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Green Mechatronic Solution

E-Mobility Taiwan Exhibition (Oct. 2021)

• The Three Business Groups Operating Performance

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ESG Update

Appendix: Financial Statements

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E-bus and E-boat Powertrain System

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E-commercial logistics Vehicle Powertrain Systems

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E-passenger Car Powertrain System

Intelligence Energy

Hai Long Wind Project Onshore Substation EPC Contract

Hai Long Offshore Wind Project and TECO

signed a preferred supplier agreement of

2021 Q3 Financials

• The Three Business Groups Operating Performance

onshore substation with an installed

ESG Update

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. capacity of 1,044MW on Sep. 29[th]

Mechatronic Engineering project of Taoyuan Airport's third terminal

TECO team has won out in the bidding on the mechatronic engineering project of Taoyuan Airport's third terminal at

TWD12.7 billion, according to the outcome publicized on Aug. 30[th]

Appendix: Financial Statements

Page 12

Air and Intelligent Life

Ensure shipments and margin

increase in Air-conditioning

project for elementary and high schools.

• Commercial AC business focused

on DC inverter duty product lines

• Total revenue of focused business lines grew 91.8% YoY

2021 Q3 Financials

• The Three Business Groups Operating Performance

ESG Update

Appendix: Financial Statements

• % to total commercial AC

business raised from 12.2% in

2020 to 20.9% in 2021

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Outlook for 4[th] Quarter

Revenue YoY Growth Green Mechatronic Solution: 10%~15% Intelligence Energy: 5%~10% Air and Intelligent Life: 5%~10%

2021 Q3 Financials

• The Three Business Groups Operating Performance

ESG Update

Appendix: Financial Statements

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Company-Wide Recurring Gross Margin : 21%~24%

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2021 Q3 Financials

Carbon Neutrality Triggers Strong Demand for Energy Conservation & Carbon Abatement Solutions

• The Three Business Groups Operating Performance

• Given motor's heavy energy consumption, as a leading motor manufacturer worldwide, TECO established Smart Solutions Sales Center and Mechatronic System Sales & Marketing Division in July 2021, for provision of tailor-made energy consumption and carbon abatement solutions, as well as feasible system programs, to customers.

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ESG Update
Smart
Appendix:
manufacturing
Financial
Smart
Statements
environmental
control
System Energy-
Solution
High- conservation
performance systems
IE4 motor (MVD/M+1/
PM)
Page 15
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• Successive completion of energy-conservation projects for major semiconductor, papermaking, and textile firms.

• Cutting-edge energy-conservation, carbon-abatement solutions：

• ✓ Electrification program for booster pump stations of U.S. Oil & Gas transmission and distribution pipelines

• ✓ Waste-heat power-generation systems for steelmaking/petrochemical firms

• Smart monitoring and management of factory power consumption

• Smart production equipment IoT, Smart product stacking/packaging/transport

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ESG Update

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MSCI Sustainalytics (100~0, 0 is the best score) A (August 6, 2021) 21.66 (August, 2021) BB (August 14, 2020) 23.6 (July 27, 2020)

A (August 6, 2021)

BB (August 14, 2020)

FTSE (0~5, 5 is the best score)

3.5 (June, 2021) 2.7 (2020)

2021 Q3 Financials

The Three Business Groups Operating Performance

• ESG Update

Appendix: Financial Statements

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Q&A

Http//www.teco.com.tw ir@teco.com.tw

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2021 Q3 Financials

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Statements of Comprehensive Income- 3Q21

	(TWD Million)	2021Q3	2021Q2	QoQ	2020Q3	YoY		The Three
	Operating Revenue	13,241	13,487	-1.8%	11,448	15.7%		Business
	Recurring Operating Revenue	13,137	12,813	2.5%	11,437	14.9%		Groups Operating
	Gain (Loss) on financial asset at fair value through profit or loss	104	674	-84.6%	11	845.5%		Performance
	Net Gross Profit **	2,874	3,733	-23.0%	2,453	17.2%		ESG Update
	Operating Profit	849	1,725	-50.8%	712	19.2%
	Non operating Income	1,266	32	3856.3%	254	398.4%	•	Appendix:
	Income Before Tax	2,115	1,758	20.3%	966	118.9%		Financial Statements
	Income Tax	(406)	(179)	126.8%	(185)	119.5%
	Net Income**	1,579	1,437	9.9%	802	96.9%
	EPS (TWD)	0.75	0.68	10.3%	0.41	82.9%
	* Including unrealized/realized benefits of affiliated companies	** Excluding	non controlling interest

• Revenue in 2021Q3 increased by approximately 15.7% compared to 2020Q3, mainly due to: 1. Revenue growth of Green Mechatronic Solution growth in Taiwan & Europe, Intelligence Energy & home appliance in Taiwan, as well as Taiwan Pelican.

• higher valuation of financial assets such as Fubon Media held by Tong An Investment.

• The net non operating income in 2021Q3 increased by TWD1.2 bn. The main reason is that

• 1. due to COVID 19 epidemic, the shareholders' meeting of those invested companies were postponed to Q3, resulting in an increase of TWD713 million .
• 1. Valuation increase of TWD67million on financial asset at fair value through profit or loss

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2021 Q3 Financials

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Statements of Comprehensive Income- 9M2021

• Revenue in 9M2021 increased by 16.1% compared to 9M2020, mainly due to: 1) Revenue growth in Taiwan, China, Europe Taiwan Pelican; 2) higher valuation of financial assets such as Fubon Media held by Tong An Investment. • The net non operating income in 9M2021 increased by 101% versus 9M2020. The main reason is that due to increase in dividend income and earning from equity method investment. • The income tax of 9M2021 is higher than that of 9M2020 by NT$302million, which is mainly due to 1) Increase in profit resulting in estimated increase in income tax and 2) recognized the basic tax resulting from Tong An Investment’s disposal of marketable securities in the current period.

(TWD Million) 9M2021 9M2020 YoY Operating Revenue 38,719 33,349 16.1% Recurring Operating Revenue 37,490 32,878 14.0% Gain (Loss) on financial asset at fair value through profit or loss 1,229 471 160.9% Net Gross Profit 9,775 8,192 19.3% Operating Profit 3,852 2,674 44.1% Non operating Income 1,453 722 101.2% Income Before Tax 5,305 3,396 56.2% Income Tax (786) (484) 62.4% Net Income 4,519 2,728 65.7% EPS (TWD) 1.96 1.41 39.0% Page 19 The Three Business Groups Operating Performance ESG Update • Appendix: Financial Statements Including unrealized/realized benefits of affiliated companies * Excluding non controlling interest

2021 Q3 Financials

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Balance Sheets - September 2021

• Cash and Cash Equivalents decreased by

TWD2.48bn compared to Year end of 2020 mainly due to purchase of mutual fund.

• Inventories increased by TWD2.35bn

compared to Year end of 2020 mainly due to business growth and preparation for potential inflation and shortage of raw materials.

• Payables increased by TWD2.1bn and TWD

3.53bn compared to Year end of 2020 and June end of 2021 mainly due to increase in inventories. • Equities increased by TWD26.5bn compared to Year end of 2020 mainly due to higher valuation of financial assets besides net income and capital increase through share swap.

	(TWD Thousand)	Sep. 30, 2021 Amount %	Sep. 30, 2021 Amount %	De. 31, 2020 Amount %	De. 31, 2020 Amount %	Sep. 30, 2020 Amount %	Sep. 30, 2020 Amount %		The Three Business
	Cash & Cash Equivalents Receivables	17,920,142 10,547,272	13% 8%	20,397,260 10,642,883	19% 10%	20,308,158 10,086,451	19% 10%		Groups Operating Performance
	Inventories	11,983,175	9%	9,627,248	9%	10,008,929	10%
	Total Assets	135,089,107	100%	105,679,071	100%	106,068,500	100%		ESG Update
	Payables	15,026,502	11%	12,921,618	12%	11,497,747	11%
	Short term Borrowings	2,148,828	2%	2,816,832,	3%	2,938,004	3%
	Long term Borrowings	4,480,954	3%	3,611,731	3%	4,671,586	4%	•	Appendix:
	Corporate Bond Payables Total Liabilities	6,000,000 40,927,377	4% 30%	6,000,000 38,053,839	6% 34%	6,000,000 38,673,838	6% 36%		Financial Statements
	Equities	94,161,730	70%	67,625,232	66%	67,394,662	64%
	Key Indices
	AR Turnover (times)	3.30		4.41		4.41
	Inventory Turnover (times)	3.35		3.36		3.15
	Current Ratio	2.16		2.33		2.36
	Quick Ratio	1.51		1.75		1.75			Page 20
	Net Debt to Equity	-2.6%		-11.8%		-9.9%