TECO — Interim / Quarterly Report 2021

Apr 27, 2021

TECO Electric & Machinery Co., Ltd.

2020 4th Quarter Earnings Conference

March 30, 2021

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Safe Harbor Statement

• This Presentation contains certain statements that are forward-looking

• 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.

2

Agenda

I. 4Q20 Financial Results

II. Recap of Recent Major Events

III. 2021 Growth Strategy

• approved by BOD dated on December 22, 2020

3

Statements of Comprehensive Income – 2020

(In NT Millions) 2020		2019	YoY
Operating Revenue 45,823 - Recurring Operating Revenue 45,350 - Gain(Loss) on financial assets at fair value through profit or Loss 473 Net Gross Profit 10,756 Operating Profit 3,534 Non-operating Income 866 Income Before Tax 4,400 Income Tax (588) Net Income ** 3,511		47,909 47,786 123 11,481 3,536 903 4,439 (920) 3,222	-4.4% -5.1% 284.6% -6.3% -0.1% -4.1% -0.9% -36.1% 9.0%
EPS(NT$) 1.81		1.65	9.7%

• Excluding non-controlling interest

4

Financial Highlights – 2020

(In NT Millions)	2020 2019 YoY	2020 2019 YoY
Net sales -Recurring *	45,350	47,786 -5.1%
Gross Margin - Recurring * Operating Margin - Recurring *	22.7% 23.8% -110bps 6.7% 7.1% -40bps
EPS (NT$)	1.81	1.65 9.7%
ROE (%) **	5.9%	5.8% 10bps
ROA (%) **	3.4%	3.4% -

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

• ** Annualized number and excluding non-controlling interests

5

Statements of Comprehensive Income – 4Q20

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(In NT Millions) 4Q 2020 3Q 2020 QoQ 4Q 2019 YoY
Operating Revenue 12,474 11,448 9.0% 12,059 3.4%
- Recurring Operating Revenue 12,472 11,437 9.0% 12,032 3.7%
- Gain(Loss) on financial assets at
2 11 -81.8% 27 -92.6%
fair value through profit or Loss
Net Gross Profit 2,564 2,543 0.8% 2,485 3.2%
Operating Profit 860 712 20.8% 660 30.3%
Non-operating Income 144 254 -43.3% 165 -12.7%
Income Before Tax 1,004 966 3.9% 825 21.7%
Income Tax (104) (185) -43.8% (168) -38.1%
Net Income ** 783 802 -2.4% 635 23.3%
EPS(NT$) 0.40 0.41 -2.4% 0.32 25.0%
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• Excluding non-controlling interest

6

Financial Highlights – 4Q20

(In NT Millions)	4Q 2020 3Q 2020 QoQ 4Q 2019	4Q 2020 3Q 2020 QoQ 4Q 2019	4Q 2020 3Q 2020 QoQ 4Q 2019	YoY
Net sales -Recurring *	12,472	11,437 9.0% 12,032		3.7%
Gross Margin - Recurring *	20.5% 22.1% -160bps 20.4% +10bps
Operating Margin - Recurring *	6.9% 6.1% +80bps 5.3%			+160bps
EPS (NT$)	0.40	0.41 -2.4% 0.32 25.0%
ROE (%) **	5.1%	5.2% -10bps	4.5% +60bps
ROA (%) **	3.0%	3.0% -	2.6% +40bps

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

• ** Annualized number and excluding non-controlling interests

7

Recurring Operating Revenue vs. Gross Margin

NT$ Billion

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14 30%
24.2%
24.2%
12
22.1% 25%
20.4%
10
20.5% 20%
8
15%
12.5
6 12.0
11.4
10.6 10.9
10%
4
5%
2
0 0%
4Q19 1Q20 2Q20 3Q20 4Q20
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Recurring Operating Revenue Gross Margin

• Recurring Operating Revenue = Operating Revenue – financial assets at fair value through profit or loss

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

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

8

Recurring Operating Profit vs. Operating Margin

NT$ Million

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1,200 9.0%
7.1%
8.0%
1,000 6.9% 6.9%
6.1% 7.0%
5.3%
800 6.0%
5.0%
600
4.0%
858
400 774 3.0%
728 701
633
2.0%
200
1.0%
0 0.0%
4Q19 1Q20 2Q20 3Q20 4Q20
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Recurring Operting Profit

Operating Margin

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

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

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Balance Sheets – Dec. 2020

( In NT$ 1,000)	Amount % Dec. 2020	Amount % Dec. 2020	Amount % Sep. 2020	Amount % Sep. 2020	Dec. 2019	Dec. 2019
					Amount %
Cash & Cash Equivalent	20,397,260	19%	20,308,158	19%	19,111,371	19%
Receivable	10,642,883 10% 9,627,248 9% 105,679,071 100% 12,921,618 12% 2,816,832 3% 3,611,731 3% 6,000,000 6% 38,053,839 36% 67,625,232 64% 4.41 3.36 2.33 1.75 -11.8%		10,086,451 10% 10,008,929 10% 106,068,500 100% 11,497,747 11% 2,938,004 3% 4,671,586 4% 6,000,000 6% 38,673,838 36% 67,394,662 64% 4.41 3.15 2.36 1.75 -9.9%		10,711,774 11%
Inventories	9,627,248				9,853,585 10%
Total Assets					99,094,404 100%
Payable	12,921,618				11,954,866 12%
Short-term Borrowings(inclu. Long - term liabilitis, current portion)					1,857,637 2%
Long-term Borrowings	3,611,731				7,084,752 7%
Corporate Bond Payable					4,000,000 4%
Total Liabilities	38,053,839				37,389,614 38%
Equities					61,704,790 62%
Key Indices AR Turnover (times) Inventory Turnover (times) Current Ratio Quick Ratio Net Debt to Equity					4.59
					3.21
					2.17
					1.57
					-10.0%

10

Revenue Breakdown

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In 2020, total
consolidated topline
down 4.35% YoY
Others Others
10.5% Electrification 9.3%
Electrification
Products
New Energy
Products
New Energy 36.4% &
40.5%
& Engineering
Engineering 10.3%
13.0%
2020 2019
Smart City
18.3%
Smart City
20.4%
Smart Smart
Manufacturing Manufacturing
19.7% 21.6%
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11

Sales on Major Business Lines

• "Electrification products" decreased by about TWD2.7 billion. The decline was mainly due to the impact of the epidemic, which reduced the demand in the North American market.

• "Smart manufacturing” decreased by about 1.4 billion, mainly due to: 1) Motovario's revenue fell severely affected by the epidemic; 2) Tecom adjusted its 3C agency business.

• "Smart City" revenue increased by about TWD600 million, mainly due to the revenue growth of Teco's home appliance and the increasing demand for e-commerce shopping has led to the growth of Taiwan Pelican due to the impact of the epidemic.

• "New energy and engineering" revenue increased by approximately TWD1 billion, mainly due to the increase in IDC engineering revenue from TECO.

TWD Billion

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19.4
20
16.7
15
10.4
10 9.0 8.8 9.4
5.9
4.9
5
0
Electrification Smart Smart City New Energy &
Products Manufacturing Engineering
2019 2020
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12

Agenda

I. 4Q20 Financial Results

II. Recap of Recent Major Events

III. 2021 Growth Strategy

• approved by BOD dated on December 22, 2020

13

Progress on Electric Vehicle

• T Power won the 29th Taiwan Excellence Gold Award. It is the only domestic manufacturer that automotive motors and drivers into one. It has won integrates

• opportunities from many domestic and foreign electric vehicle manufacturers. It is expected to gradually realize in the third quarter of 2021.

• 2021/2/1 announced to join the Hon Hai MIH platform, supporting commercial vehicle solutions, and is the only supplier among suppliers that independently designs, develops and manufactures motors and electronic controls, and is a member of high-power and high-voltage products. In addition, TECO is also actively discussing the demand for related models with Foxtron Vehicle Technoloty to strive for future supply opportunities.

• 2021/3/17 signed a MOU with the electric bus manufacturer, RAC Electric Vehicle. RAC will purchase 500 sets of electric bus power systems for two years. The first batch of 30 sets will be delivered in the second quarter of this year. It will be TECO's self-made power module with motor and drives.

14

Continual Asset Revitalization

Xinzhuang Factory

• Base area: 37,263 ㎡ (B type industrial zone)

• Development progress:

Joint construction with Kindom Construction Corp. It is expected to be in 2022 and in 2028. The total floor area approved completed of the building is about 78,987 pings, planned to develop as a compound park of biotechnology, AI and ICT industries. It is estimated that the asset appreciation will exceed TWD10 billions.

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Songjiang Building

• -Base area: 827 ㎡ / Teco holds about 57%

• -Development progress:

Applied to reconstruction according to " Statute for Expediting Reconstruction of Urban Unsafe and Old Buildings” and it is expected to demolished and reconstructed 2021 end to be a by year commercial and office building for lease.

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15

Achievement of ESG

 2020/11/16 TECO has been incorporated, as the only Taiwanese firm in the category of ELQ Electrical Components & Equipment, into 2020 Dow Jones Sustainability Index (DJSI), thanks to its extraordinary performance in the two items of "innovation management" and "environmental policy and management system," for both of which it was granted full marks.

• 2021/2/22 TECO Electric & Machinery has been granted "Industry Mover" status in S&P Global 2021 Sustainability Yearbook, in acknowledgement of its remarkable performance in sustainability.

16

Vision 1/2 Implementation on Teco’s

• TECO publicizes the company's vision and development results through public speeches, exhibitions, social platforms, etc. Such as :

• Implementation of ESG and Vision

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• Development of EV powertrain

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• Solution for Smart City

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17

Vision 2/2 Implementation on Teco’s

• Please click the web link below to watch the video:

• Implementation of ESG and Vision https://youtu.be/8mu2rFqpyVQ https://youtu.be/f4zo6rdbYtE

• Development of EV powertrain htts://youtu.be/o2V6jzHsbOw https://youtu.be/4u1yTlwUMTM

• Solution for Smart City https://youtu.be/rAkuzOrd4XM https://youtu.be/X-DVaSwEjD8

18

Material Agenda of AGM

- Dividend Policy

Paying cash dividend TWD1.15 per share which is 20-year high; payout ratio reached at 63.5% which is 5-year high.

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TWD
Earnings per share Cash Dividend per Share
2.50
2.00 1.76 1.81
1.56 1.59 1.65
1.50
1.15
0.99
0.88 0.86 0.90
1.00
0.50
0.00
2016 2017 2018 2019 2020
50.0% 55.1% 56.6% 60.0% 63.5%
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Agenda

I. 4Q20 Financial Results

II. Recap of Recent Major Events III. 2021 Growth Strategy

- approved by BOD dated on December 22, 2020

20

Strategically Focused Industries

“Renewable energy" represent 20% of domestic energy supply in 2025

Green Energy

• Solar 20GW grid-connected: including construction project, equipment and power station operation and maintenance business, the scale is estimated to exceed TWD3 trillion

• Offshore wind power 5.5GW grid-connected: output value exceeds TWD900 billion

• Taipower’s energy storage demand is nearly 600MW: about TWD18 billion for construction projects and equipment business

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EV
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• The scale of the EV industry – It is estimated CAGR> 22% globally during 2017-2025 and the scale will reach US$567.2 billion.

• The Ministry of Transportation & Communication will invest TWD90 billion in the next 10 years to promote the electric bus industry.

• Taiwan's e-bike is ranked first in the EU import market, accounting for 63.4% of the market in 2020.

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Smart
City
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IDC

• Google- Estimated increase of 6-8 phases of IDC construction planning, with a total investment of more than TWD70 billion

• Microsoft is expected to invest US$300 million to build IDC in Taiwan.

• Air-conditioning is fully installed in primary and secondary schools, with 100,000 units and TWD10 billions of business opportunities

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Smart
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Auto
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• Global Industrial Control and Factory Automation Market: CAGR>8% during 2020-2025.

• The value of warehousing and logistics automation is estimated to reach US$270 billion in 2025

• The global AI application market has a CAGR of >30% from 2019 to 2023, of which the Asia-Pacific region has grown more than 38%

21

Generate over TWD20 billion revenue in three years

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Smart
Green
Energy
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• Develop solar power plant/energy storage business with TECO's equipment and system advantages, and extend it to solar smart diagnosis and monitoring system to strengthen maintenance and operation business

• Strive for the turnkey project of offshore wind power onshore substation and develop the generator OEM business

• • EV powertrain

• a. Cooperate with domestic and foreign automakers and system manufacturers to provide power systems for commercial and passenger vehicles

• b. Develop large-capacity and high-voltage motor drive systems to strive for business opportunities in electric buses for public transportation

• c. Expand the OEM production of 2W electric scooters/bicycles and the assembly of power modules at home and abroad

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Smart City
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• Develop new markets in Taiwan based on IDC mechanical and electrical engineering foundation, and expand business to other Asia-Pacific regions

• Smart logistics industry application: Introduce AI image visual driving warning system, improve the intelligent and safe transportation of moving vehicles, and integrate a full-field intelligent management platform

• Business Opportunities for Air Conditioning in Primary and Secondary Schools: Use EMS central control management to achieve smart energy-saving benefits, plus exclusive PM2.5/bacteriostatic and clean technology

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Smart
manufa
-cturing
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• Smart handling and packaging: develop AR recognition technology and multi-vehicle automated guided vehicles (AGV) to provide one-stop smart logistics solutions

• Smart factory IoT4.0 solution: through unmanned processing and assembly line construction investment to develop industry 4.0 intelligent system integration technology and modules

• Smart operation & maintenance: through the MHm+ cloud platform, with digital value-added maintenance services, strengthen customer linkages and follow-up business opportunities

22

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

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