YGG — Annual Report 2020

Mar 23, 2021

Safety First  Quality  Speed  Teamwork  Excellence Yeong Guan Group (1589 TT) 2020 Financial Results

Mr. Andy Tsai (Vice Chairman) Mr. Richard Lee (CSO) Mr. Ching-Wu Tsai (CFO) Ms. Lucy Chiang (AVP) Mr. Kevin Tsai (AVP)

March 24, 2021

Disclaimer

The information contained in this document was verified by an independent third party. YG does is not responsible for the accuracy, fairness, and completeness of any information contained in this document. You should not assume any information in this document to be accurate, fair, nor complete. The information or opinions contained in this document is provided on a specified date, which YG reserves all right to update. YG has no obligation to notify you of any updates after a specific date or any development of information in the documents. YG will not accept any liability for any loss resulting from the use of this document or its contents or for other reasons related to this document.

This document does not constitute an offer or solicitation of an offer of purchase or acquisition to sell or issue shares of YG or any of its subsidiaries or related parties in any jurisdictions, does not serve as a part an offer or incentive, nor should be interpreted as such. Any part thereof or distribute the facts does not constitute the basis of any contract or commitment, and should not be relied upon in respect of any contract or commitment.

Your acceptance of this document constitutes your agreement that the information contained in the document is kept strictly confidential, securities researchers should have eligibility of the securities research and follow any relevant securities laws and regulations and restrictions of the appropriate jurisdiction before publishing research results on YG.

This document is provided for the securities researchers for use as their research reference only. Any part of the document cannot be photocopied, copied, forwarded, or in any manner, directly or indirectly transferred to any other person or for public announcement and for any other purpose.

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Outline

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Section One: 公司策略 Overview 1. Yeong Guan 2. 2020 FinaSection One: 公司策略 cial Highlights Section Two: 3. Market Trends 營運目標 Section Three: 永冠簡介 4. Development Strategy 5. DSection Four: 財務表現 ta led Financial Figures

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3

Yeong Guan Overview

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Yeong Guan Overview

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 Nearly half a century in the foundry industry
 Founded in Taiwan in 1971, investing in China since 1992. Now with 6 Design Casting
factories.
 Around 2,500 employees Total
Assembly Machining
Solution
 2020 Revenue reached NT$ 8.18 billion, with 176,000 tons of castings
shipped
 Annual capacity of 200,000 tons Welding Painting
 Lead the Industry in Environment, Health and Safety (EHS) Best Practices
 Several of our plants have earned recognition from local regulatory
authorities. Renewables
 EHS qualification is required to gain long-term order flows from Tier 1
MNCs.
 The installation of high standard, environmental friendly equipment
enhances our cost-competitiveness
 Optimizing Lean Production: Improve efficiency
Plastic Industrial
Injection Machinery
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2020 Q3 Updates

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Develop New Customers

World economies are recovering from COVID-19, and thus demand for high quality casting increase as well. Increased efforts are put into new customer development, including Enercon of Germany

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Expect a strong 2021 Q1

March shipment expected to Be 15,000-16,000 tons 2021 Q1 shipment target Is 44,000-45,000 tons

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Price Adjustment

Around 57 customers with annual revenue more than 1 million NTD. 51 customers have agreed to price adjustments, the others are still in discussion.

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2020 Financial Highlights

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Increased Wind demand drives Revenue & Margin

 Due to strong demand from wind market, 2020 Q4’s revenue and shipment volume reaches new heights since 2012.

Margin

Return on Equity

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25% 6%
22% 24% 2% 1% 4%
21% 0%
-1%
18%
11% 2,431 2,488
2.11
1.94
2,168 [2,229] 2,136 1.82
1.61
0.75
1,130
-1.06
3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
Revenue NT$ millions EPS NT$ dollar
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2020 Net Earnings Analysis

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Unit NT$ Thousand
Operating Interests Other Incomes Exchange Interest Income Tax Net Earnings
Margin Income Rate Gains Fees
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Plastics/Industrial Machinery Industries Rebound

• 2020 Q4 Revenue composition: Renewables 67.4%, Plastic Injection 14.4%, Industrial Machinery 18.2%

• Plastic Injection Molding/Industrial Machineries demand grows, while Renewables output sets new record.

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3,000,000 80.00%
70.00%
2,500,000
60.00%
2,000,000
50.00%
1,500,000 40.00%
30.00%
1,000,000
20.00%
500,000
10.00%
0 0.00%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
再生能源類 Renewables 注塑機 Plastic 產業機械 Industrial 營收 Revenue in NT$ 百萬
Injection Machinery NT$ Million
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2020 Income Statement

Unit: Thousand NTD	2020	2019	YoY
Revenue	8,184,273	7,899,986	3.6%
Gross Profit	1,789,787	1,371,353	30.6%
Gross Margin	22%	18%	4PP
Operating Expense	1,245,087	1,158,893	7.4%
Operating Income	544,700	212,460	156.4%
Operating Profit Ratio	6%	3%	3PP
Non Operating Items	79,038	8,868	791.3%
Profit before Tax	623,738	221,328	181.8%
Profit after Tax	516,530	163,526	215.9%
EPS (Basic $NTD)	4.81	1.54

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2020 Balance Sheet

Unit: Thousand NTD	2020	2019	YoY
Total Assets	16,394,386	13,521,005	21.3%
Cash	2,682,852	1,450,683	84.9%
NR & AR	3,516,934	2,946,597	19.4%
Inventory	1,324,434	1,225,756	8.1%
Total Non-Current Assets	6,980,605	6,737,520	3.6%
Total Liabilities	7,630,444	5,698,938	33.89%
Bank Loans	3,498,085	3,858,326	-9.3%
NP & AP	1,646,381	990,180	66.3%
Total Equity	8,763,942	7,822,067	12.0%
Common Stock	1,106,175	1,056,175

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2020 Revenue Analysis

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Revenue By Application (%) Revenue by Currency (%)
Industrial
NTD
Machinery EUR
4%
18%
7%
USD RMB
12% 77%
Plastic
Injection
14%
Renewables
68%
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Market Trends

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US Wind Market Developments

• In 2020, US installed 17 GW of new wind energy, expects to add 21 GW more in 2021

• Various States declares 2030 wind energy installation targets: New York 30 GW, California 30 GW, Virginia 12 GW, New Jersey 12 GW, Maryland 12 GW

Source: S&P Global Market Intelligence

• U.S. House of Representatives Energy and Commerce Committee proposes the CLEAN Future Act on March 2nd.

• Biden Administration: Achieve net zero greenhouse gas emissions by 2050. By 2030, reduce greenhouse gas emissions by at least 50% compared to 2005 levels

• Backed by 25 governors supporting the Paris Climate Agreement

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Source: World Resource Institute. Photo by Darren Halstead/Unsplash

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EU Wind Market Developments

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Source: Wind Europe
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Source: Wind Europe
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• EU’s economic recovery package is as high as 6.73 trillion Euros, and member states are required to submit their national budget plans by the end of April.

• EU requires member states to invest 37% of their budget in projects that can combat climate change.

• During 2020, new orders for wind turbines increased 73%

• Onshore turbine orders increased 13% to 8.2 GW

• Offshore turbine orders increased 6 folds to 6.4 GW

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China announces Carbon Neutral targets in UN address

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2021-2025 GREEN ENERGY
INVESTMENT
國家能源集團 CEIC 國家電投 SPIC 華能集團 CHNG
三峽新能源 CTG 中廣核 CGN 華潤電力 CR-Power
40
80
30
+380
75 GW 75
80
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 China’s major energy developers have successively announced their respective 14th FiveYear Plan with green energy investment goals. When combined it has an average annual new install rate of over 76 GW (wind power + solar)

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• China forecasts total wind installation to reach 536 GW by 2025, meaning 51.2 GW/year

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• 2020 new wind installation was 52 GW

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Plastic Machinery Industry Optimistic on 2021

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• Plastic Injection Molding industry serves: automotive, consumer electronics, appliances, food packaging etc.

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• VDMA data shows 7% growth in revenue for plastic/rubber machinery

• Growth in passenger/commercial vehicles, food packaging, appliances sales

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Asia Pacific Region Leads The Economic Recovery

• Some Asian countries are expected in 2021 to achieve GDP growth from 2019 levels

• During 2020, 75% of Yeong Guan’ sales came from the Asia-Pacific region

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Development Strategy

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Taichung Plant to Start Production in 2022

• Timeline: Construction started in 2020, targeting trial production by Q2 2022.

• Capacity: 80,000-100,000 tons/year.

• 45K by 2023, 60K by 2024, 80K by 2025

• Advantages:

• Customers nearby (Siemens/MVOW)

• Localization requirements

• Proximity to harbor

• Government incentives

• Capex

• Phase 1: NT$ 5.22bn to reach 45k output

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Taiwan
Strait
Siemens Factory
YG Site
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Received Construction License in mid January 2021. Foundation being laid per original plans.

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Thailand Construction Starts in H2 2021

• Construction starts in 2021. Production to begin in 2023.

• Phase 1: 60,000 tons/year capacity. Onshore Wind, Plastic/Industrial machineries.

• Advantages:

• 968,000 m² site with industrial development potential.

• 8 years tax-free and 5 years halved tax incentives.

• EIA approved, can be developed in stages

• Capex: estimated NT$ 2.6 billion for Phase 1

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Total Area
968,000 m²
1 hr drive from 3 nearby sea
距離3個主要港口約1
ports
小時車程
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Thailand’s Board of Investment is reviewing Yeong Guan’s application in due process. Factory design being finalized.

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Outlook for 2021 and Beyond

 Near Term (1-2 years)

• Develop new customers with the global economic recovery

• For 2021, we expect steady demand from Wind and growth from other industries, translating to a 5-10% growth of 185,000-194,000 tons output.

• Taichung factory for wind castings: production in 2022

 Mid Term (3-5 years)

• Thailand plant: Construction starts in 2021. Production begins in 2023.

• Capacity reaches 250,000 tons/yr.

• Long Term (5-10 years)  Sustainable operations & succession planning

• Building upon ESG framework

• Corporate social responsibility

• Capacity reaches 300,000 tons/yr

 Long Term (5-10 years)

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Estimated Shipments
出貨噸數預估（千噸）
(thousand tons)
195
176
175
164
155 152 151
146
134
135
115
95
75
2015 2016 2017 2018 2019 2020 2021E
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Detailed Financial Figures

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Historical Income Statement

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NT$ Million YoY(%)
2016 2017 2018 2019 2020
2016 2017 2018 2019 2020
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NT$ Million	2016	2017	2018	2019	2020	YoY(%) 2016 2017 2018 2019 2020	YoY(%) 2016 2017 2018 2019 2020	YoY(%) 2016 2017 2018 2019 2020	YoY(%) 2016 2017 2018 2019 2020	YoY(%) 2016 2017 2018 2019 2020
Sales Revenue	**7,374 **	**6,404 **	**6,196 **	7,900	8,184	-9.2	-13.1	-3.2	27.5	3.6
Gross Profit	**2,419 **	1,432	831	1,371	1,790	-9.3	-40.8	-42	65	30.6
Operating Profit	1,144	295	-245	212	545	-24.5	-74.2	-183.1	186.5	157.1
Income before Tax	1,325	342	-232	221	624	-25.9	-74.2	-167.8	195.3	182.4
Net Income	997	258	-274	164	517	-26.1	-74.1	-206.2	159.9	215.2
EPS (NT$)	8.5	2.28	-2.48	1.54	4.81	-30.6	-73.2	-208.8	162.1	212.3
Key financial ratio (%)
Gross Margin	33	22	13	18	22
Operating Margin	16	4	-4	3	6
Net Margin	13	4	-4	2	6
OPEX ratio	17	18	17	15	16

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Historical Balance Sheet

NT$ Million	2016	2017	2018	2019	2020	YoY(%)	YoY(%)	YoY(%)	YoY(%)	YoY(%)
						2016	2017	2018	2019	2020
TOTAL ASSETS	**15,052 **	14,483	14,531	13,521	16,394	-3.5	-3.8	0.3	-7	21.2
Cash	4,241	3,316	3,153	1,451	2,683	-21.6	-21.8	-4.9	-54	84.9
NR & AR	2,186	2,026	2,103	2,947	3,517	-12	-7.3	3.8	40.1	19.3
Inventory	1,261	1,256	1,368	1,226	1,324	-3.3	-0.4	8.9	-10.4	8
Fixed Asset	5,701	6,279	5,920	5,735	5,755	8.5	10.1	-5.7	-3.1	0.3
TOTAL LIABILITIES	4,974	4,768	6,250	5,699	7,630	0.8	-4.1	31.1	-8.8	33.9
Bank Loans	619	612	4,584	3,858	3,498	23.8	-1.1	649	-15.8	-9.3
NP & AP	1,098	1,136	1,050	990	1,646	-3.2	3.5	-7.6	-5.7	66.3
TOTAL EQUITY	10,078	9,715	8,281	7,822	8,764	-5.4	-3.6	-14.8	-5.5	12
Common Stock	1,188	1,188	1,116	1,056	1,106	0.7	0	-6.1	-5.4	4.7
Book valueper share	82.3	79.3	72.9	72.5	79.2
A/R turnover days	116	121	123	117	145
Inventoryturnover days	98	99	97	78	76
A/P turnover days	82	82	74	57	75
ROE (%)*	9.8	2.8	-3.2	2.1	6.3

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• ROE: Parent company Net income / average common equity

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Quarterly Income Statement

NT$ Million	**3Q18 **	**4Q18 **	**1Q19 **	**2Q19 **	**3Q19 **	**4Q19 **	**1Q20 **	**2Q20 **	**3Q20 **	4Q20
Sales Revenue	1,558	1,703	1,552	1,951	2,168	2,229	1,130	2,136	2,431	2,488
Gross Profit	216	266	218	304	390	459	127	465	582	616
Operating Profit	(43)	(29)	(38)	47	105	99	(111)	154	290	212
Income before Tax	(26)	(51)	(102)	35	101	186	(128)	223	267	262
Net Income	(46)	(60)	(106)	19	80	172	(113)	193	207	230
EPS (NT$)	(0.41)	(0.55)	(1.00)	0.18	0.75	1.62	(1.06)	1.82	1.94	2.12
Revenue by Application (%)	**3Q18 **	**4Q18 **	**1Q19 **	**2Q19 **	**3Q19 **	**4Q19 **	**1Q20 **	**2Q20 **	**3Q20 **	4Q20
Renewable Energy	23.5	38.8	43.3	47.9	59.4	66.6	60.7	67.0	72.8	67.4
Injection Molding Machine	36.3	29.2	26.9	24.3	16.7	14.6	17.7	14.1	11.7	14.4
Industrial Machinery	40.2	32.0	29.8	27.8	23.9	18.8	21.6	18.9	15.5	18.2

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Thank you for your consideration!

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Investor Relations Kevin Tsai Office : +886 02 27917198 ext: 17 E-mail : ir@ygget.com

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www.ygget.com

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