YGG — Interim / Quarterly Report 2020

Jan 15, 2021

Safety First  Quality  Speed  Teamwork  Excellence Yeong Guan Group (1589 TT) 「 The Great Reset – New Industry Landscape after COVID-19 」 by Masterlink

Mr. Kevin Tsai (AVP)

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.

==> picture [133 x 42] intentionally omitted <==

2

Outline

==> picture [57 x 347] intentionally omitted <==

Section One: 公司策略 Overview 1. Yeong Guan Section One: 公司策略 2. 2020 Q3 Financial Highlights Section Two: 3. Market Trends 營運目標 Section Three: 永冠簡介 4. Development Strategy 5. Section Four: 財務表現 Financial Figures Appendix

==> picture [133 x 42] intentionally omitted <==

3

Yeong Guan Overview

==> picture [133 x 42] intentionally omitted <==

4

==> picture [718 x 487] intentionally omitted <==

==> picture [133 x 42] intentionally omitted <==

5

Yeong Guan Overview

==> picture [719 x 446] intentionally omitted <==

----- Start of picture text -----

 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 NT$ 8.2 billion, with 176,531 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
6
----- End of picture text -----

2020 Q4 Updates

==> picture [105 x 102] intentionally omitted <==

COVID-19

Resurgence of COVID-19 in EU and the US. YG’s customers continues to operate business normally. Shipments to EU/US remains normal. YG’s supply chain is normal

==> picture [105 x 103] intentionally omitted <==

Employee Wellbeing

Daily monitoring the health of our ~2,500 employees. Strict protocols remains in place to keep out COVID

==> picture [106 x 102] intentionally omitted <==

Capital Raising

3[rd] Convertible Bond (NT$ 1.55 Billion raised) Equity Financing (NT$ 400 Million raised)

==> picture [133 x 42] intentionally omitted <==

7

2020 Q3 Financial Highlights

==> picture [133 x 42] intentionally omitted <==

8

Increased Wind demand drives Revenue & Margin

 Due to strong demand from wind market, 2020 Q3’s revenue and shipment volume reaches new heights since 2012.

Margin

Return on Equity

==> picture [635 x 235] intentionally omitted <==

----- Start of picture text -----

24% 4%
21% 22% -1% 0% 2% -1% 1%
18%
16%
11% 2,431
1.94
2,136 1.82
1,951 [2,168 2,229] 1.61
0.75
0.18
1,130
-1.06
2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
Revenue NT$ Million EPS NT$ dollar
----- End of picture text -----

==> picture [133 x 42] intentionally omitted <==

9

Operating Profit continues to Improve

==> picture [621 x 358] intentionally omitted <==

----- Start of picture text -----

Operating Profit & Operating Profit Margin
500 50%
400 40%
300 30%
200 20%
100 10%
0 0%
-100 -10%
-200 -20%
Operating Profit
營業淨利 (NT$ 百萬) 營業淨利率 Operating Profit Margin (%) (%, 右軸)
(NT$ Million)
1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20
----- End of picture text -----

==> picture [133 x 42] intentionally omitted <==

10

3[rd] Quarter Net Earnings Analysis

==> picture [661 x 382] intentionally omitted <==

----- Start of picture text -----

Unit NT$ Thousand
Operating Interests Other Incomes Exchange Interest Income Tax Net Earnings
Margin Income Rate Losses Fees
----- End of picture text -----

==> picture [133 x 42] intentionally omitted <==

11

Renewable Product Demand Reaches New High

• 2020 Q4 Revenue composition: Renewables 72.8%, Plastic Injection 11.7%, Industrial Machinery 15.5%

• Due to COVID-19, non-renewables product demand remains low. Renewables shipment continued to grow. Revenue Allocation by Product Sector

==> picture [645 x 298] intentionally omitted <==

----- Start of picture text -----

3,000 80.00%
70.00%
2,500
60.00%
2,000
50.00%
1,500 40.00%
30.00%
1,000
20.00%
500
10.00%
0 0.00%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
Renewables Plastic Machines Industrial Machinery Revenue NT$ millions
----- End of picture text -----

==> picture [133 x 42] intentionally omitted <==

2020 Q3 Income Statement

Unit: Thousand NTD	3Q2020	2Q2020	QoQ	3Q2019	YoY
Revenue	2,430,601	2,135,664	14%	2,168,195	12%
Gross Profit	582,178	465,019	25%	390,298	49%
Gross Margin	24%	22%	2PP	18	6PP
Operating Expense	292,462	310,608	-6%	285,651	2%
Operating Income	289,716	154,411	88%	104,647	177%
Operating Profit Ratio	12%	7%	5PP	5%	7PP
Non Operating Items	(22,518)	68,353	-133%	(3,166)	-611%
Profit before Tax	267,198	222,764	20%	101,481	163%
Profit after Tax	206,588	193,094	7%	80,015	158%
EPS (Basic $NTD)	1.94	1.82		0.75

==> picture [133 x 42] intentionally omitted <==

13

2020 Q3 Balance Sheet

Unit: Thousand NTD	3Q2020	2Q2020	QoQ	3Q2019	YoY
Total Assets	15,136,360	13,636,832	11%	13,828,344	9%
Cash	2,457,711	1,581,766	55%	1,582,427	55%
NR & AR	3,549,690	2,707,002	31%	2,980,309	19%
Inventory	1,267,130	1,354,009	-6%	1,430,111	-11%
Total Non-Current Assets	6,496,625	6,516,012	0%	6,903,761	-6%
Total Liabilities	7,130,921	6,118,893	17%	5,962,327	20%
Bank Loans	3,516,690	4,160,440	-15%	4,104,711	-14%
NP & AP	1,291,932	1,069,589	21%	1,104,145	17%
Total Equity	8,005,439	7,517,939	6%	7,866,017	2%
Common Stock	1,056,175	1,056,175		1,056,175

==> picture [133 x 42] intentionally omitted <==

14

Market Trends

==> picture [133 x 42] intentionally omitted <==

15

Offshore Wind Market growth forecast to 2030

 206 GW of new Offshore Wind capacity to be added from 2020 to 2030

==> picture [533 x 358] intentionally omitted <==

==> picture [133 x 42] intentionally omitted <==

16

UK plans for more Offshore Wind investments

• The Prime Minister of the UK announced an increase of 2030 offshore wind energy installation target from 30GW to 40GW

• Onshore/offshore wind power is the most cost competitive power generation method in the UK

==> picture [329 x 285] intentionally omitted <==

==> picture [133 x 42] intentionally omitted <==

==> picture [369 x 303] intentionally omitted <==

17

China announces Carbon Neutral targets in UN address

• China aims to become carbon neutral by 2060

• BNF forecasts China’s cumulative wind installations will grow from 241.5 GW to 413.1 GW between 2021-2025

• Average 34 GW of new wind installation is possible (2019’s installation was around 25 GW)

==> picture [295 x 199] intentionally omitted <==

==> picture [284 x 169] intentionally omitted <==

==> picture [295 x 194] intentionally omitted <==

==> picture [133 x 42] intentionally omitted <==

18

RE 100 members prefer to invest in Wind Energy

 As of the end of 2019, the RE 100 organization has more than 200 members and we expect more international corporations to join in the future.

 66% of the green energy purchased by RE 100 members is wind

==> picture [421 x 272] intentionally omitted <==

==> picture [133 x 42] intentionally omitted <==

19

Growth in Auto Sales expect to spur Plastic Injection machines demand

• The number of new car registrations in the EU expect to grow further in 2021

• Auto Sales in mainland China increased in October compared with the same period last year

==> picture [399 x 211] intentionally omitted <==

China Auto Market Stats

==> picture [644 x 148] intentionally omitted <==

==> picture [133 x 42] intentionally omitted <==

Source: daas-auto

20

World Economies continue to Recover

==> picture [275 x 397] intentionally omitted <==

• IMF data shows that by the end of August 2020, the industrial production index and retail activities of most countries are back close to the level before COVID-19

• World Bank predicts with the rollout of COVID-19 vaccines globally, economic recovery can be expected in 2021.

==> picture [451 x 198] intentionally omitted <==

==> picture [452 x 29] intentionally omitted <==

==> picture [133 x 42] intentionally omitted <==

21

Development Strategy

==> picture [133 x 42] intentionally omitted <==

22

Taichung Plant to Start Production in 2022

• New Capacity for Offshore Wind sector

• Timeline: Construction will start in 2020, targeting trial production by 2Q22.

• 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

==> picture [313 x 292] intentionally omitted <==

----- Start of picture text -----

Taiwan
Strait
Siemens Factory
YG Site
----- End of picture text -----

Signed Conditional Contracts with Siemens/MVOW for the supply of castings for Taiwan’s offshore wind market.

We expect 30,000 tons/year demand from Siemens Taiwan, and 50,000 tons demand from international markets.

==> picture [133 x 42] intentionally omitted <==

23

The World is Coming to YGG

Our Taichung Plant is happening at the right time and in the right location

Located right at the port

Ease of transportation for both finished product and production inputs leads to lower costs and enhanced competitiveness.

Proximity to customers Targeting APAC markets

Siemens’ assembly plant is A wind energy supply right next door and chain cluster is forming in MVOW’s facility is also Taiwan – ideally located to nearby. supply APAC Offshore demand.

Modern plant design Advantages post COVIDLower wind energy 19 costs Capable of producing super large castings, such Tariff advantage relative Wind Energy has become as 14MW offshore to China-based producers. one of the cheapest products. European peers have been energy sources weakened financially.

Wind Energy has become one of the cheapest energy sources

==> picture [133 x 42] intentionally omitted <==

24

Sizable Global Offshore Market for Yeong Guan

• Yeong Guan expects its share of the global offshore wind turbine market to increase from less than 5% now to 22% once the Taichung plant reaches its 80,000-tons total annual capacity.

2019 Offshore Market Share (%)

2030e Offshore Market Share (%)

==> picture [522 x 231] intentionally omitted <==

----- Start of picture text -----

Yeong
Guan Yeong
Guan
<5%
22%
----- End of picture text -----

Note: Assuming 1GW of Offshore Wind demand equals to 12,000 tonnes of castings.

==> picture [133 x 42] intentionally omitted <==

25

Thailand Construction Starts in 2022

• Construction starts in 2022. Production to begin in 2024.

• 45,000 tons/yr capacity or more. Automated production, producing full range of products

• 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: THB 1 bn (or around NT$ 1 bn) for Phase 1

==> picture [313 x 257] intentionally omitted <==

----- Start of picture text -----

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
----- End of picture text -----

COVID-19 pandemic has tremendous impact on Thai economy this year. Thai government announced new incentives for foreign investments in April 2020. Yeong Guan has applied for new incentives in July 2020.

==> picture [133 x 42] intentionally omitted <==

26

Outlook for 2021 and Beyond

• Near Term (1-2 years)  Renewables to drive shipments growth

• 2020 shipment: 176,531 tons

• For 2021, we expect increase from Wind and demand return from other industries, translating to a 5-10% growth.

 Mid Term (3-5 years)

• Taichung plant: Construction starts in 2020, production by 2022.

• Thailand plant: Construction starts in 2022. Production begins in 2024.

• 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)

==> picture [307 x 354] intentionally omitted <==

----- Start of picture text -----

Estimated Shipments
(in 1,000 tons)
195
176
175
164
155 152 151
146
134
135
115
95
75
2015 2016 2017 2018 2019 2020 2021E
----- End of picture text -----

==> picture [133 x 42] intentionally omitted <==

27

Financial Figures Appendix

==> picture [133 x 42] intentionally omitted <==

28

Income Statement

NT$ Million	**2016 **	**2017 **	**2018 **	**2019 **	2020 Q1-Q3	2019 Q1-Q3	YoY(%)	YoY(%)	YoY(%)	YoY(%)	YoY(%)
							2016	2017	2018	2019	2019 V 2020 Q1- Q3
Sales Revenue	7,374	6,404	6,196	7,900	**5,696 **	5,671 913 114 35 -7	-9.2 -9.3 -24.5 -25.9 **-26.1 **	-13.1 -40.8 -74.2 -74.2 **-74.1 **	-3.2 -42 -183.1 -167.8 **-206.2 **	27.5 65 186.5 195.3 **159.9 **	0.4 28.6 192.1 934.3 4200
Gross Profit	2,419	**1,432 **	**831 **	1,371	1,174
Operating Profit	**1,144 **	295	-245	212	333
Income before Tax	**1,325 **	342	-232	221	362
Net Income	997	258	-274	164	287
EPS (NT$)	8.5	**2.28 **	**-2.48 **	1.54	2.7	**-0.08 **	**-30.6 **	**-73.2 **	**-208.8 **	**162.1 **	3475
Key financial ratio (%
Gross Margin	33	22	13	18	21	16
OperatingMargin	16	4	-4	3	6	2
Net Margin	13	4	-4	2	5	0
OPEX ratio	17	18	17	15	15	14

==> picture [133 x 42] intentionally omitted <==

29

Balance Sheet

NT$ Million	2016	2017	2018	2019	2020 Q1-Q3	2019 Q1-Q3	YoY(%)	YoY(%)	YoY(%)	YoY(%)	YoY(%)
							2016	2017	2018	2019	2019 V 2020 Q1-Q3
TOTAL ASSETS	15,052	14,483	**14,531 **	13,521	15,136	13,828	-3.5	-3.8	0.3	-7	9.5
Cash	4,241	3,316	3,153	1,451	2,458	1,582	-21.6	-21.8	-4.9	-54	55.4
NR & AR	2,186	2,026	2,103	2,947	3,550	2,980	-12	-7.3	3.8	40.1	19.1
Inventory	1,261	1,256	1,368	1,226	1,267	1,430	-3.3	-0.4	8.9	-10.4	-11.4
Fixed Asset	5,701	6,279	5,920	5,735	5,534	5,859	8.5	10.1	-5.7	-3.1	-5.5
TOTAL LIABILITIES	4,974	4,768	6,250	5,699	7,131	5,962	0.8	-4.1	31.1	-8.8	19.6
Bank Loans	619	612	4,584	3,858	3,517	4,105	23.8	-1.1	649	-15.8	-14.3
NP & AP	1,098	1,136	1,050	990	1,292	1,104	-3.2	3.5	-7.6	-5.7	17
TOTAL EQUITY	10,078	9,715	8,281	7,822	8,005	7,866	-5.4	-3.6	-14.8	-5.5	1.8
Common Stock	1,188	1,188	1,116	1,056	1,056	1,056	0.7	0	-6.1	-5.4	0
Book value per share	82.3	79.3	72.9	72.5	74.4	72.9
A/R turnover days	116	121	123	117	157	123
Inventory turnover days	98	99	97	78	80	87
A/P turnover days	82	82	74	57	69	62
ROE (%)*	9.8	2.8	-3.2	2.1	3.7	-0.1
30 * ROE: Parent company Net income / average common equity

Quarterly Income Statement

NT$ Million	**2Q18 **	**3Q18 **	**4Q18 **	**1Q19 **	**2Q19 **	**3Q19 **	**4Q19 **	**1Q20 **	**2Q20 **	3Q20
Sales Revenue	1,662	1,558	1,703	1,552	1,951	2,168	2,229	1,130	2,136	2,431
Gross Profit	201	216	266	218	304	390	459	127	465	582
Operating Profit	(96)	(43)	(29)	(38)	47	105	99	(111)	154	290
Income before Tax	(105)	(26)	(51)	(102)	35	101	186	(128)	223	267
Net Income	(128)	(46)	(60)	(106)	19	80	172	(113)	193	207
EPS (NT$)	(1.15)	(0.41)	(0.55)	(1.00)	0.18	0.75	1.62	(1.06)	1.82	1.94
Revenue by Application (%)	**2Q18 **	**3Q18 **	**4Q18 **	**1Q19 **	**2Q19 **	**3Q19 **	**4Q19 **	**1Q20 **	**2Q20 **	3Q20
Renewable Energy	22.2	23.5	38.8	43.3	47.9	59.4	66.6	60.7	67.0	72.8
Injection Molding Machine	38.7	36.3	29.2	26.9	24.3	16.7	14.6	17.7	14.1	11.7
Industrial Machinery	39.1	40.2	32.0	29.8	27.8	23.9	18.8	21.6	18.9	15.5

==> picture [133 x 42] intentionally omitted <==

31

2020 Revenue Analysis

==> picture [614 x 277] intentionally omitted <==

----- Start of picture text -----

Revenue By Application (%) Revenue by Currency (%)
Industrial
NTD
Machinery EUR
4%
18%
8%
RMB
USD
76%
12%
Plastic
Injection
14%
Renewables
68%
----- End of picture text -----

==> picture [133 x 42] intentionally omitted <==

32

Thank you for your consideration!

==> picture [721 x 152] intentionally omitted <==

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

www.ygget.com

==> picture [133 x 42] intentionally omitted <==

33