(14 March 2019, Hong Kong) Sun.King Power Electronics Group Limited (“Sun.King Electronics” or the “Company”, together with its subsidiaries collectively known as the “Group”) (Stock Code: 580.HK) is pleased to announce that the Group recorded sales revenue of RMB1.29 billion for the twelve months ended 31 December 2018 (the “Period”), up 11.7% year-on-year. As the revenue from high-margin products as a proportion of total sales revenue dropped, net profit attributable to owners of the parent slightly declined by 5.9% year-on-year to RMB183 million. The Board recommends to pay a final dividend of 3 HK cents per share.

DC Transmission Projects Are Poised to Experience Phenomenal Growth

During the Period, the Group’s power transmission and distribution business generated revenue sales of RMB735 million, up 6.4% from a year ago and accounting for 57% of total revenue sales. While the sales revenue from ultra-high-voltage direct current (UHVDC) transmission operation decreased by 70% year-on-year to RMB142 million, that of flexible DC transmission business surged by 2.8 times to RMB472 million. However, due to the lower margin of flexible DC transmission business, the gross profit margin of power transmission and distribution business dropped from 48% in 2017 to 35% in 2018.

The year 2018 was a transition year for the Group’s UHVDC transmission business. While most projects delivered last year commenced development in 2017, there were only two new projects added in 2018. They are “Qinghai-Henan” Project and “Shaanbei-Wuhan” Project, which commenced development in the fourth quarter of 2018 and the orders related to them are expected to be delivered in 2019. As to flexible DC transmission operation, many orders relating to the Renewable Flexible DC Transmission Demonstration Project in Zhangbei (the “Zhangbei Project”) were delivered in the Period, leading to a remarkable growth in revenue sales from this segment.

The UHVDC transmission sector is expected to sustain stable growth in the long run as the National Energy Administration of China made it clear in the “Notice on Accelerating the Planning and Construction of a Batch of Key Projects for Power Transmission and Transformation” issued in September 2018 that it will approve of the start of seven new UHVDC transmission projects by the year end of 2019. Moreover, the development of the Zhangbei Project and the Demonstration Project on Multi-terminal UHVDC Transmission from Wudongde Power Station to Guangdong and Guangxi (the “Wudongde Project”) commenced, and the State Grid announced plans to encourage private investments in UHVDC projects. Hence, the UHVDC projects (mainly UHVDC transmission and flexible DC transmission projects) are poised to experience phenomenal growth in the future.

The seven new UHVDC transmission projects under the planning of the State National Energy Administration of China:

Satisfactory Performance of Electrified Transportation Business

During the year, the electric power application technology for energy consumption was further developed. Electrification in the transportation sector, including rail transportation, vehicles, vessels and aircraft, was vigorously pursued, driving the satisfactory growth in the Company’s electrified transportation business. In 2018, the revenue sales from this segment reached RMB91 million, up 109% year-on-year and accounting for 7% of the total revenue sales.

As to the electrified railway wagon business, the Group’s revenue sales from this segment grew significantly due to higher procurement volume of electric locomotives and outstanding performance of Electric Multiple Unit business. As for the new energy vehicle business, the revenue sales from this segment grew mildly due to the increase in the number of newly-added customers and higher order value from existing customers.

According to the “Action Plan on Driving Freight Growth from 2018 to 2020” issued by the China Railway Corporation in July 2018, domestic railway cargo transport capacity will significantly increase along with the cargo volume growth. Accordingly, the procurement volume of high-power electric locomotives is expected to grow significantly. Meanwhile, the 13th Five-year Plan put forth the goal of increasing the production and sales volume of new energy vehicles to 2 million units by 2020. Therefore, the Group’s electrified transportation business is expected to see brisk growth.

Continued Expansion of Revenue Sales from Industrial and Other Businesses

In 2018, revenue sales from industrial and other businesses maintained steady growth and reached RMB464 million, up 10% year-on-year and accounting for 36% of total revenue sales. Benefiting from increased demand for power semiconductors and satisfactory performance of laminated busbar business, revenue sales from electrical equipment operation grew rapidly. Thanks to the bulk supply of special power products, sales revenue from scientific research institutes and others significantly increased.

Remarkable Achievements in R&D

As a leading high-tech enterprise, the Group has always put technological innovation as the primary driver of its development and adheres to its corporate mission of “promoting improvement in China’s electric power efficiency. Therefore, it attaches great importance to technological innovation and new product development. In 2018, the Group made remarkable achievements in R&D, including the successful development of digital IGBT for electrified vehicles. Besides, the Group and the CSIC 704 Institute jointly developed 1KV/100A marine solid DC circuit breaker. It successfully developed power electronic capacitor for flexible DC transmission equipment and customer site testing and inspection is underway. As to special power supply, the Group successfully completed R&D of a special power supply with mass production and delivery was made.

During the Period, the Group retained sound financial position with a number of key financial indicators stayed at healthy levels. Its debt-to-asset ratio was maintained at a relatively low level of 33%, and cash collection from operations climbed by 45% from a year ago. Cash generated from operating activities climbed by 114% year-on-year.

Looking ahead into the future, Mr. Xiang Jie, Chairman of Sun.King Electronics, said, “In order to cope with rapid development of the market, the Group will implement the following four business development strategies: (1) it will consolidate and expand the scale of related businesses to seize market opportunities arising from the fast-growing DC transmission sector; (2) it will expand the electrified railway transportation businesses, including freight and passenger transport, vehicles and power supply systems, and common development in multiple fields; (3) it will commence technological R&D for high-end power electronic devices and a number of projects equipped with self-developed technology have been launched; (4) it will put internationalization as one of its key development strategies and identify foreign companies with cutting-edge technology for acquisitions, strategic cooperation or industrial alliances, thereby strengthening its leadership in cutting-edge technology R&D and market layout.”

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Sun.King Power Electronics Group Limited

Sun.King Power Electronics Group Limited, a leading provider of solutions for electric power system upgrading and innovation, drives its growth mainly through solid R&D capability. The Company has made vigorous efforts to develop emerging power electronic technology which is coherent with the Chinese government’s strategy to promote the use of low-carbon energy. Its products are equipped with internationally leading technology used in ultra-high-voltage DC power transmission, flexible DC power transmission, smart grids, micro-grids, transportation electrification and industrial electrification. The Company was established in 2002 and listed on the Main Board of the Hong Kong Stock Exchange in October 2010. Its stock code is 580.HK.

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