The content of Chint Electric (601877)’s 2020 semi-annual board of directors’ operating review is as follows:

1. Discussion and analysis of operating conditions

(1) Overview

In the first half of 2020, the epidemic had a great impact on the global economy. Unstable factors in the international situation increased and domestic economic growth slowed down. As the domestic epidemic has been effectively controlled, positive factors in new technologies, new industries (300832), and new business formats have increased.

On the one hand, the company's board of directors and management actively responded to the call, earnestly fulfilled corporate social responsibilities, and took practical actions to join the national epidemic prevention and control battle. On the other hand, they closely focused on business goals and carried out work in an orderly manner. Arrange for enterprises to resume work and production, vigorously promote the linkage of production, supply and marketing, and strive to ensure the delivery of global customer orders. Through scientific research and judgment, the company seizes opportunities from the dialectical understanding of "danger" and "opportunity", and promotes the transformation and upgrading of the manufacturing industry by embracing new ideas and new technologies; the company adheres to customer-centricity and is guided by strategic goals and market demand. Continue to achieve steady development.

During the reporting period, the company achieved operating income of 14.609 billion yuan, an increase of 1.26% over the same period last year; net profit attributable to shareholders of listed companies was 1.811 billion yuan, an increase of 1.49% over the same period last year.

During the reporting period, the company and its subsidiaries won honorary titles such as "Leading Enterprise in Manufacturing Benefit per Mu in Zhejiang Province", "Leader in Enterprise Standards of Zhejiang Province", and "List of Smart Photovoltaic Pilot Demonstration Enterprises" by the Ministry of Industry and Information Technology. .

(2) Low-voltage electrical appliances

During the reporting period, the low-voltage electrical appliance industry continued to show three trends: the concentration of industry leaders continued to increase, the shift from single components to integrated system solutions, and the increasing importance of global market layout. Major industry trends, the rapid development of the Internet and communication technology have provided new development directions for low-voltage electrical products, and low-voltage electrical products are becoming increasingly intelligent. In the future, new requirements for smart grids and intelligence in the equipment manufacturing industry will increase market demand for smart low-voltage electrical products, and push low-voltage electrical products to continue to become smarter. Demand will be boosted by active participation in industry integration and industrial chain optimization.

Despite the impact of the epidemic, through the unremitting efforts of all employees, the company actively adjusted the production rhythm, further optimized the business structure, continued to increase the proportion of industry customers, and achieved excellent operating results.

1. Deepen the layout and continue to consolidate the advantages of channel distribution

During the reporting period, the company focused on the development idea of ??"improving the top layer, strengthening the middle layer, and strengthening the grassroots" to consolidate and improve the first-level channel network layout, focusing on strengthening the layout and construction of the secondary channel network, accelerating the penetration and development of the third-tier channel network, and building the most complete and in-depth channel network in the industry. As of the end of the reporting period, the company has deployed 475 first-level distributors with provincial capitals, municipalities and prefectures as the core; it has also extended to districts, counties and towns, and has more than 5,000 second-level distributors; it has achieved first- and second-level channels. The city-level coverage rate is 95%, and the channel network has basically achieved nationwide coverage.

Actively carry out channel ecological construction work, plan network layout, clarify classification authorization, adjust regional scope, implement customer attribution, implement indicator restoration, standardize cross-border sales channel reconstruction work, and promote the realization of regional single custody and Channel customers are single-owned; focus on areas with great potential, lock 500 channel customers and 160 terminal industry customers to carry out key expansion; at the same time, give full play to the advantages of dealers' regional roots and promote dealers to accurately develop terminal customers; gradually differentiate dealer-led distribution Wholesale business and end-customer business; invest key resources in end-customer business and guide dealers to gradually transform into a technical marketing business model.

Make every effort to promote the company's brand promotion and accelerate the construction of CHINT brand halls, electrical industry supermarkets and other projects to further enhance the influence and reputation of the CHINT brand in the terminal market. As of the end of this reporting period, the company had deployed 15 brand experience halls, 32 electrical industry supermarkets, 256 SI image stores, and 115 secondary image stores; and through more than 240 various industry exhibitions, one-on-one product promotion meetings, Customer technical exchange meetings and other forms demonstrated the brand image and technical achievements.

In the face of the epidemic, the company actively responded to the call and launched the "Facilitate Resumption of Work, Chint Respects" campaign, and tried its best to support the resumption of work and production of channel outlets and industry end customers, further demonstrating the industry responsibility of leading companies and deepening the It has gained customers' trust in the company and won high praise from channels and end customers.

2. Fully developed, the share of industry customers has increased significantly

Industry customers have higher demands for customization and industry characteristics, and have put forward higher requirements for the integrated design capabilities of comprehensive solutions. Require. A solid industry customer market share is an important driving force for the company's long-term sustainable development. During the reporting period, the company continued to enrich and optimize the structure and scale of its direct sales team, forming a stable and sufficient regional direct sales business force and a front-line market segment business development team; at the same time, it continued to promote the industry focus of the direct sales team and move towards the "future" in the civilian field. Community" and upgrade to the theme of "Energy Efficiency Management" in the industrial and commercial fields to make full use of the company's full industry chain advantages.

During the reporting period, the company took advantage of collaborative operations and planned in each segmented industry to focus on key products of counterpart industry companies, supporting, complete sets, and integrated application scenario solution products from other industry companies, and targeted Industry segments form an iron triangle project team to identify customer pain points, implement product portfolio strategies accordingly, accelerate new product development and stock replacement, and strive to become experts in market segments and continue to expand market share. The company has established strategic cooperative relationships with major state-owned enterprises and central enterprises such as China Communications Construction Company, China Construction First Engineering Bureau, China Construction Eighth Engineering Group Co., Ltd., China Aluminum Corporation (601600), China Railway Materials Trading, Power Construction Corporation of China (601669), etc., and also has Achieved substantial breakthroughs and progress: In terms of centralized power procurement, the company has strong business development momentum in the provincial bureaus of the State Grid Southern Power Grid. Not only has it obtained orders for mainstream traditional products such as circuit breakers, cost-controlled switches, and transformers, but it has also A breakthrough in molded case circuit breaker products. Power engineering has become a high-quality growth point for Chint's power business. In recent years, the business team has successfully expanded its business in Changsha, Jinan, Fuzhou and other prefectures and municipal bureaus. This year, it overcame the difficulties of the epidemic and made new breakthroughs in key customers such as Shandong Gaomi, Hunan Changde, and Shengli Oilfield;

In terms of communications and OEM customers, the company continues to maintain good cooperative relationships with customers such as China Mobile, China Unicom, Huawei, and ZTE, and has added a number of new benchmark customers with dominant positions in various industries, including Sany Heavy Industry (600031), Zoomlion, Dongfang Pump Industry, Rifa Precision Machinery (002520), Jingwei Textile Machinery (000666), Midea Electric Appliances (000527), etc. have further established the company's ability to provide customers in various industry segments. The advantageous position of strong comprehensive solution capabilities;

In terms of real estate construction, the company has reached strategic cooperation with more than 10 TOP20 real estate companies such as China Merchants, Sino-Ocean, R&F, China Fortune Land Development (600340), and Shanghai Zhongliang. , the territory of the industry continues to expand.

At the same time, the company gave full play to the advantages of its dealers taking root in the region, and achieved important results in customer development in subdivided industries, assisting dealers to develop new customers including Muyuan Co., Ltd. (002714), Wanma New Energy, Ningbo It has a large number of well-known customers in the industry, including Haitian, and its business covers many sub-sectors such as modern breeding, new energy, plastic machines, lifting and environmental protection.

3. Internal repair and external expansion, the international business structure was steadily optimized

During the reporting period, the company continued to deepen its close collaboration with international customers through continuous innovation, and faced a severe recession in the global economy. Under the difficult situation of great uncertainty in the external environment, overseas markets still achieved positive growth in the first half of the year.

After taking adequate epidemic prevention measures, the company quickly resumed production as soon as possible, making full use of its intelligent manufacturing advantages formed by "machine substitution" to quickly release and improve production capacity to ensure Fast delivery of overseas customer orders. At the same time, the company's long-term international localization strategy has given full play to its huge advantages, using domestic international production capacity collaboration with Singapore, Vietnam, and Egypt as well as more than 20 overseas regional logistics warehouse networks around the world to form close links with local customers more effectively and realize the goal of The continuous and stable supply and services of front-line customers have greatly enhanced customer stickiness and satisfaction, strengthened brand trust, and the sales of overseas subsidiaries have maintained rapid growth.

The company continues to strengthen professional market breakthroughs, deeply explore the industrial value chain, give full play to the advantages of the entire industry chain, and promote cooperation with customers in key industries such as electric power, new energy, construction, and HVAC.

The company has won multiple projects such as the CapitaLand Group data center project in Singapore and the ENGIE wind power generation project in Chile. Through in-depth product customization research and development, the integrated smart circuit breaker has won a billion-dollar smart meter external circuit breaker purchase order from the Saudi National Electric Power Company. Through this cooperation, Chint Electric has become a key project supplier of the State Grid’s “Belt and Road Initiative”.

During the reporting period, the company actively overcame unfavorable factors, innovated marketing measures, and created new popularity for the brand. It has successively launched 7 online live broadcasts across the industry chain in English and Spanish, and launched multiple online product promotion meetings, industry salons, online marketing conferences and other activities to attract customers to watch CHINT without leaving home, maintaining the company's relationship with customers. Continuous positive interactions between customers.

4. Combining production and research, accelerating the implementation of smart manufacturing strategies

Sustained large investment in R&D is an important foundation for the company to become the world's leading provider of comprehensive energy solutions. As of the end of this reporting period, the company had 283 scientific and technological projects under research; in the first half of 2020, there were 256 patent applications, 278 patent authorizations, 22 trademark applications, 23 trademark registrations, and 4 software registrations; and led the completion of 1 Zhejiang Province manufacturing standard The project was approved; the "Key Technology and Industrialization of Electromagnetic Residual Current Action Circuit Breaker Based on Lean Automated Production" project won the third prize of the 2019 Zhejiang Province Science and Technology Progress Award.

During the reporting period, the company continued to deepen the innovative application of lean production, implemented 54 lean projects, optimized processes to improve production efficiency, and responded quickly to market demand; in the first half of the year, 66 equipment technical renovation projects were carried out, and 22 projects were accepted. , greatly improving the automation level of key parts manufacturing, assembly, online testing, packaging, etc., and improving product quality consistency and reliability; fully implementing the intelligent manufacturing strategy, focusing on promoting small circuit breakers, molded case circuit breakers, frame circuit breakers, and communication The construction of 5 digital workshops including contactors and relays continues to promote the deep integration of automation and informatization and the level of digitization. The company's capabilities in digital design, design and implementation of intelligent manufacturing software and equipment, digital workshop operation and maintenance, and big data value mining have been significantly improved. Through the deep integration and system integration of automation and informatization, the company creates a new model of green, efficient and lean intelligent manufacturing, and provides the industry with overall solutions for intelligent manufacturing systems.

During the reporting period, the company launched a number of innovative products including NA1P-S, a low-voltage power distribution product for the power Internet of Things, and won recognition from industry customers. The company will give full play to its resource advantages of familiarity with domestic market application scenarios and direct connection with customer technical institutions to carry out projects in key areas such as 5G base station construction, UHV, intercity high-speed railway and urban rail transit, new energy vehicle charging piles, and big data centers. layout.

(3) New energy

During the reporting period, faced with the unfavorable situation of tight supply of raw and auxiliary materials in the photovoltaic industry and great impact on logistics efficiency, the company's new energy business was in a "crisis" "Taking the opportunity", relying on the rich experience accumulated in the photovoltaic field and implementing a localized development strategy, it has minimized the impact of overseas epidemics on project construction. During the reporting period, the company's photovoltaic new energy business grew steadily. The company has achieved global module sales of 2,220MW, and the 146MW project in the Netherlands and the 51.42MW project in Poland have entered the construction stage; the domestic market continues to advance steadily, the 100MW Baicheng Front Runner Subsidy Base was successfully connected to the grid, and won the bid for the country's 1.15GW bidding and affordable project in 2020 ; The company’s new household installed capacity exceeds 600MW.

1. Continuous model innovation, rapid growth of household installed capacity

During the epidemic, the company made business deployment and preparations in advance, actively carried out household business model innovation, improved channel ecological construction, and channel Vitality continues to increase, welcoming the era of household parity. During the reporting period, Chint's "Taiji" household system was released, which will provide customers with four worry-free intelligent solutions in terms of capital, quality, after-sales and revenue. Break through the limitations of business promotion forms in special periods and use the Internet to conduct online product and business exhibitions or industry seminars to focus on target customers, create a sales boom, and increase business sales. During the reporting period, the company's new household installed capacity exceeded 600MW, continuing to rank in the leading position in the country.

2. Lay out domestic power stations to increase follow-up development potential

Make full use of the company's full industry chain advantages, increase independent development efforts of regional companies across the country, and increase end customer stickiness.

As of the end of the reporting period, the company's total installed capacity reached 4.35GW. Actively participated in the national project bidding in 2020, combined with its own advantageous resources, and finally obtained 1.15GW of bidding and affordable projects, laying a solid foundation for the company to achieve its business goals in the future.

3. Adjust the pace in a timely manner and realize the grid connection of the power station on schedule

During the reporting period, the company overcame various unfavorable factors and the Baicheng Phase II 100MW Photovoltaic Leader Subsidy Project was connected to the grid on schedule. Power generation reflects the company's comprehensive strength in high-efficiency component technology and EPC cost and quality control fields.

At the same time, Wenzhou 550MW Yuguang Project, Liaoning Fuxin 70MW Project, Xishui 100MW Project and other projects are under intensive construction. Overseas, projects in the Netherlands and some projects in Poland will also be connected to the grid this year.

4. Strengthen technological progress and significantly improve manufacturing capabilities

During the reporting period, battery efficiency and component power reached industry-leading levels, with the average battery mass production efficiency reaching 23%, and AstroSemi component power The mainstream power of single glass reaches 450W, and AstroTwins double glass reaches 445W. The mainstream power range of mass production is industry-leading.

During the reporting period, Chint New Energy was officially selected into the list of smart photovoltaic pilot demonstration enterprises. The company won the 2020PVEL/DNVGL "Top Module Manufacturer" and won two firsts: AstroTwins product first in the industry in comprehensive reliability ; The company’s number of awards ranked first among all participating manufacturers.

(4) Company Management

1. Promote process changes and support rapid business development

During the reporting period, the company actively promoted organizational structure adjustments and strengthened front-line market operations. Playing the leading and core role in resource allocation and marketing decision-making, it effectively solves management shortcomings, makes business decisions efficiently, and transmits information smoothly, significantly narrowing the scope of management, reducing communication costs, and improving management efficiency. We will further improve the sales project management system, conduct a summary of the operation of the Iron Triangle project, and solidly advance the marketing management system, process organization building, lead management and contract delivery.

2. Upgrade human resources organization and consolidate soft competitive strength

During the reporting period, the company continued to deepen innovative human resources organizational changes and improve "front-office, middle-office and back-office" human resources Three-pillar structure, professional support for rapid business development. Strengthen the recruitment and supply of international, mid-to-high-end talents, focus on accelerating the cultivation of endogenous talents, comprehensively implement scientific talent inventory, and stimulate organizational vitality and employee self-motivation. Through the linkage of overseas charging station universities, marketing, technical quality, production and other colleges, we will continue to build a learning organization and enhance the employer brand power.

3. The party model leads by example and helps the company resume work and reach production capacity

The company’s party committee focuses on epidemic prevention and control with one hand and resumption of work and production with the other, so as to achieve "both hands must be tough and both battles must be carried out" To win”. The company immediately established a corporate epidemic prevention leading group, activated the emergency response mechanism, and acted as a pioneer in various tasks such as front-line epidemic prevention, epidemic prevention publicity, ideological guidance, job attack, and difficulty assistance; it also implemented and solved the problems of return transportation, accommodation, etc. for employees. Life support and other issues. The party committee launched the "Resumption of Work Pioneer" campaign to provide a strong red impetus for enterprises to resume work and reach production capacity.

2. Possible risks

1. Macroeconomic downward pressure

The company’s main business is in the fields of low-voltage electrical appliances and photovoltaics. The above-mentioned industries are closely related to the macroeconomic There is a strong correlation between economic cycles and is greatly affected by the economic development cycle. In the first half of 2020, affected by issues such as the macroeconomic environment and geopolitics, the risk of global economic downturn and financial market uncertainty increased significantly, and there may be a risk of declining product demand in the downstream areas where the company's main business is concentrated.

2. Exchange rate fluctuation risk

Most of the company’s export products are priced in RMB, but sales from international business are mostly settled in US dollars and euros. Therefore, if the exchange rate between RMB and major foreign currencies such as the US dollar and the euro fluctuates too much, the company's exchange rate risk may increase. Given that the international exchange rate market is still very likely to fluctuate in the second half of this year, the company will continue to strengthen the use of hedging tools and use methods such as expanding cross-border trade settlement in RMB to control or reduce exchange rate-related risks to the company.

3. Industry policy risks

In recent years, the country has issued a large number of policies to support the development of new energy industries such as photovoltaics, and the industry has grown rapidly. However, if the intensity of policy support changes in the future, it may have a certain impact on the company's operating performance and profitability.

4. Risk of rising raw material prices

In the field of low-voltage electrical appliances, the raw materials required for the company's production are mainly copper, silver, steel and plastic; in the field of photovoltaic, the cost of photovoltaic power generation development and construction is mainly For solar cell silicon wafers and other equipment and raw materials. Although benefiting from technological progress and increased production capacity as well as the company's integrated operations, it can offset part of the risk of raw material price changes, if raw material prices rise significantly in the future, it may have an adverse impact on the company's manufacturing costs.

5. Rising labor costs

As the largest manufacturer of low-voltage electrical appliances in terms of production and sales in China, the company’s main production bases are located in Shanghai and Zhejiang in the Yangtze River Delta region. Labor costs have increased rapidly in recent years. The upward trend, coupled with the impact of delayed resumption of work after the year, has put certain pressure on the company's cost control.

In the second half of the year, the company will continue to promote intelligent manufacturing and transformation and upgrading, use digital means to recruit and train personnel, and implement a short-, medium-, and long-term salary design and incentive mechanism to fully mobilize employees. Initiative and creativity.

3. Analysis of core competitiveness during the reporting period

As a leading enterprise in the domestic low-voltage electrical appliances and new energy industries, the company has realized the layout of the entire power industry chain and has the integration and solutions for the entire industry chain. Program advantages. At the same time, the company has strong competitive advantages in cost control, scale and production line automation, as well as technological innovation, channel and brand management.

(1) As a leading enterprise in the domestic low-voltage electrical appliance industry, the company’s competitive advantages are mainly reflected in the following aspects:

1. Channel advantages

The company It has the most complete and sound sales network in the industry and has formed a marketing system with provincial capital cities as the core and county and district levels as auxiliary points. The construction of these sales networks and the formation of supporting logistics and service capabilities are the result of the company's long-term hard work.

2. Advantages in industry expansion

The company has established and has a power and industry sales team, as well as an industry solution and marketing application team. It focuses deeply on industry market expansion and deeply promotes technical marketing. Through the innovative development of business models such as 3PA, Audio-Technica team and full value chain marketing, the development of major industry customers has achieved fruitful results.

3. Advantages of innovative technology

The company insists on independent innovation and increases investment in scientific research. With the comprehensive promotion of Chint's Kunlun series of products, the quality and brand value of Chint's products will be further enhanced, leading the entire low-voltage electrical appliance industry to re-enter a new era of quality innovation and revolution.

4. Brand advantage

The company's "Chint" and "Noyak" have significant brand benefits in the industry. During the reporting period, the Kunlun series of new products and system solutions continued to develop , achieved effective improvements in products and services, and further enhanced the company's brand competitive advantage.

5. Management advantages

The company has a first-class management team and a modern enterprise management mechanism. It has established a stable and experienced management team at all operating levels. Most of the senior management The talents have more than ten years of industry experience. At the same time, the company makes full use of information technology, applies enterprise resource management (SAP/R3), product life cycle management (PLM), collaborative management and other systems to fully implement "Digital Chint" and deeply implement refined management in all aspects of production and operation. , has significant advantages among its peers in terms of resource optimization, energy conservation and emission reduction, and environmental friendliness.

6. Cost advantage

The company’s cost control relies on two major advantages: First, scale effect. As a leading domestic low-voltage electrical appliance company, the company’s revenue from similar products is ahead of its domestic peers. , the marginal effect brought by scale effectively reduces various costs; the second is lean production, the company fully implements the lean production model, improves the on-site process level, improves the company's production logistics management efficiency, and uses advanced information management methods be solidified. At the same time, the company optimizes its product structure and reduces the company's production costs, so that the company's production costs are ultimately effectively controlled and reduced.

(2) As a pioneer in the photovoltaic new energy industry, the company’s core advantages are as follows:

1. First-mover advantage

Chint New Energy is the earliest company in China to Private enterprises that transfer photovoltaic manufacturing to photovoltaic power station construction have various qualifications and have a talent team with strong comprehensive capabilities and rich experience in development, design, engineering construction, and professional operation and maintenance.

2. Integration advantages

Chint New Energy has the entire industry chain of power generation, collection, inverter, transformation, distribution, transmission and control system products, and is equipped with rich supporting engineering general contracting and power station operation Dimension Experience is the only full-product provider in the industry with the advantages of system integration and technology integration, providing customers with one-stop service and complete quality assurance.

3. Advantages of globalization

Chint New Energy’s overseas power plants cover four continents and regions in Europe, Asia, Africa and America, joining forces with rich and stable international partners and complete investment risks Control system, based on the policy support of "Going Out" and "One Belt, One Road", has achieved significant overseas performance.

4. Cost advantage

Establishing comprehensive cooperation with major domestic and foreign financial institutions, the financing ratio and financing cost are at an advantageous level in the industry. Known for its "low overall cost and high operational efficiency" that is coordinated across the entire industry chain, it continues to obtain reliable and competitive financing and creates industry-leading returns on power plant projects with optimal kilowatt-hour costs.

5. Scale advantage

The company realizes the connection of the entire industrial chain of power generation, distribution and sales of electricity, and electricity consumption. Through integration, it seizes the opportunities of new energy and power reform, exerts synergy effects, and utilizes the entire industry. With the core advantages of the chain, we will continue to expand the scale of photovoltaic power generation, seize the opportunity of the liberalization of electricity distribution and sales, participate in the electricity sales business, build a regional microgrid that integrates "new energy generation, distribution, electricity sales, and electricity consumption" to realize a business model of innovation.