Dear shareholders,

In 2019, China continued to pursue the strategy of “replacement of other energy with clean energy and replacement of other energy with electricity” with a focus on vigorously developing clean energy power generation and power energy application. As one of the main industries applying the efficient and energy-saving emerging power technologies, the power electronics industry has received high attention and excellent development opportunities.

Sun.King Power Electronics Group Limited (the “Company”, together with its subsidiaries, the “Group”) continued to adhere to the business philosophy of “motivating corporate development with scientific and technological innovation”, strived in advancing innovation and research and development (“R&D”) and made great achievements. It successfully launched new technologies and products such as DC-link capacitor for flexible direct current (“DC”) transmission, network impedance measurement and laminated busbar for 5G communication. The Group’s innovative technologies also made outstanding achievements in sectors such as physics research, intelligent grid, rail transportation and high voltage direct current (“HVDC”) transmission.

The international R&D capability of the Group has further strengthened with three international R&D teams established which comprise a power electronics technology R&D team in Switzerland, a semiconductor technology R&D team in Switzerland and a network impedance measuring technology R&D team in Germany.

The Group launched the R&D and production project (the “IGBT Project”) of the power semiconductor core device – insulated gate bipolar transistor (“IGBT”). As the core device in the field of power semiconductors, IGBT is the “CPU” in the field of electrical equipment. It plays a vital role in many high-efficient, energy-saving and innovative power application fields represented by smart grid, rail transportation, new energy vehicles, new energy power generation and frequency conversion energy saving, etc. The independent R&D and manufacturing of IGBT are important initiatives of the Group to strengthen core competitiveness and drive long-term development through innovation and R&D.

REVIEW

In 2019, as various industrial policies such as the Notice on Accelerating the Planning and Construction of a Batch of Key Projects for Power Transmission and Transformation (《關於加快推進一批輸變電重點工程規劃建設工作的通知》) and the Action Plan on Freight Growth from 2018 to 2020 (《2018-2020年貨運增量行動方案》) were gradually implemented, investment in markets such as HVDC transmission and rail transportation remained at a high level. Benefiting from this, the Group recorded revenue of RMB1,395.6 million for 2019, representing a 8.1% increase compared to the same period of last year. However, due to the impact of decrease in the revenue of products with higher gross profit margin, in particular products for ultra-high voltage direct current (“UHVDC”) transmission sector (which decreased by 28.0% as compared with the same period of last year), the Group’s consolidated gross profit margin decreased to 30.4% from 33.7% in the same period of last year, and net profit decreased to RMB200.0 million from RMB210.2 million in the same period of last year.

The Group sold part of its industrial business through the disposal of its 43% equity interests in Jiujiang Sun.King Technology Co., Ltd. (九江賽晶科技股份有限公司) (“Jiujiang Sunking”). Following the disposal, the Group further focused on its core business, and accelerated high-end technology R&D and commercialisation. The net proceeds from the disposal of RMB193 million will be mainly used for R&D of new technologies as represented by the IGBT Project and business development.

2019 is a year for the Group to build on past achievements.

After nearly 20 years of development, the Group has become the leader in high-end power electronics technology in China, with many leading technologies and products at home and abroad. In particular, the Group made outstanding achievements in R&D and operation in the HVDC transmission sector. The Group’s operating efficiency has grown steadily with continuously enhanced R&D capabilities and increasingly stronger talent team.

Nevertheless, there is no end to technological innovation, and corporate development requires constant self-breakthrough. The Group will promote the implementation of the IGBT Project with all-out effort and strive to launch the first batch of prototypes in the first half of 2020 and complete the construction of the first production line by the end of 2020. It will also accomplish the strategic goal of creating high-end IGBT products with independent technologies as soon as possible, and make them the new driving force for the Group’s long-term development.

In addition, in keeping with its corporate mission of promoting green energy development with technological innovation, the Group will continue to promote the wide usage of emerging technologies such as network impedance measurement, solid state DC and alternating current (“AC”) circuit breakers, pulse power and online monitoring in the new energy power generation, new energy vehicles, intelligent grid, rail transportation and other industrial and civil sectors.

CORONAVIRUS DISEASE (COVID-19) OUTBREAK

As the outbreak of coronavirus disease (COVID-19) is touching the heart of Chinese people, it also touches the heart of all employees of the Group. The Group resolutely follows the arrangement and requirements of the Chinese government at all levels to fight the epidemic and strictly implements measures to prevent and control the epidemic, and donated RMB1 million to the Wuhan Red Cross to fight the epidemic. The Group also implements various measures to minimise the adverse impact of the epidemic on its operation.

ACKNOWLEDGEMENTS

On behalf of the board (the “Board”) of directors (the “Director(s)”) of the Company, I would like to thank the shareholders of the Company (the “Shareholder(s)”), stakeholders, members of the Board and all our staff for their support and contributions. Together with the management team, I will continue to strive for better returns for the Shareholders and for greater corporate social value.

Xiang Jie
Chairman

Hong Kong, 25 March 2020