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Dongyue Group Limited(Stock code: 189)
2
1. Company overview
3
Company Overview
Leading new materials & fine chemicals enterprise
Well-known, market-recognized brand
High-quality, long-term customer base Fast-growing, high-return business model
• Dongyue Group was established in 1987, headquartered in Huantai Shandong, and was listed on the Hong Kong Stock Exchange in December 2007
• Over 20 years, it has developed a hi-tech fluorine silicon industrial chain with environmentally friendly new materials and new energy products, to become Asia’s largest fluorine silicon materials production base and China’s leading fluorine silicon enterprise.
• The company persists in innovation, owning many IP rights in environmentally friendly new materials and new energy. It has broken foreign monopolies in new environmentally friendly refrigerants, fluorine silicon materials, and chlor-alkali ion `s, replacing them with localized production.
• Excellent supplier for well-known enterprises such as Dupont, Daikin, Solvay, Haier, Hisense, Glee, Midea, Changhong and Chunlan
• Top Chinese brand, well-known Chinese trademark
• National Labor Award
• National Enterprise Technological Center
• Key National New Hi-Tech Enterprise
• First fluorine silicon new materials industrial park in China
• National post-doctorate workstations, occupied by Taishan academics
• National new materials industrial base and key enterprise
• One of the nation’s first batch of 18 technology export innovation bases
• National 863 Plan, National Fire Torch Project Certificate/Implementation Enterprise for 11th Five Year Technology Support Plan
Net profit growth Return on equity
6.4% 6.9%
27.3%
2008 2009 2010
138 154
781
2008 2009 2010
RMB million
4
Development history
July 1, 1987Jinan Chemical Plant Huantai Branch established. Two furnaces totaling 1.2ktpy commence operation
1993Renamed as “Zibo Dongyue Fluor-chemical Co., Ltd.”, Dongyue starts to operate independently from Jinan Chemical Plant
October 1995Established import export company and entered into the global market
1998Start of cooperation with Tsinghua University and independently developed environmentally friendly refrigerant product series , beginning Dongyue’s history of self driven R&D
May 16, 20013ktpy polytetrafluoroethylene project commences production, ending China’s history of limited small-scale production
April 20023ktpa PTFE project enters production
2006Received state approval for Dongyue fluorine silicon industrial park, the first specialized fluorine silicon industrial park nationally
2007Phase I of 300ktpa organic silicone project enters production. The Company has 180ktpa capacity as of 2010
March 2007CDM project jointly developed by the Group, Mitsubishi and Nippon Steel formally commences production December 10, 2007
Listed on the Hong Kong Stock Exchange
March 22, 2008
Following the “China Top Brand” award in 2006, the Group’s “Dongyue Federation” trademark was recognized as a “Well-know Chinese Trademark” becoming the first in the industry to win both awards
September 22, 2009Chlor-alkali ion membrane production commenced, marking the end of China’s dependence on foreign technology and the start of localized production
30 June, 2010Dongyue’s chlor-alkali ion membrane successfully applied in a 10ktpy chlor-alkali production line, marking the beginning of localized chlor-alkali ion membrane production and application, ending the chlor-alkali industry’s dependence on foreign technology
Early Stage Establishing a comprehensive product platform
Rapid development through superior technology
5
Product overview
End applications
Air conditioning
Refrigerator/ freezer
Central air conditioning
Automobiles Tubing Bearing Insulation materials
Aerospace Building materials
Electronics Clothing additives
Cosmetics
Environmentally-friendly refrigerants
Organic SiliconePolymer Membranes
Dongyue is the world largest producer and seller of environmentally-friendly refrigerants, independently developing over 20 types of environmentally-friendly refrigerant products for use in industrial, commercial, household air-conditioning systems
New environmentally-friendly refrigerants, jointly and independently developed by Dongyue and Tsinghua University, received the State Technological Invention Award, and are far more environmentally friendly and energy saving compared to traditional refrigerants
Dongyue’s environmentally-friendly refrigerants received China’ Top Brand, Well-know Chinese Trademark, and were used in major national projects such as the Beijing Olympic stadium
Dongyue’s key fluoro-polymer
product is PTFE With its excellent heat-resistant,
corrosion-resistant, aging-resistant and abrasion-resistant properties, PTFE is may be used in the lining of chemical equipment and tubing, mechanical seals, various high-pressure engine pipelines, wire and cable insulation materials, advanced coatings, and human medical products
Organic silicone is widely used in military, aviation, automotive, electronic, construction and other industries, mainly in the form of additives, treatment chemicals, stabilizers, lubricants, sealants, etc, and are an important ingredient in industrial processes
Organic silicone can be used to insulate buildings, airport runways, roads and windows, can be used as electric insulation material, automotive sealants and in keypads. It can also be used in high end cosmetics, baby utensils and other day to day uses
On Aug 20, 2010, the Company’s fluoralkali membrane was successfully implemented at China Salt Changzhou Chemical, and has been in stable operation for over a year, with major parameters reaching world class levels. The company published an article in this year’s fluoralkali technology summit, highly praising the domestic development of membrane products in China
In the first half of this year, the Company has undergone intensive R&D to facilitate large scale commercial production. We have planned for two batches of large scale production for testing and sale purposes in order to realise revenue while further intensifying product development efforts
Chemicals Textiles PesticidesPetroleum
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2. Company value chain and product overview
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Vertically integrated value chain
After 20 years of development, the Group has established an vertically integrated value chain
Fluorite
AHF
R22
TFE
Industrial Salt
Chlor-AlkaliCMS
Silicone monomer
Silica flour
Fluoro-monomer
Organic silicone:
Crude rubber
Silicone rubber
Rubber compounds
White carbon black, combustion method
Other
HFP
R134a
R439A
R125
R142b
R32
Aqueous dispersion
Molding particles
Molding micropowder
Presinter materials
Granulation material
Concentrates
Fluoropolymer
Ion-membrane used in chlor-alkali
R152
Fluoro-silicone material
8
Refrigerants
Overview
• Dongyue’s current refrigerant products include R22, R134a,
R439a, R152a, R125, R142b, R32, etc, used in industrial,
commercial and residential climate control systems
• Dongyue has developed independently and in collaboration with
Tsinghua University refrigerant products such as R439a, R415b,
R418a, R425a, DYR-1, DYR-2, DYR-5, DYR-6, DYR-7, DYR-406, DYR-
413, LXR2a, etc, some of which have been awarded national level
awards, and are more environmentally friendly than comparable
products
• Dongyue’s independently developed refrigerants such as R439 have
seen widespread application in the market, and are being used by
Haier, Hisense, Gree, Midea, etc
Main applications
29.8%
8.7%
3.1%
14.9%1.9%
Refrigerants41.6%
Timetable for global phase out of HCFCs
• A global solution for the phase out of HCFCs was reached at the September 2007 19th Meeting of the Parties to the Montreal Protocol
201075% reduction in use of HCFCs
201590% reduction in use of HCFCs
2020Complete phase out of HCFCs
2020-30Retain 0.5% for maintenance purposesAdvanced
economies
Developingeconomies
2013Growth in use of HCFCs frozen
201510% reduction in production and use of HCFCs
202567.5% reduction in production and use of HCFCs
2030Complete phase out of HCFCs
2030-40Retain 2.5% for maintenance purposes
202035% reduction in production and use of HCFCs
18%
6% 7%11%
F22 134 439 R125
9
Fluoropolymer
Overview
• Fluoro-polymers are a high end polymer product which will see an
increasingly wide range of applications following construction of
China’s high speed rail and gas transportation infrastructure as
well as Li-ion batteries increasing use of fluoro-polymers. The
Group’s main fluoro-polymer products include PTFE
• PTFE excels when used in chemical equipment, pipe linings,
sealants, pressurized engine oil pipes, cable insulation, high
performance coatings, medical materials thanks to its high
resistance to heat, corrosion, aging and abrasion
Main applications Fluoro-polymer industry overview
• Markets for fluoro-rubber, fluoro resins, fluoro membranes and other
products are still in relatively early stages in China
• Fluoride fine chemicals generate the highest value amongst the entire
fluoro-polymers value chain
• Fluoride fine chemicals are at the pinnacle of the fluoro-polymer
industry
41.6%
8.7%
3.1%
14.9%1.9%
Fluoropolymer29.8%
10
Fluoropolymer
Mainly used inMain products Examples of excellent performance
Suspension resin
Dispersion resin
Further-processed products
Suspension medium grain
-DF101, DF102
Suspension fine powder
- DF16D, DF-17A, DF-16A-30, DF-17A-30
Medium grained resin for electrics
General-purpose resin
- DF-201, DF-203, DF-204, DF-205
Dispersion concentrate
- DF-301, DF-302
Modified resin
- DF-2040, DF-2046
Pre-sintering material
- DF-22, DF-22A
Additive-free granulation material
DF-101 resin: low packing density, soft particles
DF-102 resin: high packing density, hard particles, clean, uniform and smooth film, high yield, supplied to Samsung to create CD liquid crystal film, which accounts for 40% of total supply
DF-17A: fine and uniform particle size, a good filler
DF-201: suitable molecular weight, elongation, high volume rate, a neat cross-section of raw materials
Compared to products of other domestic companies, DF-204 has stable quality between batches, which has this special property of fibers that can be pulled. Key customer Shanghai Lingqiao uses it to produce PTFE fibers, filters, achieving 100% delivery ratio
DF-2040: increased thermal stability, flexibility, resistance to stress – cracking and cleanness
DF-22: good fluidity and smooth surface finish
DF-22A: particle diameter of 300µm-900µm, excellent fluidity, smooth surface finish
Additive-free granulation material with uniform particle size, high strength, mobility, and easily integrated particles, resistance to cracking
Leveraging its rich industry experience, advanced production technology, and good customer relationships, Dongyue continues to innovate in the fluoropolymer business segment, to provide customers products with superior performance.
11
Organic silicone
Overview
• Organic silicone is widely used in military, aviation,
automotive, electronic, construction and other industries, mainly
in the form of additives, treatment chemicals, stabilizers,
lubricants, sealants, etc, and are an important ingredient in
industrial processes
• Organic silicone can be used to seal buildings, airport runways,
roads and windows, can be used as electric insulation material,
automotive sealants and in keypads. It can also be used in high
end cosmetics, baby utensils and other day to day uses
Main applications Industry overview• Between 2000 and 2010, global organic silicone consumption growth
reached approximately 6% CAGR. China’s growth in the same period
reached 21%, far higher than 3.1% and 3.3% in the US and Canada
respectively• China is the largest consumer of organic silicone globally, with total
consumption reaching 400,000 tons in 2009 (30% of total global
consumption)• Organic silicone monomers are expected to experience strong demand in
the next two years, with consumption of 1.08 million tons, 1.28 and
1.61 million tons in 2010, 2011 and 2012 respectively, representing
growth of 22.0%, 19.2% and 25.4% respectively
• Domestic producers of organic silicone have been gaining market share,
with imports accounting for 86.6% of total consumption in 2000-04 but
only 60.68% in 2005-08
41.6%
29.8%
3.1%
14.9%1.9%
Organicsilicone8.7%
12
Chlor-alkali ion membranes
Overview
• Chlor-alkali ion membranes are a key component of the chlor-alkali membrane cell production process,
and have the advantages of being high purity, low pollution, low energy consumption. It is widely
used in many industries such as petrochemical, textiles, agrichemicals, and is the most advanced
chlor-alkali production technology
• Fuel cell membranes are a new business born from the development process of chlor-alkali ion
membranes. Dongyue has participated in the EU 6th
Framework Agreement, Sino-Canada Cooperative
Project, and is cooperating with leading global hydrogen fuel cell researchers, and has achieved
significant technical breakthroughs
Main applications Industry overview
• China’s annual chlor-alkali production is 30 million tons, or a third
of global production. The membrane cell production process accounts
for over 22 million tons of sodium hydroxide
• The diaphragm cell process consumes more energy and is more polluting,
and the Ministry of Industry and Information Technology has announced
that during 2011 the use of membrane cell production process shall
increase from 65% to 85% of total production. This will promote the
growth of domestic players in the industry
13
Favorable government policies
Energy conservation and environmental
protection regulations
Controls on fluorspar exports by
the Chinese government
Government policies for silica powder, DMC, silicone, PVC
and chlor-alkali ion membrane
• Energy conservation and environmental protection are two key focal points
of China’s 12th Five Year Plan
• The Chinese government’s regulatory policies and measures will be
favorable towards the company’s new environmentally-friendly
refrigerant, CDM and chlor-alkali ion membrane businesses
• The Chinese government will ban the export of fluorspar and implement
tighter controls on the export of hydrofluoric acid. This will increase
the local supply and be beneficial to the development of local fluoride
production companies
• From September 29, 2009, an anti-dumping tariff was imposed by the
Ministry of Commence on PTFE imports from the US, South Korea, Japan,
Russia and Taiwan, which will benefit Dongyue
• Export restrictions on metal silicon (a material used in organic silicon
production that is highly energy consuming) will help raise the local
supply and reduce foreign procurement costs
• Anti-dumping policies directed at DMC (dimethylcylosiloxane) will also be
favorable to the price of locally-produced DMC
14
3. Investment highlights
15
• Strong business growth driven by an increasingly optimized product mix
– Favourable government policies for fluoropolymer products which is expected to help the company
expand to new markets
Investment highlights
Demand for Dongyue’s products will increase significantly on the back of China’s overall economic growth
• Benefitting from strong growth in end markets
– Rapid development of the Chinese economy will boost demand for refrigerants, silicone and other
products
1
• Leading market position in China
– Largest refrigerant manufacturer in China with diverse revenue streams from refrigerants, silicone
products, chlor-alkali ion-exchange membranes and carbon credit revenue
2
• Environment-friendly products with strong government support
– Supported by the Chinese government, we have accelerated development of our environment-friendly
refrigerants, expanding our market and extending our leadership in the refrigerant market
4
• Extensive sales network and high-quality, highly-stable customer base
– As the supplier for some of the most respected names in the chemical industry, Dongyue’s products
have a prominent presence in China and in the world
5
• Strong R&D capabilities
– We have a dedicated R&D team with industry leading R&D capabilities
6
• Highly experienced management
– Highly experienced senior management with a recognized track record in creating value for investors
7
3• Vertically integrated value chain and self sufficient business model
– Dongyue has been increasing its percentage of self-supply of raw materials by way of building an
vertically integrated value chain. Synergies have yielded significant economic value
8
16
Benefitting from strong growth in end markets
China’s GDP growth rate
Organic silicone monomer consumption in ChinaGrowth in Chinese demand for refrigerant end products
• China is the world’s fastest growing key economy
– 2010 GDP YoY growth of 10.3%
– Expected 2011-2013 GDP average growth rate of 8% and above, far exceeding
other major economies
• Significant increase in PRC demand for refrigerant end products
– Stimulated by strong local demand, a strong upward trend is seen in the
local sales of key end products, air-conditioning products and
refrigerants
– With the rise in consumption and export demand, the demand for
refrigerants is expected to remain strong
• Significant increase in PRC demand for organic silicon
– Dongyue’s commencement of organic silicon production in 2007 has played
a key role in the company’s growth
– China is the world’s largest organic silicon producer, with a
consumption growth far exceeding that of other regions
Strong Chinese economic trends will drive growth for refrigerants as well as its end-market products, while concurrently increasing demand for organic silicon products
1
2
3
1
Source: UBS research
10.1% 10.4%11.6%
13.0%
9.0% 8.4% 10.3% 8.7%
Mean: 10.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2004 2005 2006 2007 2008 2009 2010 2011
Year
GDP Growth ()%
Refrigerator sales volume change Air-conditioning sales volume change
120 150 193 240326
560 528610
720
885
1074
1272
1600
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F
(000
s un
its)
消费
0
1,000
2,000
3,000
4,000
5,000
6,000
05年
1月05年
7月06年
1月06年
7月07年
1月07年
7月08年
1月08年
7月09年
1月09年
7月10年
1月10年
7月
(千单位)
0500
1,0001,5002,0002,500
3,0003,5004,0004,5005,0005,500
05年
1月05年
7月06年
1月06年
7月07年
1月07年
7月08年
1月08年
7月09年
1月09年
7月10年
1月10年
7月
(千单位)
(000s units)
(000s units)
Jan 2005
Jul 2005
Jan 2006
Jul 2006
Jan 2007
Jul 2007
Jan 2008
Jul 2008
Jan 2009
Jul 2009
Jan 2010
Jul 2010
Jan 2005
Jul 2005
Jan 2006
Jul 2006
Jan 2007
Jul 2007
Jan 2008
Jul 2008
Jan 2009
Jul 2009
Jan 2010
Jul 2010
Consumption
17
Leading market position in China
Main products and uses
Dongyue’s and peers’ HCFC-22 capacity ('000 tonnes)
• Largest manufacturer of HCFC-22 and PTFE refrigerant in China
– Annual capacity of 200,000 Mt and 30,000 Mt respectively
• Strong market share
– ~30% or more market share in F22
– ~15% market share in new green refrigerants, and this
number is still rising
– ~35% market share in fluoropolymers
• Breakthrough in chloralkali ionic membrane technology, ability to
enter into monopolistic market
• Additional income stream from CER proceeds
– Among 11 companies granted CER rights in China
– Ability to sell CER credit to generate additional revenue
2
Dongyue has a market leading position in China’s refrigerants and fluoropolymer industries
Dongyue’s and peers’ PTFE capacity('000 tonnes)
Fluoropolymers
Refrigerants
Organic silicon
• HCFC-22
• HFC-134a
• R439A
• R152
• Other new green refrigerants
• Mainly used in
– Air conditioners
– Refrigerators
– Central cooling systems
– Automobiles
• Includes PTFE and HFP
• Used in
– Pipes
– Bearings
– Insulate Casing
– Aerospace movable parts
• Mainly used in
– Architecture
– Electronics
– Clothing additives
– Cosmetics
Entering into ionic membrane sector
• First and only chloralkali ionic membrane
created with domestic self-developed
technology
• Marking end of monopoly of overseas
manufacturers in the area
• Estimated significant increases in demand for
chloralkali in China
• Strong government support for continued
production of chloralkali
• Group is actively researching and developing
other membranes: hydrogen fuel cell membrane,
membrane for seawater desalination, membrane
for waste water treatment.
200
110 100
45
Dongyue JiangsuMeilan
QuzhouJuhua
ChangshuZhonghao
30
18
85
3
Dongyue ZhonghaoChengguang
3F JaingsuMeilan
ZhejiangJusheng
18
Environmentally friendly products with strong government support
The PRC government has attached great significance to Dongyue, both for its environmentally friendly products and innovation in the ionic membrane field
4
Environmentally friendly products is a trend in consumer spending and government policy
50,000 Mtpa environmental-friendly
and energy-saving refrigerant production
plant
World’s largest CDM project for ozone
depleting gas-HCFC23 decomposition
Production of more energy saving
chloralkali ionic membrane with less
pollutants
Increasing environmental awareness results in an increasing demand for environmentally friendly products
Environmental protection is a key focus area of China in its 12th Five-year Plan
Leverage off market leading position in ‘green’ refrigerants in China and globally
Source: Dongyue, CCBIS Source: Company information
• Dongyue has great development prospects.
Wen Jiabao, Prime Minister of the People’s Republic of China
• I am encouraged and inspired after visiting Dongyue
Group; Dongyue has broken the monopoly of foreign
technologies through its independent innovation,
which has inspired the whole Chinese nation.
Li Keqiang, Vice Premier of the State Council
• Dongyue will surely become a time-honored
enterprise of the century, the Chinese DuPont, BASF
and Bayer.
• Realize value through benefits; award talents
with fortune. You have won honor for our
motherland.
The Central Government’s increasing focus on environmental protection, industry restructuring and the elimination of pollution-heavy products will create a favorable environment for the Dongyue’s growth
• You have filled the gap in this area of expertise
for our country, and broke the overseas
technological monopoly. I hope you will continue to
strive. You will not just have presence in this
area of expertise, but will also continue to strive
and become world industry leaders!
Hu Jintao, CPC Central Committee General Secretary and State President
Li Yuanchao, Member of Political Bureau of CPC Central Committee
Zhang Ping, Director of the National Development and Reform Commission
Dongyue’s new environmental-friendly products
Refrigerants series Applications
Dongyue seriesR439a Automotive air-conditioning, household air-conditioning, heat
pump systems, central air-conditioning, industrial refrigeration, heat pump water heaters
DYR-1 Automotive air-conditioning
DYR-2 Industrial refrigeration and cold storage
DYR-4 Refrigerator, freezer, automotive air-conditioning, food counters
DYR-5 Household air-conditioning, heat pump systems, central air-conditioning, industrial refrigeration, heat pump water heaters
Tsinghua series
R415,R418,R425 Air-conditioners, refrigerators and other cooling systems, commercial air-conditioning, household air-conditioning, industrial refrigeration, cold storage and transport refrigeration
19
An increasingly optimized products mix5
Core products and applications
Suspension medium grain Suspension fine powder
Medium grained resin for electrics General-purpose resin
Dispersion concentrate Modified resin
Pre-sintering Additive-free granulation material
Large turning plate, large molded plates of mid/high thickness
Molded products, and molded panels
Electrical film
Turning film, color film
Fillers
Precision filter
Waterproof products, wire coating
Sealing material, waterproof film
Low-density sealing tape
Squeezed tube, braided packing, seal tape processing
Elastic tape, two-way stretch film
impregnated glass cloth and asbestos
Anti-dropping agent, impregnated glass cloth and asbestos; anti-adhesive, anti-fouling coatings and non-stick coating
Pipes, wire insulation
Small-diameter tube, tape for electrics
Large-diameter pipes, bars
Pipes, bars, profiles
Applications in automated processing
Major international PTFE producers are mostly market giants
Europe North America Asia
In view of a severe shortage of resources, the Chinese government will impose a complete ban on fluorine export – this will increase the supply in China and ramp up the development of domestic fluorochemical producers
In addition, the Ministry of Commerce decided that, as from 29 September 2009, PTFE importsfrom the US, South Korea, Japan, Russia and Taiwan will be subject to 10%-25% anti-dumping duties for as long as 5 years, to the benefit of Dongyue’s PTFE business
Also, the Chinese government encourages the development of emerging industries of strategic importance (e.g. new materials), and the formulation of relevant plans are now underway. High-performance fluorine materials are an important branch of the new-material industry – the production of organofluorine and high-performance inorganic fluorochemical products is listed in the Industry Restructuring Directive (2007) as an industry encouraged by the government
The State Council points out that ”(Efforts must be made to) speed up the development of high-performance fluorine resin, fluororubber, environmentally-friendly refrigerants and detergents and fluorinated membrane materials, as well as core technologies needed for fluoride fine chemical industrialization”
Favorable policies in China
Fluoropolymer development provides fresh impetus to the company’s business growth, and its products are well-supported by favourable government policies
20
Extensive sales network and high-quality, highly-stable customer base
Source: Company Data
Company’s domestic sales network covers areas including Shandong, Henan, Beijing/Tianjin, Northeastern Anhui,
Guangdong, Shanghai, Nanjing, Chengdu, Wuhan
International sales network covers areas including Japan/South Korea, SE Asia, the Middle East, Africa, South
Asia, Americas and Europe
Supplier for well-known local and international brands
2011 H1 refrigerant supply ratio for the Group’s major customers
The Company supplies products to well-known home appliance manufacturers such as DuPont and Daikin
6
Dongyue’s global distribution network
Source: Company Data
2011 H1 PTFE supply ratio for the Group’s major customers
41% 32%
80% 72%
100%
0%
20%
40%
60%
80%
100%
Gree Midea Haier Aux Changhong
OtherDongyue
89%100%
80%60%
39%
0%
20%
40%
60%
80%
100%
ZhenjiangChunhuan
ShanghaiLingqiao
YangzhongHaiteng
NingboChangqi
GuangdongSihui
OtherDongyue
21
Strong R&D Capability7
Dongyue’s R&D System
Dongyue Research Institute
Provincial Fluorine Silicon Engineering Center
State-recognized Enterprise Technology Center
Dongyue-Shanghai Jiaotong University Polymer Research Center
National Technology Research Support Program, Special Project Group
Possesses a professional technology R&D team and leads the industry in terms of R&D
• Close cooperation with 3M,
Asahi Glass, Daikin, Nippon
Steel, Mitsubishi, Tsinghua
University and Shanghai
Jiaotong University
• Highly advanced research
center that provides ideal
conditions for product
creation
• Talent retention and increased
expenditure strategy
• Successful production of
chlor-alkali ionic membrane,
marking the end of the
foreign monopoly
• Owns many IP rights and patents in
the fluorine silicon industry
• Owns 61 patents, including
patents for environmentally-
friendly refrigerants,
fluoropolymer products, and chlor-
alkali ionic membrane
Cooperation with world-class companies
Dedicated multi-disciplinary R&D
team
Successful chlor-alkali ionic membrane
experiments
Owns IP rights and patented technology
22
Highly experienced management8
Dongyue is supported by an enviable board and management team, with a proven domestic and international track record in delivering value for its investors
Mr. Zhang Jianhong
Chairman & CEO
Mr. Liu Chuanqi
Executive Director & President
Mr. Cui Tongzheng
Executive Director, Vice President, CFO
Mr. Zeng Hongzhi
GM of Shandong Dongyue Polymer Material
Mr. Pang Feng
GM of Shandong Dongyue Chemical
• Group Chairman & CEO since 2006, senior policy official, with MA in Economics
• 20 years experience in chemical industry
• also the Chairman of Shandong Dongyue Chemical Co., Ltd, Shandong Dongyue Polymer Material Co., Ltd and
Shandong Dongyue Organosilicon Material Co., Ltd; ex-Chairman of Shandong Dongyue Fluorine Silicone
Materials Company Limited
• President and executive director of the company
• Joined Dongyue Group and its former organization since Oct 1986
• Ex-GM of Shandong Dongyue Chemical
• Almost 20 years experience in chemical industry, director at several Group subsidiaries
• Executive Director, Vice President and CFO of the company since Jul 2006
• Joined Dongyue Group and its former organization since Nov 1988
• Ex- Deputy GM of Shandong Dongyue Chemical
• BA from the Institute of Statistics of China and MBA from Shanghai Jiaotong University
• Director and GM of Shandong Dongyue Polymer Material, with Bachelor's degree.
• Joined Dongyue Group in 2003, he has worked as head of Environmental Protection Division, Dongyue Group,
head of Corporate Management Division, Dongyue Group, Executive Deputy GM of Shandong Dongyue Polymer
Material and Director and GM of Shandong Dongyue Polymer Material consecutively
• Joined Dongyue Group in Mar 1988, now GM of Shandong Dongyue Chemical Company Limited, and before that he
has worked as Workshop Team Lead, Workshop Vice Supervisor, Workshop Supervisor, Deputy GM Production,
Executive Deputy GM and GM consecutively
• MBA, Shanghai Jiaotong University
• Awards received include Excellent Individual, Top 10 Youth, Labor Model, Excellent Party Member and
Excellent Individual for Tapping the Potential etc.
23
4. Financial highlights
24
Strong growth in revenue and profit
Revenue Gross profit
Profit before tax Net profit
Growth = 115.3%
Growth = 273.0%
Growth = 414.0%Growth = 412.1%
2,591
5,579
2010 H1 2011 H1
RMB million
659
2,458
2010 H1 2011 H1
RMB million
400
2,056
2010 H1 2011 H1
RMB million
290
1,485
2010 H1 2011 H1
RMB million
25
Rising profitability levels
Gross profit margin Operating margin1
Profit before tax margin Net profit margin
1 Operating profit = profit before tax + finance expenses – interest income
25.4%
44.1%
2010 H1 2011 H1
17.2%
38.0%
2010 H1 2011 H1
15.4%
36.8%
2010 H1 2011 H1
11.2%
26.6%
2010 H1 2011 H1
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Business segment analysis
Product segment revenue
Product segment results
2010 H1 2011 H11
2010 H1 2011 H1
41.6%
29.8%
8.7%
3.1%
14.9%1.9%
60.6%
26.5%
5.7%6.5%
0.7%
1 Excluding loss of RMB8.2 million in organic silicon
39.8%
21.7%
9.9%
1.5%
25.5%
1.6%
69.7%
14.7%
0.7%
7.3%6.5% 1.1%
Refrigerants Polymers Organic Silicone CER Dichloromethane, PVC and liquid alkali Other
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Excellent returns on investments
Return on equity1 Return on assets2 Return on invested capital3
1 Annualised et income divided by total equity
2 Annualised net income divided by total assets
3 Annualised et income divided by the sum of total equity and total interest
bearing debt
23.2%
70.7%
2010 H1 2011 H1
9.3%
33.1%
2010 H1 2011 H1
14.7%
53.0%
2010 H1 2011 H1
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Superior operating efficiency
Accounts receivable days Inventory days Accounts payable days
54
57
2010 H1 2011 H1
46
32
2010 H1 2011 H1
73 74
2010 H1 2011 H1
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5. Development strategy
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Development strategy
• Continue to strengthen R&D for new refrigerant, new materials, organic silicone processing,
membrane products in order to bolster the Group’s core advantage
• Strengthen the Dongyue brand, improve product quality and increase brand recognition
• Continue to develop human resources, laying a solid foundation for the company’s new product
R&D and business development
• Accelerate the construction of raw material production facilities, securing stable supplies of
raw materials for the development of the Group
• Continue to improve environmental management and ensuring production safety
• Continue to build an integrated business model and fluoro-silicone product value chain
• Through development of membrane products, the Group has gained access to a variety of new core
technologies relating to new refrigerants and polymers. The Group will take advantage of such
new technologies to improve its products and accelerate growth