D G Technology announces 2017 Interim Results

Highlights

• Total revenue increased approximately 46.6% y-o-y to approximately RMB 238.6 million
• Gross profit increased to approximately RMB95.7 million, representing a y-o-y increase of approximately 43.0%
• Profit attributable to owners of the Company increased by approximately 38.9% to approximately RMB14.1million
• The sales contracts of asphalt mixing plants completed by the Group increased from 18 to 28 as compared with last corresponding period
• Continued to expand business and entered into potential markets in the "One Belt One Road" countries, apart from subsidiaries set up in Singapore and India in prior years, a wholly-owned subsidiary in Pakistan was set up during the period, principally engaged in leasing of asphalt mixing plants and provision of customized solutions to the local markets in Pakistan.

Financial Highlights

HONG KONG, CHINA - Media OutReach - 29 August 2017 - D&G Technology Holding Company Limited ("D&G Technology" or the "Group" ; HKSE: 1301), a leading medium-to-large scale asphalt mixing plant manufacturer and service provider in China,announced its interim results for the six month ended 30 June 2017. During the period, the Group recorded a total revenue of approximately RMB238.6 million (2016 corresponding period: approximately RMB162.8 million), representing an increase of approximately 46.6%. Profit attributable to owners of the Company was approximately RMB14.1 million (2016 corresponding period: approximately RMB10.2 million), representing an increase of approximately 38.9%.

During the period, earnings per share were RMB2.3 cents (2016 corresponding period: RMB1.6 cents).

Business Review

During the period, the Group continued to participate in top-tier highways construction and maintenance projects in the PRC and overseas countries. There were 28 (2016: 18) sales contracts of asphalt mixing plants completed by the Group during the period and the asphalt mixing plants were used in major highway construction and maintenance projects such as Waiwu Expressway (威烏高速), Lungtsing Expressway (龍青高速), Waiyat Expressway ( 濰日高速) etc. Out of the 28 asphalt mixing plants sold during the period, 1 asphalt mixing plant was sold to Hong Kong and 8 were sold to overseas countries including 5 to Russia, 2 to Angola and 1 to Pakistan. The increase in demand for asphalt mixing plants resulted in an increase of approximately 58.3% of revenue from sales of asphalt mixing plants during the period, whereas, the sales of asphalt mixing plants accounted for approximately 85.8% (2016: 79.4%) of the total revenue of the Group during the period.

The Group continued to expand its business and entered into potential markets in the "One Belt One Road" countries. During the period, the Group has signed a sale contract with a customer in Malaysia and the contract is expected to be completed in the second half of the year. Besides, a wholly-owned subsidiary was set up in Pakistan which is principally engaged in leasing of asphalt mixing plants and provision of customized solutions to the local markets in Pakistan. With the established overseas network, the Group is prepared to participate in the upcoming road construction projects along the "One Belt One Road" countries.

In order to provide one-stop total solution to the customers, the Group has set up a wholly owned subsidiary engaged in finance leasing in Shanghai Free-Trade Zone and commenced its finance leasing business in late 2016. The capital contributed to the finance leasing business amounted to RMB50 million as at 30 June 2017 and the finance leasing business generated interest income of approximately RMB1.8 million during the six months ended 30 June 2017.

Sales of asphalt mixing plants business

Revenue from the sales of asphalt mixing plants increased as a result of the increase in number of contracts as well as the increase in average contract value. The increase in number of contracts was mainly due to increase in road construction projects in China and overseas during the period. Overall Gross profit margin remained stable at approximately 38% during the period. Revenue from the sales of Recycling Plant increased by 137.6% which was mainly due to an increase in number of contracts offset by the slightly decrease in average contract value during the period.

Sales of spare parts and components and provision of equipment modification services business

Revenue from sales of spare parts and components and provision of equipment modification services increased by approximately 6.2% during the period. Gross profit margin increased by 18.2 percentage points during the period which was mainly due to improvement in gross profit margin of both sales of spare parts and components and modification services.

Operating lease income of asphalt mixing plants

Revenue from operating lease of asphalt mixing plants slightly decreased by 8.3% primarily because the total volume of productions during the period were lower compared with the last period even though the number of operating agreement increased from 9 to 10 during the period.

Development of Upstream and Downstream Asphalt Related Business

During the six months ended 30 June 2017, the Group continued to conduct research on the combustion technology in order to develop the business of manufacturing and sale of burner combustion equipment and the provision of related technical support services. The burner combustion equipment can be applied in a wide spectrum including asphalt mixing plants, furnace, heating system, etc. As at 30 June 2017, the combustion technology is still in research phase and the Group is preparing to patent the combustion technology once developed.

Research & Development

During the period, the Group had 51 (31 December 2016: 49) registered patents in the PRC (of which 4 were invention patents) and 24 (31 December 2016: 22) software copyrights. In addition, 5 patents were pending registration as at 30 June 2017. The Group continued to cooperate with the Research Institute of Highway, Ministry of Transport ( 交通運輸部公路科學研究院) and Institute of Tsinghua University, Hebei (河北清華發展研究院) in a number of national technical support projects focusing on energy saving, emission reduction, environmental protection and recycling aspects of resources recycling. The current research and development projects include "Asphalt Pavement Recycling Technology Equipment and Demonstration", which is a project subsidised by the PRC government and expected to be completed in late 2017.

Future Prospects

Looking forward, the Group expects the PRC government to continue adopting policies to stimulate the economy and maintain currency stability. In light of growing awareness on environmental protection issues during the asphalt mixture production among the road construction and maintenance companies and the PRC government's emphasis on reducing pollution from industrial sector, the Group believes there is a growing demand for our recycling and environmentally-friendly products. The Group expects the demand for recycling asphalt plants as well as the modification services of adding recycling and environmental protection functions to existing plants to increase. The Group will further promote green technology innovation and continue to improve its competitive advantage so as to reinforce its leading position in the market.

"One Belt One Road" is a core development strategy in the PRC covering a broad spectrum of economic, political and social aspects of Mainland China and abroad. Investment in infrastructure overseas is a way of building up strategic partnerships with countries in the "One Belt One Road" region. Recently, the Group has participated in numerous "One Belt One Road" construction projects led by China state-owned enterprises, including major expressway construction project of the "China-Pakistan Economic Corridor", and the project of "Central Asia Economic Corridor". The Group is honored to participate in the major infrastructure construction projects along the "One Belt One Road" countries, and is prepared for more projects in the future.

Ms. Glendy CHOI, Executive Director and Chief Executive Officer of D&G Technology,said, "We expect the demand for asphalt mixing plants in the second half of 2017 shall remain strong and more projects along the 'One Belt One Road' regions . The Group shall take the momentum forward and develop its business in the industry."

About D&G Technology Holding Company Limited

D&G Technology is a leading medium-to-large scale asphalt mixing plant manufacturer and service provider in China. The Group's core products include conventional hot-mix asphalt mixing plants and hot-mix asphalt mixing recycling plants. Asphalt mixtures produced by these plants are used in construction and maintenance of all grades of roads and highways. The Group also offers asphalt mixing plant customer services including sales of spare parts and components and provision of equipment modification services and leasing of asphalt mixing plants through operating leases. With headquarters in Hong Kong and a production base in Langfang, Hebei, D&G Technology is certified as a high-technology enterprise in Hebei and enjoys a preferential enterprise income tax rate of 15%. Its products are sold to most provinces, municipalities and autonomous regions in China. The Group has asphalt mixing plants projects in a total of 23 countries, including Australia, Russia, India, Thailand and Brunei, etc. For more details, please refer to: www.dgtechnology.com.