Huazhang Technology’s 2017/18 Interim Net Profit Increased by 55.3%

Contract Value of Project Contracting Services for Paper-making Industry Increased by 1.7 times

Promotes all-encompassing services to paper-making companies

Strives to become a high level "Made in China" enterprise

Result Highlights

• Revenue increased by 20.7% to approximately RMB242.1 million
• Gross profit and net profit reached approximately RMB66.5 million and RMB22.2 million, representing an increase of 39.0% and 55.3%, respectively
• Non-GAAP profit for the period reached approximately RMB28.0 million which is a remarkable results
• Contracts signed totaled approximately RMB819.6 million, representing an increase of approximately 2.3 times
• Contract value of project contracting services for the paper-making industry was about RMB427.4 million, representing an increase of approximately 1.7 times
• Completed the acquisitions of a leading distributors of headbox in the PRC and a logistic company, improving all-encompassing services to paper-making plants
• Secured a master contractor contract in respect of slurry and automation equipment for paper machine project in Vietnam, exporting complete-set equipment under national "One Belt, One Road" initiative

Financial Highlights

HONG KONG, CHINA - Media OutReach - February 28, 2018 - Huazhang Technology Holding Limited ("Huazhang" and its subsidiaries, together, the "Group", HKSE: 1673) announced its interim results for 6 months ended 31 December 2017 ("the period under review"). The Group's revenue in the period under review amounted to approximately RMB242.1 million (6 months ended 31 December 2016: RMB200.6 million), representing an increase of 20.7%. Profit attributable to owners of the parent significantly increased by approximately 54.4% to RMB22.1 million (6 months ended 31 December 2016: RMB14.3 million). Gross profit margin increased by 3.7 points to 27.5% (6 months ended 31 December 2016: 23.8%)

Business Review

The year 2017 has turned out to be a fruitful year for paper-making industry in the PRC. Several environmental protection policies were announced during the period under review, which are conducive to industry consolidation. More efforts were put into restructuring and upgrading of the industry. The Group actively facilitated its internal affairs as well as business by upholding the policy principles of "New Huazhang, New Development, New Dream" and has achieved remarkable results. For the six months ended 31 December 2017, the Group recorded a turnover and profit of approximately RMB242.1million and approximately RMB22.2 million respectively, representing an increase of approximately 20.7% and approximately 55.3% as compared with the same period in 2016. The increase was mainly attributable to the Group's successful provision of comprehensive solutions for the paper-making industry to the medium and large paper-making companies. The contracts signed by the Group totaled approximately RMB819.6 million, representing an increase of approximately 2.3 times over those recorded in the same period last year.

"New Huazhang" -- Improved all-encompassing services by completing several acquisitions

In September 2017, the Group completed the acquisition of Hangzhou MCN Paper Tech Co., Ltd. and Hangzhou Haorong Technology Co., Ltd., a company that owns patents and know-how in headbox production. The acquisition would be able to diversify the Group's products and grant the Group access to one of the core technologies of paper-making production equipment. In November 2017, the Group completed the acquisition of Fu An 777 Logistics Limited ("777 Logistics"). 777 Logistics is principally engaged in logistics and warehouse businesses. Currently, the infrastructure of the logistics and warehouse centre in Yangjiang City, Guangdong Province has been completed and the centre is capable of providing bonded logistics services of raw materials, equipment and supplies for paper-making companies. 777 Logistics Group allows the Group to establish a one-stop integrated service platform to promote all-encompassing services to paper-making companies.

After the acquisitions, the Group's business segments can be categorized into four segments: (i) Industrial products, including industrial automation systems and headboxes; (ii) Project contracting services, including design services, project management services and installation services; (iii)  Environmental products, including sludge treatment products, wastewater treatment products and refuse derived fuel products, and; (iv) Supporting services, including after-sales services, machine running services, warehouse and logistic services and renovation services.

"New Development" -- Business of project contracting services for the paper-making industry increased rapidly

The contract value of project contracting services for the paper-making industry accounting for the total contract value during the period under view was about RMB427.4 million, representing an increase of approximately 1.7 times as compared to the same period in 2016. Currently, the market demands for paper-making projects and comprehensive solutions for the paper-making industry are strong, because medium and large paper-making companies lack engineering and technical talents. These companies are in need of comprehensive solutions services providers. Leveraging on the accumulated experience in the industry over the years, the Group has been providing extensive services to the paper-making companies, including boot service, paper-making supply chain financing service, with a view to achieve the Group's goal in providing all-encompassing services to paper-making plants.

"New Dream" --Strive to become a high level "Made in China" and "go global"

In 2017, the Standing Committee meeting of the State Council pointed out that the PRC was in the process of accelerating the industrialization and that the manufacturing industry was an important pillar and foundation of the national economy. As the No. 1 paper-making equipment supplier, the Group will step up its efforts in innovation and research and development to help China become a nation that provides complete equipment for the paper-making industry, on top of being a large producer of paper. This will enable paper-making equipment enterprises in China to enjoy a greater competitive advantage as compared with international paper-making equipment giants in developing the paper-making industry under the national "One Belt, One Road" initiative. The Group has secured a master contractor contract in respect of slurry and automation equipment for a 250,000 tonnes paper machine project in Vietnam. It is a showcase of the Group's ability to export complete-set equipment under the national "One Belt, One Road" initiative, strengthening the Group's determination to "go global".

Looking ahead, Mr. Zhu Gen Rong, the chairman of Huazhang Technology Holding Limited, said, "The positive trend of the paper-making industry in 2017 will sustain. We will focus on the problems faced by paper-making companies and make timely response with appropriate adjustment of strategy so as to take the lead in the market. Moreover, The Group will continue to enhance services for the entire industry chain of the papermaking industry and provide professional, all-encompassing services. We will step up our efforts in innovation and R&D, in order to export complete-set equipment under the national 'One Belt, One Road' initiative. In future, we will move forward courageously in the new direction of 'New Huazhang, New Development, New Dream' and deliver sustainable business growth for creating more values for shareholders."

About Huazhang Technology Holding Limited

Huazhang Technology Holding Limited is an integrated service provider in paper-making industry and its principal business includes project contracting service, research and development, manufacture and sale of industrial automation systems, sludge treatment products and headbox, and after-sales and add-valued services. The Group has been in the paper-making industry for over 17 years. The Group's self-manufacturing system and equipment are custom-built in accordance with the specifications and requirements provided by the Group's customers, which include various papermaking enterprises in the PRC. The group strives to become a leading solution provider and comprehensive service provider for the papermaking industry in the PRC.