Ruifeng Power Announces 2017 Annual Results; Revenue Increased by 4.5%

Expanding Production Capacity & Enhancing Core Competence

Result Highlights

• Revenue increased by 4.5% to approximately RMB700.4 million
• Gross profit and net profit reached approximately RMB217.4 million and RMB94.8 million, respectively, representing a y-o-y increase of 12.6% and 1.1%, respectively
• Incurred listing expenses of RMB18.2 million for the year under review
• Sales from cylinder blocks reached RMB577.6 million, representing a y-o-y increase of 7.2%
• Completed 7 new production lines, adding designed production capacity 430,000 units
• Completed the design and construction of three automated processing lines to produce light-weight cylinder block products as well as the establishment of a "smart factory" network platform
• Developed and produced six new models of cylinder blocks and one new model of cylinder heads

Financial Highlights

HONG KONG, CHINA - Media OutReach - 16March 2018 - Ruifeng Power Group Company Limited ("Ruifeng Power" or the "Company" and its subsidiaries, together, the "Group", stock code: 2025.HK), a Chinese leading specialized manufacturer of cylinder blocks (a major structure in automobile engines), announced its annual results for the year ended 31December 2017 ("the year under review") today. The Group's revenue for the year under review amounted to approximately RMB700.4 million (the year ended 31 December 2016: RMB669.9 million), representing an increase of 4.5%. Profit and total comprehensive income attributable to equity shareholders of the Company increased by approximately 1.1% to RMB94.8 million (the year ended 31 December 2016: RMB93.7 million). Gross profit increased 12.6% to RMB217.4 million, while gross profit margin increased to 31.0% (the year ended 31 December 2016: 28.8%). The Board does not recommend the payment of a final dividend for the year ended 31 December 2017 (2016: Nil). The Board considered that the Company intends to declare dividends starting from the year ending 31 December 2018.

Business Review

The automobile industry in China has exhibited strong growth in recent years. According to the data published by China Association of Automobile Manufacturers, in 2017, the production volume of China's passenger and commercial vehicles increased by approximately 1.58% and approximately 13.81% to 24.8 million and 4.2 million respectively. The increase of the passenger vehicles also results in more outsourcing of engine spare part and component production. Meanwhile, Chinese government has also vigorously promoted energy-saving and emission reduction measures. New emission standards require a technology innovation in the industry.

During the year under review, the Group has seized the development opportunities of the automobile industry and achieved sustained growth in 2017, creating desirable return for shareholders. For the year ended 31 December 2017, the Group recorded a revenue and profit of approximately RMB700.4 million and RMB94.8 million, respectively, representing a year-on-year growth of approximately 4.5% and 1.1%, respectively. Among which, sales from cylinder blocks reached RMB577.6 million, representing a y-o-y increase of 7.2%, while sales volume was 631,005; sales from cylinder heads reached RMB92.2 million, representing a y-o-y increase of 1.4%, while sales volume was 152,975; sales from ancillary cylinder block components reached RMB30.5 million.

Expansion of Production Capacity

During the year under review, the Group has expanded the production capacity in response to the increased market demand for the products.7 new production lines were completed during this year, adding designed production capacity 430,000 units. Besides, the Group has invested approximately RMB134.1 million in capital expenditures. As at 31 December 2017, the Group owned and operated a total of three precision casting lines and 20 mechanical processing lines, including 16 for cylinder blocks, 2 for cylinder heads and 2 for other ancillary cylinder block components. The designed production capacity of rough cast cylinder block, cylinder block production and cylinder heads reached 666,190 units, 1,011,637 units and 164,079 units respectively. For the year ending 31 December 2018, the Group planned to increase 3 production lines which are expected to be completed by the end of 2018. After the completion, the Group's designed production capacity will further increase by 160,000 units.

Implementation of intelligent manufacturing

Since December 2015, the Group has started designing and establishing an integrated smart manufacturing process to optimize production process and improve operation efficiency.The implementation of intelligent manufacturing has also achieved progress in 2017. Ruifeng Power had collaborated with three corporate partners to design, construct and implement the individual intelligent manufacturing systems to be used in the smart manufacturing process. In June, 2017, the Group had completed the design and construction of three automated processing lines to produce light-weight cylinder block products as well as the establishment of a "smart factory" network platform as part of the implementation of our smart manufacturing process.These three automated processing lines began mass production in November 2017. The intelligent manufacturing process enables the Company to produce higher quality products and increase their overall operational efficiency. It also follows the national policy trend of the manufacturer industry.

New products and R&D

During the year under review, research and development department of the Group helped successfully develop and produce six new models of cylinder blocks and one new model of cylinder heads for the customers. For the self-developed production equipment and processes in relation to the manufacture of cylinder blocks and cylinder heads, as at 31 December 2017, the Group owned 12 patents in the PRC, including 11 utility model patents and one invention patent. For the year ended 31 December 2017, the Group invested in research and development amounting to RMB22.0 million (2016: RMB20.8 million) for product developments and improvement and enhance of production processes.

Looking ahead,Mr. Meng Lianzhou, the chairman of Ruifeng Power Group Company Limited, said, "In early 2018, Ruifeng power was successfully listed on the Main Board of the Stock Exchange of Hong Kong Limited, which represents the recognition from the capital market. For the future, we will continue to increase our production capacityin response to increased market demand and implement intelligent manufacturing strategies, as well as further enhance our product design and research and development capabilities. Regarding business cooperation, we will establish a Sino-foreign joint venture with a Japanese partner to produce aluminum alloy cylinder blocks and cylinder heads. Besides, we will also pursue strategic alliance with a Swiss technology provider of surface solutions. By seizing the opportunities of the rising automobile industry and enhancing our core competence, the Group will create more value for shareholders. "

About Ruifeng Power Group Company Limited

Ruifeng Power Group Company Limited is a specialized manufacturer of cylinder blocks, a major structure in automobile engines, based in China. The Company ranked fourth among specialized cylinder block manufacturers in China in terms of sales volume in 2016, according to the Frost & Sullivan Report. Ruifeng Power is also an established producer of cylinder heads. The size of its operations and significant production capacity allow the Company to take on some of the leading automobile manufacturers in China, including Jiangling Motors, Beiqi Foton Motor, Jiangxi Isuzu, JAC Motors and Great Wall Motors. The Company was among the first few automobile engine spare part manu-facturers in China to adopt the intelligent manufacturing initiatives. The production facilities and processes afford it a high level of flexibility to meet the diverse needs of its customers.