New Daxin Materials: 2011 Annual Audit Report

I. Overall business of the company during the reporting period

(I) Overall operation of the company during the reporting period

2011 is the first year of the "Twelfth Five-Year Plan". It is also an extraordinary year in the development of China's photovoltaic industry. After experiencing the rapid development of the "Eleventh Five-Year Plan" period, the development of the photovoltaic industry began to adjust. Due to the impact of the international economic environment such as the European debt crisis, the demand for photovoltaic industry terminals in the second half of 2011 has dropped sharply. In the overall adjustment of the photovoltaic industry, the company's development has also withstood the test. During the reporting period, according to the strategic development plan formulated by the board of directors, the management of the company focused on the development goal of “developing and producing silicon carbide powder products, making excellent suppliers in new materials and new energy fields”, and consolidating wafer cutting. On the basis of the cuttings product business, we will increase the development of mortar recycling and reuse, and strive to tap the potential of new use of silicon carbide, expand the market in multiple directions and in multiple forms. In the case of the downturn of the photovoltaic industry, we are actively Looking for opportunities in the crisis.

In 2011, the company realized operating income of 1,635,829,900 yuan, an increase of 35.15% over the same period of the previous year; operating profit of 126,560,600 yuan, down 19.47% over the same period of the previous year; net profit attributable to shareholders of listed companies was 127,974,300 yuan, down from the same period of the previous year. 15.90%. In the first half of 2011, the company was still affected by the adjustment of the photovoltaic industry, and the production and sales were in line with expectations. However, since the second quarter, especially since the third quarter, most of the companies in the downstream of photovoltaics and batteries have large gross profit margins. The decline in the range, many companies have suffered losses, the lack of capacity utilization in the industry is more common, the sales price of photovoltaic products has fallen sharply. Although the company maintained its leading position in 2011, the sales volume still maintained a year-on-year growth, but due to the need to digest the high-priced inventory in the previous period. As a result, the gross profit margin decreased, resulting in a certain decline in the overall performance of the company in 2011.

In terms of business development, in 2011, the company's shareholders' meeting reviewed and approved the use of funds raised in the other funds related to the main business of 148.9 million yuan (adjusted investment amount of 196.4 million yuan) through the wholly-owned subsidiary Kaifeng Wansheng new materials Co., Ltd. newly built "60,000 tons of silicon wafer cutting mortar recycling project". After the project is completed, the company will become one of the largest suppliers of recycled cutting fluid and recycled cutting material in the recycling market, increasing the company's profitability. Closed the strategic cooperation relationship with downstream customers, improved the company's competitiveness, and effectively promoted the company's sustained and healthy development.

At the same time, based on the existing business, the company actively researches and develops new silicon carbide materials, increases research and development efforts according to market demand, vigorously develops new products with high technology content and high added value, and strengthens the existing ultra-fine silicon carbide of the company. Research on the utilization of powder. In 2011, the silicon powder purification project jointly developed by the company and other units has been completed in the laboratory joint research and development stage, and is now in the pilot preparation stage. On the basis of the existing production technology, the company will continue to strengthen technical cooperation with relevant units, enhance independent innovation capability, and achieve close integration of R&D and production, thereby promoting the improvement of the company's product technology level and enhancing its core competitive advantage.

In terms of management, in 2011, the term of the first board of directors of the company expired, and the procedures of the board of directors and the shareholders' meeting were renewed. The company took this opportunity to actively establish and improve the internal control system, further standardize the company's operation and improve corporate governance. At the same time, the company also realized that in the current economic downturn, it is necessary to further improve the efficiency of the team. Based on the needs of development, the company will continue to strengthen the cultivation and introduction of outstanding talents, especially technical and management talents. On the one hand, it will strengthen the cultivation of internal talents, especially the cultivation of technical talents, and improve the company's R&D and independent innovation capabilities. On the other hand, it will focus on introducing external talents, introducing high-end talents and enhancing the vitality of the company.

Second, the prospect of the company's future development

(1) Trends in the industry in which the company is located

1. Current situation of the industry in which the company is located

In 2011, the domestic and international economic forms have undergone major changes. Due to the impact of the European debt crisis, the terminal demand for the photovoltaic industry chain has shrunk. The gross profit margin of most of the wafers and batteries in the downstream of PV has dropped significantly, and many companies have suffered losses. The lack of capacity utilization is more common. It is widely believed in the industry that the downturn in this round of PV industry is more serious than the impact of the 2008 financial crisis. The current market for solar terminal applications is mainly in Europe, and Europe is currently in deep debt crisis. Whether the European debt crisis can be significantly improved in 2012 will directly affect the development of the photovoltaic industry, thus affecting the demand for solar crystal wafer companies for the company's products.

2. The long-term development trend of the industry in which the company is located

Although the photovoltaic industry was hit by the international market in 2011, solar energy has a huge potential for development and application as a sustainable energy source. Solar energy is one of the most basic forms of energy for human survival and development. From the perspective of the development of modern science and technology, advances in solar energy development and utilization technologies may determine the future lifestyle of human beings. In addition, the pressure of environmental degradation and the need to reduce CO2 have promoted the use of renewable energy. In the next few decades to one hundred years, traditional thermal power generation (coal, oil, natural gas) will be less and less. The nuclear energy crisis brought about by the earthquake and tsunami in Japan will prompt humans to re-examine the use of nuclear energy. The sustainable development of human society, the urgent need for inexhaustible new energy, the use of sunlight to turn light into electricity photovoltaic technology is the most direct and most effective way and method, so the solar photovoltaic industry will become a new energy source The mainstream, the company is firmly optimistic about the long-term development trend of the photovoltaic industry.

The good prospects for the development of the photovoltaic industry will not bring good opportunities to all enterprises in the photovoltaic industry chain. In the early stage, because of the optimistic PV industry and a large amount of capital investment, the staged supply in the industrial chain is far greater than demand, resulting in competition within the industry. More intense, the cost of each link in the industry chain is declining; coupled with technological progress, the cost of the entire industry chain is reduced, which has accelerated the marketization of the photovoltaic industry and gradually got rid of government subsidies.

At present, the photovoltaic industry is maturing. Under the guidance of the international market situation, the industry has moved toward merger, integration, restructuring, and joint reshuffle. PV companies with capital and technological advantages are continuing to promote technology along the path of reducing costs. R & D and scale production; and many uncompetitive, backward production enterprises will be eliminated, which is conducive to the transformation and upgrading of China's photovoltaic industry and benign development.

(2) The market structure of the industry in which the company is located

Under the background of global development of low carbon, green economy, energy saving and sustainable development, the solar photovoltaic industry has good development prospects. According to the latest report released by the European Photovoltaic Industry Association EPIA, the installed capacity of global PV grid-connected systems increased to 27.7GW in 2011, an increase of 11.1GW compared with 16.6GW in 2010. The cumulative global installed capacity of photovoltaics exceeds 67.4GW, which means PV It has become the third largest renewable energy source after hydropower and wind power.

As a big energy consumer, China faces the wave of the new energy revolution, and investment in the new energy sector will be the main support direction for China's future policies. According to the National Development and Reform Commission's Medium- and Long-Term Development Plan for Renewable Energy, after two upward adjustments, China's PV installation target for 2015 will be 15GW, and will reach 50GW by 2020. During 2012-2015, the annual average PV installation will be domestic. The volume will reach 3.5GW, and the domestic PV market will usher in a period of continuous growth.

(3) The market position of the company

In 2011, due to the dual effects of foreign PV subsidy policy and the international economic downturn, the PV market has been in short supply, which has caused the PV industry to experience cold. Although after a period of market regulation, the reduction of subsidies in various countries has also eased, and the PV market has shown signs of recovery, but the overall situation is still not optimistic. At present, the demand for components in Europe is declining, which directly affects the development of the domestic photovoltaic industry.

The current market demand for crystalline silicon wafer cutting blades is sluggish, which is a microcosm of the current cold weather in the photovoltaic industry. Generally speaking, due to the sluggish domestic PV industry and the rapid expansion of the previous enterprises, the competition in the industry has intensified. At present, the industry enters the integration period, and through integration, winning companies will have a competitive advantage. In addition, the demand for crystalline silicon wafer cutting blades will increase by 15%~20% in the future international market. With the increasing proportion of energy structure in the photovoltaic industry, the prospect of the wafer wafer cutting edge market is still being I am optimistic.

After years of development, the domestic crystalline silicon wafer cutting blade industry has formed an industry competition pattern led by several companies such as the company and Pingdingshan Yicheng New Materials Co., Ltd.

During the reporting period, the company further strengthened the company's leading position in the domestic market by enhancing the deep processing capacity of waste mortar, closely cooperating with downstream slicing enterprises, and ensuring stable orders for large customers.

(4) Main advantages and disadvantages of the company's development

1. The main advantages of the company's development

(1) Waste mortar recycling and reuse advantages

In the case of the sluggish PV industry, the company has increased the capacity and quality of waste mortar recycling from the downstream cutting company's demand for cost reduction. At present, the company's waste mortar processing capacity has been in the forefront of the country.

(2) economies of scale

There are few domestic enterprises capable of large-scale production of crystalline silicon wafer cutting blades and waste mortar recycling and recycling. The company is specialized in the processing and recycling of crystalline silicon wafer cutting blades and waste mortar with a continuous and stable supply capacity. One of the production enterprises has obvious economies of scale.

(3) Advantages of production equipment

With the continuous improvement of the quality requirements of the cutting blade material in the photovoltaic market, the requirement for the concentration distribution of the grain size of the wafer wafer material is also obviously improved, so the particle size classification is an important link in the production process. The company's automatic siphon particle size grading equipment and grading automatic control equipment are all designed independently, which realizes the automation of mechanical parts, improves the product particle size concentration, shortens the production time, reduces human interference and reduces labor intensity.

2. Disadvantages in the company's development

Compared with the internationally renowned manufacturers of silicon carbide powder materials, the company's current development disadvantages are mainly due to its single product structure. Although the company has started the waste mortar recycling and 8,000 tons of silicon carbide special cutting edge project for semiconductor wafer cutting, the company's product structure still needs further optimization from the long-term strategic layout.

(5) Opportunities, risks and challenges faced by the company

1. Opportunities facing the company

Although the current PV industry is in a downturn overall, there are still opportunities and opportunities for the company as a whole. First, the industry has entered an integration period, and a market with reasonable supply and demand and competition is expected to be formed after integration. It can be expected that a considerable number of small and small enterprises will be integrated through mergers and acquisitions. The company is the only listed company in the segmentation industry of crystalline silicon wafer cutting, with strong anti-risk ability and can be integrated in the process. In the second place, the layout of the company after the listing is relatively reasonable. The mortar recycling business can closely contact the downstream slicing enterprises to achieve a win-win situation. Third, the development of the photovoltaic application market is a medium- and long-term trend. It is expected that 2017-2020 In the year, photovoltaic power generation will achieve a cheaper Internet access, when solar energy will be able to compete with fossil fuels.

2. The risks faced by the company

(1) The risk of continued downturn in the photovoltaic industry

As the current terminal market for the photovoltaic industry is mainly in Europe, the downturn in the European economy has severely affected the major PV markets. In the long run, the development of renewable green energy is the general trend, but whether the European economy can achieve recovery in the short term still has considerable uncertainty.

The current development of the photovoltaic industry in the domestic market depends on the government's policy guidance, and the content of the government's photovoltaic support policy and the speed at which the policy is initiated are also uncertain.

(2) Risks of accounts receivable and cash flow

Due to the current downturn in the photovoltaic industry, downstream wafer companies have experienced widespread losses. Therefore, while cutting-edge production companies compete for limited markets, they need to face the demanding requirements of downstream companies for payment terms. In the process of market expansion, the company has a contradiction between expanding sales volume and stable credit policy.

(3) The risk of a single product structure

The company's main products are solar crystal wafer cutting blade and waste mortar recycling. If the development of photovoltaic industry changes, it will lead to changes in the market of solar wafer cutting blade, which may adversely affect the company's operating performance.

(4) Technical risk

1 technology replacement risk

According to different production technologies, solar cells are classified into crystalline silicon solar cells and thin film solar cells. The production technology of crystalline silicon solar cells is relatively mature, and is currently widely used. In recent years, due to the high cost of crystalline silicon solar cells and the continuous advancement of thin film solar cell technology, the market share of thin film batteries has expanded, which has also had a certain degree of impact on the crystalline silicon solar cell market.

2 cutting technology replacement risk

At present, silicon wafer cutting adopts wire cutting technology, and diamond wire has been used for the opening of polysilicon. If the comprehensive application cost is further reduced, it may bring alternative risks to the company's existing products.

3. The challenges facing the company

After the company went public, it has continuously strengthened management in terms of business philosophy, continuous research and development, and personnel structure, and has made certain progress; but it should also be seen that the company still has shortcomings in technology research and development and new product development. Still not optimistic, the company still faces enormous challenges.

(1) The problem of expanding the market in a depressed market environment. At present, the downstream enterprises of the company are still in a state of loss or meager profit. Under such a market situation, the company faces enormous challenges in how to achieve stable business development.

(2) The challenges of technological innovation in the photovoltaic industry to the company. As an important part of the emerging industry, the innovation of the photovoltaic industry is very active. The company actively tracks the trend of technology development in the industry. The improvement and breakthrough of existing technology solutions and routes in the industry will pose challenges to the company's products.

(6) Future development strategy of the company and business plan for 2012

1. Company development strategy planning

The overall strategy for the company's development in the next few years is: based on scientific and technological innovation, focusing on research and development, production of silicon carbide powder products, and becoming a superior supplier in new materials and new energy fields, while vigorously developing the company's existing main business, We will closely focus on the construction of the industrial chain around the main industry, actively explore development opportunities in the field of new materials and new energy, and optimize the product structure of the company.

2. The company's 2012 business plan

Facing the current situation of the photovoltaic industry, the company's business plan for 2012 is mainly to stabilize the new cutting material business, expand the mortar recycling and recycling business, and promote the growth of the new cutting material business with the development of recycling and recycling business. Fine management, the combination of open source and throttling.

(1) Guarantee R&D investment and promote technological innovation. The company will continue to increase investment, research and development of new products and new technologies, and further enhance the company's research and development and innovation capabilities; at the same time strengthen exchanges and cooperation with scientific research institutions, improve technical level, enhance the comprehensive competitiveness and profitability of the company's products. .

(2) Standardize management and improve the assessment system. Based on the performance appraisal system, establish a target management responsibility system, clarify work objectives and work standards, motivate employees, and provide basis and basis for personnel promotion, rewards and punishments, and training.

(3) Further strengthen the system construction and optimize the process. Strengthen the implementation of the system through system optimization, training, evaluation, inspection, and supervision. Continue to increase supervision of finance and auditing, strengthen supervision over major issues such as production and operation, fund management and income distribution, enhance the effectiveness of supervision, and ensure the standardized management of enterprises.

(4) Further improve corporate governance, form a scientific corporate governance system and management mechanism, improve the company's risk management and control system, and improve the company's risk identification, prevention and management capabilities.