Section One Important Notice

1. 1. The abstract of this annual report comes from the full text of the annual report. To fully understand the company's operating results, financial status, and future development plans, investors should visit the www.sse.com.cn website to carefully read the full text of the annual report.

1. 2. The Board of Directors, Supervisory Board, and directors, supervisors, and senior management of the Company warrant that the content of the annual report is true, accurate, and complete, and contains no false records, misleading statements, or major omissions, and assume individual and joint legal liabilities.

1. 3. All directors of the company attended the board meeting by resolution of the board of directors (supervisory board).

1. 4. Zhong审衆環 Accounting Firm (Special General Partnership) issued a standard unqualified audit report for the Company.

1. 5. Board Resolutions Profit distribution plan or capital reserve to share capital increase plan approved for this reporting period

It is proposed to distribute cash dividends to all shareholders based on the total share capital on the equity registration date when the profit distribution plan is implemented, at 10 cash dividend per share 4.32 yuan (tax inclusive), with a total cash dividend of RMB 100,017,504.00 yuan (tax inclusive), and the remaining undistributed profits will be carried forward to the next year. In addition to the aforementioned cash dividends, the company will not issue bonus shares or implement capital reserve to share capital increase in this profit distribution, nor will it convert capital reserve into share capital.

Section Two Company Profile

1. Company Overview

2. Introduction to the Company's Main Business during the Reporting Period

2021 The fluctuation in the commercial vehicle market in [Year] was mainly due to demand fluctuations caused by the switch to China VI emission regulations for heavy-duty diesel vehicles. China V products were lower in purchase cost and operating cost than China VI products, so the market preferred China V products. In addition, " Blue-plate light trucks ” factors such as consumer wait-and-see due to policy expectations and a cooler real estate development industry also exacerbated the downward pressure on the commercial vehicle market. 2021 Commercial vehicle sales in [Year] 479.3 million units, a year-on-year decrease of 6.6 % . Among them, heavy truck sales were 139.5 million units, a year-on-year decrease of 22.4 million units, a year-on-year decrease of 13.8 % , medium trucks 17.9 million units, a year-on-year increase of 2 million units, an increase of 12.3 % , light truck sales were 211 million units, a year-on-year decrease of 8.9 million units, a decrease of 4% . (Data source: cvworld.com.cn)

From 2001-2021 China's automobile sales and growth rate, the total output and sales of automobiles in China have ranked first globally for 13 consecutive years, and have made significant progress in " electrification, connectivity, and intelligence ” . China's position as a major automobile country has been further consolidated, and it is moving towards becoming a strong automobile country.

The company's main business is the research and development, production, and sales of diesel engine parts. The main business models include product sales and entrusted processing. Under the product sales model, the company purchases raw castings such as cylinder blocks, cylinder heads, and connecting rods for processing and then sells them to customers; under the entrusted processing model, the company processes raw castings such as cylinder blocks, cylinder heads, and connecting rods provided by customers according to their requirements. The company's main customers are large engine manufacturers and vehicle manufacturers such as Foton Cummins, Dongfeng Cummins, Dongfeng Commercial Vehicle, Guangxi Yuchai, and China National Heavy Duty Truck Group.

The company adopts the "order-based production" model widely applicable in the industry. The company generally first signs framework agreements with major customers, including product types and other details. Under the framework agreements, customers regularly provide specific orders, and the company carries out batch procurement, production, and supply according to the customer's specific orders. The company's production model is "order-driven under lean production." Based on the actual needs of customers, and in accordance with the product design drawings, product production process requirements, and product supply standards specified by customers, the company organizes and implements demonstrations and customizes supporting diesel engine parts production and processing workflows for customers, forming a complete set of diesel engine parts production and processing solutions, providing qualified products to customers within the agreed time.

The company operates in the automotive parts industry, which is an important part of the specialized division of labor in automobile manufacturing. According to the "National Economic Industry Classification" ( GB/T4754-2017 ), the company's industry is "Automobile Manufacturing" ( C36 ) within "Automobile Parts and Accessories Manufacturing" ( C3670 ); according to the China Securities Regulatory Commission's "Guidelines for Industry Classification of Listed Companies" (CSRC Announcement [2012]31 Number), the company's industry is "Automobile Manufacturing" ( C36 ).

3. Company's main accounting data and financial indicators
   1. Recent 3 year's main accounting data and financial indicators

Unit: Ten thousand yuan Currency: RMB

1. 2. Main Accounting Data for Each Quarter of the Reporting Period

Unit: Yuan   Currency: RMB

Explanation of Differences Between Quarterly Data and Disclosed Periodic Report Data

4. Shareholder Information
   1. Total number of ordinary shareholders, total number of shareholders with voting rights restored for preferred shares, and total number of shareholders holding special voting rights shares at the end of the reporting period and at the end of the month before the annual report disclosure, and the top 10 Ten Shareholders

Unit: Shares

1. 2. Between the company and its controlling shareholder Diagram of property rights and control relationships

1. 3. Diagram of property rights and control relationships between the company and the actual controller

1. 4. Total number of preferred shareholders at the end of the reporting period and the top 10 Ten Shareholders

5. Corporate bonds Status

Section III Important Matters

1. In accordance with the principle of materiality, the company shall disclose significant changes in its operating performance during the reporting period, as well as matters that had a significant impact on the company's operating performance during the reporting period or are expected to have a significant impact in the future.  

2021 The company achieved operating revenue of 1,581.5448 million yuan for the year, a year-on-year decrease of 5.75%; operating profit of 279.2068 million yuan, a year-on-year decrease of 21.17%; and net profit of 252.1969 million yuan, a year-on-year decrease of 21.37%; of which the net profit attributable to shareholders of the parent company was 249.4123 million yuan, a year-on-year decrease of 20.71%.

As of the end of 2021, the company's total assets were 3.691 billion yuan, total liabilities were 1.424 billion yuan, and owners' equity was 2.268 billion yuan.

2. If the company faces delisting risk warnings or termination of listing after the disclosure of its annual report, the reasons leading to such delisting risk warnings or termination of listing shall be disclosed.