Review on the Management of Jinjing Technology’s 2023 Annual Board of Directors

() The operating comments of the Board of Directors in 2023 are as follows:

　　I. Discussion and analysis of business conditions

In 2023, all business segments of the company strengthened strategic management, launched an all-round audit of strategic implementation, and the overall budget management showed a transformation, from financial budget to comprehensive budget. Strategic planning and budget were correctly linked, and strategic intentions ran through. Budget objectives basically reflected strategic intentions, and key tasks also ran through strategic intentions. Open up new paths for capital operation, establish overseas financing system, meet the fund demand of overseas projects of the company, and improve the debt structure of the company. Strengthen the internal control and supervision of responsibilities, and continuously optimize the standards of system, process and procedures. Cultural construction leads the practice of Jinjing development model and creates an efficient organizational atmosphere. The soft power of management has been continuously improved, and the training of business plan management process has been organized to transform business ideas into major measures and concrete actions.

(1) Construction and energy-saving glass business

1. Optimize product structure, improve quality and reduce consumption, and increase added value of products. By strengthening the process control and optimizing the adjustment process, the comprehensive finished product rate and the first-class product rate have been improved year-on-year, while the unit consumption of natural gas and electricity has been reduced. We have coordinated efforts to organize the implementation of product transformation and upgrading, and made a forward-looking strategic layout. Zibo Coating Company adjusted its product structure and differentiated itself from Tengzhou Off-line Coating Company. Throughout the year, it mainly produced double silver, three silver and automobile coating products, with high value-added products accounting for 100%. Zibo Processing has transformed its product structure to increase the output of high value-added products.

2. Introduce and strengthen the mechanism of bidding and negotiation, combine bidding and negotiation, improve the efficiency of bidding and procurement, introduce new suppliers to key raw materials, break the exclusive monopoly and reduce procurement costs.

3. The construction of standard chemical plants continued to advance, the standard documents of each module were improved and updated, the system construction was strengthened, the operation procedures of production processes were revised, and the implementation assessment scheme was formulated.

4. Optimize the assessment mechanism of marketing and production, increase the assessment weight of key driving indicators, and stimulate organizational vitality.

5. Jinjing Technology and Ningxia Jinjing were rated as national green factories, Jinjing Technology’s ultra-white float glass was recognized as a famous brand in Shandong in 2023, and Jinjing building insulating glass, tempered glass and laminated glass were selected in the Catalogue of Green Building Materials in Zibo.

(2) Soda soda business

This year, the company’s soda ash business seized the favorable opportunity and its operating performance reached a record high.

1, pay attention to excellent operation, standardization construction, combined with their own situation, unify the thinking of all staff, and create a positive organizational atmosphere.

2. Pay attention to the pre-management of safety and environmental protection, seize the opportunity, coordinate production and sales, dynamically adjust the production load every month, iterate and correct the key tasks in the current production period, strive to increase production and reduce consumption, and reduce production accidents and equipment failures; Cooperation between production and supply, balanced supply, reduction of unnecessary intermediate links, continuous reduction of procurement expenditure, improvement of procurement capacity, and substantial reduction of raw coal procurement costs.

3. Complete the renovation of one lime kiln, the renovation of four carbonization towers, and the renovation of 4# boiler with low nitrogen to improve efficiency, so as to achieve production and efficiency.

4. Optimize the customer structure, increase the proportion of sales terminal customers, and fully expand the profit-making space.

(3) Photovoltaic glass business

1. The Malay base starts standardization construction, tamps the basic management, and takes the cadre management training and employee skills training as the breakthrough point to accelerate cultural integration. Adhere to the customer-oriented value proposition, improve product delivery capacity, lock the price of soda ash in time, and reduce procurement costs. The second line of Malay Jinjing broke through many difficulties such as project funds and equipment construction period, and was put into operation in the first half of 2023, and reached its production capacity quickly.

2. Ningxia Jinjing leans towards high value-added customers, continuously improves the finished product rate of original films and deep processing, internally taps potential, reduces production unit consumption, takes gas as a breakthrough, broadens sources, breaks bottlenecks, and reduces the purchase price of main raw fuels.

3. During the reporting period, the TCO upgrade of Tengzhou Second Line was basically completed.

Ii. the industry in which the company is located during the reporting period.

(A) construction and energy-saving glass industry

In 2023, the architectural glass market went out of a wave of upward repair, but the range was limited. The main reasons were as follows: the continuous losses in the second half of 2022 made the industry’s production capacity decrease significantly, and the supply pressure was reduced in stages in early 2023; Measures such as ensuring the delivery of the building have guaranteed the basic demand, and the demand for home improvement has gradually increased, and the supply and demand structure has gradually improved, which has formed certain support for the price; In the first half of the year, the price of soda ash went down, the glass production cost was significantly improved, and the profits of the original film manufacturers rebounded significantly, once again returning to the profit range of the whole industry. With the improvement of profits, the resumed production capacity is also increasing. At the end of 2023, the production capacity reached a historical high, and the supply pressure gradually increased, which inhibited the repair performance space and put some pressure on the medium and long term.

1. Changes in industry capacity and output: According to statistics, by the end of December 2023, there were 255 float glass production lines in China, with a total daily melting capacity of 173,000 tons, an increase of 7.5% over the end of last year. In terms of industry output data, the National Bureau of Statistics data shows that at the end of December 2023, the cumulative output of flat glass in China was 969.41 million TEUs, down 3.9% year-on-year, mainly due to the time difference of production line changes during the year, resulting in no year-on-year increase in output.

2. Price change: In 2023, the price focus of glass products showed a pattern of rising first and then declining, the fluctuation range narrowed, and the overall price stabilized. The annual average price was about 1980 yuan/ton, up about 100 yuan/ton from the previous year.

(2) Soda industry

General situation of overall operation of soda ash industry in 2023;

1. Industry capacity and output change: By the end of 2023, the effective capacity of soda ash industry was about 36.38 million tons, an increase of 5.8 million tons compared with 2022, with an increase rate of about 19%. Among them, there are 11 ammonia-alkali enterprises with a total production capacity of 14.05 million tons, accounting for 39%; There are 21 joint alkali enterprises with a total production capacity of 17.33 million tons, accounting for 47%; There are 3 natural alkali enterprises with a total production capacity of 4.6 million tons, accounting for 13%; One foaming agent co-production enterprise with a total production capacity of 400,000 tons, accounting for 1%.

According to the National Bureau of Statistics and customs data, the output of soda ash industry in 2023 was 32.64 million tons, an increase of 3.44 million tons compared with 2022, with an increase of 11.8%. The annual import volume was 683,000 tons, up 500.47% year-on-year, and the export volume was 1.488 million tons, down 27.51% year-on-year.

2. Price change: In 2023, although the production capacity of the industry increased significantly, the demand for soda ash increased due to the influence of the high production capacity of float glass and the continuous increase in the production capacity of photovoltaic glass. The industry inventory remained low throughout the year, the supply and demand market was relatively balanced, and the annual average price reached a record high.

(3) Photovoltaic glass industry

In 2023, the photovoltaic calendered glass industry in China showed a positive development trend, mainly reflected in the significant increase in output. However, while the output is increasing, it also faces the dual pressures of rising costs and falling prices.

First of all, in terms of output, from January to December 2023, the cumulative output of photovoltaic rolled glass in China reached 24.783 million tons, an increase of 54.3% compared with the same period last year. This remarkable growth rate reflects the rapid development of photovoltaic industry and the increasing demand for photovoltaic calendered glass.

Secondly, in terms of cost, in 2023, the photovoltaic calendered glass industry is facing the pressure of rising cost, and the trigger factor is mainly the price fluctuation of upstream main raw materials.

Furthermore, in terms of price, in 2023, the price of photovoltaic calendered glass showed a trend of low operation. Due to the intensified market competition and the rapid release of production capacity, the average prices of 2 mm and 3.2 mm photovoltaic calendered glass were 18.7 yuan/m2 and 25.9 yuan/m2, respectively, down by 10.2% and 4.1% year-on-year.

Iii. Business of the Company during the reporting period

(A) building and energy-saving glass

The products of this plate mainly cover glass original sheet and low-e energy-saving glass, and the latter is located in green materials, serving green buildings, and providing product support for developing green materials, energy saving and emission reduction, and actively exploring zero-carbon buildings. Among them, the daily melting capacity of the original glass sheet is close to 7,000 tons, and the main operators are Jinjing Technology Headquarters, Tengzhou Jinjing and Ningxia Jinjing. The annual production capacity of Low-E energy-saving glass is 20 million square meters, and the main operators are Jinjing Technology Headquarters and Tengzhou Jinjing.

(2) Soda soda business

The main operating entity of the company’s soda ash business is Shandong Haitian Biochemical Co., Ltd., a wholly-owned subsidiary, with an annual production and sales volume of about 1.35 million tons.

(3) Photovoltaic glass business

The company’s photovoltaic glass business serves the field of green energy, and its industrial entities are located in Ningxia in the northwest of China, Malaysia and Shandong in overseas Southeast Asia. The main products are photovoltaic crystalline silicon components and thin film components for industrial support.

Iv. analysis of core competitiveness during the reporting period

1. Advantages of large-scale production and operation: The company has become one of the leading enterprises in the glass industry and soda ash industry, with the advantages of large-scale operation.

2. Improve the operation of the industrial chain, and the company’s core competitive advantage will continue to increase: the company has formed a mine/soda ash-glass-glass deep processing industrial chain. In the future, with the continuous increase in the proportion of photovoltaic glass, energy-saving glass and deep processing products, the advantages of the whole industrial chain will become more and more obvious in the future competition.

3. Rationality of regional layout of production entities: The company’s production entities are based in East China, actively deployed in North China and Northwest China, and actively expanded overseas in response to the national "Belt and Road" policy, with a reasonable strategic layout.

4. Based on the layout advantages of end customers’ needs and the technical advantages of two different process routes, embrace the trend and lay out green buildings and green energy tracks.

5. Management advantages: The formation of human resources, corporate culture, standard processes and other systems has realized the connection between the concept level, institutional mechanism level and behavior standard level of Jinjing management system, and established a development model for enterprises to achieve sustainable development.

6. "Jinjing" brand advantage. (1) Through brand promotion, Jinjing series products are applied to landmark buildings such as China Zun, Beijing Yintai Center, Bird’s Nest, Water Cube, Speed Skating Hall of Winter Olympics, Beijing Daxing International Airport, International Conference Center, Sunshine Valley of Shanghai World Expo, Shanghai Center Building, World Finance Building, Shenzhen Ping ‘an Building, Burj Khalifa in United Arab Emirates, Apple Store in the United States and Oracle Bone Inscriptions Headquarters in the United States. (2) In March 2022, Jinjing brand glass and soda ash were selected as the first batch of "Good Shandong" brands.

V. Discussion and analysis of the company’s future development

(A) the industry pattern and trends

1, building and energy-saving glass

The competition pattern will gradually change from the scale expansion driven by the previous demand to the competition pattern dominated by technological innovation and quality improvement; Although the current price-led homogenization competition still exists, after a new round of production capacity is cleared, the future market competition will no longer be a simple product price competition, but will be upgraded to a comprehensive competition that integrates resources, layout, industrial chain, technology, differentiation and many other aspects. This has been fully reflected in the head enterprises, and the living space of small-scale enterprises without any outstanding advantages will become smaller and smaller. The competitive advantage in the future will be reflected in two aspects: first, the advantage of the whole industrial chain, expanding raw fuel upstream and terminal products downstream, that is, whoever has the advantages of cost and product end and takes the lead in completing industrial transformation and upgrading, will take the lead in the competition; The second is to take a differentiated route. For most enterprises, while maintaining a certain scale, they will also gain a competitive advantage by playing a "stronger" professional field in market segments and opening up new markets and "doing new things".

(1) High quality will become the main demand direction of architectural glass. In the short term, real estate-related demand still accounts for more than 70% of the total glass demand. With the continuous decline of the source index of real estate, the total demand for architectural glass will be reduced, but the accumulated unfinished quantity over the years, the renovation of old homes, the renovation of curtain walls and the increase of unit consumption ratio will reduce the demand for hedging parts. In this process, the improvement of quality will be the main direction, especially the improvement of building energy-saving standards supported by policies and people’s pursuit of quality of life will further increase the consumption and proportion of energy-saving Low-E glass, that is, the competition of building glass will turn to functional and high-end products.

(2) The production end faces the pressure of re-contraction. The capacity contraction of float glass mainly comes from two aspects, one is profit squeeze, and the other is policy guidance. Under high supply pressure, if the demand performance is lower than expected and the price falls below the cost line, some production capacity will be forced to quit, especially the production lines with high kiln age and high cost. At present, there are about 30 production lines with kiln age over 10 years, and there is a possibility of cold repair in this part of the production line. In addition, under the background of strict management of production capacity and energy consumption indicators, some production lines are also facing certain production stoppage risks.

(3) Improving the quality and extending the industrial chain have become the choices of the head enterprises. The demand for glass is more diversified, high-quality and functional. The original piece of glass must be continuously improved in product quality and through a large number of deep processing technologies to meet the increasingly diversified and functional terminal demand, and low-end products with only basic glass functions will inevitably be phased out. In this context, the proportion of coating and deep processing of the original film manufacturers will also increase, and the delivery of the original film will be changed to the delivery of processed products to improve the overall competitiveness.

2. Soda industry

At present, there are three mainstream production processes in domestic soda industry: ammonia-alkali process, combined alkali process and natural alkali process.

Ammonia-alkali method: Influenced by the national environmental protection policy and other factors, the prices of raw materials needed by enterprises are rising continuously, resulting in high production costs. Combined soda process: In recent years, the process of ammonia synthesis by combined soda process has been developing continuously in terms of process progress and equipment upgrading, which has greatly reduced the production cost of this process. At the same time, its market competitiveness has been gradually strengthened because it produces 1 ton of sodium carbonate by-product 1 ton of ammonium chloride and accounts for the sales profit of two tons of products. With its unique production technology and low production cost, trona method has unique advantages in market competition. In recent two years, with the discovery and exploitation of trona ore, the production capacity of trona has increased rapidly, the market share has gradually increased, and its market influence has been continuously enhanced.

(1) The industry’s production capacity will continue to increase, and the supply-demand structure will undergo structural changes (relevant data comes from market public information).

Due to the limitation of production process, the production cost of ammonia-alkali process is high and the product is single, and there is no new capacity plan. Due to the accounting of two tons of products (1 ton of soda ash is produced and 1 ton of ammonium chloride is produced by-product) and the upgrading of technology and equipment in its synthetic ammonia process, there is still room for reduction in production cost, and there are still plans for new capacity in the follow-up. It is estimated that there will be about 3.5 million tons of new capacity in the next 1-2 years. Because of its unique advantages of low cost and strong market competitiveness, trona will still have 2.8 million tons of new production capacity in the next two years.

(2) The industry concentration will be further improved, forming a situation in which three mainstream production processes are in a tripartite confrontation.

The newly-increased production capacity of the industry is mainly concentrated in the enterprises with large capacity in the combined alkali and natural alkali processes, especially the natural alkali. With the continuous increase of its production capacity, the proportion of the industry is gradually increasing, while the proportion of the ammonia alkali production capacity is gradually decreasing. With the gradual increase of the production capacity of combined soda and trona, the concentration of the industry will be further improved, and the three production processes of combined soda, ammonia soda and trona will stand out.

3. Photovoltaic glass industry

The market competitive advantage of photovoltaic glass mainly lies in the cost advantage brought by the extension of scale and industrial chain, that is, photovoltaic glass enterprises expand to the upstream raw material end, and purchase based on scale, reducing production costs, and the product price difference is small, especially in the context of low profit in industrial chain, the competitive advantage is more obvious.

Regional market layout and application of new technologies are also competitive strategy choices for photovoltaic glass enterprises. Cooperate with component enterprises in the region to form strategic cooperation and occupy a place in the market; In addition to the crystalline silicon solar energy route, the thin-film solar energy market also has great market potential because of its technical advantages, especially the lamination of the two, which is another competitive field of photovoltaic glass, but it depends on the progress of the demand volume in the end market.

(1) The pattern of double increase in supply and demand continues, and the head concentration becomes more and more obvious. Under the background of double carbon, the staged supply and demand structure may interfere with the development progress of photovoltaic glass, but it will not change the general trend.

(2) On the supply side, there are a large number of production lines with ignition expectations, but due to the prosperity of the industrial chain, the enthusiasm for production may be weakened in the short term. It is estimated that the new production capacity will be around 20,000 tons in 2024, that is, the production capacity at the end of the year will reach 120,000 tons/day; Judging from the time node of the year, it is expected that the second and third quarters will be the relative peak of production; Because some production lines are facing the expiration of kilns and small tonnage lines do not have advantages, there is the possibility of cold repair.

(3) On the demand side, the installed capacity of solar photovoltaic still has a large room for continuous growth, and it is expected to reach more than 410GW in 2024, which is slightly lower than the growth rate of supply, that is, there is no obvious situation that the supply of photovoltaic glass exceeds the demand, and the supply side is ahead of the demand side for 6-12 months; Domestic photovoltaic industry accounts for a relatively high proportion in the global industrial layout, so it is necessary to pay attention to the influence of external environment or demand changes on the export of photovoltaic products.

(4) In the process of rapid growth of photovoltaic glass, the market share of head enterprises has gradually increased.

(II) Company development strategy

The company adheres to the differentiated business strategy, gives full play to the company’s unique technical advantages and industry experience, introduces and independently researches and develops high value-added products leading in high-end technology production industry, and accelerates the adjustment of existing product structure, thus continuously increasing the proportion of high value-added products in the company’s products; At the same time, the company continues to expand and extend the industrial chain, making use of the differentiated advantages of glass products to carry out industrial integration, transforming from traditional industries to green energy and green building tracks, creating a complete and efficient industrial chain and enhancing core competitiveness.

In the future, we will provide the society with more advanced green materials, more economical green buildings and more efficient green energy, and take the road of low-carbon development, green development and functional compounding.

(3) Business plan

In 2024, with the goal of achieving high-quality development and improving profitability, all business segments will actively change their business concepts, improve efficiency, continuously strengthen their operational management capabilities, and promote business transformation and upgrading.

1. Optimize the marketing organization structure, establish the strategic cooperation relationship with key key customers, and plan the construction of key customer system; Strengthen differentiated marketing.

2. Production should strengthen the setting of key driving indicators, improve quality and reduce costs, continuously promote the acquisition of key resources, and strengthen the coordination of production, supply and marketing to achieve cost reduction and efficiency increase.

3, supply to break the exclusive supply situation, strengthen centralized procurement and reduce procurement costs.

4. Continue to promote technological change, increase investment in research and development, and gradually shift to a new quality productivity model with innovation as the core.

5. Improve the matching between organizational structure and business transformation; Promote the construction of standardized companies and explore the feasibility of industrial intelligence to improve efficiency and reduce costs.

6. Provide talent guarantee for business transformation through external introduction and internal training.

(4) Possible risks

1. Risk of market demand fluctuation: The downstream customers of the company mainly include real estate industry, automobile industry, photovoltaic industry, etc. If the demand of the above industries fluctuates greatly, it may have a great impact on the company’s operating performance.

2. Risk of excessive supply release: If the production capacity in the industry grows too fast, it may lead to overcapacity, which in turn will lead to price drop and intensified market competition.

3. Risk of environmental protection policy: With the improvement of environmental protection standards, in order to meet stricter emission standards, it is possible to increase investment in environmental protection and upgrade environmental protection facilities in the future, which will increase the operating costs of enterprises and further affect their profit level.

4. Risk of rising prices of main raw materials and fuels: The production costs of glass and soda ash are easily affected by the upstream main raw materials and fuels, and the rising prices of main raw materials and fuels will increase the cost pressure.