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Chaowei Power’s Revenue Increases by 28.8% to RMB8,308 million in 1H 2014

Benefits from Industry Consolidation and Rigid Demand Expands Market through Technology Innovation and Comprehensive Development

Financial Highlights (Unaudited)

(Hong Kong, 1 September 2014) Chaowei Power Holdings Limited (“Chaowei Power” or the “Group,” stock code: 0951), a leading lead-acid motive battery manufacturer in China, announced its unaudited interim results for the period ended 30 June 2014 (“Period”).

During the first half of 2014, revenue of Chaowei Power increased by 28.8% to RMB8,308 million, mainly due to the significant growth in sales volume. Gross profit increased by 21.6% to RMB1,192 million as compared to the same period of 2013. Gross profit margin decreased to 14.3%, mainly due to the increase in sales rebates given to customers. Profit attributable to owners of the Company amounted to RMB125 million, with a decrease of 42.1% as compared to the same period last year and basic earnings per share of the Group amounted to RMB0.12.

The Chinese government has implemented administrative and regulatory measures including the Entry Requirements of the Lead-acid Battery Industry (“Entry Requirements”). A direct result of these measures is that a large number of substandard enterprises had been shut down or their production had been halted, further accelerating the industry consolidation. According to the Ministry of Industry and Information Technology (“MIIT”), the number of enterprises in the lead-acid battery industry in

the PRC decreased substantially from approximately 1,930 in 2011 to around 400 enterprises as at the beginning of 2013, and the trend continued during the Period. The “Opinions on Promoting the Regular Development of the Lead-acid Battery and Recycled Lead Industries” (“Regular Development Opinions”) required substandard enterprises not passing the environmental inspections and the Entry Requirements to be eliminated by the end of 2015. The lead-acid battery industry is expected to further consolidate in the coming two years. Six subsidiaries of the Group, accounted for more than half of its total production capacity, were included in the three lists of a total 50 “Enterprises Engaging in Lead-acid Batteries Production and Recycling Operations in Compliance with Environmental Protection Laws and Regulations” announced by Ministry of Environment Protection (“MEP”), while the remaining production capacity is also expected to pass the required inspections. Meanwhile, 江西新威動力能源科技有限公司 (Jiangxi Xinwei Power Technology Co., Ltd.), a wholly-owned subsidiary of the Group, was also selected by MEP and MIIT as one of the first group of enterprises that fulfills the Entry Requirements.

Leading-edge techniques for environmentally-friendly products
Chaowei Power is one of only a few companies in the PRC that have successfully applied the Enclosed Battery Formation Process to large scale production, and is the only lead-acid motive battery manufacturer which has comprehensively applied gel battery technology. During the Period, the utilisation rate of Enclosed Battery Formation Process in the Group rose significantly to more than 95% of the production capacity, representing the highest level within the industry. Additionally, the Group has also achieved total cadmium-free production, in compliance with the Entry Requirements in 2013. The Group has more fully implemented “green production” through installing advanced emissions control equipment in subsequently opened new plants. Chaowei Power’s environmental protection efforts have gained recognition from regulatory bodies and the general public. In May 2014, the Group was the first lead-acid battery enterprise to garner the “China Baosteel Environmental-friendly Prize,” the highest recognition of environmental protection in the PRC.

Strategic production plan
Chaowei Power has formulated and managed a comprehensive production strategy and its major production facilities are located in close proximity to markets and regions in seven provinces with the strongest demand for lead-acid motive batteries namely in Shandong, Jiangsu, Henan, Zhejiang, Anhui, Jiangxi and Hebei provinces. During the Period, the Group also actively optimised its existing production facilities and constructed new production lines to boost its annual capacity from 120 million battery units at the end of 2013 to the current output of 130 million units per year, thus topping the industry.

Nationwide sales network
Regarding the primary market, the Group has maintained good relationships with renowned Chinese electric bike manufacturers, including Yadea, EverMaster, Luyuan, Lima, Bidewen, etc. Regarding the secondary market, the Group’s extensive distribution network covers every province and region. The number of the Group’s independent distributors in secondary markets has increased from 1,383 at the end of June 2013 to 1,783 at the end of June 2014, representing an increase by 28.9%. The Group is committed to reducing intermediaries within sales channels in a bid to increase the profitability of its sales outlet.

Leading-edge research and development
As at 30 June 2014, Chaowei Power has engaged more than 280 talents possessing professional high-tech expertise. In addition, the Group has forged research and development (“R&D”) partnerships with leading R&D organizations and professional institutions, of which include Tsinghua University and other institutions, in order to supplement its R&D capability. As at 30 June 2014, the Group had been awarded a total of 652 patents, consisting of 48 invention patents, 456 utility model patents and 148 design patents. During the Period, approximately RMB203 million has been allocated to R&D by the Group, accounting for 2.4% of the total revenue.

Diversified product portfolio
Its R&D efforts to support new product development are complemented by the Group’s strong emphasis on exploring new markets, in order to keep pace with the shifting market trends and maintain its competitiveness. In April 2014, the Group entered into a framework investment agreement with MOLL, a German lead-acid motive batteries manufacturer, to collaborate on the development of automotive start-stop batteries. This bilateral collaboration provides the Group with enhanced product technology and facilitates its future expansion into the production of automotive start-stop batteries, thus enriching its technologic expertise and adding long term strategic investment value.

Future Development
Chaowei Power has consistently led the market of lead-acid motive batteries for electric bikes in China, with its share soaring to 38.3% at the end of 2013. The promotion of the Entry Requirements is in its final stage resulting in the less competent firms falling from market. The trend provided a good opportunity for the Group to further expand its market share, affirming its position as a leading industry player.

In view of the unhealthy levels of environmental pollution and traffic congestion, electric bikes offering environmentally-friendly, energy-saving, safety and convenience features provide an effective solution to these serious issues. Beyond this, electric bike is also an ideal vehicle which complements the “Inter-village Road Network Construction Project” introduced by the Chinese government. Therefore, the popularity of electric bikes rose gradually. In addition, with a rapidly aging population combined with the continually increasing need for transportation of agricultural products, the demand for electric tricycles as transportation by the elderly and for short-distance cargo transport has surged. Keen demand for electric vehicles is also anticipated to support China’s burgeoning logistics industry.

Driven by ongoing industry integration and rigid customer demand, both the electric bike and lead-acid motive battery industries are expected to experience steady development. Frost & Sullivan forecasts the compound annual growth rate of the sales volume for electric bikes and electric bike lead-acid batteries in China from 2014 to 2017 to reach 9.5% and 10.9% respectively. Facing such favourable environment, the Group will allocate greater resources to the development of technology and products as well as marketing activities. Meanwhile, it will maintain its focus on advancing its leading edge in product diversity and innovation through R&D of accessories, the ongoing research of its expert team and establishment of a research center.

With respect to products, the Group intends to ride on its current competitive advantages to pursue advances in new products, while closely monitoring market trends to develop diversified products. The Group will continue its research and production of storage batteries and lithium batteries on a small scale to prepare a solid technical base in order to seize future business opportunities in this segment. In addition, the start-stop battery is becoming one of the major areas for future development of the Group. With respect to its marketing efforts, the Group adheres to the philosophy of partnership and integration and is committed to brand building and cooperation with independent distributors, aiming to establish expansive marketing networks to fully exploit the vast potential in the market.

The Group firmly believes that it can achieve profit growth and further development from it foundation of production facilities and processes that meets the current standards through enhancing its R&D capability and stronger collaboration with its distributors.

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