() The business review of the Board of Directors in the first half of 2023 is as follows:
I. Main businesses of the Company during the reporting period
(1) Overview In the first half of 2023, the company continued the previously established business development strategy of cultivating, investing or expanding mergers and acquisitions, and made every effort to build a business with good long-term development prospects and large room for growth, so as to speed up the layout of various sectors and the development needs of subsequent industrialization, further optimize the allocation of the company’s assets, actively improve the company’s fundamentals, and enhance the company’s overall competitiveness and sustainable development capability. The company continuously optimizes the management level, improves the operating efficiency, constantly standardizes corporate governance, timely adjusts the organizational structure according to the business situation, and controls various costs and expenses. During the reporting period, the company’s business mainly includes military business, agricultural business and biological health business. (2) Description of main business and products 1. Military business sector 1.1 Main business and products Since its establishment, Zhuding Gongda, a holding subsidiary of the company, has been committed to the development, industrialization and large-scale promotion of new generation electronic packaging materials and products, such as high-silicon aluminum alloy, gradient silicon-aluminum composite materials and heterostructure functional materials. Its products are mainly used in advanced radar, high-power semiconductor integrated circuits, aerospace, satellite communications, lasers and other aerospace military fields, and are an important part of high-power microwave electronic devices, which play a supporting role in protecting, radiating and electromagnetic shielding the integrated circuits and modules of high-power microwave electronic devices. During the reporting period, Dingding University of Technology continued to uphold the belief of "serving the country with science and technology and casting Dingding with ingenuity", aiming at the difficulties, high points and pain points of the preparation technology of new materials for metal military industry and the downstream military application, and continued to overcome difficulties. Through close cooperation with downstream military customers, the application process of new materials such as high-silicon aluminum alloy material, gradient silicon-aluminum composite material, heterostructure composite material and 4047 aluminum alloy cover material in the downstream has been effectively accelerated, and cutting-edge products with high technology content and high application value have been continuously contributed to China’s military and aerospace industry. Xinruiguang, the holding subsidiary of the company, is mainly engaged in precision machining and special welding manufacturing of lightweight, high-precision and high-strength important metal functional parts in aircraft, aircraft and vehicle-mounted equipment in aviation, aerospace, shipbuilding and armament industries, which are embodied in various machining parts, welding parts, forgings and powder metallurgy parts. During the reporting period, Xinruiguang, together with two holding subsidiaries, actively explored military customers such as aerospace, rocket army, navy and army weapons, expanded production lines and increased production capacity to fully meet customer requirements. 1.2 Main business models 1.2.1 procurement mode The procurement modes of Zhuding Gongda and Xinruiguang are all on-demand procurement, that is, according to the customer’s orders, the procurement plan is prepared, the purchase orders are issued, and all kinds of raw and auxiliary materials are purchased from suppliers in a centralized or batch manner. 1.2.2 Production mode The technical and production departments of Zhuding Gongda and Xinruiguang carry out process analysis according to the drawings and technical parameters provided by customers, complete product design, determine the process plan and compile the process regulations. After determining the production task, the production department will schedule the production according to the contract delivery time. All functional departments and production teams of the production department strictly implement the production control procedures according to the process regulations and work instructions formulated by the technical department, and complete the production tasks within the specified time. In the production process, the quality inspection department strictly monitors the quality of each production link to ensure the quality of products. After the finished products are put into storage, the warehouse management department will check the receipt with the contract and handle the product shipment. 1.2.3 sales model Zhuding Polytechnic University and Xinruiguang mainly adopt the direct selling mode, and their customers are mainly related military enterprises and military research institutes affiliated to China Electronics Technology Group Co., Ltd., () Group, Aerospace Science and Industry Group, Ordnance Group, CSSC, Chinese Academy of Sciences and other military research groups. For the sales or technical services of newly developed products, Zhuding Polytechnic University and Xinruiguang both become research or contracting units by participating in the bidding, competitive negotiation or accepting commissioned research tasks organized by customers. For the products that have been batch-produced and finalized, based on the requirements of military support and confidentiality, military products are usually supplied by R&D enterprises as suppliers to ensure production after finalization, and the procurement adopts supporting supply mode. 1.2.4 R&D mode Both Zhuding Polytechnic University and Xinruiguang adopt independent research and development mode, which mainly includes two categories: model follow-up research and self-selected research and development. Model follow-up research focuses on the overall technical index requirements of downstream customers’ models and equipment, and carries out synchronous research and development from the aspects of development and design, raw material selection, material design and development, manufacturing process, quality and performance testing, etc., in order to verify the product design characteristics requirements, process stability and reliability, and production cost-utility ratio. At present, both Zhuding Gongda and Xinruiguang have participated in the follow-up research of several models of downstream customers. Self-selected R&D is the independent research and development conducted by Zhuding University of Technology and Xinruiguang based on the demand of market, scientific research institutes and military enterprises or the development trend of technology. On the one hand, it focuses on improving product quality, R&D and production efficiency, and improving product maturity. On the other hand, it develops new products, technologies or services, and recommends them to downstream customers for trial use, so as to meet or create market demand and maintain the leading technology level in sub-sectors. 2. Agricultural business sector 2.1 Main business models In the first half of 2023, Wanfang Maijie, the holding subsidiary, continued its basic business framework based on the purchase, storage and sales of raw grain, with scientific and technological innovation as the core and supply chain business as the driving force. Within the scope of basic framework business, Wanfang Maijie has formulated three basic strategies for development. First, strictly control quality risk management, stabilize the original purchasing and storage business, and ensure that the output value target is achieved. Second, through scientific and technological innovation, strengthen brand building, create diversified industries, find market differences, and improve product profitability. Third, strengthen capital liquidity, improve turnover rate, reduce financing costs, and realize grain financialization. Through the establishment of the basic business framework and basic strategy, we have confirmed the direction for reaching the output value target and profit target in 2023, and ensured the sustained and stable development of Wanfang Maijie. 2.2 Main products and application fields Songyuan is located in the middle and west of Jilin Province, on the black soil belt of the three major cold regions in the world. The soil in this area is soft and fertile, rich in nitrogen, phosphorus, potassium and all kinds of organic matter, and the organic matter content is about 10 times that of loess. It is known as the "black gold" in the soil, which is most suitable for the cultivation of high-quality rice and is the main production base of high-quality japonica rice in China. The raw grain of Chongmi brand is taken from Jiangshui irrigation area in Qianguo County, which grows naturally under sufficient sunlight. After many processes such as selection, husking, rice milling and color selection, it finally enters the homes of ordinary people. In addition to the vertical distribution in the rice field, pet rice brand series products should also extend horizontally the local agricultural and sideline products that have been included in the category of national geographical indication protection varieties, such as Gan ‘an yellow millet, Gan ‘an red pepper, Gan ‘an mutton, etc. By enriching and perfecting the product types in both vertical and horizontal directions, pet rice brand series products should not only go out of Jilin, but also go to the whole country. 3, biological health plate In recent years, the company has done more exploration and accumulation in the fields of big health, biological products and modern agriculture. In March 2022, the company participated in Weihai Dongpu Biotechnology Co., Ltd. through capital increase, and successfully cut into the astaxanthin industry. In November 2022, the company signed the Investment Agreement between Wanfang Town Investment Development Co., Ltd. and Runtian Zhiguang (Beijing) Agricultural Technology Co., Ltd. (hereinafter referred to as "Runtian Zhiguang") to build an annual production of 12,000 tons of Phaffia rhodozyma astaxanthin project (hereinafter referred to as "astaxanthin project") in Jiangyuan District, baishan city, Jilin Province, in December 2022. RMB 0 million was used to establish Jilin Wanfang Dongpu Astaxanthin Industrial Technology Development Co., Ltd., of which RMB 70 million was subscribed by the company, accounting for 70% of the registered capital; The contribution subscribed by Runtian Zhiguang is RMB 30 million, accounting for 30% of the registered capital. On April 10, 2023, the astaxanthin project passed the information registration of enterprise investment projects in Jilin Province, and the project is continuing to advance. The company increased investment in R&D, actively created an astaxanthin industrial chain ecosystem, and accelerated the offline and online marketing of astaxanthin eggs and skin care products. During the reporting period, the company’s first astaxanthin egg brand store "Bai Su Zhen" opened in Beijing, and astaxanthin eggs have settled in a large supermarket in Beijing, and will expand to cities outside Beijing in the second half of the year. Second, the core competitiveness analysis (1) Military business sector 1. Advantages of management team and technical personnel The R&D team of Zhuding University of Technology is composed of experts and doctors in the field of materials science and engineering technology. Its leader, Professor Xing Dawei, is a doctor of engineering in the School of Materials Science and Engineering of Harbin Institute of Technology, and a senior visiting scholar in the University of Tennessee and Oak Ridge National Laboratory. His research fields involve "high-silicon aluminum alloy electronic packaging materials", "copper-based alloy electrical contact materials", "preparation technology and application basis of magnetic micro-wires", "ferromagnetic micro-wire absorbing and its electromagnetic shielding effectiveness" and "composition design of bulk amorphous alloys". Professor Xing Dawei has rich experience in the development of new materials and achieved remarkable results. He has presided over many scientific research projects such as the general project of National Natural Science Foundation (research on optimization and coupling mechanism of GMI effect of magnetic microfibers based on magnetic domain analysis), the special fund for scientific and technological innovation of returnees, and the key research project of Municipal Science and Technology Bureau (low-cost manufacturing technology of electronic packaging materials for high-power devices). He has participated in the research work of related national "863" plan, pre-research fund for final assembly and other projects, and won the second prize of natural science in the Science and Technology Award of the Ministry of Education, the first prize of Heilongjiang University Science and Technology Award, and the second prize of Heilongjiang Province Science and Technology Award. In addition to Professor Xing Dawei, Zhuding University of Technology also has a group of professionals with many years of experience in the fields of materials science and engineering, precision machining, etc., including one doctor and one master. In addition, Zhuding University is backed by Harbin Institute of Technology, which is also very beneficial for the continuous introduction of relevant professionals. The core management and technical team of Xinruiguang are all veterans in the domestic military industry, all of whom have worked in the military industry for many years. They have deep technology, accumulated experience and rich experience in military project development in the fields of special welding and precision machining of aviation, aerospace, missiles, ships and other related components, laying a solid foundation for the smooth development of subsequent related businesses. 2, product performance advantages Graded silicon-aluminum functional materials successfully developed by Zhuding University of Technology and applied in batches in the downstream aerospace military industry and other fields belong to the third generation+advanced electronic packaging materials, which well solve the three major pain points in the process of aerospace military electronic packaging, namely, it is difficult to give consideration to the thermal conductivity and welding sealing performance of materials, and the packaging system such as packaging shell, chip integrated circuit and cover plate is cracked, expanded and damaged due to the mismatch of thermal expansion properties of materials, and the packaging integration is difficult to improve. The double-sided gradient silicon-aluminum advanced composite material developed by Zhuding University of Technology makes it possible for the traditional brick radar T/R module design to be more advanced chip module design, which can double the integration of radar T/R module at most, and has very important value and significance for realizing high integration, miniaturization and weight reduction of radar products. The preparation technology of heterostructure composite materials successfully developed by Zhuding University of Technology has realized the integrated forming and preparation technology of two or more metal composite materials such as gradient silicon aluminum, silicon aluminum, aluminum, copper and titanium and metal simple material. Heterostructure composite materials have three advantages, which are incomparable to single composite materials and simple materials, such as highly simplified material preparation process and greatly improved reliability. Its preparation technology belongs to the high point of advanced material preparation technology and has high practical application value and good application prospect. At present, Zhuding University of Technology has closely designed, experimented and verified a number of new products related to heterogeneous composite materials with downstream military customers, and many of them have been applied in small batches and achieved output value. At present, Zhuding University of Technology has mastered the processing technology of 4047 aluminum alloy military plate, and the related products have been verified by downstream military customers, and their performance indexes have reached or exceeded those of similar products imported from abroad. At present, the related products of Zhuding University of Technology have been applied in batches in the downstream military customers, and the imported products have begun to be replaced. 3. Advantages of technology research and development At the beginning of its establishment, the concept of Zhuding University of Technology was to fully develop high-tech and high-performance new materials and try to avoid homogenization competition and price war with competitors. Under the leadership of Professor Xing Dawei, the development of new materials related to Zhuding University of Technology has achieved remarkable results, and it has achieved practical applications or technological breakthroughs in many new material preparation subdivisions, such as the third generation advanced metal electronic packaging material high-silicon aluminum alloy, advanced functional composite new materials gradient silicon aluminum, SiC/Al, graphene /Al, heterostructure materials, and 4047 aluminum alloy imported substitute cover materials. In the future, Zhuding University of Technology will continue to develop more advanced materials according to the needs of downstream military customers to better meet the needs of downstream customers. Up to now, Zhuding University of Technology has been recognized as the fourth batch of "Little Giant" enterprises specializing in specialty and novelty of the Ministry of Industry and Information Technology, and Harbin Enterprise Technology Center. The project "New Materials and New Structures for Composite Gradient Electronic Packaging" of Zhuding University of Technology has been approved by the Science and Technology Department of Heilongjiang Province as a major scientific and technological achievement transformation project in Heilongjiang Province, and the gradient silicon-aluminum electronic packaging materials produced by Zhuding University of Technology have been recognized as the first batch of single champion products of municipal manufacturing industry in Harbin by Harbin Bureau of Industry and Information Technology. Xinruiguang has a professional technical team in the special welding of military metal parts. The team members have participated in the formulation of the aerospace standard "QJ20469-2016 Laser Welding Process Specification for Titanium and Titanium Alloys" and cooperated with Harbin Institute of Technology in the field of special welding. Xinruiguang’s technical center has a team of experts in non-standard equipment design, precision CNC machining, precision connection, welding deformation control and simulation technology, which has unique advantages in welding equipment integration and application, and has strong secondary design and structural analysis capabilities for aerospace products and complete precision measurement, physical and chemical and nondestructive testing capabilities for complex surfaces. 4, customer quality advantage Based on advanced material preparation technology and leading product performance advantages, the current customers of Zhuding University of Technology are mainly the 13th Institute, 55th Institute and 29th Institute under China Electronics Technology Group, 33 institutes under Aerospace Science and Technology Group, 23 institutes under Aerospace Science and Industry Group, China Aerospace Research Institute under China Academy of Sciences and other well-known research institutes in the industry. All the above customers belong to high-tech military research institutes, which are in a leading position in technology and have strong research and development strength in their respective sub-fields. With the acceleration of national defense construction and the continuous promotion of integration of defense and civilian technologies and the securitization of military assets, related customers have developed rapidly. By cooperating with the above-mentioned customers, Zhudinggong can achieve synchronous and rapid development with customers, and on the other hand, it can keep itself at the forefront of technology in the industry to continuously walk in the forefront of the industry. Based on the differentiated competitive advantages in the fields of special welding and precision machining, Xinruiguang has established good business relations with well-known domestic military enterprises such as subsidiaries of Aerospace Sanjiang Group, related institutes of Ordnance Group, related factories of CSSC, Luoyang Aerospace Institute, Hunan Jintian, (), (), etc., which has laid a solid foundation for the follow-up business. (2) Agricultural business sector The construction and development of Wanfang Maijie, a holding subsidiary of the company, is based on Songyuan City, Jilin Province, which is located on the beautiful Songhua River and at the southern end of Songnen Plain, with rich land resources, flat terrain, fertile soil and good ecological environment. It is an important commodity grain base in China, known as "granary, beautiful forest, meat warehouse and fish town", and its economic aggregate ranks third in Jilin Province. The core team of Wanfang Maijie has been engaged in agriculture for many years, rooted in rural areas, rooted in safety, has extensive agricultural resources and rich experience, and runs through the whole industrial chain of agricultural industry. The core management team has rich practical experience, which has formed a complete production and sales model, whether it is the purchase, weighing, drying, storage and sales of grain or the logistics, processing and promotion of agricultural products. (3) Biological health sector The production technology used in the company’s annual output of 12,000 tons of Phaffia rhodozyma astaxanthin project comes from Weihai Dongpu Biotechnology Co., Ltd., a shareholding company. After years of painstaking research, its R&D team has developed a unique technology for preparing astaxanthin with microbial additives. In this technology, natural Phaffia rhodozyma is used as a strain to prepare natural astaxanthin with high antioxidant capacity through modern biological high-density fermentation technology. Compared with Haematococcus pluvialis method, this technology has many advantages, such as not being limited by regional climate, cheap and easily available raw materials, short production cycle and low production cost, and it is a very promising batch production technology of astaxanthin. At present, the company’s technical team has overcome the technical bottleneck of high astaxanthin production by Phaffia rhodozyma, and the astaxanthin content reaches 1.3%, which is three times higher than the national standard. The R&D team of Phaffia rhodozyma Astaxanthin Project consists of experts and talents in the fields of biotechnology and fermentation engineering, including 2 doctors, 4 masters and 8 engineers. Its team has more than 10 kinds of biological products, such as technical development, clinical, production and market management experience, and won many awards in the biological field. Iii. Risks faced by the Company and Countermeasures (1) the risk of market competition Although the company took the lead in making breakthroughs in gradient silicon-aluminum composite, heterogeneous structure composite and 4047 aluminum alloy cover plate, it is not excluded that other competitors will also make breakthroughs and compete with the company in the market in the future. The fiercer market competition will affect the overall income and profit level of the company. Countermeasures: The company will continue to increase the development of new products and market development, maintain a certain competitive advantage, and strive to maintain a leading position in which people have advantages over others. (2) Risks caused by natural disasters The development of agriculture can not be separated from the natural environment. Because of the complexity and variety of natural disasters in China, the agricultural economy closely related to the changes of natural environment will also suffer losses, some of which are even disastrous. Countermeasures: In view of the risks caused by possible natural disasters, the company will improve the resilience of infrastructure, enhance the awareness of disaster prevention, and scientifically use new technologies to reduce the impact of agricultural natural disasters. (3) risks brought by entering new fields With the development of the company’s new business strategic layout, it will face challenges and risks in terms of talents, technology, market and goodwill generated by mergers and acquisitions. Countermeasures: The company will reserve the corresponding talents and resources through all-round organizational structure and system design, through the combination of integration and introduction, fully mobilize the enthusiasm of team work, establish a perfect market-oriented incentive and restraint mechanism, strengthen quality control management, and deepen the construction of internal control system, so as to optimize the company’s overall operation ability, establish an effective management system, and resolve or reduce the risk of entering new fields.
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