Tongda Group Announces 2018 Interim Results

During the Period, on the back of the growth in shipment volume of major customers, revenue of the Group grew by 14.7% to approximately HK$4,150.3 million and gross profit margin was 23.1%. Net profit attributable to owners of the Company increased by 44.2% to approximately HK$418.9 million. Earnings per share were HK6.91 cents.

The Board has recommended payment of an interim dividend of HK2.0 cents per share for the Period (2017: HK1.6 cents).

The Group maintained a solid financial position. As of 30 June 2018, it had a pledged deposits balance and cash and cash equivalents of HK$1,496.5 million (31 December 2017: HK$1,274.2 million).

Mr. Wang Ya Nan, Chairman and CEO of Tongda Group, said, "Despite the challenging global economic situation and intense competition within the industry, as a world-leading solutions provider of high-precision components for smart mobile communications and consumer electronic products, the Group has maintained a strong relationship with domestic and foreign leading brands over the years by capitalizing on our leading technological advantages and one-stop solutions. During the Period, the Notebook Computer segment was spun off and successfully listed on the Main Board of the Stock Exchange Hong Kong. With rising shipment volumes of major customers, the Group has successfully seized the opportunities which in turn gradually boosted the overall performance."

Business ReviewHandset Casings and High-precision ComponentsDuring the Period, the performances of major customers in oversea markets were satisfactory, as the Group continued to adjust its customer mix and product portfolio, and to expand the scope of cooperation with major handset customers. This business recorded an increase of 22.9% from HK$2,355.5 million in the corresponding period of last year to HK$2,894.9 million, representing 69.7% of the total turnover.

In order to cater to the physical demand for wireless charging and changes in design of international high-end handsets, the handset market has shifted from being dominated by metal casings last year to introducing In-Mold Transfer (IMT) uni-body casing that has a similar texture with glass or adopting metal middle frames with non-metal back covers (such as 2.5D/3D IMT, composite materials, glass or ceramic back covers) as fashionable specifications. As a major domestic supplier of IMT casings, the Group focuses on providing non-metal back covers and uni-body casings for handset models with a large shipment volume and high price-performance ratio, and the demand for these models rapidly rose during the Period. Meanwhile, the demand for traditional metal handset casings remained stable, as did the Group's customer mix and product portfolio mix in this category.

As for the tri-proof (waterproof / dustproof / shockproof) and high-precision components, the additional production capacity was gradually ramped up in the first half of the year. Moreover, the Group has proactively carried out product research and development ("R&D"), staff recruitment and training for the new project of a major customer in the second half of the year, in order to handle further diversified products and orders during that time. The specialized team of the Group has worked closely with its customers and has currently participated in their different business divisions, in order to achieve horizontal expansion of multiple products and to lay a firm foundation for a long-term partnership.

Smart Electrical Appliances CasingsThis business primarily engages in manufacturing control panels, metal accessories and casings for high-end electrical appliances for Chinese and international brands. During the Period, its turnover increased by 32.4% from HK$381.8 million in the corresponding period of last year to HK$505.6 million, representing 12.2% of the total turnover. Its products include smart electrical appliances, such as air-conditioners, washing machines and refrigerators, which are applicable to the Internet of Things.

Household and Sports GoodsThe segment supplies durable household goods, household utensils and sports goods to European and U.S. brands. During the Period, its turnover increased by 33.2% from HK$267.7 million in the corresponding period of last year to HK$356.6 million, representing 8.6% of the total turnover.

Network Communications Facilities and OthersDuring the Period, turnover of this segment has amounted to HK$309.7 million, representing 7.5% of the total turnover. The Group mainly produces set-top box casings and interior decorations of automotive for customers in Europe and the U.S. The Group has currently secured over 30 orders from ten automotive brands, for some of which design and trial production have been underway in the first half of this year. Together with the stable production for the existing projects, the overall business has developed rapidly.

Percentage of the Total Revenue by Product Type for the Six Months Ended 30 June 2018 Compared with the Previous Corresponding Period:

2018 2017Handsets Casings and High-precision Components 69.7% 65.1%Smart Electrical Appliances Casings 12.2% 10.6%Household and Sports Goods 8.6% 7.4%Network Communication Facilities and Others 7.5% 10.2%Notebook Computers 2.0% 6.7%

ProspectsWith the rapid growth in the past few years, the handset industry is tending to maturity with the continuous integration of various brands in China. The Group faces increasingly intensified competition, which requires it to optimize its own competitive advantages in order to secure its market share. Its proprietary surface decorating technology is applicable to different materials, forming a matrix with various craftsmanship and technologies for all types of products to lead the market in both quality and scale, enabling the Group to address the shifts in trends more efficiently and comprehensively, as well as to tap the opportunities in the ever-changing markets.

Looking ahead, the proportion of the high-precision components business will keep increasing at a fast pace. The Group is working closely with various business divisions of its major customers. In the future, it will dedicate greater efforts to R&D so as to broaden its own technical capabilities. At the same time, the Group will remain dedicated to coordinating and carrying out development with customers in close concert at the initial design stage in order to seize greater involvements in projects and gain a larger share of their business. It would also proactively expand the product lines with its customers so as to forge a solid and lasting partnership.

Mr. Wang concluded, "In the face of the unstable global markets and maturing handset industry, together with the potential risks of a US-China trade dispute and the swift depreciation of the Renminbi, our gross profit margin may be subject to continuous pressure if situation worsens in the second half of 2018. The Group will keep abreast of changing market conditions leveraging its own technological development capabilities and quality customer base. Internally, we are committed to increasing the Group's production efficiency and comprehensive competitiveness through enhancing our capacity in product competitiveness and cost control and management, in order to tackle the challenges ahead and achieve sustainable growth."

About Tongda Group Holdings LimitedTongda Group is the world's leading solutions provider of high-precision components used in smart mobile communication and consumer electronic products. The Group has been listed on the Main Board of The Stock Exchange of Hong Kong Limited since 2000, under the Information Technology - IT Hardware category, and has been selected as a constituent stock in the Hang Seng Composite LargeCap & MidCap Index, Hang Seng Composite Industry Index - Information Technology, Hang Seng SCHK ex-AH Companies Index, Hang Seng SCHK Mainland China Companies Index, Hang Seng Stock Connect Hong Kong Index, Hang Seng Stock Connect Hong Kong MidCap & SmallCap Index and Hang Seng Global Composite Index. The Group garners the DHL/SCMP Hong Kong Business Awards 2015 - Enterprise Award and has been selected to the Forbes Asia's 200 "Best Under A Billion" list in 2016. Mr. Wang Ya Nan, Chairman and CEO of the Group has been named the winner in the technology category of EY Entrepreneur of the Year China 2016.

Leveraging its leading metal casings, In-Mold Lamination ("IML") and insert molding business technology, as well as the stable and high-quality clientele, the Group has established a solid presence in the markets for handsets, smart electrical appliances and automotive interior decorative business. The Group is dedicated to satisfying customers' needs through establishing global service networks in various regions, with strategically located production bases in Shishi city, Xiamen, Shanghai and Shenzhen, as well as R&D centres in Shanghai and Taiwan.

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