INNOV’s 2022 Annual Board Operation Review

The content of the 2022 annual board of directors management review of Yinuowei is as follows:

1. Business Overview

Business model:

Since its establishment in 2003, it has focused on the development of the main business of polyurethane, focusing on the R&D, production and sales of downstream derivatives of EO and PO, extending the industrial chain vertically, diversifying horizontally, resisting the periodicity of the chemical industry, and improving Anti-risk ability. Adhere to technology research and development as the drive, customer demand as the guide, close to the market in depth. Relying on years of technology accumulation in the field of EO, PO and AA downstream derivatives, taking advantage of independent innovation, developing high value-added products, and improving market competitiveness, polyurethane prepolymers are already in the leading position in the industry. aspect has a leading role. Polyether, combined polyether, polyester polyol and other series products have stable quality, stable growth in market share, and outstanding competitive advantages. Through continuous technological innovation, the development of differentiated products, the provision of diversified services, and the advantages of the upstream and downstream industrial chains, the company's profits have continued to grow.

1. Sales mode

The company mainly adopts the product sales model of "payment first, goods later". The company implements a strict credit policy, and only gives a certain credit line and credit period to a small number of high-quality customers with high reputation or stable cooperation, considering factors such as their qualifications, cooperation situation and sales scale. The company's products are sold by the business department, which is divided into different business departments according to the products. The personnel of each business department are composed of sales personnel and R&D personnel, forming a departmental structure of "research and sales integration", and giving full play to the vitality of the business department. The company mainly adopts the direct sales model for product sales, subdivides customers, digs deep into customer needs, increases the development of strategic cooperation customers, conducts market expansion in a planned way, and improves marketing efficiency. While deeply cultivating the domestic market, the company actively explores the international market. In 2016, the company officially established a Dubai office. In 2017, the company established a Vietnam office. The products have been exported to more than 60 countries and regions in Southeast Asia, the Middle East, Europe and the United States. The company's export business has a strict system process, from customer inquiry, contract signing, production and stocking, chartering and booking, commodity inspection, export declaration, preparation and copying of customs clearance documents, delivery of documents to final file archiving are carried out in strict accordance with the standards , to control the foreign trade risk. At the same time, during the process of customers using the products, the company will provide continuous technical guidance, and the R&D team will go deep into the customer's production site to provide customers with high-quality consulting services.

2. Purchasing mode

The procurement adopts the mode of combining centralization and decentralization, and adopts the method of centralized procurement for bulk raw materials. Integrate the resources of each subsidiary through centralized procurement, give full play to the advantages of large-scale procurement, obtain more favorable prices, avoid repeated procurement of similar products, reduce procurement frequency and supply-demand docking costs, reduce procurement costs, and improve procurement efficiency. During the reporting period, the procurement channels were improved, strategic partnerships were established with some suppliers, and annual plans were determined to ensure supply. Establish a complete supplier evaluation system, regularly evaluate suppliers objectively from different dimensions, select high-quality suppliers to establish long-term, close, stable and friendly cooperative relations, and ensure the stability of product quality and timeliness of supply from the source .

3. R&D mode

Insist on focusing on the main business, professional focus, adhering to the concept of scientific development and high-quality development, insisting on technological innovation and quality first, and strengthening product quality improvement with continuous technological supply to enhance the core competitiveness of enterprises. Adhere to the market as the center,According to the relevant provisions of the “Guidelines for Management of Accreditation” (Guokefahuo [2016] No. 195), high-tech enterprises need to be re-certified after 3 years. If the aforementioned entities fail to pass the re-certification of high-tech enterprises in the future, they will no longer enjoy relevant Tax incentives, corporate income tax will be paid at a rate of 25%.

Countermeasures:

1) Innovation is the primary driving force leading the development of the enterprise, continue to increase the ability of scientific and technological innovation, and accelerate the research and development of new technologies and new products.

2) Continue to carry out in-depth cooperation with colleges and universities, make full use of college resources, give full play to the company's talent accumulation advantages, and accelerate the company's continuous research and development capabilities and technological innovation advantages

5. Exchange rate fluctuation risks and countermeasures

The impact of exchange rate fluctuations on the company is mainly manifested in two aspects: first, if the RMB continues to appreciate sharply, the price advantage of the company's products in the international market will be weakened, thereby affecting the company's operating performance; Second, the company's export business is mainly settled in US dollars, and exchange gains and losses have a certain impact on the company's performance. As the company's overseas sales revenue continues to increase, if the RMB exchange rate is unstable in the future, the company may have greater exchange risk due to exchange rate fluctuations.

Countermeasures:

1) The company's International Trade Department keeps up with market conditions and chooses USD or RMB for settlement according to exchange rate fluctuations.

2) The International Trade Department and the Finance Department keep an eye on the exchange rate trend and settle foreign exchange in a timely manner to avoid exchange rate risks, increase exchange income, and ensure the profit margin of the company's export business.