D&G Technology Holding Company Limited Announces Proposed Listing on Main Board of the HKEx

Captures the Opportunities Arising from the “One Belt One Road” Strategy

D&G Technology Holding Company Limited (“D&G Technology” or the “Group;”), a leading medium-to-large scale asphalt mixing plant manufacturer and service provider in China, announced its proposed listing on the Main Board of the Hong Kong Stock Exchange today. D&G Technology proposes to offer 150,000,000 shares (subject to the over-allotment option), 90% of which are for the International Offering (subject to adjustment and the over-allotment option), with the remaining 10% for the Hong Kong Public Offer (subject to adjustment), at an offer price range of HK$1.82 to HK$2.40 per share. Assuming the over-allotment option is not exercised and the offer price is set at the upper end of the pricing range, the Group is expected to raise up to HK$360 million.

The Hong Kong Public Offer will begin on 14 May 2015 (Thursday) and will end at noon on 19 May 2015 (Tuesday). The final offer price will be determined on 19 May 2015 (Tuesday) and the allotment results will be announced on 26 May 2015 (Tuesday). Trading of D&G Technology’s shares is expected to commence on 27 May 2015 (Wednesday) under the stock code of 1301. The shares will be traded in board lots of 2,000 shares.

Net proceeds will be used to finance the expansion of manufacturing facilities, research and development activities, the development of new businesses, the expansion of sales and distribution networks and for working capital and other general corporate purposes.

BOCOM International (Asia) Limited is the sole sponsor of the global offering, BOCOM International Securities Limited is the sole global coordinator, while BOCOM International Securities Limited and Guotai Junan Securities (HK) Limited are the joint bookrunners and joint lead managers.

Ms. Glendy Choi, Executive Director and Chief Executive Officer of D&G Technology, said, “Since 2003, through the development and launch of the 4000 model series of asphalt mixing plants and the “Double Drum” recycling plants with a 50% designed RAP(reclaimed asphalt pavement) added capacity, we have led the industry in China, achieving many “firsts” in the past 13 years. In 2004, the successful development of the “DG Leap” automated control system enabled the Group to build close relationships with customers over the years. We are one of the few companies that can supply one-stop asphalt mixing plants. In 2009, we were the first to launch the 5000 model series conventional plants and the “Recycling Ring” recycling plants. In 2014, we led the industry through the launch of the first “Monoblock” recycling plant in China.”

D&G Technology is a leading medium-to-large-scale asphalt mixing plant manufacturer and service provider in China, with a market share of 13.8% ranking second based on the sales volume of medium-to-large scale asphalt mixing plants manufactured in China in 2013. The Group’s core products include conventional hot-mix asphalt mixing plants (“conventional plants”) and hot-mix asphalt mixing recycling plants (“recycling plants”). Asphalt mixtures produced by D&G Technology’s plants are used in road construction and maintenance projects, including the construction and maintenance of all grades of roads and highways. The Group also offers asphalt mixing plant customer services including sales of spare parts and components and provision of equipment modification services and leasing of asphalt mixing plants through operating leases.

With headquarters in Hong Kong and a production base in Langfang, Hebei, the Group’s products are sold to many municipalities and autonomous regions in China and 18 overseas countries. It has sold more than 300 units of asphalt mixing plants to customers in China and overseas emerging markets and developed countries including Australia, Russia, Southeast Asia, Middle East, India and countries in Africa. The Group is also one of the suppliers of asphalt mixing plants in a number of major construction projects in the PRC, including Beijing-Tibet Highway (京藏高速), Beijing-Hong Kong-Macau Highway (京港澳高速), Jiaozhou Bay Bridge (膠州灣大橋) and Hangzhou Bay Bridge (杭州灣大橋).

The Group recorded stable growth driven by the construction and maintenance of roads. The CAGR of total revenue between 2012 and 2014 was 10.4%. Thanks to the Group’s efforts in promoting recycling plants, its sales has grown rapidly and the CAGR of the sales revenue of recycling asphalt mixing plants reached 88.1%, making it the main growth driver. The Group also boasted high operational efficiency with net profit achieving a CAGR of 29.3% between 2012 and 2014, and its net profit margin reached 18.7% in 2014.

D&G Technology has a strong in-house professional R&D team and innovative capability. The Group has also cooperated with research institutions and universities in China, including the Research Institute of Highways, the Ministry of Transport and the Institute of Tsinghua University, Hebei.

In 2004, D&G Technology introduced to the market the “DG Leap” automated control system, a real-time production management system which can automatically control the operation of the asphalt mixing plant, collect and analyze production data and provide maintenance recommendations to customers in a timely manner. A remote monitoring system was subsequently developed and added to “DG Leap” in 2010. To date D&G Technology has 39 registered patents in PRC, of which 3 were invention patents and 36 were utility model patents, in addition to 22 software copyrights in the PRC.

The Group is poised to capture the development opportunities presented by recently launched favourable Chinese government policies. Since the second half of 2014, the National Development Reform Council has approved infrastructure projects involving investment of more than RMB1 trillion. In addition, the PRC government is to contribute US$40 billion to set up a Silk Road Fund to provide investment and financing support to carry out infrastructure, resources, industrial cooperation, financial cooperation and other projects related to closer connections across Asia.

Moreover, in the “Twelfth Five-Year Plan”, China continues to extend the national road network. The government’s freeway development plan calls for the construction of 7 radial lines, 9 longitudinal lines and 18 transverse lines, with an available mileage of 108,000 kilometres. According to the “Twelfth Five-Year Plan –Development Outline of Highway Maintenance Management” (《「十二五」公路養護管理發展綱要》), the national and provincial highway undergoing medium-to-large scale repair works should account for not less than 17% of the total length in 2015. The total length of expressways, first grade highways and second grade highways to be repaired could reach approximately 120,000 km. The “Twelfth Five-Year Plan” also encourages environmental protection through supporting recycled asphalt mixtures in asphalt pavement maintenance and construction work, and has in recent years been increasingly stringent in its environmental protection regulations and laws. Furthermore, the 2014 version of the “Support Field for the National Major New Product Plan” has been issued to promote the development of asphalt recycling equipment. This policy directive provides significant potential for further growth in asphalt mixing plants with recycling features.

To tap the enormous market opportunities, the Group will strive to expand annual production capacity, upgrade its factory and increase the outsourcing of non-key parts or components to subcontractors, thereby enhancing production efficiency. The Group will also conduct research and development to introduce low-energy consumption products with environmentally friendly features in line with market trends and demand and high mobility products suitable for shipping to overseas countries that address the needs of the local and overseas markets. The Group will also expand its technology research centre currently located in the manufacturing facilities in Langfang, Hebei, as well as strengthen relationships with organisations including the university research institute. These measures will improve overall research and development capabilities and the technological standard, thereby helping the Group to maintain its leading position in the asphalt mixing plant industry.

Ms. Choi concluded, “We expect the market demand for our recycling plants to grow driven by the positive impact of the various national policies. We also expect the increase of production capacity of our recycling plants and introduction of new asphalt mixing plants with recycling features would enable us to capitalise on market opportunities. We are focusing on creating products with cutting-edge technology and the research and production of key parts and components. We are also developing new asphalt mixing plants with low energy consumption which are more environmentally friendly. Meanwhile, we are continuing to promote our equipment and systems modification services, particularly services improving energy-saving capability and the addition of recycling functions to conventional plants. At the same time, we are increasing the sales proportion of equipment modification services and equipment leasing in order to boost our profitability. Moreover, we also plan to extend our value chain upstream and downstream including industrialisation of key components and engaging in commodity asphalt mixture sales with our own asphalt mixing plants, aiming to create a stable revenue source and facilitate the Group’s development into a leading one-stop asphalt mixing plant service provider in China over the long term.”