MIRA INFORM REPORT

Report No. :	345637
Report Date :	20.10.2015

IDENTIFICATION DETAILS

Name :	LETONG CHEMICAL CO., LTD.
Registered Office :	Letong Industrial Park, Guantang, Jinding, Zhuhai Guangdong Province 519085 Pr
Country :	China
Financials (as on) :	30.06.2015
Date of Incorporation :	13.11.1996
Com. Reg. No.:	440400000015734
Legal Form :	Shares Limited Company
Line of Business :	Subject is engaged in manufacturing and selling inks.
No. of Employees :	699

RATING & COMMENTS

MIRA’s Rating :

Ba

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Status :	Satisfactory
Payment Behaviour :	No Complaints
Litigation :	Clear

NOTES:

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – March 31, 2015

Country Name	Previous Rating (31.12.2014)	Current Rating (31.03.2015)
China	A2	A2

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

CHINA - ECONOMIC OVERVIEW

Since the late 1970s China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role - in 2010 China became the world's largest exporter. Reforms began with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, growth of the private sector, development of stock markets and a modern banking system, and opening to foreign trade and investment. China has implemented reforms in a gradualist fashion. In recent years, China has renewed its support for state-owned enterprises in sectors considered important to "economic security," explicitly looking to foster globally competitive industries. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2014 stood as the largest economy in the world, surpassing the US for the first time in modern history. Still, China's per capita income is below the world average.

After keeping its currency tightly linked to the US dollar for years, in July 2005 China moved to an exchange rate system that references a basket of currencies. From mid 2005 to late 2008 cumulative appreciation of the renminbi against the US dollar was more than 20%, but the exchange rate remained virtually pegged to the dollar from the onset of the global financial crisis until June 2010, when Beijing allowed resumption of a gradual appreciation. In 2014 the People’s Bank of China (PBOC) doubled the daily trading band within which the RMB is permitted to fluctuate.

The Chinese government faces numerous economic challenges, including: (a) reducing its high domestic savings rate and correspondingly low domestic consumption; (b) facilitating higher-wage job opportunities for the aspiring middle class, including rural migrants and increasing numbers of college graduates; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy's rapid transformation. Economic development has progressed further in coastal provinces than in the interior, and by 2014 more than 274 million migrant workers and their dependents had relocated to urban areas to find work. One consequence of population control policy is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the North - is another long-term problem. China continues to lose arable land because of erosion and economic development. The Chinese government is seeking to add energy production capacity from sources other than coal and oil, focusing on nuclear and alternative energy development.

Several factors are converging to slow China's growth, including debt overhang from its credit-fueled stimulus program, industrial overcapacity, inefficient allocation of capital by state-owned banks, and the slow recovery of China's trading partners. The government's 12th Five-Year Plan, adopted in March 2011 and reiterated at the Communist Party's "Third Plenum" meeting in November 2013, emphasizes continued economic reforms and the need to increase domestic consumption in order to make the economy less dependent in the future on fixed investments, exports, and heavy industry. However, China has made only marginal progress toward these rebalancing goals. The new government of President XI Jinping has signaled a greater willingness to undertake reforms that focus on China's long-term economic health, including giving the market a more decisive role in allocating resources. In 2014 China agreed to begin limiting carbon dioxide emissions by 2030. China also implemented several economic reforms in 2014, including passing legislation to allow local governments to issue bonds, opening several state-owned enterprises to further private investment, loosening the one-child policy, passing harsher pollution fines, and cutting administrative red tape.

Source : CIA

Company name and address

LETONG CHEMICAL CO., LTD.

LETONG INDUSTRIAL PARK, GUANTANG, JINDING, ZHUHAI

GUANGDONG PROVINCE 519085 PR CHINA

TEL: 86 (0) 756-3383338/6886888

FAX: 86 (0) 756-3383339/6886000

EXECUTIVE SUMMARY

Date of Registration : NOVEMBER 13, 1996

REGISTRATION NO. : 440400000015734

LEGAL FORM : SHARES LIMITED COMPANY

CHIEF EXECUTIVE : ZHANG BINXIAN (LEGAL REPRESENTATIVE)

REGISTERED CAPITAL : cny 200,000,000

staff : 699

BUSINESS CATEGORY : manufacturing & TRADING

REVENUE : CNY 229,228,000 (JAN. 1, 2015 TO JUN. 30, 2015)

EQUITIES : CNY 595,175,000 (AS OF JUN. 30, 2015)

WEBSITE : www.letongink.com

E-MAIL : lt@letongink.com

PAYMENT : NO COMPLAINTS

MARKET CONDITION : COMPETITIVE

FINANCIAL CONDITION : FAIRLY stable

OPERATIONAL TREND : FAIRLY STEADY

GENERAL REPUTATION : AVERAGE

EXCHANGE RATE : CNY 6.33 = USD 1

Adopted abbreviations (as follows)

SC - Subject Company (the company inquired by you)

N/A – Not available

CNY – China Yuan Ren Min Bi

OPERATIONAL TREND & GENERAL REPUTATION:

This section aims at indicating the relative positions of SC in respect of its operational trend & general reputation

Operational Trend:- General Reputation:-

Upward Excellent

Steady Good

Fairly Steady Fairly Good

Ordinary Average

Fair Fair

Stagnant Detrimental

Downward Not known

Not known Not yet be determined

Not yet be determined

LEGAL STATUS & HISTORY

SC was established as a shares limited company of PRC with State Administration of Industry & Commerce (SAIC) under registration No.: 440400000015734 on November 13, 1996.

SC’s Organization Code Certificate No.: 63280402-3

SC’s registered capital: cny 200,000,000

SC’s paid-in capital: cny 200,000,000

Registration Change Record:-

Date	Change of Contents	Before the change	After the change
--	Registered Capital	cny 75,000,000	cny 200,000,000

Current Co search indicates SC’s shareholders & chief executives are as follows:-

Name of Shareholder (s) (As of Jun. 30, 2015)	% of Shareholding
Liu Qiuhua	13
Shenzhen Zhongrun Huaxin Investment Enterprise (Limited Partnership)	3.22
Ren Gang	1.5
Xu Xuedan	1.23
Liu Dan	1.19
Tianjin Yixuan Equity Investment Fund Management Co., Ltd.	1.11
Yang Chen	0.9
Yunnan International Trust Co., Ltd.-Huiyingtong No. 60-Asset Trust	0.8
Wang Wenjuan	0.77
Yunnan International Trust Co., Ltd.-Huiyingtong No. 11-Asset Trust	0.75
Other shareholders	75.53

SC’s Chief Executives:-

Position	Name
Legal Representative, Chairman and General Manager	Zhang Binxian
Deputy General Manager	Liu Ming
	Li Hua
Director	Jia Shaohua
	Sha Zhenquan
	Wan Liangyong
Supervisor	Kuai Shuhong
	Zhang Xuemei

RECENT DEVELOPMENT

SC is listed in Shenzhen Stick Exchange with code 002319.

SHAREHOLDER CHART & BACKGROUND

Name (As of As of Jun. 30, 2015) % of Shareholding

Liu Qiuhua 13

Shenzhen Zhongrun Huaxin Investment Enterprise (Limited Partnership) 3.22

Ren Gang 1.5

Xu Xuedan 1.23

Liu Dan 1.19

Tianjin Yixuan Equity Investment Fund Management Co., Ltd. 1.11

Yang Chen 0.9

Yunnan International Trust Co., Ltd.-Huiyingtong No. 60-Asset Trust 0.8

Wang Wenjuan 0.77

Yunnan International Trust Co., Ltd.-Huiyingtong No. 11-Asset Trust 0.75

Other shareholders 75.53

MANAGEMENT

Zhang Binxian, Legal Representative, Chairman and General Manager

-------------------------------------------------------------------------------------------------------

Gender: M

Age: 54

Qualification: Master Degree

Working experience (s):

From 1996 to present, working in SC as legal representative, chairman and general manager

Liu Ming, Deputy General Manager

-------------------------------------------------------

Gender: M

Age: 47

Qualification: University

Working experience (s):

From 2007 to present, working in SC as deputy general manager

Li Hua, Deputy General Manager

----------------------------------------------------

Gender: M

Age: 39

Qualification: University

Working experience (s):

Before, as director of SC

From 2013 to present, working in SC as deputy general manager

Director

----------

Jia Shaohua

Sha Zhenquan

Wan Liangyong

Supervisor

--------------

Kuai Shuhong

Zhang Xuemei

BUSINESS OPERATION

SC’s registered business scope includes manufacturing and selling various inks, coatings and related ancillary products.

SC is mainly engaged in manufacturing and selling inks.

Brand: LETONG

SC’s products mainly include:

Gravure Inks

Flexo Inks

Heat Transfer Inks

Water based Inks

Anti-forgery Inks

UV Inks

Plastic Spraying Inks

SC sources its materials 100% from domestic market. SC sells 80% of its products in domestic market, and 20% to overseas market, mainly U.S.A. and Europe.

The buying terms of SC include Check, T/T and Credit of 30-60 days. The payment terms of SC include Check, T/T, L/C and Credit of 30-60 days.

*Major Customers*

-----------------------

Shanghai Ziquan Label Co., Ltd.

Dongguan Huayuan Package Co., Ltd.

Chongqing Dingzheng Package Materials Co., Ltd.

Foshan Sanshui Chengyuan Printing Packing Co., Ltd.

*Major Suppliers*

---------------------

Guangxi Yulin Dongsen Chemical Co., Ltd.

Zhongshan Xinhui Chemical Products Co., Ltd.

Zhuhai Longshun Chemical Co., Ltd.

Foshan Shunde Yutai Cotton Cellulose Co., Ltd.

Dongguan Chengtai Chemical Co., Ltd.

Staff & Office:

--------------------------

SC is known to have approx. 699 staff at present.

SC owns an area as its operating office and factory, but the detailed information is unknown.

RELATED COMPANY

Subsidiaries:

==========

Shanghai Letong Package Materials Co., Ltd.

Zhuhai Letong New Materials Technology Co., Ltd.

Huzhou Letong New Materials Technology Co., Ltd.

Zhengzhou Letong New Materials Technology Co., Ltd.

Zhuhai Zhitong Investment & Development Co., Ltd.

PAYMENT

Overall payment appraisal:

( ) Excellent ( ) Good (X) Average ( ) Fair ( ) Poor ( ) Not yet be determined

The appraisal serves as a reference to reveal SC's payments habits and ability to pay. It is based on the 3 weighed factors: Trade payment experience (through current enquiry with SC's suppliers), our delinquent payment and our debt collection record concerning SC.

Trade payment experience: SC’s supplier refused to make any comments.

Delinquent payment record: None in our database.

Debt collection record: No overdue amount owed by SC was placed to us for collection within the last 6 years.

BANKING

The bank information of SC is not filed in SAIC.

FINANCIALS

Consolidated Balance Sheet

Unit: CNY’000	As of Dec. 31, 2013	As of Dec. 31, 2014	As of Jun. 30, 2015
Cash	107,607	26,558	48,012
Notes receivable	74,161	34,150	44,629
Accounts receivable	223,296	226,748	241,481
Advances to suppliers	48,814	3,220	8,847
Interest receivable	0	0	0
Dividends receivable	0	0	0
Other receivable	4,600	3,649	3,718
Inventory	91,361	101,467	94,099
Other current assets	7,020	8,897	7,047
	------------------	------------------	------------------
Current assets	556,859	404,689	447,833
Long-term equity investment	0	0	0
Investment real estate	0	3,950	3,765
Fixed assets	220,837	415,198	493,657
Construction in progress	219,957	91,355	5,483
Intangible assets	27,070	28,039	27,873
Goodwill	0	0	0
Long-term prepaid expenses	595	455	390
Deferred income tax assets	7,051	10,724	11,918
Other non-current assets	7,358	180	90,000
	------------------	------------------	------------------
Total assets	1,039,727	954,590	1,080,919
	=============	=============	=============
Short-term loans	142,432	119,000	226,500
Held for trading financial liabilities	0	0	0
Notes payable	88,986	45,538	35,516
Accounts payable	89,462	54,357	85,158
Advances from clients	8,977	6,541	11,002
Payroll payable	6,140	6,638	3,075
Tax payable	7,946	6,204	7,671
Interest payable	266	498	666
Other payable	27,782	7,020	4,904
Other current liabilities	14,701	21,625	28,833
	------------------	------------------	------------------
Current liabilities	386,692	267,421	403,325
Non-current liabilities	64,400	96,206	82,419
	------------------	------------------	------------------
Total liabilities	451,092	363,627	485,744
Equities	588,635	590,963	595,175
	------------------	------------------	------------------
Total liabilities & equities	1,039,727	954,590	1,080,919
	=============	=============	=============

Consolidated Income Statement

Unit: CNY’000	As of Dec. 31, 2013	As of Dec. 31, 2014	From Jan. 2015 to Jun. 30, 2015
Revenue	564,232	597,580	229,228
Cost of sales	417,281	467,494	165,021
Taxes and surcharges	3,421	2,977	1,532
Sales expense	37,440	37,381	17,387
Management expense	64,705	63,461	30,794
Finance expense	3,451	12,696	9,139
Investment income	0	0	0
Non-operating income	827	727	639
Non-operating expense	966	113	172
Profit before tax	32,728	10,514	4,585
Less: profit tax	7,691	1,605	499
Profits	25,037	8,909	4,086

Important Ratios

=============

	As of Dec. 31, 2013	As of Dec. 31, 2014	As of Jun. 30, 2015
*Current ratio	1.44	1.51	1.11
*Quick ratio	1.20	1.13	0.88
*Liabilities to assets	0.43	0.38	0.45
*Net profit margin (%)	4.44	1.49	1.78
*Return on total assets (%)	2.41	0.93	0.38
*Inventory / Revenue ×365/180	60 days	62 days	74 days
*Accounts receivable / Revenue ×365/180	145 days	139 days	190 days
*Revenue / Total assets	0.54	0.63	0.21
*Cost of sales / Revenue	0.74	0.78	0.72

FINANCIAL COMMENTS

PROFITABILITY: AVERAGE

The revenue of SC appears average in its line.

SC’s net profit margin is average.

SC’s return on total assets is average.

SC’s cost of sales is average, comparing with its revenue.

LIQUIDITY: FAIR

The current ratio of SC is maintained in a normal level.

SC’s quick ratio is maintained in a fairly good level.

The inventory of SC is maintained in an average level.

The accounts receivable of SC appears large.

The short-term loans of SC appear large.

SC’s revenue is in a fair level, comparing with the size of its total assets.

LEVERAGE: AVERAGE

The debt ratio of SC is low.

The risk for SC to go bankrupt is average.

Overall financial condition of the SC: Fairly Stable.

CONCLUSIONS

SC is considered medium-sized in its line with fairly stable financial conditions. The large amount of accounts receivable and short-term loans may be a threat to SC’s financial condition.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.64.82
UK Pound	1	Rs.100.55
Euro	1	Rs.73.75

INFORMATION DETAILS

Analysis Done by :	KAS
Report Prepared by :	TRU

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
--	NB	New Business	--

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.