THIRD QUARTERLY REPORT 2020

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 8128

TECHNOLOGY

AND RESOURCES LINKS

Third Quarterly Report 2021

CHARACTERISTICS OF THE GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE "STOCK EXCHANGE")

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that the companies listed on GEM are generally small and mid- sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the main board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this report, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this report.

This report, for which the directors of China Geothermal Industry Development Group Limited (the "Company") collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the GEM (the "GEM Listing Rules") of The Stock Exchange for the purpose of giving information with regard to the Company. The directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this report is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this report misleading.

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China Geothermal Industry Development Group Limited

Third Quarterly Report 2021

HIGHLIGHTS

Revenue for the nine months ended 30 September 2021 (the "Review Period") amounted to approximately HK$138,565,000.

Net loss after tax of the Group for the Review Period amounted to approximately HK$45,418,000.

No dividend was declared for the Review Period.

FINANCIAL REVIEW

The following table provides a brief summary of the financial results of China Geothermal Industry Development Group Limited (the "Company") and its subsidiaries (collectively the "Group"). For more detailed information, please refer to the unaudited consolidated financial statements for the Review Period and for the nine months ended 30 September 2020.

		Three months ended		Nine months ended
		30 September		30 September
	2021		2020	2021	2020
		HK$'000	HK$'000		HK$'000	HK$'000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Revenue
- Shallow geothermal
energy	44,922		40,659	127,460	132,435
- Air conditioning/shallow
geothermal heat pump	2,420		36,930	3,744	55,356
- Property investment and
development		2,777		3,267			7,361		10,695
		50,119		80,856	138,565	198,486
Loss for the period		(16,707)	(25,658)	(45,418)	(10,798)
Loss attributable to owners of
the parent		(16,703)	(24,538)	(43,666)	(15,365)

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During the Review Period, the Group's revenue amounted to approximately HK$138,565,000 which was mainly contributed by shallow geothermal energy utilisation business as compared with that of approximately HK$198,486,000 for the corresponding period last year. The revenue decreased by approximately HK$59,921,000 as compared with that of corresponding period last year. During the period, the revenue from the shallow geothermal energy utilization system and the sales of relevant equipment has declined which was mainly attributable to the new contracts of engineering projects secured in the first three quarters was relatively low. Also, the gross profit of the signed contracts has decreased and the number of projects under construction has decreased compared with the same period last year, resulting in the shrinkage of the income scale and the decrease of gross profit.

Furthermore, the substantial decrease in coal-to-electricity projects in Hebei region during the period led to the sales contract of HYY Ground Source Heating Devices dropped significantly as compared with the same period last year. The Group's gross profit margin for the nine months ended 30 September 2021 was 21.16% which has decreased by 7.34% as compared with 28.50% for the corresponding period last year.

Other income and gains decreased from approximately HK$24,357,000 in the corresponding period last year to approximately HK$11,710,000 for the nine months ended 30 September 2021. This was mainly due to no waiver of the account payables during the period.

Selling and distribution expenses amounted to approximately HK$15,912,000 and HK$13,608,000 for the nine months ended 30 September 2021 and 2020 respectively. The selling and distribution expenses in the Review Period increased as compared with the corresponding period last year which was mainly due to the increase of expenses for the expansion of other markets by the Group.

During the Review Period, administrative expenses increased by approximately HK$7,051,000 or 11.91% as compared with that of nine months ended 30 September 2020. The increase in administrative expenses was mainly due to the increase of HK$6,300,000 in research and development expenses of the Group for the first three quarters as compared with the corresponding period last year.

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China Geothermal Industry Development Group Limited

Third Quarterly Report 2021

Finance costs amounted to approximately HK$3,305,000 for the nine months ended 30 September 2021 as compared with approximately HK$22,534,000 for the last corresponding period. The finance cost mainly represented the borrowing cost on the loan. The decrease was mainly attributable to the repayment of loan.

For the nine months ended 30 September 2021, the loss was approximately HK$45,418,000, whereas loss was approximately HK$10,798,000 for the corresponding period in last year. The substantial increase of loss during the period was mainly due to the significant decline in the scale of revenue affected by the volatile epidemic situation and the decrease in gross profit margin resulted in a decrease in gross profit.

BUSINESS REVIEW AND OUTLOOK

During the period under review, the Group recorded approximately HK$138,565,000 in revenue as compared with approximately HK$198,486,000 i n t h e s a m e p e r i o d l a s t y e a r . R e v e n u e d r o p p e d b y a p p r o x i m a t e l y HK$59,921,000 as compared with that of the same period last year which was mainly attributable to the revenue of shallow geothermal energy utilization system and equipment sales declined as well as the gross profit of the contracts decreased. The Group's gross profit margin for the first nine months ended 30 September 2021 was 21.16% which was decreased by 7.34% from approximately 28.50% of the same period last year.

During the period under review, the loss was approximately HK$45,418,000, compared with a loss of approximately HK$10,798,000 in the same period last year. The increase in the loss during the period was mainly due to the substantial decline in the scale of revenue and the decrease in gross profit resulted by the decline in gross profit margin.

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