Shenguan () : Announces 2017 Interim Results - Overall Operations Remains solid Product Diversification Continues to Make Progress

(18 August 2017 - Hong Kong) - Shenguan Holdings (Group) Limited ("Shenguan Holdings" or the "Company", together with its subsidiaries, the "Group", HKEx stock code: 829), the largest manufacturer of edible collagen sausage casing products in China, today announces its interim results for the period ended 30 June 2017 (the "Period").

The Group's revenue for the Period was approximately RMB429.9 million, representing a decrease of approximately 0.2% as compared with the same period last year. Profit attributable to owners of the Company decreased by approximately 62.7% to approximately RMB33.2 million. If the return received from the contract in progress of approximately RMB25.6 million recorded in the first half of 2016 was excluded, the profit attributable to owners of the Company should have decreased by approximately 47.6% as compared with the same period last year. Earnings per share was RMB1.02 cents.

During the Period, the sales volume of the Group's collagen sausage casing products increased by 12.2% year-on-year. However, the Group continued to cut price for boosting sales of certain old sausage casing during the first half of the year which had dragged down the overall average selling price. The average selling price still dropped slightly in the first quarter of 2017 when comparing with the fourth quarter of 2016, but it started to rebound from the second quarter of 2017 as inventory pressure eased. The average selling price for the second quarter of 2017 was similar to that for the fourth quarter of 2016.

Unit costs of production remained stable as the Group adopted cost control measures such as energy savings and wastage reduction, mechanization and labour force savings, but overall operating leverage has decreased and led to a decrease in the Group's net profit. The gross profit margin decreased from 33.5% to 25.5% for the Period. The decrease in gross profit margin is mainly due to a decline in the average selling price.

During the Period, the Group continued to make progress in product diversification. "Meday" collagen chips and "COLL-FULL" collagen piece facial masks are both qualified for mass production and the products of the two brands were officially launched for sales in early 2017. However, the sales contribution remains small for the Period. Selling and distribution expenses as a percentage of revenue increased to approximately 4.7% for the Period from approximately 2.0% for the Prior

Period, mainly due to the increase in marketing costs for the promotion of various new products including the "Meday" collagen chips and the "COLL-FULL" collagen piece facial masks, as well as the increase in wages due to the expansion in sales team.

The Group has appointed Chinese actress Xu Lu in May this year, as ambassador for the "COLL-FULL" brand. In the future, the Group will further strengthen market planning and marketing accordingly so as to capture a larger market share.

Moreover, the Group is increasing its equity interests in Guangdong Victory Biotech Co., Ltd. and Ferguson (Wuhan) Biotech Company Limited respectively during the Period. The transaction for Guangdong Victory's equity interests was completed during the Period.

Looking forward to the second half of 2017, the Group will continue to follow the established Thirteenth Five-Year Plan, and use its collagen technologies as the core technology, its collagen sausage casing business as the foundation, and collagen-based products such as foods, healthcare products, cosmetic products, medical products and medical materials as the development direction, through automation and knowledge-based measures to achieve product diversification and strengthen the development of the health industry and emerging strategic industries, thereby developing Shenguan into a world-class base for collagen research and development and application, and the largest supplier of collagen raw materials. The Group will launch new products, such as solid collagen, in the second half of 2017.

While adhering to the mission of "de-stocking, adjusting structure, maintaining stable growth", the Group will enhance development in setting up the Group's management model, and sales and marketing system so as to maintain its leading position in the collagen sausage casing market. The Group will also establish a quality control model and introduce stringent quality responsibility system to ensure the quality objectives are achieved. At the same time, the Group will innovate to improve labor productivity per capita, reduce the costs of energy consumption, improve the quality and lower the costs.

The Group will take into account the effect of climate and sales seasonality in the production management and make full use of abundant production capacity when formulate annual, monthly and daily production plans. The Group will avoid production arrangements during the summer period with high energy consumption and low production efficiency, and during the higher tariff periods of each day, in order to reduce energy consumption and improve production efficiency.

The Group will also consolidate its marketing and sales team. In particular, it will step up the establishment of the marketing team for non-casing new products for further expansion of the sales channels of its products, formulate sales incentive policy and customer support in order to accomplish sales targets.

Ms Zhou Yaxian, the Group's chairman, concluded, " Better livelihood, continuously rising consumption and diversified consumer needs will create new market opportunities. The recovery of pork consumption from the decline in the past two years will benefit the Group's development. As the Group's overall operations remains solid and overall financial position remains sound and

healthy, the Group believes that the above initiatives will continue to foster its sustainable development, promote the development of the collagen sausage casing business and further widen the application of collagen technology to generate fruitful returns for shareholders of the Company in the long term."

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About Shenguan Holdings

Shenguan Holdings (HKEx stock code: 829) is the largest manufacturer of edible collagen sausage casing products in China, specializing in the manufacture and sale of edible collagen sausage casing in China. Since 2015, the Group has further expanded into the business of pharmaceutical products, food and skin-care products. The Group is listed on the Main Board of The Stock Exchange of Hong Kong Limited.

For further information, please visit Shenguan Holdings' website: http://www.shenguan.com.hk/

For further inquiries, please contact: Y Communications

Charis Yau / Natalie Tang

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Email: cyau@ycom.hk / ntang@ycom.hk