Monday, November 30, 2020
 
Columnist
Martin Hennecke
 
XIEZHONG INTL
HKEx Stock Code : 03663 
 
Corporate Profile
Principally engaged in the design, production and sale of automotive heating, ventilation and cooling (“HVAC”) systems and a range of automotive HVAC components.

Business Review - For the year ended December 31, 2012

The Group is one of the leading suppliers of HVAC systems for motor vehicles in China. We are principally engaged in the development, production and sales of automotive HVAC systems and a range of automotive HVAC components. Our automotive HVAC systems and HVAC components are mainly used in sport utility vehicles (“SUVs”), pickup trucks and heavy trucks. We also supply HVAC systems and HVAC components for construction machineries and other types of vehicles, such as light trucks, multi-purpose vehicles (“MPVs”), sedans and buses. Currently, we have two production bases, one in Jiangning District of Nanjing, Jiangsu Province for the manufacturing of HVAC systems and HVAC components, and the other one in Fushun Economic Development Zone in Fushun, Liaoning Province for the manufacturing of HVAC systems (installation of compressors are excluded).

According to the statistical data of 中國汽車工業協會 (China Association of Automobile Manufacturers), the number of motor vehicles manufactured and sold in 2012 were 19,271,800 units and 19,306,400 units respectively, representing a year-on-year growth of 4.6% and 4.3% respectively. Amongst those motor vehicles, the number of passenger vehicles manufactured and sold were 15,523,700 units and 15,495,200 units respectively, representing a year-on-year growth of 7.2% and 7.1% respectively; the number of commercial vehicles manufactured and sold were 3,748,100 units and 3,811,200 units respectively, representing a year-on-year decrease of 4.7% and 5.5% respectively. In 2012, the government of China imposed more stringent macro-economic adjustment measures, thereby lowering the economic growth rate of China. Together with more intensive competition in the motor vehicles industry and the increasing labour costs in China, the profit of the Company in 2012 decreased when compared with that in 2011.

During the year, the turnover was RMB589.7 million, representing a decrease of 4.9% when compared with that of RMB619.9 million in 2011. The gross profit as a whole was RMB155.6 million, representing a decrease of 9.6% when compared with that of RMB172.2 million in 2011. The profit attributable to equity shareholders was RMB68.0 million, representing a decrease of 21.0% when compared with that of RMB86.1 million in 2011. The Company recorded listing expenses in the income statement of RMB5.0 million in 2012, which was RMB5.2 million in 2011.

We acknowledged the importance of research and development and continued to upgrade its capability in this respect so as to meet the demand for research and development of new products. During the year, we successfully developed the HVAC systems for medium and high-end sedan model C70 of Beijing Automotive Group Co., Ltd., sedan model H230 and H220 of Huachen Automotive Group Holdings Company Limited and AUV passenger buses of Beiqi Foton Motor Co., Ltd. and commercial production also started within the year. In September 2012, the Human Resources and Social Security Department of Jiangsu Province (江蘇省人力資源和社會保障廳) granted Xiezhong Nanjing, a subsidiary of the Company, the work station status for implementing post-doctoral projects under the post-doctoral innovation and practice centre. We would take this opportunity to further upgrade our research and development capabilities.

Business Outlook - For the year ended December 31, 2012

Looking forward, the economy of China will enter into a new stage featuring the reinforcement of free domestic markets. As a result, domestic demand arising from urbanisation will become the main drive of economic growth and will also facilitate the transformation and upgrading of various industries. We believe that the automotive industry will become one of those directly benefiting from the said development. The Group will continue to strengthen its leading position in the market of automotive HVAC systems for SUVs, pickup trucks and heavy trucks in China, and will spare no effort to explore the market of HVAC systems for sedans. Being an integral part of the automotive industry, the market of HVAC systems for sedans is immense. With our experience accumulated in the market of HVAC systems for sedans for years, we strongly believe that the HVAC systems for sedans will represent a higher percentage in the turnover of the Group in the future.

In order to maintain the Group's core competitiveness, the Group will continue to focus on the development of its principal business, namely HVAC systems for motor vehicles. The Group will further enhance its competitive edges in the market by pursuing the following goals.


1) Product Research and Development



The strong research and development capabilities of the Group have been one of the key reasons for its success. In future, we will strive to strengthen our research and development capabilities by recruiting more talents and increasing research and development expenditure. We will strengthen the co-operation in research and development activities with universities, motor vehicle manufacturers and suppliers of air-conditioning components of the Group. Moreover, we are in the course of constructing a research and development building with a gross floor area of 15,631 sq.m. in Jiangning, Nanjing City, which is expected to be put into operation in 2013.

On the other hand, since environmental protection has been a major concern of the world in recent years, the Ministry of Science and Technology of China announced《電動汽車科技發展“十二五”專項規劃》(the “Twelfth Five-year” Plan Specialised in the Development of Electrical Automotive Technologies*) in March 2012, pursuant to which vehicles using new energy would be the focus of the development of the automotive industry in the future. We have started the research and development of air conditioning systems for electric vehicles since 2008 and commenced to provide Beiqi Foton Motor Co., Ltd. with air conditioning systems for electric vehicles since 2010. We will continue to co-operate with other parties for the development of air conditioning systems for electric vehicles.

2) Cost Advantage

In order to maintain our long-term competitiveness and a stable profit margin, we will endeavour to maintain our cost advantages. We will optimise our manufacturing process and production efficiency by ways of research and development of new products, technical improvement and automated production, and increase our market share for the sake of enhancing the economies of scale.

3) Upgrading of Production Base

In order to further improve our services to our customers, lower the distribution costs and strengthen our strategic co-operation with major customers, except for the production base in Jiangsu Province, we are planning to continue to upgrade our production bases in Liaoning Province and Beijing City for the sake of lowering the transportation costs and further improving our service quality to customers. The plant in Beijing City is expected to complete in 2013.

4) Market Penetration

We will make use of our competitiveness to secure a larger market share in the medium and high-end market eventually. In 2012, the Group started the commercial production of HVAC systems for medium and high-end sedan model C70 of Beijing Automotive Group Co., Ltd., and also successfully secured orders for components of sedan model T91/T93 from 神龍汽車有限公司 (Dongfeng Peugeot Citroen Automobile Co., Ltd.*), thus laying a solid ground for our penetration in the medium and high-end market.

Source: Xiezhong Intl (03663) Annual Results Announcement
Chairman Chen Cunyou Issued Capital (shares) 800M
Par Value HKD 0.01 Market Capitalisation (HKD) 744M
 
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