Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
HUAZHANG TECH
HKEx Stock Code : 08276 
 
Corporate Profile
The Group is principally engaged in the research and development, manufacture and sale of industrial automation systems and sludge treatment products for the paper-making industry and other industries such as metallurgy and electricity in the PRC. The Group's industrial automation systems and sludge treatment products are custom-built in accordance with the specifications and requirements provided by its customers and are mainly sold to customers in the paper-making industry in the PRC. According to Euromonitor, in 2011, the Group had a market share of approximately 5.7% of the industrial automation system market for the paper-making industry in the PRC and a market share of approximately 0.1% of the entire industrial automation system market in the PRC in the same year. The Group is also engaged in the provision of after-sales services to its existing customers.

Majority of its industrial automation systems are made from its self-developed software and hardware sourced from its suppliers, and are used in industrial production applications to improve production line efficiency by controlling the production process. The Group's industrial automation systems mainly comprise four types of products, namely drive control system, distributed control system, machine control system and motor control centre. The Group's sludge treatment products are dewatering systems made from its self-developed software and hardware sourced from its suppliers and are used for the separation of solid from liquid in the handling of industrial waste in order to reduce sludge disposal costs and to meet the PRC government's requirements for environmental protection. The Group's sludge treatment products include filter press and steel-belt filter press. The Group also sells the hardware of its sludge treatment products separately. The Group also provides after-sales services, including on-site engineering and maintenance services, as well as the repair and replacement of spare parts and components, to customers of both its industrial automation systems and sludge treatment products. After-sales services are provided to its customers free-of-charge within the warranty period and its customers would be required to pay the Group for such services after the expiry of the warranty period.

The Group estimates that the aggregate net proceeds available to the Group from the Placing (after deducting underwriting fees and estimated expenses payable by the Group in connection with the Placing, and assuming a Placing Price of HK$1.20 per Placing Share will be approximately HK$59.5 million (assuming the Offer Size Adjustment Option is not exercised). The Group currently intends to apply such net proceeds for several purposes, including the development of both its industrial automation system business segment and sludge treatment products business segment, in the following manner: for increasing its production capacity by building a new production plant of approximately 11,000 sq.m. (which includes an industrial automation plant of approximately 6,000 sq.m. and a sludge treatment plant of approximately 5,000 sq.m.) and improvement of the roads and the greenery in the factory area; for improvement of the production process using the high/low voltage power supply systems, addition of new laboratory facilities and testing facilities; for a new production line and a control centre equipment for production of cabinets. Cabinet is one of the components of its industrial automation systems and the Group intends to make its own cabinets for its production use; for its product development and innovation. In respect of its industrial automation business, the Group has finalised the design, confirmed the main raw materials to be used for production and completed the system solution for its own RGU, which is one of the components currently used by its industrial automation systems. The Group also has plans to (i) further develop newer models of the distributed control system, the drive control system as well as the motor control centre; and (ii) complete the corresponding software registrations. In respect of its sludge treatment business, the Group has plans to design and develop various new products to cater for customers from other industries such municipal sludge treatment, coal and gas, nonferrous metals and chemical treatment. The Group also has plans to further develop newer models of the drive control system, distributed control system and the motor control centre, as well as to complete the corresponding software registrations; for increasing the market awareness and enhancing the image and/or reputation of the Group. The Group intends to carry out the following marketing activities: (i) placing advertisements in magazines for the paper-making industry; (ii) design and distribute marketing materials such as product brochures and corporate videos; (iii) participate in the Beijing paper-making equipment exhibition; (iv) participate in the Shanghai paper-making equipment exhibition; (v) organise marketing activities for both current and new products; for improving its current information management system by upgrading the current ERP system; and for working capital and other general corporate purposes.
Chairman Zhu Gen Rong Issued Capital (shares) 272M
Par Value HKD 0.01 Market Capitalisation (HKD) 495M
 
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