At present, the market demand for the automotive industry and construction machinery industry has grown strongly. Drive shafts are used as parts and components for automobiles and construction machinery. Their market demand has grown at the same time. The development situation is gratifying. As a leading enterprise in the industry of non-equal-speed drive shafts, Far East Drive will soon enter the Chinese securities market, undoubtedly receiving the attention of investors. In recent years, as the company seized the historical opportunity of the rapid development of China's automobile and construction machinery industry, it continuously improved and improved its management, technology, production, marketing, etc., and established its leading position in the domestic non-equal-speed driveline shaft supporting market. Excellent ability. The company is currently further expanding its competitive advantage by extending its upstream industrial chain and its nationwide network.

The leader in the domestic drive shaft industry

Xuchang Far East Driveshaft Co., Ltd. is mainly engaged in the research, development, production and sales of non-constant speed drive shafts and related parts and components. It is the largest non-constant speed drive shaft manufacturer in China. At present, the company has an annual production capacity of 1.4 million sets of non-equal-speed transmission shafts, capable of producing more than 5,680 varieties. The company's products are divided into four major series of light, medium, heavy and construction machinery, of which heavy-duty and engineering machinery series Mainly used for heavy trucks, loaders and cranes.

After the establishment of Xuchang Far East Transmission Shaft Co., Ltd. in 2004, the incentive mechanism was put in place, the management efficiency was greatly improved, and the company focused on the non-equal-speed driveshaft sector, and its operating performance improved steadily. In particular, in recent years, the corporate culture has been implemented to drive the development of the company’s economy and technology, adhere to the “innovation perfect every day” business philosophy, through the introduction, digestion, absorption and re-innovation, so that the development of the enterprise has become the largest in the industry in the country, the most varieties Full production shaft with the strongest production capacity. Even in the financial crisis of 2008, performance still grew. In 2009, the company's operating income and net profit reached 617 million yuan and 131 million yuan, respectively, an increase of 1.8% and 39.5% year-on-year respectively.

Due to the high technical content, high unit value, and high gross profit margin of heavy-duty trucks and construction machinery driveshafts, subject to capacity constraints, the company’s investment in these two market segments is relatively large and the market share is high. In 2009, the company’s The market share of heavy-duty trucks and construction machinery transmission shafts was 20.1% and 56.3%, respectively. With the production of raised investment projects, after the company's production capacity has increased, it will gradually increase its investment in the drive shafts of the sub-markets such as light trucks and passenger cars, and its market share will also increase.

In the future, the company will continue to focus on the R&D and production of automotive and engineering machinery driveshaft products. While consolidating its position as a non-equal-speed driveshaft leader, it will also develop and develop constant speed driveshafts; and use Xuchang headquarters as a key process processing base to radiate across the country. Establish a production assembly plant and market network; expand overseas markets on the basis of consolidating the domestic market, integrate into the global auto parts procurement system, commit to serving domestic and foreign host manufacturers with high-performance products, and create the world's top transmission shaft product supply Business.

Leading technology unique

In recent years, Far East Drive can maintain a high level of gross profit, mainly because it owns domestic leading technology. As the key components of the automobile, the driveshaft has high requirements for product quality and manufacturing process, especially the drive shaft for heavy trucks and construction machinery. The company has always attached importance to technology research and development, after long-term efforts and technology precipitation, has accumulated a wealth of drive shaft manufacturing technology, the overall level can be in line with international standards.

At present, the company is a high-tech enterprise, which has Henan Province Automobile Transmission Shaft Engineering Technology Research Center and Xuchang City Transmission Shaft Engineering Technology Research Center, with complete testing and testing equipment. As of December 31, 2009, the company had 440 various technical personnel, accounting for 30.22% of the total number of employees. It has established extensive technical cooperation relationships with Changchun Automobile Research Institute, China Automotive Engineering Research Institute, Tsinghua University, Jilin University, Zhengzhou Light Industry College, and other scientific research institutes, which plays an important role in improving the design and development capabilities of enterprises and maintaining the leading position of the industry. effect.

The company has been committed to non-constant speed drive shaft R & D and production, through long-term technology accumulation, has a leading domestic drive shaft manufacturing technology, the overall level and international standards. At present, the company has ten utility model patents and two design patents. Spline nylon coating technology, drive shaft face flange gear technology and welding technology have a leading position in the industry. Through years of accumulation and improvement of process flow and production line design, the company has formed a unique "U-type numerical control one-flow production line", effectively increasing production efficiency.

The “Xuqichuan” trademark owned by the company is a famous trademark of Henan Province and a key protection trademark of Henan Province; the company’s leading product automobile transmission shaft assembly has been awarded “China Top Brand Product”.

Develop upstream control costs

From 2006 to 2009, the annual production capacity of the company's driveshafts reached 80, 100, 130 and 1.4 million sets respectively. Apart from the shrinking downstream demand caused by the financial crisis in 2008, the company’s capacity utilization rate continued to maintain a high level of over 90%. Since 2006, the company has achieved outstanding profitability through effective cost control measures. The gross profit margin of heavy truck series and construction machinery series products is maintained at around 30%, and the gross profit margin of other products has increased year by year. Judging from the net interest rate, it has remained above 10% in recent years. By optimizing the technological process, the company has increased the material utilization rate from the industry's average of 75%-80% to 85%-90%, and some products have even increased to 99%. Greatly reduce the production costs of the company's products.

The main raw materials needed by the company's production are steel, universal joints, blanks, and supports, which account for about 73% of the product cost, and are the main factors influencing the cost. In recent years, raw material prices have fluctuate greatly. The company actively cooperates with the airport to upgrade its products, and has more new products, which effectively and steadily raises the overall price level. If the price of raw materials fluctuates too much, the company and upstream and downstream will make appropriate adjustments to the prices of the products according to the circumstances. As a whole, the company can maintain product price volatility lower than raw material price volatility, have certain bargaining power, and have stable profitability. [next]

Strategic layout of the country properly

Due to the limited production capacity, the company's non-constant speed driveshafts are mainly used for heavy trucks and loaders. On heavy trucks, the domestic top 10 heavy truck companies, Zhongqiu, FAW and the Second Automobile Division are mainly supplied through the group's internal companies, and the company can only enter in small quantities. The company is the main supplier of Dongfeng Liuzhou and the other 7 heavy truck manufacturers. Companies are also the company's major customers, relying on these customer companies in the 2009 heavy truck series of shaft market share of 20.1%.

In the loader market, major domestic loader manufacturers Liugong, Longgong, Xiagong, Shandong Lingong, Shandong Shangong, and Chenggong are major customers of the company. The market share of these companies is 83%, and the market share of these customer companies in the loader sector is maintained at over 55% year-round.

In addition to the traditional supporting model, the company also formed a more stable and cooperative relationship with the automaker through capital bonds. With the improvement of the timely supply requirements of the main plant and the need for the inventory control of the auxiliary plants, it has become a trend to establish a production base around the main plant. At present, the company's customers have spread all over the country, and shipping from Xuchang to the country requires more transportation costs. In this context, the company gradually began to establish or participate in the establishment of a production base around the host plant. One model is to establish subsidiaries in areas where customers are concentrated, such as Weifang Far East and Liuzhou Aerospace, which can be closer to the market, provide timely supply and adjust product types, and reduce inventory and logistics costs. Another model is to set up a joint venture company with the host plant, such as Beiqi Far East, Chongqing Heavy Duty Far East. This model can stabilize the matching relationship, maximize the market share of customers, reduce potential competitors, and achieve a win-win situation.

The “joint construction+ joint venture with host plant” model further strengthened the company’s supporting relationship with the downstream vehicle customers and laid the foundation for the company to expand new customers and further increase market share. Take Beiqi Far East as an example, Far East Drive provides its main drive shaft components, which are processed by Beiqi Far East and sold to Beiqi Holding’s subsidiaries, such as Beiqi Foton. Far East Drive no longer provides driveshaft products directly for Beiqi Foton. The establishment of a joint venture subsidiary will help stabilize the matching relationship between the company and its customers, maximize customer orders, and expand the company’s product supply share. Subsidiaries have more opportunities to participate in the design and development of new products for host customers, which will increase the customer's reliance on the company's products.

In addition, the joint venture subsidiary is generally set up near the customer's production base. This can give full play to the location advantage of the subsidiary company, make it more close to and understand the market, and it is more conducive to respond flexibly to changes in the customer's needs. It can also save transportation costs and inventory costs. After the establishment of Beiqi Far East, according to the agreement, it will account for 80% of the market share of Beiqi Foton. The company's sales revenue to Beiqi Far East will increase rapidly, and it will also save a lot of transportation costs.

Fundraising projects boost development

In recent years, the company's continuous increase in production capacity still cannot meet market demand, and the bottleneck of production capacity is obvious. The main purpose of this fundraising investment project is to increase production capacity, including the annual production capacity of 1 million units of the headquarters, Weifang's annual output of 500,000 sets of commercial vehicle driveshaft projects and ZTE's annual production of 20,000 tons of transmission shaft component forging projects, with a total investment of 348 million yuan. In 2009, the company has invested an additional 100,000 sets of capacity in advance, which is included in the current 1.4 million sets of production capacity.

After the fund-raising project is completed, the company will add 1.5 million sets of production capacity of commercial vehicle driveshafts, which will increase about twice the current capacity. This will effectively solve the company's current capacity bottleneck and help the company gain greater market share. At the same time, the company will also increase the forging capacity of 20,000 tons of driveshaft blanks. Blank forging belongs to the highest technological content and the most critical link in the production of driveshafts. It also has the largest profit margins. The completion of raised investment projects will further increase the company's blank self-sufficiency rate. , thereby improving the company's profitability.

Everbright Securities Industry Researcher Min Min estimated that the company's operating income from 2010 to 2012 is expected to be 8.0 billion yuan, 1.017 billion yuan, 1.242 billion yuan, and a net profit of 183 million yuan, 243 million yuan, 278 million yuan, according to the release Diluted equity calculations correspond to 2010-2012 EPS of 0.98 yuan, 1.30 yuan, and 1.49 yuan respectively. According to the same company's comparable price-earnings ratio valuation 30 times in 2010, taking into account the company's leading industry, profitability is stronger than similar companies, giving the company a premium, corresponding to 30 times the PE in 2010, the company listed a reasonable value range of 27 yuan - 30 yuan.

“At present, the company’s products are in short supply, and the raised investment projects are mainly aimed at the problem of insufficient capacity of the company. After the expansion of production capacity, the company will be able to invest in subdivided products such as lighter cards and passenger cars, and be ready for the export and after-sales service market.” Guotai Junan Industry researcher Chen Xiwei believes that the net profit for 2010 and 2011 is forecast to be 166 million yuan and 208 million yuan, respectively, an increase of 47.1% and 27.2% respectively. According to the total share capital of 187 million shares issued, the corresponding EPS is 0.89 yuan and 1.11 yuan.

Chen Xiwei further pointed out the company's future development highlights. Firstly, the increase in sales generated after the investment project is put into production; second, the joint venture project with Dongfeng Driveshaft will increase the company's share of Dongfeng Commercial Vehicle (the market size in 2008 is 750,000 sets of transmission shafts). . Third, export growth. On March 30, 2008, the company signed a five-year supply contract with Meritor HEAVY VEHICLESYSTEMS, an internationally renowned automotive parts supplier, ArvinMeritor, and plans to sell US$4.56 million worth of driveline components annually. However, due to the impact of the financial crisis, according to confirmation documents provided by ArvinMeritor in January 2010, the company can achieve its volume supply in the second quarter. At the same time, the company will continue to engage with other international suppliers of parts and components to further develop overseas markets. Finally, if the sedan isokinetic driveshaft is successfully developed, it will significantly increase the company's growth potential.

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