On the status of the industry, Wanliyang is the leading company in the domestic card transmission manufacturers and has a market share of more than 70%. However, we are still not optimistic about the company's prospects.
If a company struggles in a shrinking market, even with a great deal of effort, it may not be able to achieve satisfactory performance growth prospects.
Nearly 70% of the company's revenue comes from the medium-duty truck transmission business, followed by light-duty trucks, with sales accounting for close to 30%, and sales of heavy-duty trucks and passenger car transmissions are relatively small.
The company's transmission business is closely related to the downstream mid-truck market demand. However, due to its lack of advantages in terms of loading capacity and flexibility, China Card has been gradually neglected in recent years. The market has been strongly squeezed by heavy trucks, light trucks, and micro cards, and the growth rate has slowed down significantly. Moreover, the company’s dependence on the card business of Foton Motor is very high, which inevitably creates certain risks to the business.
In 2010, with the commercial vehicle market returning steadily and the rise in steel prices, the increase in unit cost of the company's products is expected to exceed the price increase, which will cause the company's gross profit margin to decline.
It should be noted that the company's fee growth rate during 2009 significantly exceeded revenue growth.
In 2010, the company is likely to experience a slowdown in its growth rate as the gross profit margin may decline. However, if the company controls the expenses during the period, the earnings growth may be less than ideal. As for the next few years, the market space for the Chinese-cabile transmission will face an unfavorable situation of continuous shrinkage. The company needs to seriously think about how to survive and develop in the cracks.
China Card Market squeezed
In recent years, the China Card market has been continuously squeezed by heavy trucks, light trucks and micro cards.
From the data, in the past three years, the average annual growth rate of China's truck production has reached 21%. Among them, driven by large-scale infrastructure construction, heavy truck market demand is strong, making heavy truck output growth fastest, with an annual average of 35%.
The growth of the micro-card market is also very encouraging due to the favorable factors of the automobile to the countryside. In the past three years, the average growth rate of China's micro-card production was 22%, and in 2009 it was as high as 51%. It is the fastest growing segment of the truck market. Types of.
In contrast, China Card, the compound annual growth rate of production in the past three years is only 11%, is the lowest growth rate truck subdivision. Although output growth in 2009 reached 42%, it was only higher than heavy trucks.
The reason for being squeezed lies in the "moderate" of medium trucks.
On the loading capacity, the medium-card and the heavy-duty trucks dwarf the comparison. In the large-scale infrastructure projects since 2008, heavy trucks obviously have more practical needs; and in terms of flexibility, the card is far less than the micro-card, and in the car In the stimulus policies for the countryside, micro-cards have become more popular in the rural market.
The current business of the company is concentrated in the transmission of the Chinese card. According to the disclosure data of the prospectus, the sales volume of the transmission products of China Cards accounted for 68.17% of the company's total revenue in 2009, and the proportion has continued to increase in the past three years.
In addition, the proportion of sales revenue of light truck business also reached 28.71%. In comparison, sales of heavy trucks accounted for only 1.4%. Despite the increase in sales of heavy trucks in 2009, the proportion has declined slightly.
Customer concentration risk
At present, one of the major risks faced by the company's operations is that sales are over-reliance on a single customer. From the data of 2009, the company’s sales to Beiqi Foton exceeded RMB 400 million, accounting for 55.4% of its operating revenue. The customer with the second-largest sales amount is Dongfeng Motor, with sales of 54.16 million yuan, accounting for only 7.5%.
It can be seen that the current operating income of the company relies heavily on Beiqi Futian, the largest customer, which will expose the company’s operations to potential risks, ie, if Beiqi Futian reduces or abandons the purchase of the company's products for various reasons, The business of the company will suffer a great blow.
Judging from the current attitude, the company will not change its high reliance on Beiqi Foton in a certain period of time. The company has already reached a sales intention contract with Beiqi Futian on the raised capital investment products. The total contract sales account for 50 of the total sales intention of the project products. About %, which accounted for 58% of the new transmission production capacity.
How to survive in the cracks
At present, the company focuses almost exclusively on the transmission production of China Card. Although the company has also increased investment in heavy trucks and passenger car transmission products since 2007, it is still in the small-scale production stage and its contribution to the overall business is still small.
Actually, the company’s current largest proportion of medium and light truck transmissions is the lowest level of profits. According to the data disclosed in the prospectus, the gross profit margins of the company’s medium- and light-duty trucks are equivalent, which are respectively 29.07% and 28.15%. Up to 37.59%, the highest gross profit rate for passenger car transmissions reached 43.49%.
The analysis we have done in the previous section shows that the medium- and light-duty truck market is facing the impact from heavy trucks and micro-cards, and the company wants to make breakthroughs in its business and needs to try to adjust the current product mix.
First of all, Futian Automobile, the largest customer of the company's mid-car transmission, is actually not a mainstream manufacturer in the Chinese card market. The first-line manufacturers in the card market mainly include Dongfeng Motor and China FAW, among which Futian is not among the top five. However, Foton has the highest market share in the domestic light truck market.
In the heavy truck market, Foton Motor’s share ranks fourth, which is inferior to China Zhongzhong, FAW and Dongfeng Motor. As for the passenger car market, Foton's domestic market share is still relatively low.
For companies, if we want to avoid future performance shocks caused by shrinking markets, we need to work hard in two areas. On the one hand, we should continue to expand our share in the advantageous areas. In addition, we need to expand the market for high-margin heavy-duty trucks and passenger cars. Share.
Therefore, given that Foton Motor does not have a leading position in the China Card Market, the company needs to maintain Foton as an important customer on the one hand, and to increase breakthroughs on other important manufacturers on the other. More importantly, in order to seek sustainable performance growth, the company needs to increase R&D investment and market development efforts in heavy truck and passenger car transmission.
If we can achieve a breakthrough in these two areas, then even if the period of cost growth, especially the management costs that include R & D investment and the excessive growth of sales costs drag on short-term profits, it is also worth it.
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