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Public company info - AVIC International Holdings Ltd. - H Shares , 00161.HK
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AVIC International Holdings Ltd. - H Shares, 00161.HK - Company Profile
Chairman Liu Hong De
Share Issued (share) 333,000,000
Par Currency Renminbi
Par Value 1.0
Industry IT Hardware
Corporate Profile Business Summary: The Group is principally engaged in the related business of manufacturing and sales of flat panel displays, printed circuit boards and watches, international engineering and trading & logistic business, and shipping building and related engineering, procurement and construction projects (“EPC projects”) development in the PRC. Performance for the year: For the year ended 31 December 2018, the Group recorded revenue of approximately RMB54,290,366,000, which represented an increase of approximately 17.32% over the previous year of approximately RMB46,276,689,000. the Group recorded a loss attributable to owners of the Company of approximately RMB568,314,000, representing a decline of approximately RMB1,079,256,000 compared with the profit of approximately RMB510,942,000 for the previous year. Business Review: High-Tech Electronic Products Business: Fast-tracking Industrial Upgrade and Promoting Efficiency Growth In respect of high-tech electronic products, the Group is engaged in research and development (“R&D”), design, manufacture, sales and service of FPD and PCB products mainly through its subsidiaries, namely Tianma Company and SCC. During the Reporting Period, the Group kept abreast of market demand in high-tech electronic products, expedited its industrial upgrade mainly through the development of pioneering products and construction of key projects, and promoted operational efficiency growth by optimizing its customer structure and improving key operational capabilities. (I) FPD: Continued growth in business scale and sustained industry leadership in innovative technologies Tianma Company focuses on the market development of FPD, with products mainly applied to the displays of consumer products such as smartphones and tablets as well as professional displays such as those for in-vehicle products, medical service and industrial control. During the Reporting Period, Tianma Company completed its acquisition of 100% equity interest in Xiamen Tianma Microelectronics Co., Ltd. (廈門天馬微電子有限公 司) (“Xiamen Tianma Company”) and 60% equity interest in Shanghai Tianma Organic Light Emitting Display Technology Co., Ltd (上海天馬有機發光顯示技術有限公司) (“Tianma Organic Company”), which improved the R&D and production capabilities in emerging display technologies such as low temperature poly-silicon (“LTPS”) and active matrix organic light-emitting diode panels (主動矩陣有機發光二極體面板) (“AMOLED”), further expanded the business scale and boosted its industry influence. Tianma Company maintained its strategic presence in visionary technologies such as flexible display and in-cell/on-cell integration touch technology, obtained a number of technological awards, and established its leading position in high-end small and medium-sized displays. Specifically, Tianma Company ranked first globally in LTPS smartphone panels and liquid-crystal display (LCD) full displays, with the consistently highest shipment worldwide; its thin-film transistor (TFT) shipment also led the Market of Mainland China and surged to top three around the globe; and the company continued to lead the world in its share in market segments such as POS terminal and aviation electronics. As a key project, the Wuhan G6 AMOLED production line realized partial mass production while Phase II of the project has commenced officially. During the Reporting Period, Tianma Company saw a decline in gross profit margin and an increase in three items of expenses due to the ramp-up of its production capacity. Meanwhile, due to the operational risks among some customers, provision of approximately RMB492 million was made for bad debts in accounts receivable by Tianma Company on a prudent basis, resulting in a year-on-year decrease in its profit. (II) PCB: A fresh record high in output and a significant rise in profitability SCC’s PCB products cover middle to high-end multilayer PCBs, packaging substrate and printed circuit board assembly (“PCBA”), which are mainly applied to high-tech fields such as telecommunications, aviation, medical service, new energy vehicles and industrial control. In 2018, SCC, with its focus on key customers, worked vigorously on obtaining orders and delivering quality, actively grasping the market opportunities communications, medical service and industrial control, continuously optimized product structure, and established its presence in smart manufacturing at a faster pace. As a result, SCC continued to record fresh historic highs in three of its business segments, namely PCB, substrate and PCBA, with substantial growth in both revenue and profit. While maintaining its leading advantage in high-tech fields such as communications and aviation, SCC has been actively establishing its presence in smart manufacturing. Its smart factory in Nantong had an auspicious start with annual gross profit exceeding expectations, setting a new benchmark for leading industrial production capacity; and the substrate factory in Wuxi completed construction ahead of schedule. As such, leveraging on its leading technology, superior product quality and premium service, SCC has earned high recognition from its core customers, and enhanced its market leadership position continuously. During the Reporting Period, SCC adopted a restricted share incentive scheme on 12 November 2018, and completed granting 2,800,000 restricted shares to 145 employees on 28 January 2019. For details of the restricted share incentive scheme, please refer to the announcements of the Company dated 12 November 2018 and 28 January 2019. Retails and Consumer Products Business: Proceeding with Transformation and Upgrading and Steadily Promoting Business Model Innovation In respect of retails and consumer products, the Group is engaged in the production and brand operation of middle to high-end watches as well as chain sales and services of luxury watches through its subsidiary, Fiyta. During the Reporting Period, the retails and consumer products business focused on the application of digital and intelligent technological approaches to promote transformation and upgrading, innovate business models, and strive for connotative growth of daily operations. In 2018, Fiyta upgraded its products and reshaped its brand in an in-depth manner, accelerated organizational reform, and beefed up the support and synergy to its own brands from professional platforms such as R&D and design. Fiyta aerospace watches and application projects won the fifth China Industry Award (中國工業大獎), the highest industrial award set up by the State Council of the People’s Republic of China (the “PRC”). Harmony worked on channel optimization with full force, leading to effective improvement in per customer transaction and customer service, appreciably enhanced capability in meticulous operation, and major profit growth. In addition, the company achieved initial breakthrough in its exploration of smart watches, and made steady progress in business model innovation. During the Reporting Period, Fiyta adopted a restricted share incentive scheme on 12 November 2018, and completed granting 4,224,000 restricted shares to 128 employees on 28 January 2019. For details of the restricted share incentive scheme, please refer to the announcements of the Company dated 12 November 2018 and 28 January 2019. International Engineering and Trading and Logistics Business: The Group is engaged in engineering contracting, cement engineering, mechatronics engineering, ship engineering and tendering agency businesses through its subsidiaries, namely Engineering Company, Beijing Company, AVIC Maritime, Weihai Shipyard and TED Company. During the Reporting Period, affected by international economic and trading environment as well as industry cycle, the international engineering and trading and logistics business saw a major decline in profit, which was mainly manifested in the following aspects: 1) Under a sluggish global economy, there was a severe shortfall in newly signed orders for cement engineering, causing the dramatic fall in revenue. Taking into account the downbeat cement sector and the sliding corporate operating results, provision was made for impairment on goodwill of KHD Humboldt Wedag International AG (KHD) based on the principle of prudence, which resulted in a considerable loss in the cement and mechatronics engineering businesses; 2) Weihai Shipyard, affected by the stagnant shipping market, reflected low utilization of capacity, resulting in a marked decline in revenue. At the same time, Weihai Shipyard suffered heavy losses due to rising prices of raw materials and equipment, higher impairment on goodwill, greater amount of three items of expenses and exchange rate fluctuations; 3) in line with the principle of being prudent, TED Company made bad debt provisions for the debts of investment enterprises accounted for using the equity method that incurred losses for three consecutive years and were unable to repay debts. Based on the aforementioned, the Group recorded revenue of approximately RMB14,191,301,000 from international engineering and trading and logistics segment for the year, representing an increase of approximately 7.19% over the previous year of RMB13,239,645,000. The loss amounted to approximately RMB1,466,825,000, representing an increase in approximately RMB1,167,598,000 as compared to approximately RMB299,228,000 for the previous year. Faced by changes in international economic environment and difficulties in operation within the industry, the Group has been closely focused on upgrading core capabilities in international engineering and trading and logistics business. Discussions have taken place on business model to have a clear view of the direction of business development, with step-bystep implementation under renewed annual strategies, all in an effort to intensively work on internal operation and improve quality and efficiency. On top of that, three cross-enterprise professional committees have been established, covering project review, project operation and financial resources sharing, to coordinate overall strategic collaboration and enhance risk control. Furthermore, the Group continued with expansion of its key business and in key countries under the “Belt and Road” initiative. As a result, 17 new projects were entered into for the engineering contracting business over the year, with a contract amount of US$3.5 billion. By improving internal management, the Engineering Company managed to turn loss into profit for its daily operation, and ranked 118th among the world’s top 250 international contractors compiled by the American Engineering News-Record (ENR) in 2018. Prospects: In 2019, against the backdrop of a complex and grim external environment and downward pressure on the economy, PRC still possesses enough resilience and enormous potential in its development, with economic momentum remaining positive in the long run. The current macro picture presents not just a challenge, but a strategic opportunity for development of the Group. As the country seeks to drive high-quality development of the manufacturing sector, the in-depth integration of advanced manufacturing and the modern service sector as well as the Belt and Road Initiative, the Group will gain even more room for development for its three core principal businesses, namely high-tech electronic products, retails and consumer products business as well as international engineering, trading and logistics. Based on the strategic orientation of its focus on principal businesses, the Group will continue to strip away its real estate business, which is expected to generate certain investment revenue. In 2019, the Group will work on prospective subject studies to bolster its strategic leadership and enhance its ability to respond to the external environment. The Group will put into practice its strategic theme of “Reform and Restructure, Focus and Breakthrough, and Value Growth”, maintain and widen the leadship of its advantageous businesses, boost strategic and operational management capabilities, carry out various reforms and development initiatives with solid efforts, convert its development drive, enhance risk resistance and attain highquality development with full force. High-tech Electronic Products Business As for high-tech electronic products business, the Group will keep on evolving towards the high-end part of the industrial chain, achieving breakthroughs in developing visionary products and constructing key projects at a faster rate, continuously improve its technological R&D and advanced manufacturing capabilities, and effectively improve the return on investment of major projects by improving the yield, upgrading technological process and smart manufacturing. As for the FPD business, the Group will push for commercial success in its organic lightemitting diode (OLED) business, and ensure significant progress in ramping up the yield and production capacity of Wuhan G6 Phase I and the Shanghai G5.5 production line as well as the construction of Wuhan G6 Phase II. As for the PCB business, the Group will fully capitalize on the market opportunities of 5G construction, promote the construction of smart factories, enable the Wuxi substrate factory to connect production lines and commence production, and explore its transformation from a component manufacturer to a solution provider under a moderately light asset model. Retails and Consumer Products Business As to retails and consumer products business, the Group will further its efforts to comprehend and cater to customer demand, strengthen customer-oriented philosophy and improve its adaptability in responding to the market. Efforts will be made to materialize the multibrand management platform and a comprehensive service provider model for luxury watches. Work will also be done to effectively raise organizational efficiency, and cultivate the capabilities in product and service innovation as well as brand operation. Fiyta will reshape its brand at a deeper level, expand channels continuously and deepen brand and channel integration. The company will also enhance business synergy, bolster cross-sector cooperation, build a business ecosystem centered on consumer demand with continuous efforts and innovate profit models to drive value growth. In the meantime, Fiyta will quicken its pace to develop new growth points such as smart watches and precision manufacturing. International Engineering and Trading and Logistics Business In 2019, in respect of international engineering and trading and logistics business, the Group will build on the established mechanism of international business collaboration, deepen business resource integration and standardize common business processes. Meanwhile, the Group will meet its responsibilities with more rigorous control over key links and improve the operation of continuously loss-making businesses in a practical manner so that such loss can be reduced and even turned into profit. In respect of engineering contracting business, the Group will focus on core markets and key business, and continue to work intensively on Southeast Asia, Far East and the “Belt and Road” regions; vigorously expand the aviation infrastructure business and innovate business models; and spare no effort to facilitate smooth execution of major projects such as Angola International Airport and Southern Sri Lanka Highway. In respect of cement construction, the Group will intensify its market development, strive to enter into contracts for core projects, properly execute the ongoing projects, and ensure that the commenced projects deliver their expected profits; KHD will optimize its organizational structure, lower purchase cost, and boost the actual profit margin of project implementation. In respect of ship engineering business, the Group will commit intensive efforts to market segments, enlarge its market shares in such segments and raise the contribution margin ratio of its products.

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