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Public company info - Shuanghua Holdings Ltd. , 01241.HK
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Shuanghua Holdings Ltd., 01241.HK - Company Profile
Chairman Zheng Ping
Share Issued (share) 650,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Automobiles & Components
Corporate Profile Business Summary: The Group is principally engaged in the design, development, manufacture and sale of automobile air-conditioner parts and components. Performance for the year: For the year ended 31 December 2019, the Group’s revenue was approximately RMB28.6 million, a decline of approximately RMB26.6 million or 48.2% from that of the corresponding period of 2018, which was approximately RMB55.2 million. For the year ended 31 December 2019, the loss attributable to the owners of the Company was approximately RMB31.4 million, while the loss attributable to the owners of the Company over the same period of last year was approximately RMB13.2 million. Business Review In the context of China’s slowing economic growth and increasing global political uncertainty, the automotive industry continued its downward trend in 2019. In response to the changing market conditions, the Group mainly adjusted its sales strategies, with an aim to reduce its risk exposure to potentially adverse or unfavorable conditions in the market . As a result, the Group’s business volume reduced considerably compared to the same period of last year. For the year ended 31 December 2019, the Group achieved sales revenue of approximately RMB28.6 million, a decrease of approximately RMB26.6 million as compared to the same period of last year. As the slowdown in China’s economic growth spreads to the upstream and downstream automotive companies of the Group, our management conducted evaluation on different customers and sub-sectors in the automotive industry, reviewed the profitability of different product types and orders, and took the initiative to reduce orders/products with low or negative profitability or with customers that had delayed or defaulted in payment to the Group, resulting in a decline in the Group’s sales in China (or referred to as the “domestic market”). For the year ended 31 December 2019, the Group’s revenue from sales to the domestic market amounted to approximately RMB25.2 million, in which the sales revenue of evaporators and condensers amounted to approximately RMB16.7 million and RMB7.0 million, respectively. Other revenue from sales to the domestic market comprised primarily of the sales of heaters, intercoolers and lubricants. On the other hand, a battle of tariff started between China and the United States (“U.S.”) (the “Sino-U.S. trade war”) in which the U.S. government imposed, among others, a 10% tariff on imports of aluminum products (aluminum is one of the raw materials for production of the Group’s products) in March 2018 and raised the tariff to 25% on all imports of automobiles, including SUVs, vans, trucks and automotive parts imported from China in May 2019. Due to the continued Sino-U.S. trade war, the Group assessed the impact of the change in trade policies and carefully selected sales orders to reduce the potential risk of credit default in payment and loss of gross margins of our products, which led to a reduction in the Group’s export business to the U.S. and overseas market (collectively, the “international market”). For the year ended 31 December 2019, the Group’s revenue from sales to the international market amounted to approximately RMB3.5 million, in which the sales revenue of evaporators and condensers amounted to approximately RMB3.2 million and RMB0.2 million, respectively. Other revenue from sales to the international market comprised primarily of the sales of heaters, intercoolers, liquid-gas separators, evaporators and condenser cores, pipes and thermostats. The Group’s management believe that the aforementioned adjusted sales strategies would benefit the Group’s development in the long term, as they would not only control and reduce the downside risks amidst the recent downturn in the automotive industry, growth pressure in economy and various uncertainties in the external environment, but also allow the Group to improve on its internal management and focus its internal resources on carefully selected markets and products that are more credible, profitable and sustainable. During the year of 2019, the Group implemented the Turnaround Plans, including (i) upgrading the Group’s business model and structure; (ii) expanding sales network; (iii) adjusting the Group’s cost structure; and (iv) strengthening the Group’s R&D capabilities. Additionally, since the main construction of the new factory owned by Anhui Shuanghua has been completed, the Group has completed the transfer and installation of the Shanghai Plant’s main production lines to the Anhui Plant, which has resumed operation. Meanwhile, the Group increased its efforts in collecting account receivables, monitoring inventory levels in a timely manner, adjusted production plans and streamlined personnel according to actual needs. Before the provision for impairment of inventories, the Group still recorded a gross profit for the year ended 31 December 2019. The Group is of the view that the decline in the Group’s business volume and performance is of a temporary nature, and the Group will achieve a turnaround through the implementation of the Turnaround Plans (with further adjustments in accordance with the actual situation). Nevertheless, as a result of the combined effects of the decrease in sales, the provision for impairment of inventories and account receivables, and the costs and loss on disposal of inventories due to the Relocation, the Group recorded a net loss of approximately RMB31.4 million, an increase from the net loss of approximately RMB13.2 million for the year ended 31 December 2018. The Group will continue to conduct comprehensive evaluation on the market conditions and be prudent in adjusting the Group’s strategies and business plans in a timely manner to manage and optimize its existing business and achieve a sustainable business development. Prospects: In formulating the Group’s business strategies, the Company has considered a number of factors, including but not limited to the change in market landscape, the market potential of the Group’s products and the Group’s position and competitiveness in the HVAC industry. In particular, the Company has reviewed the automotive industry trends and the Group’s business prospects by making reference to, among others, the independent research report prepared by Frost & Sullivan Limited, an independent industry research consultant engaged by the Group in October 2019, in relation to the market of China and global passenger vehicle HVAC components and other automotive parts (the “F&S Report”). According to the F&S Report, the domestic small to medium-sized OEMs, which mainly engage in manufacturing small to medium level small displacement models, have weaker brand names and product strengths, as compared to those of other premium local brands or foreign brands. As the primary customer sources of small and medium-sized OEMs are consumers from third and fourth tier cities whose purchasing power and willingness are largely influenced by the rising housing price and the economic downturn, the small and medium sized OEMs experienced a significant decline in sales and a negative growth from 2015 to 2019 of which the compound annual growth rate (“CAGR”) was –9.3% and –10.9%, respectively. In order to expand sales, they cut prices to make profits and forced suppliers to lower prices or delay payment to transfer part of the profit pressure to suppliers. The large-sized OEMs usually have strong financial strength, brand strength or product strength and can leverage on the effect of economy of scale, which bring them stronger competitiveness as compared to the small to medium-sized OEMs. Even during the industry downturn, the average sales growth of the large-sized OEMs declined modestly, and the CAGR from 2015 to 2019 was 1.1%. Although facing downward pressure, the large-sized OEMs normally have a wide range of car models and a steady stream of development plans for new car models in the coming years. It is expected that sales volume of the large-sized OEMs will maintain a stable growing trend. According to the F&S Report, the new car sales market in China has entered into the saturation stage. Going forward, the aftermarket will be the key growth point of China automotive industry which is primarily attributed to the immense car ownership scale and growing average car age. Driven by the quick growth of new car sales for the past several years, the ownership of passenger vehicles in China also grew quickly. Total ownership of passenger vehicles will reach 219.5 million units in 2019, grew by 10.5% annually since 2015. The demand in the aftermarket is highly related to the number of vehicles in use and therefore is less prone to the economic cycle. Due to the change in business environments in the OEM market and the aftermarket, the Group has re-evaluated its business strategies, plans and resources in various endeavors. Leveraging on the substantial relevant experience of the management of the Group and the reputation of the Group in the industry, the Group focuses on (i) optimizing the Group’s business model and structure, consolidating its market position in the growing domestic aftermarket; (ii) expanding sales network and enhancing cooperation with large-sized OEMs; (iii) improving the Group’s cost structure and diversifying business portfolio; and (iv) enhancing the Group’s core technology and competitiveness. The Group targets to become a leading listed company with sustainable growth driven by its management and expertise, business cooperation, competitive cost structure and advanced technological strengths and capabilities. Optimizing the Group’s business model and structure, consolidating its market position in the growing domestic aftermarket (1)Establishing a joint venture engaged in air conditioning compressor business (2)Enhancing collaboration with major distributors to steadily increase market share in the aftermarket Expanding sales network and enhancing cooperation with large-sized OEMs Improving the Group’s cost structure and diversifying business portfolio (1)The Relocation (2)Diversifying business portfolio (3)Broadening the range of selection of suppliers Enhancing the Group’s core technology and competitiveness

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