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Public company info - China Leon Inspection Holding Limited , 01586.HK

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China Leon Inspection Holding Limited, 01586.HK - Company Profile
Chairman LI Xiangli
Share Issued (share) 400,000,000
Par Currency U.S. Dollar
Par Value 5.0E-5
Industry Other Support Services
Corporate Profile Business Summary: The Group is principally engaged in the testing and inspection of coal and coke in China。 Performance for the year: The Group’s revenue increased by 19.7% from approximately RMB155.8 million in 2015 to approximately RMB186.5 million in 2016. The Group’s gross profit increased by 19.8% from approximately RMB80.4 million in 2015 to approximately RMB96.4 million in 2016. The gross profit margin increased from 51.6% in 2015 to 51.7% in 2016, which generally remained stable. Business Review: Facing the situation of coal overproduction, the Chinese government has started implementing policies to reform the production side and reduce coal usage in 2016, which has proved to be substantially effective. The coal market began to recover and the coal price posted a dramatic growth followed by a phase of gradual steadiness. According to the National Statistics Bureau, the domestic production volume of raw coal in 2016 was 3.36 billion tons, representing a decrease of 9.4% as compared to 2015, while the domestic power generation over the same period increased by 4.5% as compared to 2015, 2.6% of which was contributed by coal-fired power generation. Since the coal market has been oversupplied as a whole and the coal trading volume is determined primarily by the demand for power generation, the decrease in coal production volume in 2016 has no direct and adverse impact on its trading volume. We believe that coal tested by independent third parties still only accounts for a relatively small portion of the existing domestic coal trading volume and that there is still substantial growth potential in the coal testing and inspection industry in the future due to the benefits coal testing industry shall enjoy from the Chinese government’s tightened regulations over coal quality and pollution remediation. In 2016, we recorded a revenue of RMB186.5 million and a net profit of RMB33.6 million, representing an increase of 19.7% and 22.0%, respectively, as compared to 2015. The Group’s service income derived from the Four Northern Ports and other ports (areas) increased by 11.9% and 42.9%, respectively, as compared to 2015. We believe the Group’s growth was primarily attributed to the following factors: (1) an increase in the concentration of the Group’s major customers as a result of the recovery of coal industry, active trading market and reform of the production side; (2) more efforts put on the Group’s marketing and sales and more orders obtained from the Group’s participation in tendering activities; (3) the competitive edge in the Group’s service network through upgrading and increasing the Group’s service centers; and (4) a substantial improvement in the Group’s technology level and service efficiency as a result of the smooth progress of the Group’s research and development work, especially for the research and development of intelligent equipment and informatized upgrading of the Group’s business, which has further enhanced the Group’s competitiveness and brand value. In 2016, we have strengthened the leading position of the Group’s core business (i.e. coal testing and inspection) in the industry through the following measures: (1) the Group’s commencement of upgrading of the service centers located in the Four Northern Ports in accordance with the use of proceeds from the Group’s IPO to improve the Group’s production capacity and accommodate increased business volume. In 2016, we completed the upgrading of the service center located in Huanghua port (phase I), which had the largest business volume among the Four Northern Ports, and the new service center in Tangshan port (Jingtang port) is under construction and will complete construction in the second quarter of 2017. Meanwhile, in July 2016, the Group’s ninth service center located in Jiangyin, Jiangsu was put into operation, which has improved the Group’s domestic service network; and (2) further efforts put on the Group’s research and development work. The information based business management system developed by the Group has completed and applied in the Group’s business. The work base station for robot sampling which we worked with a robot manufacturer has been developed and will be put into operation in April 2017. In addition, in 2016, we applied for 14 new patents (including an invention, utility model and software copyright) and published two corporate standards. Prospects: Further solidify the Group’s leadership in coal testing and inspection industry The Group believe that coal testing and inspection are the Group’s core competency. The Group intend to continue to solidify the Group’s leadership in this industry by (1) upgrading and expanding the Group’s network of service centers, (2) strengthening the Group’s research and development capabilities to improve the Group’s testing procedures and laboratorial capabilities, and (3) consolidating China’s coal testing and inspection market through select acquisitions. The Group intend to enlarge the Group’s core competency by identifying and capturing new growth opportunities in the coal testing and inspection market. As the Group’s services are being offered primarily to seaborne coal trade through the Four Northern Ports, the Group plan to expand the Group’s testing services to inland coal trade, a market largely untapped by independent assurance providers. Through the Group’s long-term stable business relationship with large coal miners and power generators, the Group are able to capture and compile comprehensive data relating to quality testing results in the Group’s in-house information system. The Group will also adapt the Group’s in-house information system to interact with the Group’s customers’ systems and facilitate the Group’s provision of comprehensive quality management services spanning the entire coal distribution chain. As the Group will build the Group’s management services upon the Group’s strong testing capabilities, the Group believe the Group are well positioned to leverage the Group’s established brand recognition and quality control measures to launch these new services. Upgrade and expand the Group’s network of service centers To improve the Group’s service capabilities and to accommodate increased business volume, the Group intend to upgrade the Group’s laboratorial facilities at the Group’s existing service centers located in the four Northern Ports. To this end, the Group intend to secure land use rights for enlarged or new office and laboratory sites, purchase and/or develop advanced sampling machinery and testing instruments, and retain additional qualified technicians to operate the Group’s upgraded service centers as and when needed. The Group’s expansion plans will further strengthen the Group’s market shares locally by allowing us to better market the Group’s service capabilities through site tours and provide improved customer experience. The Group’s current service centers cover primarily major seaports for coal trade in China. As the Group’s operation continues to grow, the Group also plan to expand the Group’s service network to other regions that are strategically important to China’s seaborne coal trade, including certain key seaports located in Shandong province (north) and Fujian province (south). As the Group further penetrate the coal testing and inspection market for coal transported via rail or truck, the Group expect to set up new service centers at strategically-located rail interchanges that are critical for inland coal trade. The Group’s geographic expansion plans reflect the Group’s commitment to providing convenient access to the Group’s services by locating the nearest full-service testing facilities. An expanded network coverage of key seaports and rail interchanges will allow us to develop and provide comprehensive quality management services spanning the entire coal distribution chain. Outside China, the Group intend to selectively open service facilities to provide coal testing services in countries with abundant coal export and import volume which represent large potential markets for us. Leveraging the Group’s integrated service capabilities, the Group intend to establish the Group’s presence in those countries through establishing subsidiaries, forming joint ventures with local business partners and/or acquiring existing service facilities. The Group will also upgrade the Group’s in-house information infrastructure to interconnect the Group’s overseas service facilities and allow seamless exchange of information and expertise, creating an integrated network to serve the domestic and cross-border flows of coal. Further strengthen the Group’s research and development efforts The Group believe that technical improvements are critical to the Group’s service offerings and the Group’s ability to compete effectively in a concentrated market, and are therefore dedicated to deploying adequate resources to advance the Group’s research and development efforts. Automation is a principal focus of the Group’s research and development efforts. The Group plan to strengthen the Group’s internal research as well as collaboration with third-party institutions to develop automated service process, which will allow us to significantly reduce labor costs, minimize human error and improve efficiency for the Group’s services. The Group also plan to develop and upgrade the Group’s in-house technology infrastructure to support the Group’s new business offerings, including comprehensive quality management services. Interacting with the Group’s customers’ systems, the upgraded technology infrastructure will capture and compile the test results from the Group’s complete service sessions, and enable us to manage holistically the coal quality over a stipulated period of time. Pursue strategic acquisition or investment to enhance the Group’s service capabilities and expand the Group’s service coverage The Group have built the Group’s business so far primarily through organic growth. There are still significant acquisition or investment opportunities in the coal testing and inspection market. Among these opportunities, the Group are focused on service capabilities or coverage that would enhance or complement the Group’s core service offerings. The key criteria the Group apply in selecting acquisition or investment targets include primarily their market size, customer base, technical capabilities and management team. The Group will not only consider independent assurance providers like us but also suitable assurance providers affiliated with coal miners or consumers. The Group believe that strategic acquisition or investment allows us to enlarge the Group’s technician base and laboratory size to support the Group’s growing business volume cost-effectively.

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