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Public company info - Universal Star (Holdings) Limited , 02346.HK
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Universal Star (Holdings) Limited, 02346.HK - Company Profile
Chairman Lyu Zhufeng
Share Issued (share) 500,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Industrial Goods
Corporate Profile Business Summary: The principal activities of the Group are production and sales of sintered NdFeB magnetic materials, also known as neodymium magnet. Performance for the year: The Group’s revenue in FY2019 amounted to RMB411.5 million, representing an increase of RMB21.7 million, or 5.6% compared to RMB389.7 million for the year ended 31 December 2018 (the “FY2018”). FY2019, the gross profit of the Group amounted to RMB115.6 million, representing an increase of RMB8.1 million, or 7.5% compared to RMB107.5 million in FY2018. Profit for the year increased by 3.1% from RMB51.0 million in FY2018 to RMB52.6 million in FY2019. Business Review The Group is a manufacturer and supplier of sintered NdFeB permanent magnetic (“SNPM”) products in The People’s Republic of China (“PRC”). Neodymium (“Nd”) is a rare earth element while Neodymium, Iron and Boron (“NdFeB”) magnetic products which contained Nd and the other rare earth elements are well-known to have strongest magnetic field with permanent status among commercially available non-rareearth based magnetic products in the market. Recently, the upward trend of the rare earth permanent magnetic industry is driven by the inevitable long and lasting trends of energy saving, emission reduction and industrial upgrading. It is because the adoption of SNPM products can effectively to implement of energy saving, emission reduction and industrial upgrading which also fit into the requirements of international emission regulations and the regulatory trends of China national policies. There is no doubt that international emission regulation continues the advancements of emission reduction and one of the major process will take place between 2020 and 2021, when European Union will implement a stringent emission requirement for automobile emissions. On this front, the Group expects it will stimulate the demands for new energy vehicles so as to the demands for middle-to-high-end series of SNPM products, to a large extent. Energy saving and emission reduction have been the national focuses in PRC. The 13th Five-year Plan for Energy Saving and Emission Reduction General Working Plan (2016) (《“十三五”節能减排綜合工作方案》(2016)) issued by the State Council of the Central Government of PRC further set out the details for energy saving and emission reduction with a sense of promoting production efficiencies. The 13th Five-year Plan for New Materials Industry (2016) (《新材料產業“十三五”發展規劃》(2016)) and the Development Guide for New Materials Industry (2017) (《新材料產業發展指南》(2017)), were endorsing SNPM products industry as one of the high-tech and green industry while the SNMP product is one of the products that also endorsed by the general national policy — “China Production 2025” for promoting industrial upgrading in various industries. The Group believes its strategy to focus on middle-to-high-end series of SNPM products would enable the Group to capture the trend in a large extent during the course of energy saving, emission reduction and industrial upgrading. In addition, along with the trend of industrial upgrading as advocated by “China Production 2025”, the Group expects a high-end downstream application — Servomotor systems, which specifically used for mechanical systems that require precise control, velocity and acceleration, will have tremendous in growth in PRC on a medium-term basis. Servomotor systems are widely used in certain industries like industrial robots and automated manufacturing. In terms of the market share of servomotor systems used in the aforesaid industries, PRC SNPM products manufacturers only account for approximately 25% of the market share (based on management’s estimation), which is much lower than the market share of approximately 60% of PRC SNPM products manufacturers in terms of middle-to-high-end series of products. The middle-tohigh-end series of SNPM products carried the major functions include: (i) saving energy/electricity as SNPM products do not require electricity to generate magnetism; (ii) providing permanent and stronger magnetic field (in comparing to non-rare-earth based magnetic products), and serve the needs of those industries that require high magnetic performance and longer product life cycle like new energy industries (i.e. industries involved in new energy vehicles, wind turbine generators and energy-saving elevators) and industrial robots; and (iii) smaller in size in terms of the same magnetic performance in comparing to non-rare-earth based magnetic products which especially fits into the requirements of highend consumer electrical products like mobile devices. In FY2019, the Group’s sales of middle-to-high-end series of products accounted for 72% of its total revenue, which was higher than the average PRC SNPM products manufacturers and contributed a higher gross profit margins in comparing to most of the major PRC manufacturers. Prospects: As a leading manufacturer and supplier of SNPM products, the Group will continue to strengthen its leading position through the wellformulated strategies: (i) focusing on middle-to-high-end series of SNPM products; (ii) being R&D-oriented; (iii) expanding customers base, especially global customers, by diversified products in selected sectors; and (iv) seeking for potential upstream and downstream merger & acquisition opportunities. The Group has been focusing on middle-to-high-end series of products, in particular, one type of high-end products — radially-oriented rings. Based on the Group’s estimation, global rare earth permanent magnetic industry is dominated by PRC SNPM products manufacturers which contribute approximately 90% of global market share, however in terms of middle-to-high-end series of products, the PRC SNPM products manufacturers only contribute approximately 60% of global market share. The Group believes focusing on middle-to-high-end series products will continue to lead the business growth and contribute higher gross profit margin to the Group. In addition, the Group fully recognises two successful factors in rare earth permanent magnetic industry, which are: (i) all orders’ requirements are in a way of difference and requested the products to be semi-tailor-made; and (ii) the cost of multi rare earth materials totally accounting for approximately 90% of the raw material costs of rare earth permanent magnetic products. To this end, the Group has been focusing on R&D as to: (1) standardising and streamlining manufacturing processes to minimise production costs and maximise the production yield rate; (2) maximising products magnetic performance through technology improvements, for instance, assigning poles of the products in systematic ways; and (3) optimising the composition of rare earth materials in order to minimise raw material costs and maximise product performance. The aforesaid R&D-focused approach enables the Group to differentiate itself from other PRC SNPM products manufacturers by achieving higher yield rate and enabling the Group to focus on middle-to-high-end series of products. At present, the Group has 60 registered patents in PRC, out of which, 5 registered patents are related to several unique manufacturing technologies of its core products — radially-oriented rings. To the best knowledge of the board (the "Board") of directors (the "Directors") of the Company, there are no similar patents among other PRC SNPM products manufacturers. The aforesaid 5 registered patents enable the Group to solve various technical difficulties including uneven magnetic orientation, uneven surface magnetic performance density and so on. Apart from the Group’s internal R&D capabilities, it also cooperates with various academic institutes in PRC including setting up cooperation projects and R&D workshops and, going forward, the Group will continue to explore ways to enhance its R&D function for the purpose of upholding its R&D advantage and leading position. Currently, the Group has an annual SNPM products production capacity of 1,920 tonnes with a production utilization rate of more than 90% in FY2019. The Listing has enhanced the Group’s corporate image and brand name which set the stage for the Group to expand customer base, in particular, the leading global and consumer electronic customers. After the Listing, the Group’s products were qualified by a Korean giant conglomerates and the largest drone company of the world and the Group, in turn, became their suppliers. With such progresses, the Group believes sales to global customers as well as customers from consumer electronics industry will drive the growth of the Group in the coming years. Rare earth is rare materials and SNPM products are highly relied on the feature of rare earth. The Group believes upstream developments should be a wise move to secure raw material supply and diversification of business risk mitigating the impacts as to the fluctuation of raw material cost to a certain extent. To this end, the Group has been actively exploring opportunities for vertical integration and seeking for potential upstream merger & acquisition developments since the Listing. Recently, the Group’s business has gradually been recovered. Although the impact of coronavirus disease (COVID-19) outbreak is temporary affecting the Group’s business development and PRC economy as a whole, the long-term positive rare earth permanent magnetic industry drivers remain in place. In addition, the Group’s well-established strategies which embraced and implemented over the past several years has begun to bear fruit with the Listing. In the course of executing the strategies, the Group strives to maximize its corporate value and share the success with its shareholders.

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