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Public company info - Xiezhong International Holdings Ltd. , 03663.HK
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Xiezhong International Holdings Ltd., 03663.HK - Company Profile
Chairman Chen Cunyou
Share Issued (share) 800,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Automobiles & Components
Corporate Profile Business Summary: The Group is principally engaged in the following two business (2018: one): 1) the design, production and sale of automotive HVAC systems and a range of automotive HVAC components and providing technical testing and related services (“HVAC business”); and 2) 4S dealership business. Performance for the year: For the Year, the Group recorded revenue of RMB1,973.5 million, representing an increase of 113.6% against that of RMB924.1 million in 2018; the Group recorded a loss attributable to equity shareholders of RMB285.6 million, representing an increase in loss of 3,004% as compared against that of RMB9.2 million in 2018. Business Review The Group has two lines of business: HVAC business and 4S dealership business. The Group is one of the leading suppliers of HVAC systems for vehicles. We principally engage in the development, production and sales of automotive HVAC systems and a range of automotive HVAC components, and provide technical testing and related services. Our automotive HVAC systems are mainly used in sport utility vehicles (“SUVs”), pickup trucks, sedans and heavy trucks, in addition to the supply of HVAC systems and HVAC components for new-energy vehicles (“NEVs”), construction machineries and other types of vehicles such as light trucks and buses. The Group’s current annual capacity of production is about 4 million sets of HVAC systems, the main customers are BAIC Motor, FOTON, PSA, DPCA, Dongfeng Group, FAW, GEELY AUTO and other well-known international and domestic auto companies. The 4S dealership business operates the sales of automobiles and spare parts and accessories, and provides a comprehensive range of after-sales services, such as repair and maintenance services. The 4S dealership business is dedicated to luxury brand and mid-to high-end brand, such as Lexus and FAW-Volkswagen, and is mainly located in Nanjing, Jiangsu Province. During the Year, the Chinese automotive market experienced its first decline since 2018 and the downward trend continued in 2019. According to the statistical data of CAAM, the production and sales of automobiles in 2019 were 25.7 million and 25.8 million units respectively, decreased by 7.5% and 8.2% respectively, year-on-year. Amongst those motor vehicles, the production and sales of passenger vehicles reached 21.4 million and 21.4 million units respectively, decreased by 9.2% and 9.6% respectively, year-on-year; the production and sales of commercial vehicles manufactured and sold were 4.4 million and 4.3 million units respectively, increased by 1.9% and decreased by 1.1% respectively, year-on-year; and the production and sales of NEVs reached 1.2 million units and 1.2 million units respectively, decreased by 2.3% and 4.0% respectively, year-on-year. As one of the main suppliers of HVAC systems for domestic vehicles in the PRC, the sales of our HVAC system business have been declining for two consecutive years since 2018. On the other hand, the 4S dealership business recorded encouraging results as the sales of the Volkswagen and Lexus brands increased significantly during the Year. In addition, we continuously optimize the business process of after-sales services. The revenue from the sales of accessories and other value-added services increased by more than 20% compared with that in 2018. During the Year, the Group recorded revenue of RMB1,973.5 million, representing an increase of 113.6% compared against that of RMB924.1 million in 2018. The gross profit was RMB175.7 million, representing an increase of 3.4% compared against that of RMB170.0 million in 2018. The loss attributable to equity shareholders was RMB285.6 million, representing an increase of 3,004.3% compared against that of RMB9.2 million in 2018. HVAC business Since 2019, the global macro economy has been sluggish. The economies of major developed regions such as the United States, Europe and Japan further slowed down, and the economic growths for most emerging economies have also shown signs of slowing down. Against the backdrop of the slow global economic growth and the rise of protectionism, the downward pressure on China’s economy in 2019 continued to increase, and competition in the HVAC industry further intensified. Throughout the years of fierce competition and challenging market environment, the Group’s revenue from HVAC business recorded for the Year decreased to approximately RMB878.0 million, showing a decrease of approximately 5.0% as compared against that of RMB924.1 million in 2018. Meanwhile, the gross profit of RMB86.4 million was recorded for the Year, representing a decrease of 49.2% compared against that of RMB170.0 million in 2018. 4S dealership business The Group’s revenue from 4S dealership business amounted to approximately RMB1,095.5 million for the Year, which is approximately 55.5% of the Group’s total revenue. The gross profit from 4S dealership business was RMB89.3 million. Prospects: The Board expects that 2020 will be a difficult year for the HVAC system business due to the continuous increase in production costs in maintaining competitiveness as well as the costs in enhancing safety requirements to cope with the development of the automotive industry and the outbreak of novel coronavirus (COVID-19) in early 2020. The COVID-19 pandemic has brought about uncertainties in the Group’s operating environment in the PRC and overseas. According to the statistics released from CAAM, the production and sales of vehicles in the PRC were approximately 3.5 million units and 3.7 million units respectively for the three months ended 31 March 2020, representing a decrease of approximately 45.2% and 42.4% as compared to the same period last year. Since the COVID-19 pandemic, the PRC Government has taken emergency measures to prevent the spread of the COVID-19 in the PRC, including, among others, imposing restriction on work resumption date after the statutory holidays for Chinese New Year. Although most of the factories of the Group have resumed since the end of February 2020, the Board expected that there will be a drop in revenue of HVAC business during the first half of 2020. On the other hand, for the 4S dealership business, we will expand our brand portfolio, apply for more dealership authorization. We will continue to focus on the luxury and mid-to-high-end brand and increase customer retention and satisfaction as well as enhancing the efficiency and quality of the operation of the Group. We will continue to expand business coverage, such as automobile premium, accident car insurance, and used car business, thereby increasing profit sources, optimizing the revenue structure, and preparing for another historic development opportunity. The COVID-19 pandemic has posed certain impacts on the business operations of the Group and the degree of the impact depends on the pandemic preventive measures and the duration of the pandemic. The Group is paying close attention to the development of, and the disruption to business and economic activities caused by, the COVID-19 pandemic and evaluating its impact on the financial position, cash flows and operating results of the Group. Given the dynamic nature of the COVID-19 pandemic, in the opinion of the Directors, the related impact on our Group’s financial condition, cash flows and operating results could not be reasonably estimated at this stage and will be reflected in the Group’s 2020 interim and annual financial statements. Looking forward, the Board will continue to assess the impact of (i) the challenging macroeconomic environment; (ii) the PRC’s slow economic growth, and (iii) the COVID-19 on the operation and financial performance of the Group and closely monitor the Group’s exposure to the risks and uncertainties. The Company is currently exploring different possible measures, including assets restructuring to improve the financial performance of the Group in the future. The Company will take appropriate measures as necessary and make announcements as and when appropriate.

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