The hottest Xiamen industry Co., Ltd. acquired the

XCMG: acquire group assets to improve performance

Guide: field research: on January 12, 2007, he had in-depth exchanges with Wang Zhiyong, Secretary of the company, Hong Zaichun, director of the strategic planning department, and Wu Jitang, mayor of the people's Government of Guankou Town, Xiamen, and visited the factory of the new plant. Discuss and exchange the company's recent business status and development plan for the next five years. Our

field research:

on January 12, 2007, he had in-depth exchanges with Wang Zhiyong, Secretary of the board of directors of the company, Hong Zaichun, director of the strategic planning department, and Wu Jitang, mayor of the people's Government of Guankou Town, Xiamen, and visited the factory of the new plant. Discuss and exchange the company's recent business status and development plan for the next five years. Our basic judgment is that after the leadership change and restructuring in 2006, the operating efficiency of the company began to improve, the management philosophy of the group and listed companies has changed significantly, and the company has entered a rising channel

positive changes brought about by the change of the new leadership:

the company hired Chen Ling as the new chairman in August 2006. Chen was born in 1953. He used to be the director of Yinhua Machinery Factory subordinate to the group company. Wang Gongyou and Hong Jiaqing were newly elected Deputy general managers of the company. Wang Gongyou previously served as the chairman of Xiamen Xiagong Xinyu machinery company. In view of the fact that the growth rate of the company's performance in the first three quarters of 2006 was far lower than that of Liugong, Longgong and other enterprises, we can speculate that the performance assessment pressure of the company's current leadership is high. Chen Ling and Wang Gongyou are both from subsidiaries of the group company. This personnel scheduling arrangement shows that the group company has changed the positioning of Xiamen Construction Engineering Co., Ltd. in the group company. According to this survey, the middle-level leading cadres of the company are currently facing great assessment pressure, and an assessment should be organized every six months. The work tasks of the management personnel are very full, and they often need to work overtime. We believe that the improvement of the company's operating efficiency caused by the change of the leadership has been reflected

the overseas listing of group companies was blocked, and the expectation of injecting assets into listed companies was strengthened

before 2004, Xiamen Construction Engineering Group Company had always planned to list in Hong Kong. Due to the decline of the overall benefits of the construction machinery industry affected by macro-control, the overseas listing of the group company was blocked, and in addition to the outbreak of the construction machinery sector in the domestic A-share market in 2006, the expectation of the group company to inject assets into listed companies became strong. At present, most of the assets owned by the group company are construction machinery parts assets, especially the parts assets supporting loader products, such as Xiamen gear factory, Xinyu machinery company, Yinhua machinery factory, Sanming heavy machinery company, Xiamen Industrial Transportation Company, etc. In 2005, the related party transactions between Xiamen Construction Engineering Group Co., Ltd. and the group companies, including the subsidiaries of the group, amounted to 745million yuan, accounting for 23.75% of the sales revenue of listed companies. At the end of 2006, Xiamen Construction Engineering Co., Ltd. acquired 60% of the equity of Xiamen Xinyu held by the group company. So far, Xiamen Xinyu has become a wholly-owned subsidiary of Xiamen Construction Engineering Co., Ltd. the main business income of the subsidiary in the first three quarters of 2006 was 28.12738 million yuan, and the net profit was 12.279 million yuan. The annual net profit is expected to reach more than 15million yuan. The net profit of Xiamen gear factory in 2005 is 3.315 million yuan, which is now entrusted by the company. Yinhua machinery factory mainly provides hydraulic cylinder support for Xiamen Industrial and Commercial Corporation, with an annual net profit of more than 10million yuan. Sanming heavy machinery company mainly produces road rollers and other road machinery products. In recent years, due to the decline of the industry boom, the business situation is not ideal. Xiamen forklift General Factory subordinate to the group company is in a state of low profit because its production scale is small and its product R & D capacity has not kept up. At the end of 2006, XCMG implemented three system reforms (employee contracts are signed once a year, redundant employees are dismissed, new employees with technical titles are recruited, etc.) to divest non-performing assets and wealthy personnel. During 2006, the company divested Xiamen forging machine tool company, Xiamen Xuefu engineering machinery, Xiamen Jiande (Quanzhou) construction machinery company, China Huada construction machinery group company, Shanghai Oriental Construction machinery leasing company Xiamen Dahua Machinery Company and other non-performing assets received 461million yuan in cash through debt transfer. Through the divestiture of non-performing assets, the company consolidated the quality of existing assets and achieved light packaging

it is expected to refinance in 2007

compared with Liugong, Longgong and other loader production enterprises, the company's gross profit margin is low, mainly because the proportion of purchased and outsourced parts of the company is too large, exceeding 70%, resulting in higher procurement costs than these enterprises. In addition, the company is located in the southeast coast, and the product sales market is mainly distributed in North China and central China. It needs to purchase steel from Chongqing Iron and steel, Angang Steel and Shaoguan Steel, and Fengshen shares purchases tires and Shangchai purchases diesel engines. The transportation cost is higher than that of Liugong and Longgong. Due to the change of the group company's positioning for Xiamen Industrial Group Co., Ltd., it is expected that in 2007, the company may acquire the group company's parts assets through refinancing, reduce related party transactions and reduce procurement costs. Xiamen Industrial Group now holds 64.84% of the company's equity, with a high shareholding ratio. Therefore, we believe that if the company implements refinancing, it may adopt the way of additional issuance to public shareholders. The group's bridge box company, gear plant and Yinhua machinery plant can be injected into listed companies. It is expected that the company will reduce the change in profitability caused by related party transactions by acquiring assets and increase the gross profit margin by 3 percentage points

the group company will no longer involve construction machinery in the future.

in addition to the above-mentioned construction machinery parts business, the group has added two new businesses in recent years: steel structure and special vehicles. The steel structure business was first set up by the group company for the construction of Haicang Bridge in Xiamen Island. The Xiamen municipal government promised that all steel structure construction projects in the next few years would be handed over to the group company. Special vehicles include trailers, irrigation storage and transportation vehicles and forklift trucks. At present, the output of special vehicle companies is small, with an annual output of more than 100 special vehicles. The strategic plan of the group company is to integrate its construction machinery assets into listed companies in succession. In the future, the group company will mainly develop non construction machinery businesses

the company's relocation land benefits greatly.

the company's original site is in Xiamen Island. Including the group company, it has a total area of 50000 square meters of Xiahe road and 270000 square meters of plant area near the stadium, a total of 320000 square meters. The land acquisition cost is 300 yuan/square meter, the price transferred to the Xiamen government is 2000 yuan/square meter, and the land income is 544 million yuan

due to the limited area of the island and in line with the strategic plan of Xiamen municipal government to relocate manufacturing enterprises, Xiamen Industrial Group Co., Ltd. and the group company moved to Guannan Industrial Zone, Guankou Town, outside the island in 2004. The industrial park of Xiamen Industrial Group, where the new plant site is located, covers an area of 1.35 million square meters, making it the largest construction machinery industrial park in China. Among them, XCMG covers an area of more than 600000 square meters, and the land cost is 90 yuan/square meter. Plus the land leveling cost, the comprehensive cost is 150 yuan/square meter. At present, the land market price in this area is 500 yuan/square meter, and the company's land value-added exceeds 200million yuan. At present, the development area of Xiamen Industrial Park is more than 900000 square meters, and nearly 400000 square meters of land remains to be developed, which reserves rich land resources for the future business development of Xiamen Industrial Co., Ltd

the loader business focuses on structural upgrading and export

the loader output of XCMG 200 "China Plastics Fair is an important platform for domestic and foreign plastic industry merchants to show their corporate brands, exchange industry information, make friends with partners, and seek development opportunities. One year ago, it was the highest in the industry. Since then, due to the company's insufficient investment in new product research and development, and the company pays too much attention to market share and ranking, the company's loader product output and gross profit margin have been distanced from Liu Gong. The company's loader product development strategy in the next three years is to Step up the sales proportion of xg953, xg955 and other high-end products, and build a self built parts supporting system to reduce procurement costs, while expanding exports

at present, the company has a capacity of 30000 loaders, and the type of loose materials of its products has the largest market share in the loader product series, accounting for more than 60%. It is estimated that the sales volume of loaders of the company will reach 17000 and 213million in 2006 and 2007. In terms of sales service, the company extended the "three guarantee period" of products from the original half a year to one year in order to occupy the market share of small and medium-sized enterprises in the industry by optimizing after-sales service. The extension of the "three guarantee" period will bring about an increase in sales expenses. In addition, the company began to focus on building the export market in 2007, hoping to expand its international market share by virtue of its geographical advantage located on the coast. Therefore, the company has strengthened its brand publicity and hired consultants, which will also lead to an increase in sales costs. In addition, in 2006, the company also obtained the right to import and export products, and in the future, products will no longer be exported through the group company

excavator business will enter a profit-making period in 2008

in 2006, the company sold 189 excavators, which were still in a loss due to insufficient scale. It is estimated that the sales volume of excavator products in 2007 will reach 500 sets, achieving a break even. In 2008, the company's excavator sales volume is expected to reach 1000 sets, achieving profitability. At present, one of the factors restricting the output of excavators is the import bottleneck of hydraulic parts and control system

Xinyu machinery company mainly produces small construction machinery

its products mainly include small excavators, small loaders and excavators loaders. At present, the output is small, but the development momentum is good. The company intends to further integrate this business and improve its product series in the future

there is room for profit from equity investment in the future

the company holds 37.5 million corporate shares of industrial securities. If industrial securities is listed, it is expected that the equity investment income can exceed 200million yuan

the Xiamen municipal government attaches importance to the future development of Xiamen Construction Machinery Co., Ltd.

the Electromechanical group under the state owned assets supervision and Administration Commission of Xiamen controls the investment of Xiamen Construction Machinery Co., Ltd., Xiamen Jinlong and Longyan. The Electromechanical group will focus on building these three enterprises in the next few years, and integrate the electromechanical assets of Xiamen with these three enterprises as a platform. As the leading enterprise of construction machinery in Xiamen, Xiamen Construction Machinery Co., Ltd. will be supported by the Electromechanical group in all aspects in the future

development goals for the next five years:

the revenue will reach 10billion yuan in 2010. The overall sales target of Xiamen Electromechanical group, the major shareholder of Xiamen Construction Engineering Group, to Xiamen Construction Engineering Group, including listed companies, is to reach 10billion yuan in 2010 and 5billion yuan in 2007. The company's business will rise in the future, and there is broad space for the scientific utilization of resources

profit forecast and investment suggestions

we assume that in 2007, the company acquired the bridge box, oil cylinder and other accessories assets of the group company through non-directional additional issuance. According to the net profit of 36million yuan of the assets to be acquired, the return on net assets of 5%, the financing is expected to be 800million yuan, the share capital is diluted by 20%, and the annual earnings per share of the company is expected to reach 0 The experimental machine is widely used in metallurgy, construction, aerospace, aviation, machinery, transportation, national defense, water conservancy, electric power, petroleum, Chinese industry, textile and other industries. It is usually 11 yuan, 0.32 yuan, 0.50 yuan, and the target price is 8.00 yuan. At present, it is undervalued by 40.85%, so we give a "buy" rating

main uncertainties

equity incentive progress, group asset integration progress, steel and other raw material price fluctuations