Planning H-share intention in the international market construction machinery industry "Ssangyong to the sea"

(Shanghai Securities News, August 6 Reporter: Zhao Bijun, Hu Wei)

 
This year seems destined to be an eye-catching year for the construction machinery industry! Sany Heavy Industry and Zoomlion, the two giants of China's construction machinery in Changsha, have officially launched the H-share plan. Zhan Chunxin, chairman of Zoomlion, and Xiang Wenbo, president of Sany Heavy Industry, said in an exclusive interview with this reporter that the H-share plan, which is not long away from financing, is to build an overseas capital platform for the next step of internationalization strategy.
"According to our goal, by 2015, 50% of Zoomlion's sales revenue will come from abroad." Zhan Chunxin said that according to the current situation, it should be said that there is no difficulty in achieving this goal. Relying on this, Zoomlion, which has entered the top 10 of the world's construction machinery, hopes to become the top 5 of the world's construction machinery in the next 5-10 years.
"The construction of the capital platform has improved the integration ability of the company's international resources, and helped to realize the true internationalization of the 'trinity' of enterprises, products and markets." Xiang Wenbo said that in 2 to 3 years, it is hoped that 20%-30% of Sany's business composition will be abroad, and in the case of the world economy has not fully recovered, the advance layout will be conducive to the realization of this goal.
Analysts believe that as a leading enterprise in domestic construction machinery, the rapid development of Zoomlion and Sany Heavy Industry has led to the rise of the entire construction machinery sector in Changsha, and the internationalization strategy of the leading enterprises will not only promote Changsha from the "domestic construction machinery capital" to "the world's construction machinery capital", but also for the entire domestic construction machinery sector, it is bound to set off an upgrade boom.
 

Overseas Strategy: Building a "Springboard" for H-Shares

"For the construction machinery industry, overseas markets must be very important areas." Zhan Chunxin, chairman of Zoomlion, and Xiang Wenbo, president of Sany Heavy Industry, told reporters that although the domestic market is performing well, in the long run, the overseas market determines the future development space of the company.
Throughout the world's top five construction machinery enterprises, have been listed overseas, and through the layout of the overseas capital market, enterprises not only obtained new sources of funds, but more importantly, the operation of the capital platform to open a broader market.
"Like Caterpillar in the United States, it has even been listed in neighboring Mexico, which is not very significant if you look at the financing needs alone, but after the listing, through the operation of the capital platform, it quickly opened up new markets." Zhan Chunxin said that after having a capital platform, in the process of overseas expansion, it can be acquired by means of private placement and shareholding without direct cash payment, which can not only achieve rapid expansion, but also reduce the risks to a certain extent.
According to reports, Zoomlion had previously tried to exchange shares with a company in the United States, although it did not materialize, but it brought a lot of inspiration and gains. In 2008, Zoomlion indirectly acquired a 60% stake in the Italian company CIFA for 162.6 million euros (about 1.7 billion yuan) in overseas expansion.
"At that time, there was no overseas capital platform, so the 162.6 million euros were paid in cash, and in fact the total amount of the acquisition amounted to 511 million euros, and we brought in co-investors." Zhan Chunxin said that from now on, the acquisition of CIFA is still very rewarding.
"I summarized four gains: *5656, Zoomlion acquired Italy's CIFA, and obtained the world's most cutting-edge industry technology, such as *typical carbon fiber pump truck boom, etc., which have independent intellectual property rights and patents in more than 100 countries; Second, the use of common procurement, the cost of Zoomlion and CIFA has been reduced; The third is efficiency, many of CIFA's important parts are now manufactured in Zoomlion's 'factory-in-factory'; the fourth is the model, Zoomlion has explored its own set of successful overseas acquisition model. ”
Looking forward to future acquisitions, Zhan Chunxin said that if there is a springboard for H-shares, it may be more likely to use capital operations such as private placements rather than direct cash acquisitions. "Now Chinese companies are growing very well, and many companies are willing to hold Chinese stocks."
Sany Heavy Industry, which also proposed the H-share plan, regards "internationalization" as "the third venture". "The issuance of H shares will bring Sany the ability to integrate international resources." Xiang Wenbo told this reporter that in addition to self-investment and factory construction, the next step is not to rule out the adoption of capital operations such as acquisitions for expansion. "We will weigh the risks between the two and will continue to focus on prudence in overseas expansion."
Xiang Wenbo said that Sany's overseas strategy can be summarized as "first south and then north", that is, first in the southern hemisphere and then in the northern hemisphere. "Because most of the southern hemisphere is a developing country, the consumption power is similar to our country, so the market is also very large, but in comparison, there is a lack of local quality construction machinery enterprises, so the southern hemisphere is our focus."
It is understood that at present, Sany Overseas has 30 subsidiaries, and has invested in Brazil, India, the United States and other places to build its own construction machinery R & D and manufacturing bases. "At present, the base in India has been put into production, and the local digestion of the product has been realized, and the German one is now under construction." Xiang Wenbo said.
According to Zoomlion's H-share plan, the number of H shares to be issued does not exceed 15% of the company's total share capital after the issuance, and industry insiders estimate that the funds raised are expected to reach 10 billion yuan, and Hong Kong, as a global financial market backed by the mainland, will help enterprises expand overseas markets and establish an international brand image.
 

Industrial upgrading: Changsha plate is full of stamina
　　

It is worth noting that Sany Heavy Industry and Zoomlion as the leading enterprises in the domestic construction machinery industry are located in Changsha, Hunan, and as the rising star of the domestic "construction machinery capital", Changsha has three listed companies in the industry, in addition to Zoomlion, Sany Heavy Industry, there are small and medium-sized board of Shanhe Intelligence, the output value of the three enterprises has accounted for a quarter of the total output value of China's construction machinery.
"There are 2 companies in a city that have entered the top 10 of the world's construction machinery at the same time, which should be said to have played a good role in promoting the city to become the capital of construction machinery." Xiang Wenbo believes that from the current development trend, the process will continue to accelerate in the next 10-20 years, and it is entirely possible for Changsha to become the world's construction machinery capital.
Analysts pointed out that the construction machinery industry is characterized by technology-intensive, labor-intensive, traditional industries, and these three points happen to be China's first comparative advantage.
"The technology-intensive characteristics require the country to have a good industrial base, and in developing countries, China is the only one; Labor-intensive, China's abundant and high-quality labor resources are unique in the world, and it is China's most competitive comparative advantage; The relative stability of traditional industrial technology gives us the advantage of being a latecomer to catch up. Xiang Wenbo believes that Changsha has not only become a city with a national construction machinery density of 5661, but also full of development potential.
* New statistics show that since 2005, Changsha construction machinery industry cluster has developed rapidly, and the total industrial output value has increased from 9.891 billion yuan in 2005 to 74.972 billion yuan in 2009, with an average annual growth rate of 65.9%. In 2009, the sales revenue of Zoomlion and Sany Group both exceeded 30 billion yuan.
According to the development goal of the "Twelfth Five-Year Plan" of Changsha's construction machinery industry, the output value will exceed 250 billion yuan by 2015, and at the same time, it will fully support Zoomlion and Sany Heavy Industry to enter the top five construction machinery in the world.
"On the one hand, it is the expansion of overseas markets, and on the other hand, it is the improvement of the core competitiveness of enterprises." The two CEOs agreed that the key to the upgrading of the construction machinery industry is not only the expansion of the market, but also the improvement of independent innovation capabilities.
In this regard, Zhan Chunxin said that the new financing projects in China will mainly be two: one is to invest in basic research, and the other is to invest in basic components. "To go out, it is more important to have technology with independent intellectual property rights." Xiang Wenbo also said that compared with European and American enterprises, domestic enterprises will have a gap in historical accumulation, so they must surpass in terms of product innovation and improvement speed.
In fact, in addition to traditional concrete machinery and cranes, the two major companies have launched new excavator projects. According to reports, now domestic and foreign earthmoving machinery is very interested, the demand is also relatively large, and the key to the excavator is the breakthrough of system matching technology.
"The excavator project Sany Heavy Industry is the first in China, and through this asset injection, the proportion of the company's excavators and cranes has increased, becoming two important parts." Xiang Wenbo said that the main sales growth in the first quarter of this year came from excavators. Zhan Chunxin said that with the commissioning of the new Huanggong production line in Xi'an in August, this field is expected to grow by 100%-150% next year.
In the view of Xiang Wenbo, who put forward the goal of the world's construction machinery capital early, the ideal construction machinery capital should have three conditions. "First, there is a high degree of industrial agglomeration, which has a certain foundation for Changsha, followed by a better industrial ecology and industrial environment, and then the overall innovation ability." Xiang Wenbo expressed the hope that the government can support the construction of the external environment in the future.
Not only are companies actively seeking further development, but the government is also strongly supportive. The Changsha Municipal Government said that it will further increase support, formulate and implement preferential policies for the development of construction machinery and supporting enterprises, increase policy support, and formulate a series of preferential policies in terms of land, taxation, policy, services, fees, and protection of enterprises, and further increase scientific and technological innovation to improve the core competitiveness of enterprises.
"Changsha is different from other domestic construction machinery cities in that two or even more enterprises gather, which is not conducive to improving industrial concentration, and a certain degree of healthy competition will also accelerate the development." An industry insider told this reporter that he is very optimistic about the development of Changsha's construction machinery industry, and with the development of H-share layout, its goal will be far more than 100 billion output value.
Wang Min, chairman of XCMG Group, previously told the media after visiting Changsha that after seeing the development of Changsha construction machinery enterprises, he felt that "he couldn't sit still", and just last year, XCMG also showed the group's ambition to achieve overseas listing within three years. Analysts believe that the positive layout of domestic leading enterprises means that the overall construction machinery industry may usher in a major upgrade.
 

Domestic market: Urbanization is good for construction machinery for a long time

"Now the domestic market is actually still very good, and the reason why we have to take precautions to lay out overseas markets is to resolve the risks that will be caused by too much market concentration." The two CEOs agreed that going out is an inevitable strategy, and they are also optimistic about the development potential of the domestic market.
"We must see that although the world's top five construction machinery companies have been listed overseas, 60%-70% of their market share is still in their own country." Zhan Chunxin said that the domestic market is very optimistic in terms of scale and growth rate.
However, since the beginning of this year, the new real estate regulation and control policy has caused concerns about the construction machinery industry or being implicated. In this regard, the two CEOs said that the impact of real estate regulation is limited, and they believe that driven by infrastructure such as transportation, and with the acceleration of domestic urbanization, the construction machinery industry will be good for a long time.
"In fact, the concrete machinery industry, which is closely related to the real estate market, is only about 30% of the real impact." Zhan Chunxin said that commercial real estate is only affected rather than suspended, and the pulling role of affordable housing cannot be underestimated. At the same time, from the perspective of the development of Europe and the United States and other countries, there will be a substantial increase in commercial concrete in the future, which makes the concrete machinery industry still have a large space.
"In recent years, a large part of our revenue growth in concrete machinery comes from the second and third tier cities, one is that they are less affected by the real estate control policy, and the other is in accordance with the requirements of environmental protection, these small cities also want to use commercial concrete, which directly stimulates the sales of concrete machinery." Zhan Chunxin said that the mechanization rate of commercial concrete is not high, so the prospect is great. The rise of emerging industries such as nuclear power will also play a significant role.
According to reports, there are two nuclear power plants in Hunan that have not yet started, and once the construction starts, the demand is also very large. "Now the main technical standards have not been determined, so our expansion of emerging industries is mainly to extend the industrial chain, and seek speed in stability." Zhan Chunxin told this reporter.
"In the first half of this year, there was a blowout in the construction machinery industry, according to our research, Zoomlion's concrete machinery revenue has exceeded last year's annual revenue in half a year, and crane sales are also very strong, but this is largely due to the result of last year's 4 trillion pull." Liu Yahui, research director of the Hunan headquarters of China Securities Construction Investment, said that it is estimated that the situation for the whole year is to rise after the high, medium and low, and there is no problem with the annual growth of 50%.
"Actually, I don't think the current investment is too much, personally, I think the country should implement a more active fiscal policy." Xiang Wenbo said that the national government, which is the main body of current wealth, must invest in order to promote further development. "As far as infrastructure construction is concerned, there is now a lot of room for development in transportation, medical care, environmental protection, etc., and some are even just starting, and these fields have a great demand for construction machinery."
Xiang Wenbo believes that if the scale of demand formed by the expansion of domestic cities is counted, the development of construction machinery will exceed expectations. "The capacity of urbanization is very large, and if Changsha becomes a city of tens of millions, the construction of transportation facilities alone will be greatly driven, and there are dozens of cities like Changsha in China."
 

Interim results: production and sales are booming, and profits have increased significantly
　　

Today, Sany Heavy Industry issued an announcement on the expected increase in performance, and it is expected to achieve a year-on-year increase of more than 150% in net profit in the first half of 2010. According to the data, in the first half of last year, the company achieved a net profit of 1.096 billion yuan. The company explained that the high growth in performance is mainly due to the strong market demand for its main products, the increase in market share, and the significant increase in sales and profit expectations.
The reporter was informed that the sales data from January to June this year show that the growth momentum of Sany Heavy Industry Concrete Machinery is very strong, and its sales performance has exceeded the total sales of 11.4 billion yuan in 2009. Under the leadership of concrete machinery, including cranes, excavators,Rotary drilling rigsand other construction machinery products are red across the board. In July, the monthly output of Sany Heavy Industry pump trucks exceeded 600 units for the first time, creating a miracle of doubling the industry's monthly production capacity.
* Deep analysts pointed out that the company's production and sales growth is steady, coupled with the broad prospects of the capital market, with the support of good performance, Sany Group to achieve the sales target of 50 billion this year, there seems to be no suspense.
At the same time, Zoomlion's profit growth in the first half of 2010 was also strong. In the 2010 interim results forecast, Zoomlion said that thanks to strong sales in the first half of the year, the company's net profit is expected to increase by 50%-100% year-on-year. The company also said that in the first half of 2010, most of its product lines are expected to achieve year-on-year growth of more than 100%. The agency believes that Zoomlion's 2010 interim results may be better than the performance forecast. The good performance has also allowed Zoomlion to give investors great returns, and refreshed the market's vision with a high distribution of 1.7 yuan for every 10 shares of 15 shares, which is very rare in the history of semi-annual reports.
The acceleration of the pace of internationalization of Zoomlion has also attracted the further favor of its controlling shareholder, the Hunan Provincial State-owned Assets Supervision and Administration Commission, which spent about 84 million yuan to increase its holdings of 4.197 million shares of the company through the Shenzhen Stock Exchange trading system between July 12 and July 16, and the Hunan Provincial State-owned Assets Supervision and Administration Commission said that in the next six months, it will continue to increase its holdings of Zoomlion shares through the Shenzhen Stock Exchange securities trading system.
The internationalization process of the two giants of Changsha construction machinery is full of expectations. Relevant statistics show that the global construction machinery industry, the Chinese market is currently hot, accounting for about one-third of the world, India and Brazil are better, and the Americas and Europe are suspended. On the other hand, judging from the historical record, more than half of the revenue of the world's construction machinery giants comes from the European and American markets, so once it recovers, the advance layout of overseas financing of Zoomlion and Sany Heavy Industry is expected to bring huge profits.