Times Weekly: Sany Heavy Industry responds to aggressive sales: the terms are the most strict in the same industry

Source: Times Weekly Author: He Guangwei

The much-watched Chinese construction equipment manufacturer Sany Heavy Industry Co., Ltd. (600031 abbreviation: Sany Heavy Industry) has become a hot topic again when it will restart H-shares, and some Japanese media have even recently said that Sany Heavy Industry may be listed in Tokyo this fall.
However, Xiang Wenbo, president of Sany Heavy Industry, denied the rumors in the Japanese media, saying that the listing plan of Sany Heavy Industry's concept stock has not changed, and he is currently waiting for the right time.
In order to consolidate its position as the top player in the industry, Sany has been expanding its advantage with its main competitors Zoomlion (000157) and XCMG Machinery (000425).
Although Sany Heavy Industry continues to move forward, its sales model in recent years has also intermittently questioned the voice, the outside world believes that it is too aggressive, and the question of Sany Heavy Industry's radical sales has been raised again.
Sany Heavy Industry responded to the outside world through the "Time Weekly", saying that Sany Heavy Industry's sales transaction terms are the most strict in the same industry, and there is no radical sales problem.
In Xiang Wenbo's view, although the investment in fixed assets has declined, new market opportunities are emerging, such as water conservancy construction, environmental governance, housing projects, urban rail transit, etc.
Xiang Wenbo believes that Sany Heavy Industry's sales are relatively rational and there is no radical problem. He said that our transaction terms are the most strict in the same industry, and Sany's rapid development stems from the competitiveness of products and services.
According to the data, although the sales and profit growth rate of Sany Heavy Industry in the first quarter of this year has been lowered from 49% last year to 35% to 40%, it is still expected to achieve sales of 110 billion yuan.

The sales model is controversial

In fact, China's major construction machinery giants have adopted their own sales model, which model is better, there has been controversy in the industry.
Due to the high unit value of construction machinery products, customers generally purchase products have financing needs, at present, construction machinery enterprises generally use four sales models: mortgage sales, financial leasing, installment sales, full sales.
According to the online preview information disclosed by the Hong Kong Stock Exchange, as of the end of March 2011, Sany Heavy Industry's mortgage sales accounted for 46.1% of sales (49.9% in 2010), financial lease sales accounted for 14%-15%, full sales were 24%, installments were 15%, and mortgages were 47%-48%.
According to the information disclosed by Zoomlion at the same time, at the end of 2010, mortgage sales accounted for 20%, financial leasing accounted for 31%, installment sales accounted for 16%, and full sales accounted for 33%.
Under normal circumstances, the mortgage and financing sales of the two giants in the construction machinery industry account for more than 50%. Xiang Wenbo said that due to the high proportion of mortgage sales of Sany Heavy Industry, the outside world believes that its "credit sales" are more aggressive, and there is a greater risk of capital return.
However, from the third quarter report of Sany Heavy Industry in 2011, its operating income increased by 59.5% over the same period last year, ranking first in the industry, with an inventory turnover rate of 3.47 times (not converted into years) and an accounts receivable turnover rate of 4.01 times (not converted into years), which are better than its competitors.
It can be seen that Sany Heavy Industry has not only achieved sales scale growth and market share expansion under this sales model, but also maintained the highest level of asset use efficiency.
In the mortgage sales business, the customer bears the responsibility of repaying the loan to the bank on time, and the guarantor of the third-party mortgage business has the responsibility to advance the bank money on behalf of the customer when the customer fails to repay the loan within the due date.
Xiang Wenbo said that if the customer has 3 consecutive periods, 6 or more cumulative periods, and the third-party guarantor refuses to continue to advance, Sany Heavy Industry needs to repurchase the equipment.
In the financial leasing business, Sany Heavy Industry directly sells equipment to customers, and the customer selects a financial leasing company, and the end customer pays an advance payment of 5%-20% of the purchase price first, and the remaining amount is paid off by the leasing company.
Xiang Wenbo added that Sany Heavy Industry only buys back equipment when the customer owes rent and the leasing company fails to fulfill the repurchase obligation.
Although there are certain risks in mortgage sales and financial leasing, in the view of Wang Hexu, an analyst in the machinery industry of Huabao Securities, as long as the control is appropriate, it will not necessarily bring losses.
From 2008 to the first quarter of 2011, Sany Heavy Industry's payments to banks (including mortgage installments and repurchase loans) due to customers' non-payment of bank payments accounted for 7.5%, 4.5%, 1.8% and 1.6% of the total amount of guarantees provided at the end of the previous year (annualized), respectively.
Quoting Zoomlion's prospectus, Wang Hexu pointed out that in 2008, 2009 and the first half of 2010, Zoomlion's payments to banks due to customer default accounted for 5.2%, 4.3% and 3.6% of the sum insured at the end of the previous year*5661 respectively.
Wang Hexu said that the amount of payments made by Sany Heavy Industry to banks due to customers' non-payment of bank payments has been declining significantly year by year, and it is lower than that of Zoomlion.
Public data also shows that from 2008 to the first quarter of 2011, the bad debt losses of accounts receivable owed by customers to Sany Heavy Industry accounted for 0.7%, 0.5%, 0.4% and 0% of the year-end accounts receivable respectively.
In 2010, Sany Heavy Industry's sales gross profit margin was 6 percentage points higher than that of Zoomlion and 15 percentage points higher than that of XCMG Machinery. In Xiang Wenbo's view, Sany Heavy Industry relies on this sales model that is different from its peers, so that Sany Heavy Industry's gross profit margin has always ranked first among companies in the same industry, close to 37%.
 

The terms of the transaction are strict
 

Before entering into a sales agreement with a customer, Sany will conduct strict credit and risk assessment on the customer, and fully consider the customer's financial status, bank account balance, bank credit, source of income, physical business, etc.
According to Duan Dawei, the chief financial officer of Sany Heavy Industry, Sany Heavy Industry only conducts mortgage and financing sales to customers with good qualifications.
In fact, the ECC system, an intelligent automatic service platform owned by Sany Heavy Industry, can not only monitor the operation status of products and improve service quality, but also lock the equipment when customers default or maliciously default on payment until the problem is solved.
Duan Dawei said that in the unlikely event that both the customer and the leasing company fail to fulfill their obligations and the equipment must be repurchased, Sany will use the remanufacturing platform to revitalize the recovered second-hand equipment and resell it after repaying the loan to avoid losses. The difference between the amount paid to the bank by Sany Heavy Industry on behalf of the defaulting customer and the resale price of the recovered machinery will not be more than 5%, and Duan Dawei believes that the repurchase will have little impact on Sany Heavy Industry.
Public data also shows that from 2008 to the first quarter of 2011, the difference between Sany Heavy Industry's mortgage advance payment and resale price was 0 yuan, income of 2 million yuan, loss of 1 million yuan, and income of 600,000 yuan.
For the sales method of financial leasing, Sany Heavy Industry is very cautious. Xiang Wenbo said that its down payment ratio is strictly controlled at 20%.
However, the sales method of financial leasing is not done by listed companies themselves. Xiang Wenbo said that the financial lease property rights are not transferred, only the rent is charged, which is a big problem for the enterprise how to determine the sales revenue, after all, the property rights of the machine are still in the hands of the enterprise.
Xiang Wenbo reiterated that Sany listed companies never do financial leasing, but are done by third-party operating institutions under the premise of complying with the regulations of the China Banking Regulatory Commission and the People's Bank of China.
If a third party does it, the bank will be more strict in its approval, and will not use the bank's money to make concessions and ignore the risks. Xiang Wenbo is worried that if the listed company does it on its own, it may relax the conditions and waive the down payment in order to achieve the sales target.
As a private enterprise, sound operation must be placed in the *5656 position. Xiang Wenbo is inconvenient to make any comments on the practices of the industry, but he said that Sany Heavy Industry has been operating steadily for a long time. In the past, Sany Heavy Industry never recognized revenue by delivery, but by payment collection. Xiang Wenbo said that this can be checked Sany's announcement, probably after 2005, the state mandated that revenue be recognized according to delivery, and Sany Heavy Industry changed the calculation method.
Xiang Wenbo said that Sany Heavy Industry usually takes a bank mortgage with a down payment of 20%, and the rest is paid monthly. If the customer is able to make the full payment within a year, the down payment may also be reduced to 10%.
Although Sany Heavy Industry's investment in fixed assets has declined, new market opportunities such as water conservancy construction, environmental governance, housing projects, and urban rail transit continue to emerge.
In addition, Sany Heavy Industry has taken a series of measures to control the risks of mortgage sales and financial leases, and Xiang Wenbo believes that the current operating risks of Sany Heavy Industry are controllable.
Xiang Wenbo believes that the transaction terms of Sany Heavy Industry are the strictest in the same industry, and the sales are not aggressive and rational. He said that Sany's rapid development is precisely because of the competitiveness of products and services.
At the beginning of the year, Sany Germany, its holding subsidiary, together with CITIC Fund, jointly acquired 100% of the shares of Putzmeister AG in Germany, with a total transaction amount of 360 million euros.
At the end of last month, two other subsidiaries of Sany Heavy Industry Co., Ltd. entered into joint ventures with companies of the Austrian PALFINGER Group, and the two sides will jointly invest 900 million yuan to build a heavy duty company in ChinacraneJoint ventures.