Chery's core value attracts market attention

In 3 years, Chery finally "broken shell." As one of the eight major plates of Chery Holdings, it gradually entered the long-term Chery Heavy Industry, finally out of the incubation stage, and officially launched into the market through the tide of state-owned enterprise reform.

A few days ago, the Changjiang Equity Exchange issued an announcement to the public that, commissioned by the construction investment company of Wuhu City, starting from August 1, it will publicly transfer the shares of Chery Heavy Industries Co., Ltd. to 1.8 billion shares and 600 million shares, and the reserve price will be 2.8 billion yuan.

The announcement also stated that the first target is to require the transferee to be ranked the top 50 in the “Top 100 List of China's Equipment Manufacturing Industry in 2013”, and the second is to explicitly introduce private equity investment institutions with management assets greater than RMB 20 billion.

The reserve price of 2.8 billion yuan and the demand for harsh targets have made Chery's heavyweight "unprecedented" and undoubtedly show its stance. Under the market's concern and exploration, the value behind it gradually surfaced to the public.

Solid layout Chery heavy competitiveness

Founded in June 2011, Chery Heavy Industry, under the guidance of Wuhu Jiantou and Chery Holdings, has expanded its business scope to include agricultural equipment, engineering machinery, and industrial vehicles in just three years. Among them, agricultural equipment is the main business of Chery Heavy Industries.

In fact, judging from the starting time of Chery Heavy Industry, it is not a good time. In 2011, the stimulation of 4 trillion yuan was more than two years. It was the capacity expansion of the construction machinery industry that came to an end. The policy stimulus gradually came to an end and the market demand entered a phase of relative slowdown.

After 2011, the construction machinery industry began to gradually enter the downturn period, and overcapacity has long plagued companies in the sector.

The data shows that in 2013, the total return on assets of First Tractor Co., Ltd., the only listed agricultural equipment manufacturing company in China, was only 1.29%. At the same time, CNH, which ranks first in the world in the production of agricultural tractors and combine harvesters, had a total return on assets of 2.23% in 2013.

According to the financial data released by Chery Heavy Industry, its return on assets is only 1%. “Perhaps, compared with the listed companies in some emerging industries, this data is not very bright. However, compared to the machinery and equipment industry, it usually takes 4 to 6 years from the input to profit, and the Chery Heavy Industry data is already quite outstanding.” The person said.

Putting aside pure financial data, Chery’s performance is remarkable in terms of market competitiveness and product competitiveness. With the help of local state-owned assets and Chery Holdings, Chery Heavy Industries has developed a rapid expansion of the layout and innovative R & D, forming a unique domestic companies with the advantage of the industrial chain.

From the public information, it can be seen that “as the only enterprise in China that has a layout of “all agricultural machinery solutions”, Chery’s heavy industry product line is relatively complete. At present, Chery Heavy Industry has more than 460 core suppliers as the main supply chain. Industrial strategic alliances, nearly 1,000 domestic two-level network resources and overseas network resources."

Due to the rapid layout, Chery Heavy Industries has completed industrial development and system construction in a short period of time. In the main business of agricultural equipment industry, Chery Heavy Industry has formed a product range with a large domestic product range and a wide range of products, covering agricultural mechanization products such as cultivation, planting, management, harvesting and drying.

“The company is one of the few companies in the field of agricultural machinery that has experienced a full-range growth in January-June 2014.” Agro-industry association sources told reporters that the company’s Valley King and Gengwang brands are already in the market and among users. High popularity and reputation.

According to Zhang Li, the German Agricultural Association, the biggest difference between domestic agricultural machinery manufacturers and foreign agricultural machinery manufacturers is not profitability but innovation and research and development. Market participants believe that the source of Chery's heavy industry market and product competitiveness is not only industrial layout, but also its innovative R&D capability. The data shows that Chery Heavy Industries spends 5% of its annual sales revenue for R&D each year. Through the integration of domestic and global stocks of agricultural machinery and agronomic research and development resources, Chery Heavy Industries has completed the construction of a technology innovation platform for internal product development and external technical cooperation. Currently, there are as many as 11 strategic development projects being promoted. It can be said that from the perspective of the company's core competence, Chery Heavy Industries has delivered a good transcript.

Broad prospects for potential agricultural market

In the face of the stagnant status of the entire construction machinery industry, market pessimism has also surfaced. There are market views that the current overcapacity in China's agricultural machinery industry is no longer worth investing. In fact, most people in the industry still believe that the golden period is far from over in the medium to long term.

“As far as the overall aspect of China's agricultural machinery industry is concerned, it is still in a tender stage with great potential for development. Perhaps in the near future, it will usher in a 'great era' with rapid development,” said Chery Heavy Industry.

From a policy-oriented perspective, agricultural mechanization indeed welcomes a rare opportunity. At the Third Plenary Session of the 18th CPC Central Committee, the four new goals of urbanization, industrialization, informatization, and agricultural modernization were proposed for the first time. At the same time, high-end equipment manufacturing has been listed as one of the eight strategic emerging industries that China has focused on developing, and it is also a key industry for government development and development. Under the guidance of a clear industry policy, agricultural machinery as an important component of the equipment manufacturing industry will undoubtedly become a beneficiary.

Judging from a series of government actions, the pace of urbanization has been markedly accelerated. With large numbers of peasants leaving the countryside, the traditional family workshop-style agricultural production methods will be replaced by industrialized and automated modern agricultural production methods. According to Lin Yifu, a well-known vice chairman of the All-China Federation of Industry and Commerce and the former chief economist and senior vice president of the World Bank, China’s urbanization rate will reach 75% and 80% by 2020. With the gradual progress of urbanization, it will also bring about a substantial increase in demand for agricultural machinery and equipment.

Multiple factors contribute to the development of the agricultural machinery industry. For Chery Heavy Industry, due to the successful completion of the creation period and the advantages of a stable business niche market, industrial chain advantages, team foundation, and innovation capability, its performance is expected to usher in new strategic growth opportunities in the near future.

Reorganization activates the vitality of Chery's own mechanism

Not only is the industry positive and the entire macroeconomic environment is beginning to pick up. Judging from the recent signal from the government, the development ideas of “stability for progress” have been straightened out, and China’s economy will go more robust and solid in the future. In the long run, there is no doubt that the Chinese economy will be in good shape.

Under such a background, the general view in the industry is that if the development of the Chinese agricultural machinery industry is to further grow bigger and stronger, it must build systems and mechanisms that can adapt to the needs of market competition, and improve the capabilities of technology, market, management, and capital operation. The fair competition in the market will be activated, and the market upgrading will be realized through market competitiveness and strength upgrading.

The State Council recently issued the "Guiding Opinions on Accelerating the Development of Producer Services and Promoting the Adjustment and Upgrading of Industrial Structure" (referred to as the "Guiding Opinion"). This is the first time that the State Council has fully deployed the development of producer services. The "Guidance Opinions" proposes a development orientation that guides the behavior of market players and clarifies the priorities for the government to create a good environment. The "Guiding Opinions" emphasizes that with the demand for industrial transformation and upgrading as a guide, through deepening reform and opening up, enterprises and market vitality will be maximally stimulated. “The reorganization of Chery Heavy Industry is just right. In shallow terms, the reorganization will bring Chery's heavy lifting in profitability and return on assets. In a deeper sense, restructuring will activate Chery’s own institutional mechanisms and vitality. , further strengthening and expansion." Industry insiders said.