Far East Drive: Unequal speed drive shaft faucet with outstanding profitability

Non-constant speed drive shaft leading enterprises. The company is the largest non-equal-speed driveshaft manufacturer in China. The production of driveshafts is mainly supported by a variety of construction machinery such as light trucks, medium trucks, heavy trucks, pickup trucks and SUVs, passenger cars and loaders, and cranes. At present, the company has 109 specialized "U-type digital flow production lines", with an annual output of 1.4 million sets of non-uniform velocity transmission shaft production capacity, can produce more than 5,680 varieties, the company's products are divided into light, medium, The four major series of heavy and construction machinery, of which mainly heavy and engineering machinery series.

The industry in which it operates is cyclically obvious, but there is no worry about long-term stable growth. The company's products mainly support commercial vehicles and construction machinery. The attributes of these two industries are typical investment products. The industry's economic climate is greatly affected by the macro economy and its periodicity is obvious. Judging from the current situation, as the country has introduced a very stringent policy of real estate control, the growth rate of fixed asset investment in China will face some downward pressure in the coming period of time, and the growth of the company’s performance may also be affected. In spite of this, China is still in the middle and late stage of industrialization, and the proportion of urbanization still has considerable room for improvement. Therefore, in the long run, there is still huge room for growth in commercial vehicles and construction machinery in China. Take the heavy truck industry as an example. Since 2003, the sales growth of heavy trucks in China has fluctuate greatly. However, if the policy factors are removed, the heavy truck industry has been in a stable growth state. The compound growth rate is about 16%. Therefore, although the short-term volatility of the company's performance may be greater, but in the long run, the company still has a good growth.

Heavy trucks and construction machinery have a prominent market position. FAW, Dongfeng, China National Heavy Duty Truck heavy truck industry three giants. Because FAW and CNHTC have their own propeller shaft supporting factories, the company provided a small amount of driveshaft products for FAW and CNHTC. However, the company is a major supplier of Dongfeng Motor's Dongfeng Liuzhou Automobile and other mainstream heavy truck manufacturers such as Beiqi Foton and Shaanxi Heavy Duty Truck are major customers of the company. The company's market position in the field of heavy-duty driveshafts is not comparable to other competitors. In 2007, 2008 and 2009, the market share of the company's heavy-duty series of driveshafts reached 20.16%, 22.03% and 20.10% respectively, ranking first in the industry.

In the field of construction machinery, the company's products are mainly used in shovel-based transportation machines and wheeled cranes that are mainly loaders. The main loader manufacturers include Liugong, Longgong, Xiagong, Shandong Lingong, Shandong Shangong, and Chenggong, all of which are major customers of the company. The company’s market position in this field is also very prominent. 2007, 2008 In 2009, the company's market share in the construction machinery transmission shaft reached 55.61%, 56.67% and 56.29%, respectively.

Establishing a joint venture with Dongfeng will significantly increase company sales. Dongfeng Motor is one of the three major automobile groups in China. In 2006, 2007 and 2008, the commercial vehicle production of Dongfeng Motor was 278,603 vehicles, 341,214 vehicles and 380,290 vehicles respectively. According to Dongfeng Motor's output, the internal market demand of Dongfeng Motor's driveshafts in 2006, 2007 and 2008 were 551,400 sets, 680,362 sets and 753,241 sets, respectively. However, Dongfeng transmission shafts are limited in capacity, and the product types are mainly heavy-duty trucks and medium-capacity transmission shafts. In 2006, 2007 and 2008, the output of transmission shafts was 197,700 sets, 234,000 sets and 21,900 sets respectively, far from being able to satisfy Dongfeng transmission shafts. The interior needs of the car.

On December 29, 2008, the company and Dongfeng Driveshaft signed the "Letter of Intent to Jointly Invest in the Establishment of a Driveshaft Joint Venture", and plans to co-fund the establishment of a joint venture to develop, produce, and sell commercial vehicle and special vehicle driveshaft assemblies and their parts and components. The company, Dongfeng Driveshaft's current driveshaft business and all its associated assets and employees will be transferred to the joint venture company. The joint venture company will use Dongfeng Motor's internal market as the main target market of the joint venture company (except Dongfeng Liuzhou Automobile). As a result, the company will enter the internal market of Dongfeng Motor with a large demand. The company's revenue and profit scale will reach a new level, and the company's industry status will be further improved.

Profitability is very prominent. The technical content of the drive shafts of medium- and light-duty trucks is relatively low, and the market is fiercely competitive and profitability is not strong. However, the host manufacturers have high quality and performance requirements for heavy-duty trucks and construction machinery driveshafts. Related driveshaft manufacturers must have strong research and development capabilities, precision machining equipment, large capital, and investment in molds, thus limiting the production of small and medium-sized manufacturing enterprises. The involvement of the industry is also more orderly. The company has outstanding technical development capabilities and scale advantages, and the company adopts a differentiated competitive strategy, focusing on the production of heavy-duty trucks and drive shaft products for construction machinery. The company has thus obtained a high profit margin. The company's gross profit margin in the last three years was over 28%, and it reached 32.81% in 2009, which is much higher than that of ordinary auto parts companies.