The scale of the manufacturing industry in mainland China is the largest in the world, and the industrial chain system has a good soil for growth.
The industrial equipment chain system is the basic component of industrial machinery and equipment, and its downstream applications are also relatively wide. In 2022, the added value of the mainland's manufacturing industry will be 33.5 trillion yuan, accounting for nearly 30% of the global manufacturing industry, with an increase of 8pct in 10 years. The scale of the mainland's manufacturing industry is the largest in the world, and it is still developing in a better direction, and the industrial chain system, as the main mechanical transmission system, will also have a good room for growth.
According to data from the China Business Industry Research Institute, the scale of the mainland industrial automation market has reached 264.2 billion yuan in 2022. According to the forecast of the China Business Industry Research Institute, the scale of the mainland's industrial automation market will grow to 282.2 billion yuan in 2023. The industrial chain drive system is one of the core components of industrial automation, and the rapid development of industrial automation will provide a good growth environment for the growth of the industrial chain drive market.
A chain drive is a meshing drive with intermediate flexible parts, which can be used for power transmission, material handling, traction lifting, and other specialized purposes with different functions. Chain drive, belt drive and gear drive are the three major transmission systems in the transmission part of the machinery industry.
Chain drives have a 100-year history and a market size of $5.1 billion in 2022. According to IMARCGroup, the total global chain drive market size was valued at USD 5.1 billion in 2022, and the global market size is expected to reach USD 6.3 billion by 2028. Japan's Tsubaki and Germany's Ives Group are recognized in the industry as two enterprises with a long history, advanced technology, excellent quality and the strongest strength.
The chain drive industry in Continental has been around for more than 70 years. There is still a gap between the revenue scale of domestic chain drive enterprises and overseas leading enterprises. The continental chain drive industry started late, the development time is short, and the scale of domestic chain drive enterprises is relatively small compared with developed countries. After years of industry development in the United States and Japan, countries such as the United States have cultivated leading enterprises such as BorgWarner and Tsubaki of Japan with annual sales revenue of more than 10 billion yuan. Although there are also leading domestic enterprises such as Zhenghe Industry and Hangzhou Donghua in China, there is still a gap between the revenue scale and product specifications and the world's leading enterprises.
The high-end chain drive system is gradually being conquered, and Zhenghe Industry is in an advantageous position.
Judging from the current situation, Zhenghe company has maintained good cooperative relations with well-known enterprises such as Ives, Guangdong Xinyuan, and Kunming Shipbuilding Logistics by virtue of superior product quality and excellent sales ability, and has established a reputation and brand image.
From a technical point of view, Zhenghe's "reinforced toothed chain for engines" is the successor of American and Japanese companies
The third successful R&D manufacturer has broken the foreign technology monopoly, established a dominant position in the R&D and production of engine tooth chain in China, and also demonstrated the company's technical strength. We believe that Zhenghe Industry is the main force of domestic high-end chain drive system localization substitution, and currently has certain advantages in technology and brand, and can maintain a good development trend in the future.
Zhenghe Industry is a leading enterprise in the domestic chain drive industry. In January 2021, Zhenghe Industry was successfully listed, becoming the first A-share listed company in China's chain drive industry and a leading enterprise in the domestic chain drive industry.
The company's main products include three categories: vehicle chain system, agricultural machinery chain system and industrial equipment chain system.
The vehicle chain includes the motorcycle chain and the automobile chain, and the motorcycle chain system produced by the company mainly includes the transmission chain (and supporting sprockets), timing chain and oil pump chain; The automotive chain system is mainly the timing chain and oil pump chain used in automobile engines;
There are many types of agricultural machinery chain systems produced by the company, and the general categories can be divided into transmission chain systems for power transmission devices and harvesting conveyor chain systems for harvesting devices;
The industrial equipment chain systems produced by the company are diverse and widely used in various fields such as logistics and transportation, machinery and equipment, food production, dock loading and unloading, and automobile production.
Vehicle chain system The company's vehicle chain products are mainly motorcycle chains and automobile chains. Motorcycle chains include drive chains (and matching sprockets), timing chains and oil pump chains. The transmission chain is mainly used for the outside of the engine, connecting the front sprocket (driving sprocket) and the rear sprocket (driven sprocket), transmitting the power of the front sprocket to the rear sprocket, in order to drive the motorcycle wheel forward chain, mainly roller chain. The company has the manufacturing capacity to manufacture standard chains, wear-resistant chains, reinforced chains and super strong chains.
The company's automobile timing chain is mainly toothed chain, sleeve chain and roller chain, and oil pump chain is mainly toothed chain and sleeve chain. After years of development, Zhenghe has become a global manufacturer of high-quality chain systems and one of the world's largest vehicle chain system production bases. In July 2022, the company successfully acquired an 85% stake in Shanghai Hantong Auto Parts Co., Ltd., further expanding the revenue scale of the automotive chain business. Shanghai Hantong is mainly engaged in the production, sales and research and development of automotive engine timing system guide rails and steel sprockets, and provides high-quality products and services for many automobile OEMs, including Changan Automobile, Jiangling Motors, SAIC Motor, BYD Automobile, Great Wall Motor, Yunnei Power, FAW Dachai, Dongan Power, etc.
Agricultural Machinery Chain System The company has many types of agricultural machinery chains. The main products are dialing chains, clamping chains, feeding chains, lifting chains, etc. The company takes the development and manufacturing of agricultural machinery chain system as the core industry, and has introduced and built a complete test equipment, automatic production line and system original supporting system.
Industrial chain system products The company's industrial chain products mainly include conveyor chains, double-speed chains, side-bending chains, traction chains, sorting chains, plate chains, drive chains, sprockets, etc. In 2023, Zhenghe products have been supplied to many well-known manufacturers in the industry, such as Kunzhou Shipbuilding, Qingdao Soft Control, Xinyuan, Kingerobot, Harbin Boshi, Yiheda, Damon Technology, DJI UAV, etc. Looking forward to the future, the company is expected to further expand the industry and product categories, and continue to develop high-quality customers.
Revenue maintained steady growth, and performance was affected by the increase in expense ratio Revenue increased steadily, and performance fluctuated slightly, and the decline in performance in 2023Q1-3 was mainly affected by the increase in expense ratio. From 2020 to 2023Q1-3, the company's total operating income achieved year-on-year growth rates of 21.25%, 39.38%, 17.95% and 3.03%, respectively, and year-on-year growth rates of 18.33%, -27.62%, 115.74% and -24.09% respectively.
Vehicle chain system / agricultural machinery chain system / industrial chain system are the company's three categories of products.
2020-2023H1 Vehicle chain system revenue accounted for 56%, 54%, 51%, and 59%, respectively, and gross profit accounted for 64%, 64%, 58%, and 64%, respectively
The revenue of agricultural machinery chain system accounted for 17%, 18%, 17% and 17% respectively, and the gross profit accounted for 16%, 21%, 20% and 21% respectively
The proportion of industrial chain system revenue is 19%, 19%, 23% and 16% respectively, and the gross profit proportion is 18%, 14%, 22% and 14% respectively.
The company's gross profit margin remained basically stable. The company's gross profit margins from 2018 to 2023Q1-3 were 24.90%, 26.47%, 25.52%, 16.88%, 23.02%, and 22.75%, respectively.
The company has been deeply involved in the chain market for more than 20 years, and has been aiming to become a global chain leader since its establishment, so it is different from other domestic chain companies, most of the companies in the same industry have a single product line, focusing on a certain market segment, the company is leading the market in terms of strategy formulation and product layout, and currently has multiple product lines such as vehicle chain / agricultural machinery chain / industrial chain and marine chain, all of which have formed an independent plate, with rich market experience and deep technical precipitation.
In the future, it is planned to invest a total of 5.5 billion yuan to expand the scale of production capacity. The company announced in March this year that it plans to invest in the construction of a chain intelligent logistics equipment and key auto parts production base in Deqing County, Zhejiang Province (Huzhou Moganshan High-tech Industrial Development Zone), and signed a strategic cooperation agreement with the Management Committee of Huzhou Moganshan High-tech Industrial Development Zone on the project strategic cooperation agreement on chain intelligent logistics equipment and key auto parts production base and set up a wholly-owned subsidiary "Zhenghe Industrial (Zhejiang) Co., Ltd." (tentative name, subject to industrial and commercial registration), mainly engaged in research and development, production, Sales of high-end industrial engineering chain system, chain intelligent logistics equipment, automotive chain system, vehicle engine key parts, transmission bicycle chain system and other chain system products. 10 new chain-type intelligent industrial engineering logistics equipment production lines, 5 production lines for key parts of automobile engines and 5 bicycle chain drive production lines (subject to the project record). The progress of the follow-up project will be completed after the implementation of the first phase of the project, depending on the company's business development and capacity demand.