Huazhong CNC: CICC, Meiyang Investment and other 8 institutions investigated our company on September 9

On September 13, 2021, Huazhong Numerical Control (300161) issued an announcement that: Yan Guoxian of CICC, Guo Weixiu, Meiyang Investment Hu Zhimin, Wang Jun of Xingye Self-operated, Song Ge of Borun Investment, Splenssay Capitaljason Wu, Yuanhao Investment Chai Yifei, Zhan Linyu of Jingxi Asset Management, Li Yi of Hualong Securities, tu Liyun investigated our company on September 9, 2021, and this survey was received by Vice President Zhu Zhihong, Secretary of the Board of Directors Chen Cheng, CNC System Division Wang Jie, and Securities Affairs Representative Wang Qiong.

The main contents of this survey are:

First of all, Chen Cheng, secretary of the board of directors, led investors to visit the company's exhibition hall and workshop to understand the company's development history and the current situation of the company's various business sectors. After the visit, communicate with investors in the conference room, the main contents are as follows:

First, Ms. Chen Cheng, secretary of the board of directors of the company, introduced the basic situation and development strategy of the company, with independent and controllable CNC technology as the core, continuously extended the core technology application field, and formed a development strategy of "one core and three armies", that is, "with CNC system technology as the core, machine tool CNC system, industrial robot, and new energy vehicle supporting as the three main bodies".

1, CNC system supporting CNC machine tools is the industrial mother machine of high-end equipment manufacturing industry, in the entire machine tool system industry chain, CNC system is the key core technology in the field of advanced manufacturing, is the "brain" of CNC machine tools. The company's CNC system supporting business mainly provides CNC system supporting services for all kinds of CNC machine tool enterprises and users in key industries such as aerospace, automotive, 3C, woodworking, grinding machines, etc., including providing high-end CNC systems of Central China 8 type for various types of special machines, high-speed drilling centers, machining centers, five-axis machine tools, etc., as well as providing a series of CNC systems, series of servo drives, series of servo motors, etc. for popular CNC lathes and CNC milling machines.

2, industrial robots and intelligent production line business in the field of industrial robots, the company has always adhered to the "PCLC" development strategy, that is, to the general multi-joint industrial robot products (P) as the main direction of attack, to the domestic robot core basic components (C) research and development and industrialization as a breakthrough, to the subdivision of industrial robot automation line (L) application as the goal, to the intelligent cloud platform (C) as a means of robot and production line network intelligence. The specific business of industrial robots and automation provides all kinds of manufacturing enterprises with products such as multi-joint industrial robot machines, robot core parts controllers, as well as intelligent production lines and intelligent factory overall solutions.

3. Education and teaching program service Education and teaching program service business mainly provides professional upgrading programs, teacher training, practical training base construction programs, and school-enterprise cooperation projects for various colleges and universities cnc technology, robots, intelligent manufacturing and other related majors, of which the equipment part includes various types of CNC machine tools, industrial robot training workstations, intelligent manufacturing teaching units, intelligent factory training bases, etc.

4. The new energy vehicle supporting business of the new energy vehicle supporting company mainly carries out technical research and application promotion around the electrification, lightweight and intelligence of the vehicle, including the servo motor, servo drive, controller, lightweight body and intelligent products of new energy vehicles.

5. The special equipment business of special equipment companies mainly includes infrared products widely used in the fields of human body temperature measurement, industrial security monitoring, etc., as well as GF equipment supporting products, such as control systems for GF equipment components or unit assembly support, special robots and intelligent systems in the field of GF applications.

2. Interactive exchange session

1. Opportunities for domestic CNC systems and the competitive landscape of CNC system market? Since 2000, the reliability of domestic economic CNC systems has been significantly improved, practical functions and low prices, the economic CNC system market is basically occupied by domestic CNC systems, but in the mid-range popular CNC system market, most of the market is occupied by imported products, and in the high-end CNC system market, especially in the field of aviation, aerospace, aviation manufacturing, the market share of domestic high-end CNC systems is lower. With the implementation of the national high-quality development strategy and the transformation and upgrading of the manufacturing industry, as well as the upgrading demand for the industrial mother machine itself, the demand for high-end CNC systems in the future is greater, which will be the company's future development opportunities. As a leading enterprise in the domestic high-end CNC system, the company takes "using Chinese brain equipment made in China" as the mission, after years of research and development accumulation and undertaking the national 04 major special project tasks, it currently has a completely independent intellectual property rights of multi-axis linkage high-end CNC system products, and has realized the localization of the corresponding core components (such as control devices, servo drives and servo motors, etc.), and the corresponding products have won the second prize of national scientific and technological progress for many times, breaking the foreign technology blockade. The company's successful development of the "Central China 8 series of high-end CNC system" has achieved benchmarking with Japan's Fanuc, Germany's Siemens and other international leading high-end products, and there are thousands of sets and high-end CNC machine tools listed in the national 04 major projects supporting applications. In recent years, in order to ensure national defense security, the company has undertaken 80% of the "brain replacement project" project in the field of national defense and military industry, and in 2019, it realized the batch matching of the first domestic numerical control system of ten major military industrial groups. The company's "Central China 9 Intelligent NUMERICAL Control System" has been supported by the national 04 major projects, and has been selected as an outstanding product of the machinery industry in the 40th anniversary of reform and opening up. In the past two years, some domestic machine tool factories have taken the initiative to find us to support, and enterprises have also realized that they must replace imports with domestic systems, otherwise they will face great risks in the future, which also brings us the opportunity to seize the commanding heights.

2. How to view other manufacturers entering the field of CNC systems? The NUMERICAL control system is the brain of the CNC machine tool, which determines the function and performance of the CNC machine tool. The core components of the NUMERICAL control system include controllers, drives, servo motors, etc., as well as various motion control algorithms, involving structures, software, hardware, control, electrical appliances, electromagnetics and other different disciplines, which is a typical multidisciplinary cross-disciplinary, multi-field integration of comprehensive high-tech products. The entire CNC system to achieve high performance, high-speed high-precision algorithm, multi-axis multi-channel function involves the integration of multi-discipline and multi-field. From the application point of view, the CNC system is the brain of the CNC machine tool, the machine tool is the industrial mother machine of the manufacturing industry, which has applications in all walks of life, which means that the applied equipment has high requirements for the system, and various working conditions and environments must be adapted, which is indeed very difficult. Starting from technology and application, entering this industry requires continuous accumulation, application, and iterative upgrading to develop after years of precipitation, and it takes a lot of effort to do well. The company has been deeply engaged in the field of CNC for many years, adhere to independent innovation, have completely independent intellectual property rights and the ability to provide a full set of solutions, and the company has invested heavily in technological innovation, and it is precisely because of this accumulation of continuous high R&D investment for many years that we have a competitive advantage in technology and become one of the few companies that can compete with imported CNC system manufacturers.

3. At present, the company's CNC system is economical and the proportion of high-end CNC systems? What is the difference between economical CNC systems and medium and high-end CNC systems? The company has always been positioned to do high-end CNC systems, the current sales of high-end CNC systems accounted for 80%, economical CNC systems accounted for 20%. The main difference between the economical CNC system and the high-end CNC system is the difference in the type of motor, processing program, processing accuracy, development degree, supporting platform, etc. The high-end CNC system is mainly equipped with five-axis and above high-grade CNC machine tools, multi-channel, heavy-duty CNC machine tools and high-speed high-precision and ultra-precision machine tools, which can meet the processing of high-precision and complex parts such as aerospace, military, communications, automobiles, ships, etc., with multi-channel CNC equipment control capabilities, with dual-drive control control, high speed and other performance.

4, 3C, automotive, aerospace sector in the company's business proportion? In general, the 3C industry accounts for a larger proportion, China is a 3C manufacturing power, and the market demand in the domestic 3C field is also huge. In the field of 3C processing equipment, the company uses the high-speed high-precision, multi-axis multi-channel technology and other key technologies of the 8-type CNC system in Central China to continue to maintain batch matching with Yuhuan CNC, Lens Technology and other machine tool companies in the field of mobile phone polishing and polishing, glass cover processing, etc. On this basis, aiming at user needs, jointly developing intelligent production lines for mobile phone polishing and polishing, and continuing to lead the field of mobile phone polishing and polishing. At the same time, in the fields of ultrasonic processing and glass carving processing, it has in-depth cooperation with Enterprises such as Guangzhou Huizhuan Technology and Fujian Jiatai CNC, batch matching, and deep ploughing market segmentation. For high-end key areas such as aerospace, we will continue to use major special demonstration and application projects as an opportunity to carry out system supporting work with key enterprises in the aerospace, automotive and parts fields, and give full play to the company's demonstration and leading role in the high-end field.

5. How to look at the "machine tool industry alliance" led by General Technology Group? This is also a good model, which can be bound to customers and can better promote and develop each other.

6. What is the reason for the decline in the revenue of industrial robots and intelligent production lines in the first half of the year? The company's production and sales of industrial robots in the first half of 2021 increased compared with the same period last year, and because the company's industrial robots and intelligent production line business segments, affected by the delivery cycle of intelligent production lines-related businesses, some contracts did not meet the relevant conditions for revenue recognition at the semi-annual reporting point, and the follow-up company will seize the project implementation delivery and acceptance confirmation.

7. What incentive mechanisms and changes do major shareholders have for the company? The controlling shareholder is optimistic about the future development prospects of the company's industry, and recognizes the company's long-term investment value, and subscribed for the company's shares issued to specific targets for 428 million yuan in cash in 2021 to support the company's "high-performance CNC system technology upgrade and capacity expansion project", which further supports the company's development and enhances the company's competitive strength; Zall itself is a market-oriented operation enterprise, the concept of marketization is worth learning from the company, and Zall has also brought some market resources and support to the company; In terms of major matters, the situation of the decision-making chain in the past was too long, and the efficiency of the company's decision-making was improved. The controlling shareholder proposed that the "three unchanged" means that the shareholder structure has changed and the strategy of "one nuclear and three armed forces" has not changed; The attributes of the enterprise have changed, and the pattern of production, education and research has not changed; The actual controller has changed, and the management structure has not changed. The company also proposed "three changes", that is, the strategic positioning should be changed, and the target positioning should be higher and far-reaching; Ideological concepts should change, from "campus culture" to "corporate culture"; The mechanism and system should be changed, and we should learn from Huawei and Zall. Zall Group proposes the "Smart Connect the World, Smart Future" industrial ecosystem composed of three ecosystems of Zall Zhilian, Zall Smart City and Zall Smart Manufacturing, and the company will play an important role in the intelligent manufacturing sector, and deeply integrate and develop with the major shareholders in the three ecosystems.

8. What are the technical advantages of the Central China 9 type CNC system, and what is the current application? Huazhong Type 9 is an intelligent NUMERICAL control system characterized by "digitalization + networking + intelligence" and integrating big data and a new generation of artificial intelligence technology, and the Huazhong Type 9 intelligent NUMERICAL control system is the cornerstone of our leading industry to achieve "open lane overtaking". On April 12, 2021, the "Central China 9 New Generation Artificial Intelligence NUMERICAL Control System" product launch conference was held, and the iNC intelligent numerical control system with independent learning and independent optimization compensation ability was officially released to the public, becoming the leader and reformer in the field of intelligent numerical control system. The new generation of intelligent NUMERICAL control system, Huazhong Type 9, practices the innovative concept of "smart +" empowering machine tools, and builds a digital twin system (S) (HCPS) that integrates people (H)-machine (P)-information (C). Central China Type 9 deeply integrates big data and artificial intelligence technology, creates an intelligent architecture of "end-side-cloud", and forms three platforms: an intelligent hardware platform that integrates AI chips, an intelligent software platform that supports AI algorithms, and an open platform for building an intelligent APP ecology to achieve "1-3" system innovation. Central China Type 9 focuses on four types of intelligent application scenarios of "quality improvement, process optimization, health protection, and production management", and Central China Type 9 supports users to develop intelligent APP and create a new ecosystem for intelligent application of machine tools. At this year's Beijing Machine Tool Exhibition, more than 10 intelligent machine tools of different specifications jointly developed by the company and a number of machine tool factories were displayed, and the performance level of machine tools was improved through intelligent technology. At present, the central China 9 intelligent CNC system has been applied in small batches in many domestic machine tool enterprises, deeply integrated with machine tool enterprises, helping the transformation and upgrading of the machine tool industry, realizing the development of CNC machine tools from digital to intelligent, and leading the new trend of intelligent CNC development.

9. Our main competitor? The company has always been positioned to do high-end CNC systems, to avoid pure price competition in the low-end market, at present our main competitors are Fanuc, Siemens, Mitsubishi and other import manufacturers. The company's continuous accumulation of high R&D investment for many years has enabled us to have a competitive advantage in technology, to meet the needs of import substitution, and to compete with international giants. In the future, on the one hand, we must continue to adhere to independent innovation, adhere to the high-end route, avoid pure price competition, and enhance competitiveness from the aspects of technology, quality and service; Second, while continuing to adhere to independent innovation, strengthen and accelerate the intensity and progress of market promotion, strive for more market share, and strive to increase profitability through scale effect; Third, with the increase in market share and sales, continue to strengthen and optimize supply chain management, improve the cost performance of the supply side, and strive for greater profit space; The fourth is to further strengthen internal operation control, improve operation and management efficiency, and reduce operation and management costs.

10. What is the progress of equity incentives? The company will seek the right time to promote the relevant incentive work, which is the trend of the times, but also the need to unite the team, stimulate morale, improve performance and accelerate the development of the company.

11. How will the industry prosperity in the future? What stage is the entire industry at the moment? According to the statistics of key contact enterprises of the China Machine Tool and Tool Industry Association, the machine tool industry has continued the recovery growth trend since the second half of 2020, compared with the same period last year and the same period in 2019, the main economic indicators have achieved substantial growth, and the quality and efficiency have improved significantly. From January to June 2021, the operating income of key contact enterprises increased by 45.7% year-on-year, compared with the same period in 2019. According to the data released by the National Bureau of Statistics, from January to June 2021, the output of metal cutting machine tools was 297,000 units, an increase of 45.6% year-on-year, and an increase of 24.3% compared with the same period in 2019; Overall, since entering 2021, the market demand for the machine tool industry has grown rapidly, and the industry has been running steadily and well, laying a good foundation for the operation of the whole year. Since 2018, the company's CNC system production and sales have continued to grow against the trend, and in 2020, the output value and scale of the CNC system have both increased by more than 50%, and in the first half of 2021, the business revenue of the CNC system sector has increased by 88.95% year-on-year. Affected by the international environment such as trade wars and the new crown epidemic, the demand for localization of manufacturing equipment in key areas such as aerospace and GF is very urgent, which has spawned the demand for domestic high-performance CNC systems, and the demand for transformation and upgrading in many fields such as aerospace, GF, energy, steel, equipment manufacturing, 3C, new generation mobile communication technology, and new energy vehicles is strong. Through our years of accumulation, our comprehensive competitiveness in technology, quality, service and other aspects continues to improve, can compete with foreign giants on the same stage, in the high-end CNC system market field to achieve import substitution, we are facing a good development opportunities, 2021 also has a higher development expectations.

12, robots except for reducer can all be produced independently, now what is the autonomy rate? The company focuses on the key core technologies of robots, has overcome more than 300 core technologies of robots, independently developed 6 series of more than 40 kinds of specification robot products, the five core components of robots in addition to the reducer all independent research and development, core independent innovation accounted for more than 80%; Solves the problem of "brainless" card neck of industrial robots, and the autonomous and controllable intelligent robot controller realizes the leapfrog and systematic development of the robot control system, which is one of the few domestic robot control systems for large-scale batch applications; At the same time, the company has the world's first invention patent in innovative mechanical structure and control algorithm, leading the design and application concept of lightweight robots; With an annual output of 5,000 sets of robot production capacity, products in many industries and fields to form a large-scale application, domestic six-axis robot market sales have been in the forefront of the country for 4 consecutive years, is the domestic industrial robot product research and development, manufacturing, application of the leading brand, is a professional engineering contractor for robot automation solutions, is a professional provider of intelligent manufacturing and smart factory overall solutions.

Huazhong CNC main business: CNC systems, robots, intelligent production lines, new energy vehicle design and supporting products, mechatronics, electronics, computers, lasers, communications, industrial software, infrared and other technologies and products development, development, production, technical services, education and training; Sales of developed products; Mechanical and electrostatic spraying processing; Manufacture and sale of Class II medical devices; Operate the export business of the products and technologies produced by the enterprise and its member enterprises; The import and export business of raw and auxiliary materials, instruments and meters, machinery and equipment, spare parts and technology required for scientific research and production of the enterprise and its member enterprises (except for commodities that are restricted by the state to operate by the company and prohibited by the state).

Huazhong CNC's 2021 interim report shows that the company's main revenue was 664 million yuan, up 12.44% year-on-year; net profit attributable to the mother was -38.697 million yuan, down 226.24% year-on-year; deducted non-net profit -57.3542 million yuan, down 1742.57% year-on-year; debt ratio was 46.6%, investment income was 411,400 yuan, financial expenses were 12.3979 million yuan, and gross profit margin was 31.53%.