on may 7, xingyuan power wanted to submit a prospectus to the hong kong stock exchange.

according to the prospectus, xingyuan power will use the funds raised to build a new production base, upgrade the existing production line, expand marketing and researchers, and supplement the company’s operating funds and general purposes.

in fact, as early as june 17, 2011, xingyuan power had submitted a listing application in hong kong. however, the company’s board of directors cancelled the listing plan for that year.

for the reason for the cancellation, xingyuan power said at that time that the main consideration was that the market conditions were not good. at that time, it was in the inflation cycle after the 2008 financial crisis, and due to the tightening of monetary policy, liquidity was affected, and new stocks in the hong kong stock market were frequently cold.

“the company will continue to review the situation and publish a separate announcement when it decides to restart.” xingyuan power said at that time.

this “scrutiny,” however, is 11 years.

net profit of 158 million has not returned to pre-pandemic levels

in the past 11 years, how has xingyuan power changed?

according to 2011 data, the company said that the net profit in the first half of 2011 was about 85 million yuan.

at that time, guoyuan securities research report believed that xingyuan power’s main business diesel power generation had the disadvantages of high noise, heavy pollution and high cost, and in the context of energy conservation and emission reduction, the industry will face a series of problems such as environmental protection in the future. therefore, hingw dynamics was given a rating of cautious subscription.

according to the prospectus, in 2019, 2020 and 2021, the revenue of xingyuan power was 1.338 billion yuan, 1.028 billion yuan and 1.301 billion yuan, and the net profit was 183 million yuan, 104 million yuan and 158 million yuan, respectively.

among them, in the first six months of 2021, xingyuan power’s revenue was 561 million yuan and net profit was 66.132 million yuan. according to this calculation, the net profit of xingyuan power in the first half of last year was only 77.8% of that of 11 years ago.

only from the half-year performance data, eleven years have passed, and the profit performance of xingyuan power has not improved significantly, or even declined.

however, xingyuan power also said in the prospectus that its operating results will fluctuate cyclically due to seasonal factors, of which the first quarter earnings are relatively low and the fourth quarter earnings are relatively high.

in 2020, the performance of xingyuan power has declined significantly compared with 2019. in this regard, the prospectus explained that the main reason is that the new crown pneumonia epidemic has adversely affected its business in 2020.

in 2021, the performance of xingyuan power has rebounded, but there is still a gap between revenue and net profit compared with 2019, and overall, the performance of xingyuan power has not increased significantly.

in terms of cash, as of december 31, 2021, hingw power held cash and cash equivalents of rmb128 million.

in terms of gross profit margin, the overall gross profit margin of xingyuan power has fluctuated, with the gross profit margin falling from 20.5% in 2019 to 16.7% in 2020, which the company explained that this is mainly due to the impact of the epidemic, resulting in a decline in gross profit and gross profit margin of the professional oilfield engine solutions business segment in 2020.

in 2021, the gross profit margin of xingyuan power increased to 18.4%.

in terms of net profit margin, in 2019, 2020 and 2021, the net profit margin of xingyuan power was 13.7%, 10.2% and 12.1% respectively, and last year did not return to the pre-epidemic level.

in addition, xingyuan power also faces the negative impact of price fluctuations, rising prices of parts and raw materials or insufficient supply. in the past three years, the raw material costs of xingyuan power accounted for about 90%, 88.2% and 87.5% of the total costs, respectively.

cummins is both the largest supplier and the top five customers

according to the prospectus, xingyuan power’s business is mainly composed of three parts: heat exchange system, power unit solution and professional oilfield engine solution.

among them, the heat exchange system is used to transfer heat from one medium to another, mainly used in power generation, construction machinery, data center and other fields; power unit solutions are mainly the sale of diesel power units, industrial power units, etc.; the income of professional oilfield engine solutions mainly comes from the engine, transmission sales and after-sales service of special machinery and equipment in the oil and gas industry.

according to the frost & sullivan report, hingwg ranks third in china’s diesel generator set solutions market in terms of revenue in 2020, with a market share of about 4.4%.

according to the data, china’s professional oilfield engine solutions business has a high concentration of industry, with the top five market participants occupying about 38% of the market share. among them, xingyuan power’s professional oilfield engine solution business ranked first in china, accounting for 15% of the market share in terms of 2020 revenue.

it is worth noting that hingw power is highly dependent on the cummins group, which provides its brand of diesel engines, which are also key components of the power unit solutions business.

cummins is a leading u.s.-based manufacturer of diesel engines listed on the new york stock exchange and a component of the s&p 500 index.

from the perspective of business connections, xingyuan power’s professional oilfield engine solution business mainly purchases special engines from cummins; in the heat exchange system business, xingyuan power supplies its heat exchange system to manufacturers including cummins; in the power unit solution business, cummins has been supplying key components to xingyuan power’s diesel power unit and industrial power unit products.

this means that in the three major businesses of xingyuan power, cummins is an important player.

from the perspective of procurement, in 2019, 2020 and 2021, the cumulative procurement amount of xingyuan power to cummins group was 755 million yuan, 483 million yuan and 628 million yuan, accounting for 61.6%, 58.3% and 57.4% of the total procurement amount in the same period, respectively.

from the perspective of sales, cummins and its related enterprises have been the top five customers of xingyuan power in the past three years, and from 2019 to 2021, the sales of xingyuan power to cummins are 177 million yuan, 202 million yuan and 260 million yuan, accounting for 13.2%, 19.6% and 20% of the total revenue.

in the past three years, hingwon power’s revenue from the top five customers accounted for 50.9%, 42.9% and 43.5% of the total revenue of each year.

“although the company has maintained a close business relationship with the cummins group, there is no guarantee that it will be able to maintain or continue to develop this business relationship in the future. if cummins group decides to terminate the business relationship, it will materially and adversely affect the company’s business and competitiveness. xingyuan power admitted.

before the listing, there was no equity financing, and the founder and his wife served as the chairman of the board and the head of finance respectively

in terms of equity structure, yuan tailong is the controlling shareholder of xingyuan power. before the listing, yuan tailong held all 100% of the shares of xingyuan power.

according to the deed of concerted action, yuan tailong was held by li zuoyuan, xu nengchen, luo huibin, zhang yu, fan xiao, huang fei, huang yue and gao yongchun.

these 8 shareholders act as concerted actors, holding a total of 91.52% of the shares, and are regarded as a group of controlling shareholders.

among them, the founders li zuoyuan and xu nengchen are husband and wife, and li zuoyuan and xu nengchen hold 26.84% and 26.84% of the shares respectively, with a total of 53.68% of the shares. in addition, luo huibin’s shareholding ratio is 8.56%, zhang yu’s shareholding is 11.99%, and fan xiao’s shareholding is 8.4%, all from xiangyang.

li zuoyuan and xu nengchen are still “old husbands and young wives”, of which li zuoyuan is 73 years old and xu nengchen is 48 years old, and the difference between the two is 25 years.

according to the prospectus, li zuoyuan is the founder and controlling shareholder of the company, and is currently the chairman of the board, an executive director and the chief executive officer, responsible for the overall strategic planning and business planning.

previously, li zuoyuan was the chairman of the board of directors of xiangyang kanghaozhi company since october 2005. according to reports, it has more than 28 years of experience in the power unit and engine manufacturing industry.

xu nengchen is currently an executive director, responsible for the company’s financial and human resource management, and was a director of hong kong changyuan donggu economic and trade company.

it is worth noting that before the listing, xingyuan power had a large dividend.

according to the prospectus, in 2019, 2020 and 2021, xingyuan power distributed dividends to shareholders of 16.4 million yuan, 36.9 million yuan and 104 million yuan respectively. it can be seen that in 2021, the net profit is less than that in 2019, the amount of dividends is 6.34 times that of 2019.

in 2021, the net profit of xingyuan power was only 158 million yuan, and the dividend of that year was 104 million yuan, which meant that 65.82% of the net profit was divided.

among them, li zuoyuan and xu nengchen alone cashed out 66.8272 million yuan through dividends last year, with a cumulative dividend of 84.4386 million yuan in three years.



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