Speaking of Weifang, a small city in Shandong Province, most people think of kites first, and secondly we may need to count the Weichai powers that frequently appear on Phoenix Satellite TV.
The kite always represents a leisurely and comfortable holiday life, but the Weichai Group from the kite city is definitely not the same.
Under the leadership of strong leader Tan Xuguang, Weichai took the country's fixed assets investment high-speed car that began in 2000. The sales revenue and profits of diesel engines doubled year after year.
At the same time, Hong Kong's listing, winning the torch, absorbing mergers and returning A shares, reorganizing Shandong Juli and a series of shocking financial circles have made the well-known Weichai Group become the star of the capital market.
Throughout this series of "soldiers assault" type of drama, Weichai Group through the control of a number of links in the industry chain, always centered around the core is to enhance its market share of power products.
Today, Weichai has set the next “surprise†goal to achieve 100 billion yuan in sales revenue in the next five to ten years, and to enter the world’s top 500, becoming the world’s leading supplier of transportation and engineering equipment with power as its core. . However, prior to this, Weichai, like all domestic manufacturing companies, had to weather the difficult times of the current economic cycle.
Capital Operation Forging the Gold Industry Chain
The current slogan of Weichai Group is “green power, international chopping woodâ€. Regarding Weichai’s internationalization path, Tan Xuguang has his firm view. “Those companies with international competitiveness can use the means of capital operation to grow stronger and bigger outside the industrial development,†and Tan Xuguang thinks, “ In addition to industrial management capabilities, entrepreneurs with a strong capital operation ability can be regarded as the leader of an internationalized company.†This expresses his positioning toward Weichai and himself.
Weichai has developed from a diesel engine plant that has been on the order of safety to the most powerful powertrain group in the country. Every step is inseparable from the help of the capital market.
In February 2003, the property rights reform of the “3/3 system†of Weichai Group was implemented. The so-called "three-three system" means that about one-third of the original corporate assets and employees enter the stock company with the core business of Steyr, in order to maintain the status of China's high-speed engine manufacturing and sales leading enterprises, and at the same time promote the existence and separation of Restructured unit development; One-third of the original enterprise's medium-speed operation business and employees remain in the surviving parent company, forming a medium-speed machine production base with medium-speed engines and casting and forging products as the main business; another third is engaged in The separation of specialized plant parts and components production was transformed into a completely independent legal entity, with supporting production as the mainstay, all of which are moving towards diversified investment.
In March 2004, the H shares of Weichai Power Co., Ltd. were successfully listed and traded on the Hong Kong Stock Exchange, raising HK$1.4 billion. Weichai excavated the first pot of gold in the capital market.
Soon after, Weichai’s opportunity came. The collapse of the “Deron Series†made the shares of Hunan Torch Group Co., Ltd. openly sold by Huarong Asset Management Company. Tan Xu was acutely aware that this was a golden opportunity. The Hunan Torch was one of the largest auto parts groups in China at the time. It owned high-quality assets such as Shaanxi Heavy Duty Truck, Shaanxi Fast Gear, Zhuzhou Spark Plug and Mudanjiang Fortis Automotive Air Conditioning. Judging from the industrial development, Weichai Power and Hunan Torch have a great industrial synergy effect. Weichai Power's reorganization of the Hunan Torch will help both parties pull on each other by virtue of their market advantages to achieve strategic cooperation. At the same time, both parties can complement each other through the supporting linkage effect in the manufacturing process of existing products, greatly reduce the production and sales costs of both products, and increase their competitiveness.
After hard to beat a strong competitor, in August 2005, Weichai Power successfully acquired the Hunan Torch with 1.023338 billion yuan and became its largest shareholder. Weichai Power has suddenly owned the "transmission + engine + axle" which is the most complete domestic heavy truck powertrain gold industrial chain. This is also a strong industrial chain with heavy profitability in China.
On April 30, 2007, Weichai Power also creatively implemented Weichai Power's H share swap to absorb the combined Hunan Torch A shares and return to the A-share market. This “H to A†capital operation case is the first merger of listed companies in the Mainland and Hong Kong under the conditions of meeting two different legal environments in the Mainland and Hong Kong and two different regulatory operating rules. The return of H-share companies to the A-share market has created a new model.
This merger not only resolved the issue of the share reform of the S Xiang Torch, but also added a financing platform for the A-share market, and simplified the ownership structure, enabling Weichai Power to directly control the core assets of the original Hunan Torch, such as Shaanxi Heavy Duty Truck and Fast. It has built an automotive industry cluster integrating heavy trucks, powertrains and components.
At the same time, Weichai’s surviving business after the reform of the “three-three†system also set foot on a new platform for development through the hands of capital. In August 2006, after Weichai acquired the net shell from Shandong Juli, it injected the original company's medium speed engine and related quality assets into the company. In April 2007, ST Juli resumed its listing. Weichai’s old products also followed. The reform of the company system has revitalized the economy and reversed the situation of Shandong Juli’s loss year after year. In May 2008, the company successfully “pulled the hatâ€.
More research and development
The golden industrial chain linked by capital bonds not only provides necessary scientific research funding for the development of Weichai, but also enables Weichai to come up with a new path of “chain innovationâ€.
In the final analysis, the manufacturing industry fights technology. Tan Xuguang knows this well. After years of accumulation, Weichai Group has formed several R&D centers in Weifang, Hangzhou, Chongqing, Shanghai, Europe, and the United States. In 2005, it was first introduced in China with Fully independent intellectual property rights to meet the national "III" engine's "blue engine" power. In 2006, it successfully launched the only domestic 12-liter high-power commercial engine. In 2007, it introduced the national IV emission engine. On July 1, 2008, it announced that it has reached the national V. The successful development of high-emission engines has enabled China's internal combustion engines to leap from "made in China" to "created in China."
At the same time, Weichai Power utilized the advantages of the industrial chain to develop a "powertrain" product that systematically matches the engine, gearbox and axle. This means that as long as the automaker matches the design of its own cabs and carriages, a new truck or bus can be brought to market, and the development cycle is shortened by 1/5. This “Powertrain†is one of the results of the “Chain Innovation†technology development strategy of Weichai Power.
In addition to its own internal “chain innovationâ€, Weichai also extended this model to the downstream vehicle companies in the industrial chain. On June 28, Weichai Power and Foton Motor signed a comprehensive strategic cooperation agreement in Beijing. An important part of the agreement is a joint R&D mechanism for both parties to further establish technological innovation, and will establish a power system technology R&D center based on vehicle needs. At the same time, they will integrate their respective R&D institutions in the world, thereby effectively reducing both design costs and establishing stronger competitiveness. As a result, Foton Motors saved test costs and Weichai Power gained a solid and stable customer relationship.
Actively adjust to avoid cyclical risks
Through capital operation, Weichai Group, which owns the gold chain of the heavy truck industry of “Engine + Transmission + Axleâ€, has a moment of infinity, but there are also concerns that Weichai will hold Baodu on the heavy truck industry chain and the risk is too high. ? Heavy trucks are a highly cyclical industry that is heavily influenced by fixed investments. Once macro-control comes, can Weichai get through difficulties?
Indeed, Weichai, who has just completed large-scale asset integration, is facing multiple challenges from both internal and external sources. On the one hand, domestic large-scale auto companies are not willing to control the fate of others and plan their own engine production bases. The pattern of market competition is changing. On the other hand, for the new “Great Weichaiâ€, the control system needs to be re-established. . At the same time, there are many uncertainties in the macroeconomic situation. The growth rate of investment in urban fixed assets has slowed down, raw material prices have soared, and tight monetary policies have had an important impact on the management of Weichai. On July 1 of this year, the switching of the emission standards of commercial vehicles from State II to State III has also brought greater uncertainties to the development of the industry.
Weichai's front road is full of thorns.
Weichai will face very big challenges in the market share of heavy-duty truck engines. For this, Tan Xuguang and his team have a sober understanding. At present, several domestic commercial vehicle groups have already formed, and no one will take any light on the engine that is the heart of the vehicle. Therefore, major auto companies will develop their own engine products, which is also in line with the development of the international auto industry.
Zhang Quan, CEO of Weichai Power, told the reporter: “The company is ready for both hands.†On the one hand, it takes advantage of the industrial chain to actively maintain customer relationships; on the other hand, it cultivates new profit growth points and increases other businesses in Weichai. The proportion of profit composition.
Regarding market share, Zhang Quan told reporters, “When we establish a cooperative relationship with customers, Weichai usually follows this concept: first, it becomes a general supplier of customers, then becomes a full range of suppliers, and finally becomes a strategic supply of customers. For example, the two sides agreed that in the next five years, the matching rate of the engines and gearboxes purchased by Weichai from Weichai will not be lower than that of 2007, and will be yearly. In addition, Futian's newly developed heavy-duty truck products will preferentially select the power system of Weichai. In addition to the imported foreign branded engines, Foton promises not to develop heavy-duty truck engines and gearbox products that compete with Weichai in the next five years; Weichai Power as a strategy Investors participate in the subscription of Foton’s private placement shares...
Zhang Quan said: "Through market-level and equity-level cooperation, the cooperation between the two parties will be further consolidated."
At the same time, Weichai took the initiative to adjust the industrial structure, expand the bus and construction machinery market, as well as marine and land-use generator sets market. Weichai Power related sources told reporters that Weichai is cultivating three new profit growth points, namely CNG/LPG gas engines and generator sets that have begun to take shape, and the remanufacturing of auto parts that are being planned.
Internally, Weichai also needs to straighten out the control and control relationships with Shaanxi Heavy Duty Truck, Fast and other companies under the original Hunan Torch. Prior to this, some outsiders commented that Tan Xuguang had no control over Shaanxi Heavy Duty Truck and other companies. Tan Xuguang disagrees with this. He believes that it is only necessary to manage "investment, assessment, budget, and cadres." He believes that “market-oriented restructuring is the most vital and typical free love.†Therefore, Tan Xuguang, who is quite strong, currently adopts a loose management system for Shaanxi Zhongqi and other former Hunan torch companies and only passes the board of directors. Conduct strategic guidance.
While rationalizing the internal and external relations, Weichai needs to concentrate on the impact of the State III handover and changes in the macroeconomic situation.
Most brokerage analysts believe that the heavy-duty truck industry will be affected by the State III switch on July 1 and there will be a round of advance consumption from the second half of last year to the first half of this year. After July 1, sales of heavy-duty trucks will decline sharply; Deceleration, as well as the impact of the increase in the cost of the National III switching, will also slow down the demand for heavy trucks. Therefore, the capital market is generally not optimistic about the performance of Weichai in the second half of the year. As of the close on July 4, the price of Weichai Power's A shares was only 41.30 yuan. The 2007 earnings per share of 4.42 yuan was calculated at a price-earnings ratio of less than 10 times.
Tan Xuguang told reporters: "Since last year, I have been publicly suggesting risks. I have never said that the State III switch will not affect the industry and the company. However, Weichai has a relatively complete industrial chain, so in the process of market adjustment, We also perform best."
Feng Gang, vice president of Weichai Power, told reporters: “In the first half of this year, the number of engines sold has increased significantly, only 20,000 units less than last year, and the implementation of weight-based charging in northern coal-producing provinces and other related policy influences have increased. Demand for heavy truck products."
Zhang Quan, CEO of Weichai Power, believes that “Weichai’s profitability in the first half of the year is not a problem. In the second half of the year, the sales of China III engines with strong profitability are significant, and the overall performance should not be affected.â€
As for the issue of rising prices of raw materials, Zhang Quan told reporters that the main raw material of the engine is pig iron, which only accounts for more than 10% of the purchase cost. For engine products with high added value, the price increase of raw materials will not cause much impact.
Weichai executives have begun to draw a blueprint for 100 billion yuan in sales revenue. Zhang Quan told the reporter that in the planning of Weichai, among the future engine products, heavy-duty engines account for about 40% of the total, and construction machinery engines account for 20%. The rest is ship power, power generation equipment and export products. At present, Weichai engines have been exported to 41 countries and regions such as Southeast Asia, the Middle East, Russia, and Latin America. In addition, Weichai is still planning a large after-sales service industry, including parts and special oil business, as well as the formation of financial leasing companies.
View related topics: Weichai Power: Expanding Auto Parts Gold Industry Chain
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