re: 1193.HK (HK listed) - China Resources Logic - HK$0.77
PRC SEMICONDUCTOR MAKER - PART #3
CORPORATE LEVEL OPERATING ISSUES
1) How do you expect the operating environment, especially Mainland China's market in the coming years to evolve?
CR Logic takes the optimistic attitude towards the operating environment of the Group. Being the Group's major market, CR Logic is benefiting from the continuing growth of China's economy as well as China's entry into WTO.
2) Will there be any new moves of the businesses?
Compressor Business : The Group will further expand its Compressor Business in Shenyang with a view to expand its market share in China.
Semiconductor Business : The Group expects the global and PRC semiconductor market will continue to grow in the next few years. The Semiconductor Business will be able to contribute substantially to CR Logic's profit in the near future when the Group is able to capture the significant growth potential of this market in China.
Office Furniture Business : There is an increasing demand in quality office furniture driven by China's entry into the WTO and the major construction and development that are going to take place in the major cities in China. The operating results of the Office Furniture Business are expected to be further improved. The Group will make use of the existing office furniture distribution network in Mainland China for improving the marketing and sales function of other businesses of the Group
PLAN AND STRATEGIES
1) What is the strategy of the Group to keep moving forward both in the short term and in the long term?
In the coming years, we will continue to improve the operational efficiency of our four core businesses, namely Compressor Business, Semiconductor Business, and Office Furniture Business.
The Group will strengthen and expand its respective businesses though mergers and acquisitions. In this regard, we are always in search of suitable opportunities that fit both our business model and development strategy.
2) What parameters are being employed in deciding which project to invest in?
CR Logic has already laid down a set of criteria and guidelines in connection with the Group's expansion plans to ensure that any such initiatives are not only in the best interest of its shareholders but will bring fruitful returns to them. CR Logic will focus on industries with sizeable market, high growth potential and high entry barrier.
3) Going forward, which business will contribute the most?
Currently, Compressor Business accounted for approximately 60% of the Group's revenue. In the near future, CR Logic intends to significantly increase the contribution from its semi-conductor business
SBU - COMPRESSOR OPERATIONS
Company history
CR Logic's Compressor Business is engaged in the manufacture and sale of air-conditioner compressors. Headquartered in Shenyang, China, it currently has an annual production capacity of over 2.2 million units of air-conditioner compressors with the completion of the first 3 phases of the development. Upon completion of the fourth phase of development by mid-2003, the total registered capital of the Group's Compressor Business will amount to approximately USD 127 million and its annual production capacity will be over 3.1 million units. The total production facilities will cover an area of 67,000 sq. m with a total workforce over 2,000.
With its origin in the early 1990s, the Group's Compressor Business is carried out through China Resources (Shenyang) Sanyo Compressor Company Limited ("CR Sanyo") which is a joint-venture incorporated in Mainland China in which CR Logic has an interest of 63.75% while Japan's Sanyo Electric Company Limited has a 13% stake.
Product/ service
With three production lines operating in their full capacity at all times, CR Logic is able to manufacture a variety of air-conditioner compressors including some of the most technologically advanced and environmental friendly air-conditioner compressors being produced in the PRC.
Market/ market positioning
The Group's products are widely recognized for their superior quality and established brandname. In 2000, CR Logic was ranked the fourth largest air-conditioner compressor manufacturer in Mainland China.
As the only Chinese manufacturer amongst the top five players with a market share of approximately 10%, CR Logic is ranked closely after international industry giants Hitachi, National and Toshiba.
In year 2000, local producers garnered approximately 67% market share of the air-conditioner market, and CR Logic supplies compressors to nearly all, such as Haier, Gree and Changhong, to name a few.
Competitive advantage
Being a leading market player, CR Logic enjoys a number of competitive advantages over other competitors. The Group employs a team of qualified and experienced professionals who are equally competent in terms of technology know-how, operations and management. 25% of the total workforce are specialist in their respective areas of expertise. In addition to sending staff members to undergo training in Japan, CR Logic has also established close linkages with leading universities in Mainland China.
CR Logic's Compressor Business has a proven track record which serves to provide stable cash inflow to support its development. The Group also has a dedicated sales force and an extensive sales network. Moreover, it has established longstanding relationships with strategic partners most of which are leaders in the air-conditioner industry.
As a pioneer in promoting the localisation of production to significantly reduce manufacturing costs, the air-conditioner compressors produced by CR Logic are well placed to compete with those manufactured by international air-compressor manufacturers
Future development
Since 1990, air conditioner compressor unit sales have recorded strong continuous growth. Thanks to the growing economy of Mainland China, coupled with increasing disposable income and low penetration rate of air-conditioners, CR Logic is poised to capture the ongoing demand for high quality air conditioners.
In the fourth quarter of 2001, CR Logic acquired two additional production lines to boost its production capacity. With the commercial operation of these two production lines expected to take place by phases in mid-2002 and mid-2003 respectively, it is expected that the Group's production capacity will be further increased to 3.1 million units per annum. This encouraging development will undoubtedly place CR Logic at an advantageous position to expand its market share in a growing economy with vast potential. It is expected that by 2004, the Group can become one of the leading providers of air-conditioner compressors in the global market.
Awards/ international standard
1994 : Passed (CCEE)
1995 : Awarded the Gold Medal in "95 Beijing International Home Appliances Exhibition"
1995 : Named "China's Brand Name Products"
1996 : Accredited ISO9000 & IS0-9002
1997 : Obtained ‘Consumers' Satisfaction Certification"
1998 : Passed Germany's Spare Parts Safety Certification (TUV)
2000 : Obtained the United States Product Safety Certification (UL)
2000 : Obtained "Consumers' Satisfaction Certification"
1996-2001 : Named "The Most Advanced Enterprise In Shenyang" |
