Maximizing the Benefit Advantage of the "Four-in-one" Model

Industry insiders said that Zhongwang's continued competitive advantage in the industry is also due to its "four-in-one" business model, that is, an enterprise has mastered the "alloy casting", "die manufacturing", "extrusion equipment" and "product development" four core production links. This enables Zhongwang to independently complete the entire production process of industrial aluminium extrusion products and respond to market demand in the shortest time.

Alloy casting refers to the technical process of converting purchased solid aluminium ingots into alloys. The process is to melt electrolytic aluminium with 99.99% purity into alloys by adding auxiliary materials. Aluminum alloy melting and casting technology is the first key link in manufacturing industrial aluminium extrusion products. Zhongwang not only owns advanced melting and casting production line, but also develops melting and casting formula according to customer's demand. It can produce all series 1 to 7 aluminium alloys.

Die plays an important role in the production of aluminium extrusion products, and it is one of the key points of product forming. Zhongwang has the largest special industrial aluminium extrusion die design and manufacturing center in the same industry in Asia, realizing the complete self-development, design and manufacture of the die, and realizing the localization of the die for difficult extrusion profiles (such as high-speed train profiles, large industrial radiators and other large cross-section complex thin-walled thick multi-cavity profiles). High-end industrial aluminium extrusion products have high technology content, which requires a number of die combinations. Zhongwang's die making includes both die design and die combination.

Zhongwang is the world's largest aluminium processing enterprise with more than 90 aluminium extrusion production lines. Among them, there are 21 large-tonnage aluminium extruders with 75MN and above, which are far ahead of the global counterparts. At the same time, the company is continually optimizing the production capacity of high-end and large-section industrial aluminium extrusion. At present, 125MN is the world's largest oil-pressure double-acting extruder, while introducing two world's largest and most advanced 225MN super-large aluminium extruders, one of which has been installed in Yingkou factory, and the second one will be installed in the factory within this year.

In terms of R&D, Zhongwang has also been generous in investment. According to the financial report, Zhongwang's overall R&D expenditure in 2015 was about 510 million yuan, accounting for 3.1% of the total income, and it continued to enjoy the preferential tax rate of 15% of the enterprise income tax as a "high-tech enterprise". Zhongwang has developed more than 100 new products in 2015, won 13 national, provincial and municipal awards for science and technology and new products, and completed 93 patent applications. At present, Zhongwang Technology Center has the qualifications of provincial postdoctoral research base and national laboratory, and has developed materials with Beijing University of Science and Technology, Shenyang University of Technology, Beijing General Academy of Nonferrous Research, Metal Research Institute of Chinese Academy of Sciences, China Heavy Machinery Research Institute and China Aviation First Aircraft Design Research Institute. In 2015, Zhongwang also jointly established Liaoning Aerospace Aluminum Alloy Research and Development Joint Laboratory with Shenyang University of Aeronautics and Astronautics and China Aviation Shenfei Civil Aircraft Co., Ltd.

Lu Changqing said: "Industrial aluminium extrusion products are non-standard products, product shape, specifications are different, need to be customized for customers. The "four-in-one" model not only diversifies the company's products, but also greatly reduces the production cycle of aluminium extrusion products, so that when new orders are received, the company can deliver the best quality products in the fastest time to meet the diversified needs of customers.

Breakthroughs have been made in many businesses

In 2015, Zhongwang's other businesses also achieved phased results. It is noteworthy that the vast majority of these "growth businesses" remain under the banner of Zhongwang, a listed company on the Hong Kong Stock Exchange.

In 2015, the first production line of Zhongwang high value-added aluminium calendering material project in Tianjin entered a critical stage before its formal commissioning. The core and supporting equipment have been tested and run one after another. The final debugging of different alloy products and trial production of some customer sample orders are under way. In the second half of 2015, the casting workshop completed casting the flat ingot of aluminium alloy at one time. The first aluminium alloy sheet and the first aluminium alloy coil were produced in the hot rolling and cold rolling production lines respectively, which marked the gradual progress of the project.

This aluminium calendering project will be put into operation soon, and will become an important source of income and profit growth point for Zhongwang in the future. According to the Boston Research Report, the consumption of aluminium calendering materials in China will continue to rise from 7.6 million tons in 2011 to 16 million tons in 2020. The consumption growth is higher than the global average level, accounting for about half of the global consumption by 2020. The industry has a very broad prospect.

At present, the global consumption of high value-added aluminium calender products accounts for 33% of the total consumption of aluminium calender, while the proportion of China is only 12%, which is far below the global level. The high-end aluminium calender market is still in its infancy, mainly relying on imports to meet market needs. Zhongwang saw this business opportunity earlier than his peers.

In addition, Liaoning Zhongwang Special Vehicle Manufacturing Co., Ltd. ("Special Vehicle Factory") has obtained production and sales licenses of several all-aluminium commercial vehicles in 2015. At present, two production lines are being constructed to produce all-aluminium semi-trailers and oil tankers respectively. The sales team of the special vehicle factory is actively contacting potential customers and striving to achieve large-scale sales within this year.

Zhongwang also extended its business to the upstream of the industrial chain and began to try to self-supply raw materials. According to the financial report, Zhongwang's high-purity aluminium and special aluminium alloy projects in Yingkou City, Liaoning Province, put into operation 400,000 tons of production capacity during the year, and began to provide high-quality aluminium alloy raw materials for Zhongwang's internal production, with a supply of about 290,000 tons in 2015.

Mature Business Returns to A Share, Star Business Retains Hong Kong Stock

On March 23, 2016, Zhongwang announced details of the proposed split listing. Zhongwang signed an asset transfer agreement with Shanghai A-share listed Zhongfang stock through an indirect wholly-owned subsidiary company. Zhongfang stock will buy all the rights and interests of Liaoning Zhongwang Group Co., Ltd., which focuses on the aluminum extrusion business. The transaction cost will be paid by Zhongfang stock to Zhongwang stock issue in China. Zhongwang in China will split into A-share listing by injecting the aluminum extrusion business into Zhongfang stock.

Analysts said that Zhongwang's asset reorganization and split listing could further enhance its market value, and also provide an independent financing platform for Zhongwang and its subsidiaries and Liaoning Zhongwang Group, so that it has the opportunity to perform better in the capital market.

"Industrial aluminium extrusion business can be regarded as a mature business of Zhongwang in China, which creates considerable and stable profits. Aluminum calendering and deep processing are the "growth business" that Zhongwang has high expectations, with huge investment in the early stage, but once put into production, the return will be considerable.

This is also the wisdom of the "Hong Kong Red Chips Return to the First Share". Through Zhongwang Refining Holdings A-share listed companies, we will continue to maintain the leading position in the industrial aluminum extrusion industry, while the deep processing business has brought steady growth benefits, while the aluminum calendering business "cultivation" for six years, "harvest" is in sight, which also provides a broad imaginative space for the future performance of Listed Companies in Hong Kong. According to Lu Changqing, the first production line and special vehicle factory of Tianjin Aluminum calendering material project will be put into operation this year.

"The Chinese government has continuously promulgated a number of favorable macro-policies to promote the high-end application of aluminium alloys in the fields of transportation, machinery and equipment, and power engineering. Facing the huge potential market, Zhongwang has three core businesses of industrial aluminium extrusion, deep processing and aluminium calendering, and has the ability of high-precision aluminium melting and casting. It will grasp the opportunities brought by China's industrial upgrading in an all-round business layout, lead the development of the industry and bring long-term and sustainable returns to shareholders. Lu Changqing said.