BRIGHT WORLD Precision Machinery (SGX: BMPM) got off to a strong start this year with a record one-day order of nearly 50 mln yuan for its metal stamping precision equipment, with its order book now standing at a whopping 280 mln.
The Jiangsu Province-based manufacturer of stamping machines and finished metal parts for the machinery, electronics, home appliance, auto and transportation sectors also won its first order from China CNR for locomotive engine components as it rides the PRC’s 700 billion yuan plan to boost the railway sector by 2011.
Bright World’s senior management was selected to be Aries Consulting’s Company of the Month, with a roomful of analysts and fund managers in Hong Kong eager to hear more about the firm’s impressive growth story, especially after Bright World just announced its 2010 net profit shot up 113% to 125.2 mln yuan.
The company said performance was driven by strong demand for stamping machines in the PRC, particularly from the automotive and home appliance sectors.
Turnover rose 85.2% yoy to a record 1.04 bln yuan backed by a shift in product mix towards high-performance and high-tonnage stamping machines where sales jumped 107% y-o-y, compared to 65.7% y-o-y for conventional stamping machines.
Bright World CEO Shao Jianjun told the gathering that a key technical cooperation agreement with a Japanese partner was a major part of its success.
“Our partnership with Aida, a global leader for stamping machines, has enabled us to develop and introduce more sophisticated stamping machines to serve the increasing needs of our customers, and to target new customers with higher technical specifications.
"It has helped us expand our presence to customers in the automotive sector, especially for Japanese and other foreign car brands.
“We intend to build on our breakthrough in the Chinese locomotive sector, a sector which is likely to emerge as one of the most exciting markets in the next decade, with the PRC government's plan to add more than 16,000 km of high-speed rail track across China.”
Bright World managed to maintain stable and relatively high gross profit margins last year of 25.6%.
Margins for conventional stamping machines jumped to 25.1%, from 17.0% for 2009, backed by an increase in average selling prices due to strong demand.
However, margins for high-performance and high-tonnage stamping machines declined to 25.5% last year from 29.3% in 2009, as overhead from the company’s new manufacturing plant kicked in.
Mr. Shao said the new plant, dedicated to the production of high-performance and high-tonnage stamping machines, was completed towards the end of FY2009. Having successfully completed the necessary trial run stage in FY2010, the Group is currently ramping up its production capacity to meet the growing import substitution trend for high-end stamping machines in China.
Bright World said it has a three-pronged strategy to sustain growth this year.
Build on its success in securing the first contract from Dalian Locomotive and Rolling Stock Co Ltd (a subsidiary of China CNR Corporation Ltd) to intensify its foray into the PRC locomotive sector. China plans to invest four trillion yuan in the railway sector over the next five years.
Expand its geographical markets by increasing sales activities across northern China and target growing industrial development in that region.
Continue its strategy of managing the cost of its raw materials, namely iron and steel, to mitigate against short-term price fluctuations. It will do so by locking in costs with suppliers upon signing contracts with customers, mixed with the bulk purchase of raw materials three months in advance.
“We expect the implementation of these strategies, and the underlying strength of the Group's present operations, to place Bright World in an ideal position to benefit from China's continued growth and role as the world's manufacturing base,” Mr. Shao added.
Bright World’s Board of has proposed a final dividend totaling 47.5 mln yuan for FY2010. This works out to be a dividend of 0.119 yuan (S$0.023) per share. The proposed final dividend is subject to shareholders’ approval at the AGM on April 28, 2011.
CEO Shao said Bright World was very keen on catching a ride on the phenomenal growth of China’s rail sector – especially high-speed railways.
Of particular note is the contract signing from Dalian Locomotive And Rolling Stock Co Ltd, a subsidiary of China CNR Corporation Ltd, a Chinese state-owned producer of locomotives, passenger coaches and freight cars. Bright World will provide Dalian Locomotive with a 1,250 ton, 2-storey high, high-performance stamping machine to produce its latest range of locomotives and high speed trains.
“We are pleased to have secured this first contract from Dalian Locomotive. Going forward, the Group intends to intensify its efforts to secure more customers from the railway sector. Demand for railway equipment is set to rise sharply in the next few years as China looks to add more than 16,000 km of high speed rail track. Indeed, the Chinese Ministry of Railway has already allocated 700 billion yuan for railway investments in 2011 alone,” Mr. Shao said.
Since listing in Singapore in April 2006, the company has received “strong, consistent support” from the PRC government.
“As we are a high-tech enterprise, we enjoy favorable tax rates of 15% in the PRC instead of the usual 25%. The government values us because we have a very diverse and flexible production capacity. There are very few companies in our space who can meet major orders with such flexibility. After our 2006 listing, we used the IPO proceeds to upgrade our facilities and purchase a lot of new equipment. Each machine costs an average of 30 mln yuan, so our gross profit took a hit post-listing.
"But as you can see from our recent results, we have long moved on from those early days and also have a diverse client base to avoid overexposure. In fact, we have over 3,000 direct and indirect customers with no one client contributing more than 5% to total revenue,” he added.
He said Bright World’s strategic location in Danyang, Jiangsu Province – a short drive from Shanghai’s industrial, port and financial facilities and a reasonable distance from a plethora of auto, appliance, machinery and railway sector manufacturers gave Bright World a leg up over its domestic competitors.
“Our logistical advantages, flexibility, growing brand name – but most importantly, our quality – will continue to win us more and more contracts in China as the economy continues to charge forward,” Mr. Shao said.
“Going forward, we are committed to upgrading both our capacity and quality, and we will be paying more and more attention to growing potential in the country’s railway sector.”
Bright World CEO interview with Reuters can be read here.
See also:
BRIGHT WORLD CFO Tells Reader: ‘Quality, Branding Keys To PRC Success’
SITE VISIT: BRIGHT WORLD Stamping Major Name For Itself In PRC
