World Precision posted CNY1.2bn new contracts

Strong contract wins signify momentum spurred by growing Chinese auto parts and home appliances market.

SGX Mainboard-listed World Precision Machinery Limited (“World Precision”), a manufacturer of precision stamping equipment in the PRC, continues its recent growth momentum with its latest contract win of RMB 26.0 million in the country’s automotive parts and home appliances industries. This brings the value of total contracts signed to-date in FY2011 past the RMB 1.2 billion mark. 

The new orders, won in a single day, are equivalent to 5 times the average daily new orders. These consisted of a combination of the group’s conventional, high performance and high tonnage stamping machines. All the new stamping machines are expected to be delivered within 5 months. 

“We are heartened to secure yet another major flow of contracts, following our RMB22.1 million worth of new orders from automotive parts manufacturers in Sep 2011.” 

“One of the main reasons for these recent increases in demand for capital equipment is the increase in foreign direct investments (FDI). As foreign multinational companies set up new factories in China, they usually tap on the well-established local supply chain for sourcing of metal stamped components. This leads to increased demand for our Group’s stamping machines as local suppliers expand their production capacity.” 

“We continue to experience strong demand for our products as manufacturers upgrade their equipment and facilities to cater to higher quality end products,” Mr Shao Jian Jun, Chief Executive Officer said.

Automotive and Home Appliance Industries
According to Reuters, China's National Development and Reform Commission has estimated that the country’s car production is expected to expand by 30 million units by 2015. The healthy vehicle sales growth coupled with the huge replacement market for auto parts, the Group is in an excellent position to increase its market share and widen its customer base. The stringent quality controls and high quality standards required by automakers is a testament of the Group’s solid track record in delivering high quality, high standard stamping machines and the Group’s strong technical expertise in matching the Group’s customers’ complex requirements. Sales to the automobile sector contributed 32% of the Group’s total revenue in 2010.

Urbanisation generates increasing demand for home appliances such as refrigerators, washing machines and colour TV sets. It is widely estimated that employment in urban areas has grown at a CAGR of 3.3% over the past 10 years. About 8m-10m jobs were created in urban areas every year. It is estimated another 400m people from rural China will migrate to the cities in the coming 20 years. Conversely, employment in rural areas has contracted at a CAGR of 0.4% over the past 10 years. Sales to home appliances and consumer goods accounted for 34% of the Group’s sales in 2010.

Capital Equipment Industry
The PRC government has designated the capital equipment industry as a key industry for the future development of the national economy. The government has launched policies to support the development of local equipment manufacturers. The outlook is positive, especially for those concentrating on the high-end equipment manufacturing, including high-speed rail (HSR) and aviation equipment. According to the 12th Five-year Plan for the capital equipment industry, output value of the whole industry is expected to reach Rmb700b in 2015, up from Rmb455b in 2009.