CXJG(SZ:002547)2017-02-28 16:00markdown [Part I](index=2&type=section&id=Part%20I%20Important%20Notice%2C%20Table%20of%20Contents%2C%20and%20Definitions) Important Notice, Table of Contents, and Definitions [Part II Company Profile and Key Financial Indicators](index=5&type=section&id=Part%20II%20Company%20Profile%20and%20Key%20Financial%20Indicators) This section provides an overview of the company's profile and key financial performance indicators [VI. Key Accounting Data and Financial Indicators](index=6&type=section&id=VI.%20Key%20Accounting%20Data%20and%20Financial%20Indicators) In 2016, the company reported a **19.74%** year-on-year increase in operating revenue, but net profit attributable to parent decreased by **9.78%** year-on-year, while net cash flow from operating activities significantly grew by **112.41%**, and total assets expanded by **54.95%** Key Accounting Data and Financial Indicators Table | Indicator | 2016 | 2015 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | **Operating Revenue (RMB)** | RMB 2.54 billion | RMB 2.12 billion | **19.74%** | | **Net Profit Attributable to Parent (RMB)** | RMB 163.45 million | RMB 181.17 million | **-9.78%** | | **Net Profit Attributable to Parent (Excl. Non-recurring Items) (RMB)** | RMB 137.57 million | RMB 169.55 million | **-18.86%** | | **Net Cash Flow from Operating Activities (RMB)** | RMB 331.81 million | RMB 156.21 million | **112.41%** | | **Basic Earnings Per Share (RMB/share)** | 0.16 | 0.18 | **-11.11%** | | **Weighted Average ROE** | **8.42%** | **10.13%** | **-1.71%** | | **Total Assets (RMB)** | RMB 5.44 billion | RMB 3.51 billion | **54.95%** | | **Net Assets Attributable to Parent (RMB)** | RMB 2.02 billion | RMB 1.87 billion | **7.81%** | [VIII. Quarterly Key Financial Indicators](index=7&type=section&id=VIII.%20Quarterly%20Key%20Financial%20Indicators) The company's 2016 quarterly operating revenue and net profit showed a relatively balanced distribution, with Q4 revenue being the highest but net profit the lowest, while operating cash flow was strong in the second half Quarterly Key Financial Indicators Table | Indicator (RMB) | Q1 | Q2 | Q3 | Q4 | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | RMB 553.85 million | RMB 649.36 million | RMB 594.55 million | RMB 738.09 million | | **Net Profit Attributable to Parent** | RMB 40.48 million | RMB 51.74 million | RMB 42.27 million | RMB 28.96 million | | **Net Cash Flow from Operating Activities** | RMB 17.13 million | RMB 98.09 million | RMB 80.09 million | RMB 136.49 million | [IX. Non-recurring Gains and Losses Items and Amounts](index=7&type=section&id=IX.%20Non-recurring%20Gains%20and%20Losses%20Items%20and%20Amounts) Total non-recurring gains and losses significantly increased to RMB **25.88 million** in 2016 from RMB **11.61 million** in 2015, primarily driven by financial asset-related gains of RMB **18.44 million** and government subsidies of RMB **13.05 million** Non-recurring Gains and Losses Table | Item (RMB) | 2016 Amount | 2015 Amount | | :--- | :--- | :--- | | Disposal Gains/Losses on Non-current Assets | RMB -2.78 million | RMB 0.39 million | | Government Grants Recognized in Current P&L | RMB 13.05 million | RMB 4.94 million | | Gains/Losses from Entrusted Investments/Asset Management | RMB 2.72 million | RMB 12.41 million | | Financial Asset-Related Gains | RMB 18.44 million | RMB 1.21 million | | Other Non-operating Income/Expenses | RMB -1.59 million | RMB -5.46 million | | **Total** | **RMB 25.88 million** | **RMB 11.61 million** | [Part III Business Overview](index=9&type=section&id=Part%20III%20Business%20Overview) This section outlines the company's primary business activities and core competitive advantages [I. Principal Business During the Reporting Period](index=9&type=section&id=I.%20Principal%20Business%20During%20the%20Reporting%20Period) The company is a supplier of precision light metal structural components and services, specializing in R&D and manufacturing of precision light metal structural components, mobile communication RF devices, and stamped sheet metal parts, widely used in communication equipment, consumer electronics, and automotive components - The company positions itself as a comprehensive solution and one-stop service provider for precision light metal structural components, with business spanning demanding sectors like communications, consumer electronics, automotive, and aerospace military[27](index=27&type=chunk) [III. Analysis of Core Competencies](index=9&type=section&id=III.%20Analysis%20of%20Core%20Competencies) The company's core competencies include leading R&D capabilities, stable high-end client resources, integrated precision manufacturing services, established brand advantages, and a rapid-response flexible manufacturing system - The company possesses provincial-level engineering and enterprise technology centers, demonstrating strong R&D capabilities[31](index=31&type=chunk) - The company has established stable supply chain partnerships with globally renowned enterprises such as Nokia Siemens, Alcatel-Lucent, and Samsung Electronics[31](index=31&type=chunk) - The company provides integrated solutions from product R&D, precision casting, CNC machining to post-sales tracking, demonstrating rapid response and flexible manufacturing capabilities[31](index=31&type=chunk)[32](index=32&type=chunk) [Part IV Management Discussion and Analysis](index=11&type=section&id=Part%20IV%20Management%20Discussion%20and%20Analysis) This section discusses the company's operating performance, financial position, investment activities, and future outlook [I. Overview](index=11&type=section&id=I.%20Overview) In 2016, despite soft market demand and rising costs, the company achieved nearly **20%** revenue growth by strengthening client relationships and expanding new businesses; however, intense price competition and underutilized new business capacity led to a **9.8%** decline in net profit, while significant progress was made in management informatization, global expansion, and operational efficiency Operating Overview Table | Indicator | 2016 | Year-on-Year Change | | :--- | :--- | :--- | | **Operating Revenue** | RMB 2.54 billion | **+19.74%** | | **Operating Profit** | RMB 202 million | **-9.92%** | | **Net Profit Attributable to Parent** | RMB 163 million | **-9.78%** | - The company's communication RF device business (especially filters) and consumer electronics business were key growth drivers[35](index=35&type=chunk)[37](index=37&type=chunk) - Through new establishments and acquisitions, the company added several entities including Huizhou Chunxing, Xi'an Xinghang, and Chunxing USA IMF, advancing globalization and business diversification[37](index=37&type=chunk) [II. Analysis of Principal Business](index=12&type=section&id=II.%20Analysis%20of%20Principal%20Business) In 2016, the company's principal business revenue grew by **19.91%**, with mobile communication RF devices showing outstanding performance, increasing by **31.41%** to become the largest revenue source, while precision aluminum alloy structural components maintained stable growth; international market revenue surged by **52.76%**, significantly outpacing domestic growth, though gross margins for major products, including precision aluminum alloy structural components and mobile communication RF devices, declined by **4.09** and **3.75** percentage points respectively Principal Business Analysis Table | By Product (RMB) | 2016 Operating Revenue | Share of Total Revenue (%) | Year-on-Year Change (%) | 2016 Gross Margin (%) | Gross Margin Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Precision Aluminum Alloy Structural Components** | RMB 1.08 billion | **42.60%** | **6.12%** | **19.00%** | **-4.09%** | | **Mobile Communication RF Devices** | RMB 1.12 billion | **44.05%** | **31.41%** | **21.15%** | **-3.75%** | - The company has high customer concentration, with sales to its top five clients accounting for **54.22%** of total annual sales, and the largest client alone representing **39.28%**[51](index=51&type=chunk)[52](index=52&type=chunk) - Financial expenses increased by **145.04%** year-on-year, primarily due to increased bank loans this year[54](index=54&type=chunk) - The number of R&D personnel increased by **56.16%** year-on-year, indicating the company's continued increase in R&D investment[55](index=55&type=chunk) - Net cash flow from operating activities significantly increased by **112.41%** year-on-year, mainly due to increased use of bill payments to suppliers, reducing operating cash outflows[56](index=56&type=chunk) [IV. Analysis of Assets and Liabilities](index=17&type=section&id=IV.%20Analysis%20of%20Assets%20and%20Liabilities) As of year-end 2016, total assets reached RMB **5.44 billion**, a **54.95%** year-on-year increase, with a significant shift in asset structure as construction in progress surged from **3.60%** to **13.18%** of total assets due to new equipment, and short-term borrowings increased from **12.11%** to **26.26%** of total assets, reflecting increased bank loans for business expansion Assets and Liabilities Analysis Table | Key Asset and Liability Item | 2016 Year-end Amount (RMB) | Share of Total Assets (%) | 2015 Year-end Amount (RMB) | Share of Total Assets (%) | Change Explanation | | :--- | :--- | :--- | :--- | :--- | :--- | | **Construction in Progress** | RMB 717.32 million | **13.18%** | RMB 126.40 million | **3.60%** | Significant increase in new equipment this period | | **Short-term Borrowings** | RMB 1.43 billion | **26.26%** | RMB 425.46 million | **12.11%** | Significant increase in bank loans this period | - As of the end of the reporting period, RMB **281 million** of the company's assets were restricted, primarily consisting of bank deposits, accounts receivable, buildings, and land use rights pledged as collateral[61](index=61&type=chunk) [V. Analysis of Investment Status](index=18&type=section&id=V.%20Analysis%20of%20Investment%20Status) In 2016, the company's investment activities were robust, with total investments of RMB **559 million**, a **23.40%** year-on-year increase, including significant equity investments such as the RMB **217 million** acquisition of a **52%** stake in Xi'an Xinghang Aviation Manufacturing Co., Ltd. to enter aerospace component manufacturing, and a RMB **102 million** investment to establish Xianyou Yuansheng Zhihui Technology Co., Ltd. for electronic components, though progress on key fundraising projects for mobile communication RF devices and consumer electronics structural components was delayed due to changes in implementation entities and complex equipment debugging - Investment during the reporting period amounted to RMB **559 million**, a **23.40%** year-on-year increase[62](index=62&type=chunk) Investment Status Analysis Table | Investee Company | Investment Method | Investment Amount (RMB) | Shareholding Ratio (%) | Principal Business | | :--- | :--- | :--- | :--- | :--- | | **Xi'an Xinghang Aviation Manufacturing Co., Ltd.** | Acquisition | RMB 216.67 million | **52.00%** | Aerospace components, mold manufacturing | | **Xianyou Yuansheng Zhihui Technology Co., Ltd.** | New Establishment | RMB 102.00 million | **51.00%** | Electronic components, investment management | - The two major fundraising projects for mobile communication RF devices and consumer electronics light alloy precision structural components were delayed, resulting in failure to reach full production and achieve expected benefits in 2016[73](index=73&type=chunk)[74](index=74&type=chunk) [IX. Outlook on Future Development](index=24&type=section&id=IX.%20Outlook%20on%20Future%20Development) The company anticipates significant market opportunities from **5G technology** communication, consumer electronics metalization, and automotive lightweighting and electrification trends, committing to six core development strategies: **globalization, vertical integration, differentiated development, Amoeba management and lean production, intelligent manufacturing, and innovation**, with 2017 plans to capitalize on communication equipment supply chain adjustments for rapid RF device business growth and breakthroughs in smartphone and new energy vehicle structural components, while addressing risks like **industry and customer concentration, rapid expansion management, new product R&D, raw material price fluctuations, and exchange rate fluctuations** through mitigation strategies - The company is optimistic about the growth opportunities in mobile internet and IoT driven by **5G technology**, expecting it to provide significant growth for its communication equipment structural components and RF device businesses[80](index=80&type=chunk)[85](index=85&type=chunk) - The company will vigorously develop magnesium and aluminum alloy structural components for consumer electronics to meet the metalization trend in products like smartphones[88](index=88&type=chunk)[89](index=89&type=chunk) - The accelerated development of new energy vehicles will drive demand for automotive aluminum and magnesium alloy materials, and the company plans to increase investment in this area[93](index=93&type=chunk) - The company has defined six core development strategies: **globalization, vertical integration, differentiated development, Amoeba management and lean production, intelligent manufacturing, and innovation**[94](index=94&type=chunk)[95](index=95&type=chunk) - The company identified **industry and customer concentration, rapid expansion management, new product R&D, raw material price fluctuations, and exchange rate fluctuations** as major risks, and has adopted measures such as hedging and diversified development to address them[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) [Part V Significant Events](index=30&type=section&id=Part%20V%20Significant%20Events) This section details the company's profit distribution, changes in consolidation scope, and significant contracts [I. Profit Distribution of Ordinary Shares and Capital Reserve to Share Capital Conversion](index=30&type=section&id=I.%20Profit%20Distribution%20of%20Ordinary%20Shares%20and%20Capital%20Reserve%20to%20Share%20Capital%20Conversion) The company's 2016 profit distribution plan proposes a cash dividend of RMB **0.50** per 10 shares (tax inclusive), totaling RMB **56.40 million**, representing **34.51%** of net profit attributable to parent, a significant increase from **11.17%** in 2015 and **16.18%** in 2014 Profit Distribution and Dividends Table | Dividend Year | Cash Dividend Amount (Tax Incl., RMB) | Ratio to Net Profit Attributable to Parent (%) | | :--- | :--- | :--- | | **2016** | RMB 56.40 million | **34.51%** | | **2015** | RMB 20.24 million | **11.17%** | | **2014** | RMB 16.87 million | **16.18%** | [VIII. Explanation of Changes in Consolidation Scope Compared to Prior Year Financial Report](index=38&type=section&id=VIII.%20Explanation%20of%20Changes%20in%20Consolidation%20Scope%20Compared%20to%20Prior%20Year%20Financial%20Report) In 2016, the company's consolidation scope significantly changed, adding 8 domestic and international subsidiaries and sub-subsidiaries, including Xi'an Xinghang, Huizhou Chunxing, Chunxing USA, and IMF, through new establishments and non-common control business combinations - Entities newly included in the consolidation scope this period include: Xi'an Xinghang Aviation Manufacturing Co., Ltd. (non-common control merger), Huizhou Chunxing Precision Manufacturing Co., Ltd. (newly established), CHUNXING HOLDINGS(USA)LTD. (newly established), and IMF&Assembly Inc. (non-common control merger)[129](index=129&type=chunk) [XVII. Significant Contracts and Their Performance](index=40&type=section&id=XVII.%20Significant%20Contracts%20and%20Their%20Performance) During the reporting period, the company had no significant sales, trusteeship, contracting, or leasing contracts; it provided substantial guarantees to subsidiaries, with an outstanding balance of RMB **428 million** at period-end, representing **21.19%** of net assets, and also engaged in short-term principal-protected wealth management using own and idle raised funds totaling RMB **444 million**, generating a profit of RMB **0.38 million** during the reporting period - As of the end of the reporting period, the company's total guarantee balance for subsidiaries was RMB **427.84 million**, accounting for **21.19%** of the company's net assets[146](index=146&type=chunk)[147](index=147&type=chunk) - The company utilized its own and idle raised funds for multiple short-term principal-protected bank wealth management products, with a cumulative amount of RMB **443.55 million**, generating a profit of RMB **0.38 million** during the reporting period[155](index=155&type=chunk) [Part VI Changes in Shares and Shareholder Information](index=51&type=section&id=Part%20VI%20Changes%20in%20Shares%20and%20Shareholder%20Information) This section details changes in the company's share capital and information regarding its shareholders and actual controller [III. Shareholders and Actual Controller Information](index=52&type=section&id=III.%20Shareholders%20and%20Actual%20Controller%20Information) As of year-end 2016, the company's total share capital was **1.012 billion shares** with **62,181 shareholders**; actual controller Mr. Sun Jiexiao directly held **42.96%** of shares, and his spouse Ms. Yuan Jing held **4.77%**, acting in concert with a high combined stake ensuring stable control, while top ten shareholders included institutional investors like National Social Security Fund 113 and Beixin Ruifeng Fund Shareholders and Actual Controller Table | Shareholder Name | Shareholding Ratio (%) | Number of Shares Held (Shares) | | :--- | :--- | :--- | | **Sun Jiexiao** | **42.96%** | 434,700,000 | | **Yuan Jing** | **4.77%** | 48,300,000 | | **National Social Security Fund 113** | **2.15%** | 21,773,285 | | **Beixin Ruifeng Fund...No. 12 Asset Management Plan** | **1.59%** | 16,100,000 | - Actual controller Sun Jiexiao and his concerted party Yuan Jing (spouse) collectively hold **483,000,000 shares**, representing **47.73%** of the company's total share capital[169](index=169&type=chunk)[170](index=170&type=chunk) [Part VIII Directors, Supervisors, Senior Management, and Employees](index=57&type=section&id=Part%20VIII%20Directors%2C%20Supervisors%2C%20Senior%20Management%2C%20and%20Employees) This section provides information on the company's directors, supervisors, senior management, and employee structure [V. Employee Information](index=62&type=section&id=V.%20Employee%20Information) As of year-end 2016, the company had **5,833 persons** employees, with production personnel accounting for the largest proportion at **3,496 persons**, technical personnel at **1,494 persons** (approximately **25.6%**), and employees with college degrees or above comprising about **44.6%**; the company implemented a compensation incentive system including monthly salary, performance, Amoeba bonuses, and EVA profit sharing Employee Information Table | Professional Composition | Number of People (Persons) | | :--- | :--- | | Production Personnel | 3,496 | | Sales Personnel | 488 | | Technical Personnel | 1,494 | | Financial Personnel | 40 | | Administrative Personnel | 69 | | Management Personnel | 246 | | **Total** | **5,833** | - The company has established a unified compensation incentive system, including performance appraisal, Amoeba bonuses, and EVA profit sharing, aiming to create a community of interest between the company and its employees[194](index=194&type=chunk) [Part IX Corporate Governance](index=64&type=section&id=Part%20IX%20Corporate%20Governance) This section outlines the company's corporate governance structure and compliance status [I. Basic Status of Corporate Governance](index=64&type=section&id=I.%20Basic%20Status%20of%20Corporate%20Governance) During the reporting period, the company operated in strict compliance with laws and regulations such as the Company Law and Securities Law, with its corporate governance largely aligning with regulatory requirements, maintaining compliance in shareholder meetings, board and supervisory board operations, independence from controlling shareholders, and information disclosure - The actual operation of the company's corporate governance is largely consistent with the normative documents of the China Securities Regulatory Commission and Shenzhen Stock Exchange, with no unresolved governance issues[199](index=199&type=chunk) - The company is completely separate from its controlling shareholder in terms of business, personnel, assets, organization, and finance, possessing independent and complete business and autonomous operating capabilities[199](index=199&type=chunk)[203](index=203&type=chunk) [Part XI Financial Report](index=71&type=section&id=Part%20XI%20Financial%20Report) This section presents the company's audited financial statements and related notes [I. Audit Report](index=71&type=section&id=I.%20Audit%20Report) Huapu Tianjian Certified Public Accountants (Special General Partnership) issued a **standard unqualified opinion** on the company's 2016 financial statements, affirming that they were prepared in all material respects in accordance with enterprise accounting standards, fairly reflecting the company's financial position, operating results, and cash flows - The audit opinion type is a **standard unqualified opinion**[221](index=221&type=chunk) [VII. Notes to Consolidated Financial Statements](index=111&type=section&id=VII.%20Notes%20to%20Consolidated%20Financial%20Statements) Financial statement notes indicate that period-end cash and cash equivalents increased by **58.76%** from period-start, mainly due to new borrowings and matured wealth management products; accounts receivable grew by **29.7%**, consistent with revenue trends; inventories rose by **44.67%** due to wireless terminal business stocking; construction in progress and short-term borrowings both significantly increased, reflecting the company's expansion phase; and goodwill substantially increased to RMB **143 million** due to acquisitions of Xi'an Xinghang and IMF - Period-end cash and cash equivalents increased by **58.76%** from period-start, mainly due to new borrowings and a significant amount of bank wealth management products purchased at the end of the prior period[352](index=352&type=chunk) - Period-end inventories increased by **44.67%** from period-start, primarily due to new wireless terminal sales business and significant year-end stocking[405](index=405&type=chunk) - Period-end construction in progress significantly increased from period-start, mainly due to substantial investment in equipment installation projects[442](index=442&type=chunk) - Goodwill book value increased from RMB **15.74 million** at period-start to RMB **143 million** at period-end, primarily due to the acquisitions of Xi'an Xinghang and IMF this period[453](index=453&type=chunk)[454](index=454&type=chunk) - Period-end short-term borrowings increased by **235.85%** from period-start, mainly to support business expansion[472](index=472&type=chunk) [VIII. Changes in Consolidation Scope](index=153&type=section&id=VIII.%20Changes%20in%20Consolidation%20Scope) During the reporting period, the company acquired Xi'an Xinghang Aviation Manufacturing Co., Ltd. and IMF & Assembly Inc. through non-common control business combinations, with a total merger cost of approximately RMB **228 million** and newly recognized goodwill of RMB **127 million**; additionally, the company established several new subsidiaries, expanding its consolidation scope Changes in Consolidation Scope Table | Acquired Entity Name | Equity Acquisition Cost (RMB) | Equity Acquisition Ratio (%) | Acquisition Date | Newly Recognized Goodwill (RMB) | | :--- | :--- | :--- | :--- | :--- | | **Xi'an Xinghang** | RMB 216.67 million | **52.00%** | August 01, 2016 | RMB 117.04 million | | **IMF** | RMB 11.43 million | **100.00%** | July 01, 2016 | RMB 10.24 million | [XV. Events After the Balance Sheet Date](index=169&type=section&id=XV.%20Events%20After%20the%20Balance%20Sheet%20Date) After the balance sheet date, the company completed a non-public stock offering, raising net proceeds of RMB **1.08 billion**; additionally, the company plans to increase capital in Kaimao Technology (Shenzhen) Co., Ltd. to acquire a **52%** stake and intends to inject RMB **195 million** into its subsidiary Huizhou Chunxing, while the board also approved the 2016 annual profit distribution plan - In February 2017, the company completed a non-public stock offering, raising net proceeds of RMB **1.08 billion**, increasing total share capital to **1.128 billion shares**[644](index=644&type=chunk) - The company plans to increase capital in Kaimao Technology (Shenzhen) Co., Ltd. to acquire a **52%** stake, and intends to inject RMB **195 million** into its subsidiary Huizhou Chunxing[645](index=645&type=chunk)[646](index=646&type=chunk)