Summary of Feiyada's Conference Call Company Overview - **Company**: Feiyada - **Year Established**: 1987 - **Main Business**: Watch manufacturing, precision technology, and smart wearables - **2024 Revenue**: Approximately 4 billion CNY (around 570 million USD) - **2024 Net Profit**: 285 million CNY (around 40 million USD) - **Key Region**: South China contributes 47% of revenue [2][3] Core Business Segments - **Watch Business**: - Self-branded watches (Feiyada) account for about 20% of total sales - Swiss luxury watch sales constitute approximately 70% of total sales - Property leasing contributes about 3.3% [3] - **Precision Manufacturing**: - Focus on precision gears and reducers, especially in aerospace applications - Recent acquisition of PROPDO, a leading manufacturer in this field [2][4][5] Strategic Initiatives - **Acquisition of PROPDO**: - Aimed at accelerating development in precision manufacturing - PROPDO specializes in small modulus gears and reducers, with applications in aerospace and robotics - The acquisition is seen as a strategic move to enhance technical capabilities and market reach [2][4][5][6] - **Future Focus**: - Emphasis on both watch business and precision manufacturing as key growth areas - Expectation for PROPDO to maintain growth in line with macroeconomic trends, particularly in civil aviation projects like C919 [2][4][8] Financial Performance and Projections - **Historical Performance**: - PROPDO has shown stable revenue and profit growth in recent years - Future revenue growth may be impacted by fluctuations in aerospace projects [5][6] - **Long-term Outlook**: - Feiyada anticipates that precision manufacturing will become a significant revenue driver over the next 10 to 20 years [5][6] Market Dynamics - **Consumer Market Influence**: - Feiyada's brand holds significant influence in the Chinese market - Confidence in the long-term prospects of the watch market despite short-term fluctuations due to economic conditions [7] - **Smart Wearables**: - The company is actively developing smart wearable technology, with the "Extreme Fox" brand being a highlight [2][29] Competitive Landscape - **Swiss Watch Market**: - Feiyada ranks second among Swiss watch distributors in China, with a significant market share [24] - Competitors include major brands like Rolex and Omega, with average customer spending ranging from 20,000 to 30,000 CNY [25][26] Challenges and Considerations - **Market Volatility**: - The aerospace sector has shown performance volatility, which may affect future revenue [19][21] - **Talent Acquisition**: - Challenges in attracting high-end talent in certain regions, but efforts are being made to bolster the workforce [9][12] Conclusion - **Strategic Direction**: - Feiyada is committed to expanding its precision manufacturing capabilities while maintaining a strong presence in the watch market - The acquisition of PROPDO is a pivotal step in this transformation, aiming for synergy and enhanced market competitiveness [10][18]

Core Viewpoint - The acquisition of Shaanxi Changkong Gear Co., Ltd. by Feiya Group aims to enhance its high-end precision manufacturing capabilities, particularly in the context of the declining traditional watch market and the rise of smart wearable devices [2][3][12]. Company Summary - Feiya Group plans to acquire a controlling stake in Shaanxi Changkong Gear, a hidden champion in the small modulus gear sector, which is controlled by the same parent company, AVIC [3][4]. - The acquisition is part of Feiya's strategy to overcome technical bottlenecks and explore new growth avenues, particularly in aerospace watches and smart wearables [3][11]. - Shaanxi Changkong Gear, established in 1969, is the only specialized gear manufacturer under AVIC and a leader in the domestic small modulus gear market, with total assets of 673 million yuan and net assets of 232 million yuan as of the end of 2024 [6][8]. Industry Context - The traditional watch market is facing significant challenges, with a reported 18%-20% decline in personal luxury goods sales in mainland China, and a 25.8% drop in Swiss watch exports to China [16]. - In contrast, the demand for smart wearable devices has surged, with a 20.1% increase in shipments in the first three quarters of the year, positioning China as the global leader in this segment [16]. - The acquisition reflects a broader trend of capital mergers in the Han Zhong region, which is undergoing a revaluation of its industrial assets and transitioning towards new industries [21][24].