Investment Consultant|Powerway Alloy
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Company Profile

Ningbo Powerway Alloy Materials Co., Ltd. (Ticker: 601137), as an industry leader in top alloy materials, is among the first batch of truly innovative enterprises in China. It is a State Enterprise Technology Center, a National Technical Innovation Demonstration enterprise, and a China “Key High-tech Enterprise.” What’s more, it is a unit-director and technical committee member of the International Wrought Copper Council (IWCC). The company has a National Post-Doctoral Research Station, a National Accredited Laboratory, and a National-domestic-united Engineering Research Centre. Following parent company Powerway Group’s strategic mission, it is constructing a three-base industrial structure seeking "new materials, new energy and capital operations”; internationalizing; and leading industry development to promote a new era of progress.

Powerway Alloy was founded in 1993 with a registered capital of 430 million RMB。 The company owns three production bases - Ningbo Yunlong and Ningbo Binhai in China, Boviet in Vietnam。 These facilities employ more than 3,000 staff on a total area of 364,400 square meters。

 

Issue-scheme of Private Equity Placement

The number of objects of issue shall be no more than 10, purchasers must be specific investors, and the matching funds raised shall be 1,500,000,000 RMB。 The targeted asset is Kangnai Te Ningbo International Trade Co。, Ltd。, whose main business is in the R&D, production and sales of solar cell panels and modules。 A form of equity-issue & cash-payment shall be adapted for the restructuring herein, to buy such assets and raise matching funds。 The transaction price to acquire 100% equity in Ningbo Kangnai Te trading Co。, Ltd。, is 1,500,000,000 yuan, of which 60% is payable in cash。 The object has made commitments regarding 3 years’ future performance as follows: 2016 annual net profit shall not be less than 100 million Yuan; 2017 annual net profit shall not be less than 117million Yuan; and 2018 annual net profit shall not be less than 134 million Yuan。 All in all, the transaction price of the objectives is valued 15 times on base of its annual net profit commitment of 2016。

Main products and applications

The company mainly produces high efficiency, energy saving alloy materials (usually incorporating copper), including lead-free and environment-friendly, high-strength, high-conductivity, and lead brass alternative alloy materials in the form of bars, wires, rods and strips. These alloys are widely used in aerospace, high-speed rail, electronic communication, automotive industry, shipbuilding, industrial machinery, precision moulds, home appliances, sanitary hardware and more than 30 other industries.

What are the strategic objectives and positioning of company?

Powerway Alloy uses exacting end-user market research, integrated social technologies, blue-sea R&D to lead industry development. Leveraging those strengths with excellent marketing and aggressive foreign market expansion will lead us well beyond our already strong market position. What’s more, through consistently improved efficiency and reduced manufacturing cost, the firm’s competitive position will be further enhanced. Finally, through synergy created by harvesting Powerway Group’s vast resources and a clustering of our own core competencies, Powerway will power into the future as first-class, worldwide leading enterprise.

What is the company's core competitiveness?

Powerway Alloy specializes in and is a global leader in the R&D, production and sales of all types of nonferrous alloy materials.

Powerway Alloy has a “dumbbell type” product development model, giving equal weight to the importance of market research and R&D. The company’s R&D target is new materials of high future demand for environmental protection, energy saving, high performance and substitute use. These innovations are patented in due course, the rights to which are managed through the company’s new and comprehensive Intellectual Property Rights System.In China, Powerway Alloy technologies are unparalleled in their specific segments and having hosted and participated in the revision of numerous national and industry standards, the firm’s status as the industry leader is indisputable.  Moreover, the company has applied for 65 patents, thus far receiving 33 China national invention patents and one US invention patent. Powerway Alloy has been awarded for two national "11th Five Years" science and technology projects, four national torch plan projects, two national innovation fund projects and two national “Key New” products.During this reporting period, the company’s products were awarded one Top-level Science and Technology Progress Award from the National Industry and Commerce Association, two Third-level Science and Technology Progress Awards from Zhejiang province and one Second-level Science and Technology Progress Award from Ningbo City. Further, the firm was granted the “Patent Excellence Award of China,” the “Mayor’s Quality Award of Ningbo,” the “Key High-tech Focused Enterprise of China” Torch, and the title “Key Research Institute Enterprise of Zhejiang.”Powerway Alloy has the industry’s most comprehensive product offerings and service, with many different models in each of several product lines to give customers in more than 30 downstream industries professional one-stop procurement. When our standard lineup doesn’t specifically solve a client’s problem, however, we provide tailored alloy design solutions as required.

What do the company's equity investment projects contain?

Powerway Alloy currently has three major equity investment projects。 The first is a high performance, high precision copper alloy strip production line project with an annual output of 20,000 tons, which is up and running。 Second and third respectively are a free-cut, lead-free brass rod & wire production line with an annual output of 10,000 tons, and a deformed zinc alloy material production line with an annual output of 18000 tons, both currently under construction。

What are the primary raw materials used in production?

Primarily copper (either red or electrolytic) and zinc, each of which purchased from both international and domestic markets.

Is copper price volatility a significant issue?

To effectively minimize the impacts of raw material price fluctuations, the company developed a hedging system, which was approved at a board meeting in January 2009. The system went into effect from that day and regulates not only the scope and processes of hedging operations, but also clarifies the responsibilities of relevant personnel and departments as follows:

the Customer Service Center Business Planner is responsible to input of the hedging order information;the Customer Service Center Director is responsible for hedging orders oversight, auditing and the matters relating to the treatment of relevant confidential information;the Raw Materials Procurement Department is responsible for the procurement information report of hedged raw materials and the raw materials order amount, through which order pricing is determined;the Finance Department is responsible for price auditing of hedged orders;the Futures Operator is responsible for hedging operations, feedback and the compilation of monthly settlement parameters;the General manager is responsible for hedge risk analysis, including price review of potentially abnormal orders;the Chairman is responsible to provide guidance and validation for major high-risk hedges.

 

What has the Company’s profits allocation been in past years?

Since our public listing in January 2011, Powerway Alloy has distributed profits six times:

The annual profit distribution plan for 2010 and 2011 was a 2-yuan cash dividend (including tax) for each 10 shares, with total cash dividends of 43 million yuan paid out each year. This represented 39.84% and 35.42% of distributable profits for 2010 and 2011 respectively.The 2012 profit distribution plan was 1.8 Yuan cash dividend (including tax) for each 10 shares. Total cash dividends were 38.7 million yuan, 38.64% of the distributable profits of that year.2013 saw a 1.5-yuan cash dividend (including tax) paid for each 10 shares, totaling 32.25 million yuan for 41.79% of distributable profits.2014 and 2015: 1.2 Yuan cash dividends paid annually (including tax) for each 10 shares; total cash dividends paid were 25.8 million yuan each year, which was 37.20% distributable profits in 2014. Additionally, in 2015, 10 shares from the capital reserve were paid out to shareholders for each 10 shares they already owned. The total transfer of paid-in capital was 215,000,000 shares, so after all capitalization transfers, the total share capital has now doubled to 430,000,000 shares.

What is the company's equity structure?

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