Wanfeng Auto’s Investment Highlights: Notes on 2020 Financial Year Results

Shanghai – Apr 20, 2021 (China Knowledge) – One of the world’s largest supplier of auto wheels and auto parts, and top general aviation aircraft manufacturer, Zhejiang Wanfeng Auto Wheel has just released its preliminary 2020 financial results.

Last year the company’s total revenue is estimated to reach RMB 10.71 bln, a 15.45% decrease from the 2019’s retrospectively adjusted figures. At the same time, its net profit attributable to shareholders of listed company is estimated to record RMB 558 mln, down 37.57% YoY. However, its performance forecast for Q1 2021 on net profit attributable to shareholders of listed company is approximately RMB 166 mln to 172 mln, a year-on-year increase of 35% to 40% on retrospectively adjusted basis.

The key highlights are:

General Aviation business driven by technological innovations to boost

performance at home and abroad

Last year the general aviation (GA) aircraft manufacturing was, to some extent, affected by the pandemic. In spite of this, the company continued to promote R&D and introduced new aircraft models, actively expanding licensing business and boosting production & sales in China. As a result, it achieved remarkable growth results with production running at full capacity amid adverse external environment. Its orders on-hand have had bookings scheduled until 2022. During Q1 2021, the company’s market share in overseas private pilot and domestic flight training segments both increased, contributing to the significant results improvement in this quarter.

Being the Top 3 GA manufacturer competing with Cessna and Cirrus aircraft Wanfeng’s Diamond aircraft possess the competitive advantage in innovation with a large number of product patents, complete aircraft models, safety features and global production and sales network. It also owns the first gasoline-electric hybrid aircraft that has been successfully flight tested capable of zero-emission and pure-electric flying. In addition, it is also the only global GA company to have both R&D and production qualifications in North America, Asia and Europe. Its twin-engine aircraft ranks the top in the world’s fixed-wing GA market and its piston-engined aircraft takes the third place.

The "National Comprehensive Three-dimensional Transportation Network Planning Outline" issued by the China’s State Council in Feb, has, for the first time, included "low-altitude economy" written into the national 14th Five-Years Plan. The country’s Civil Aviation Administration has said it intends to propose intelligent aviation transportation and ‘smart’ concept airports. Such government high priority list will offer enormous market opportunities to Wanfeng’s aviation business.

Capital injection from state-owned enterprise (SOE) could boost Wanfeng’s

aviation business in domestic market, and improve profitability

In Jan, Qingdao Wansheng Chengfeng Equity Investment, a state-owned enterprise, formally invested in Wanfeng Aircraft Industry. This injection of capital is seen to help the company tap the trillion-yuan GA market in China, while improving its profitability and reducing investment risks. The transaction also sets an example for strategic cooperation between private and state-owned enterprises, particularly in the GA industry.

In post-epidemic era, policies will benefit development of NEV auto parts

Due to recurrence of epidemic in many countries, Wanfeng was quick to respond to market conditions, and adjusted its business structure, gradually stabilizing its operating performance in H2 2020. This also set the stage for the company to realize remarkable recovery growth in Q1 2021.

To counter the volatilities in its traditional auto market, it has expanded new energy vehicle (NEV) market since the beginning of this year. Its synergistic approach of combining "magnesium alloy, aluminum alloy, and high-strength steel" for its lightweight solutions for the metal components has become the first choice from major NEV OEMs. Wanfeng currently supplies lightweight products to NEV brands such as Tesla (TSLA), China Evergrande New Energy Vehicle Group (0708), Nio (NIO), Xpeng (XPEV), and BYD (002594).

In tandem, Wanfeng is also likely to ride on the boom of NEV when "New Energy Vehicle Industry Development Plan (2021-2035)" was announced by the State Council’s General Office last Nov proposing that ‘by 2035 pure electric vehicles will dominate the new car sales and that public transportation vehicles will be fully electrified’. This should put Wanfeng on track to supply premium lightweight products of high quality catering to the NEV market.