Symbol

EVA HOLDINGS(00838) Company Profile

		Company Profile
	Stock Name	EVA Precision Ind
	Listing Date	2005-05-11
	Sector	Industrials
	Chairman	ZHANG Hwo Jie
	Par Value	0.1
	Total Issued Capital	1.741B
	Market Cap	1.341B
	Principal Activities EVA is a vertically-integrated precision metal and plastic mould and component manufacturing service provider. The Group's existing services include mainly i) design and fabrication of precision metal stamping and plastic injection moulds; ii) manufacturing of precision metal stamping and plastic injection components by using tailor-made metal stamping and plastic injection moulds; iii) lathing of metal components; and iv) assembly of precision metal and plastic components manufactured by the Group into semi-finished products and finished products through automated technologies such as laser welding. At present, the businesses of the Group cover mainly office automation equipment and automotive components. Latest Results The Group's profit attributable to shareholders for the year ended 31-12-2023 amounted to HKD 237.1 million, an increase of 15.1% compared with previous corresponding period. Basic earnings per share was HKD 0.1362. A dividend of HKD 0.0199 per share was declared. Turnover amounted to HKD 6.18 billion, a decrease of 1.4% over the same period last year, gross profit margin up 0.9% to 20.9%. (Announcement Date: 28 Mar 2024) Business Review - For the year ended December 31, 2023 Office automation equipment The Group has been in the OA equipment business for almost 30 years. Boasting profound experience and excellent product quality, the Group has gained the acclaims and trust from customers and their support of the Group’s products. In recent years, the Group has also worked on expanding its Design and Electronic Manufacturing Service (“D-EMS”) operation, and its complete machine assembly and sales of assembly parts businesses, so as to increase market penetration and diversify business.During the year, turnover of the OA equipment business dropped 4.6% to HK$4,295,475,000 (2022:HK$4,502,285,000), affected mainly by the overall sluggish market. The industrial park in Weihai’s Double Islands Bay is one of the largest the Group operates and its serves as the D-EMS service base of the Group in Eastern China. The base provides customers, such as Fujifilm, TOEC, Lenovo and Great Wall Electronics, with one-stop, vertically integrated services–“D-EMS Services”that covers from mould design to complete machine assembly, and products including moulds, metal components, plastic components as well as complete A4 copiers and peripheral equipment for A3 copiers. During the year, Weihai’s OA equipment business performed outstandingly, with turnover surged markedly by 89.9% year-on-year, and its annual sales are expected to cross the HK$1 billion mark in the next few years. The good performance was owed mainly to the Group deepening strategic cooperation with its long-term customer Fujifilm, which helped fuel orders and in turn the increase in turnover. In addition, this also greatly boosted production capacity utilisation of the Weihai production base. The Group has full confidence in Weihai’s business and expects a substantial increase in D-EMS orders for A3 copiers within three years. At the same time, the supportive polices of and grants from the local government can also help promote development of Weihai’s business.Construction of phase II of the Weihai industrial park had commenced at the end of 2022 and is expected to be completed and start production in the first half of 2024. By then, the OA equipment business of Weihai is expected to see larger scale expansion over a few years and its production capacity topping all of the Group’s production bases. As for the Shenzhen operation, shipments were reduced during the year due to customer destocking.And, as in recent years, some orders have moved to Southeast Asia, turnover of the operation dropped by 15.8% year-on-year. In Vietnam, impacted by the same phenomenon of customer destocking, the Group’s turnover fell by 19.2% from the peak in 2022. From projection based on the latest order status, the Group believes the destocking trend will gradually ease off this year. Although the Group’s industrial park in Vietnam has actively developed in the past few years to match the trend of OA equipment orders moving south, the strategic deployment to gradually increase production capacity there for taking more of those orders takes time to materialise, and meanwhile, the Shenzhen factory is inevitably receiving fewer orders because of the order shift. Also, capacity utilisation will peak soon at the Group’s industrial park in Haiphong City, Vietnam and the temporarily leased new factory nearby.Thus, to adequately meet customer demand, the Group has obtained a new leasehold land in Quang Ninh Province in northern Vietnam during the year and will begin construction of a new industrial park in 2024. The park’s land area is approximately 60,000 square metres, which will be 1.6 times bigger than the existing Haiphong industrial park and is expected to be completed and in operation in 2026. The Group believes its business stands well to benefit from the shift of orders southward as it will allow the Group to take advantage of the low labour costs and policy incentives in Vietnam to drive development of the OA equipment business and increase revenue. The Group expects Vietnam to continue to propel development of the entire OA equipment business and is optimistic about its development in Vietnam in the next few years. In Suzhou, customers reducing production during the three-year-long pandemic and some customers gradually moving south had cost the Group a lot of orders. Then, in 2023, affected by the continuing sluggish market, the annual turnover of the Suzhou Industrial Park declined by 19.2%. Early in 2021, the Group began to take measures to cut manpower and non-essential expenditures to reduce costs there, resulting in a streamlined operation. When the business environment was still unclear, the management endeavoured to ensure the industrial park could breakeven, with maximising shareholders’interest being the top priority for the Group. In the long run, the Group holds a cautious view about the prospects of its business in Suzhou. It will keep finetuning its operational approach and strategies taking reference to market changes and business performance, so as to meet market needs. During the year, the OA equipment business segment recorded profit of HK$337,365,000 (2022:HK$253,507,000) and the segmental profit margin was 7.9% (2022: 5.6%), which was mainly attributable to the segment’s cost control initiatives including implementing lean production, the synergies from integrating the capacity of EVA Intelligent Manufacturing acquired in 2021 hence lowering operating cost from lower salaries, rental and administrative expenses, and the one-off gain from the write-back of provisions related to compensations for EVA Intelligent Manufacturing staff and the gain recognised on termination of its factory lease. The Group will continue to rise to the challenge, strive to stabilise the OA equipment business, develop and launch more relevant and practical products and solutions for it believes the business segment still has huge room for development. Automotive components For the year ended 31 December 2023, the Group’s automotive components segment recorded growth, with turnover up 6.9% year-on-year to HK$1,887,183,000 (2022: HK$1,765,780,000). After four years of optimising strategic layout and integrating advantageous resources, the segment was able to grasp the global economic recovery trend and the increase in automobile market consumption, and opportunities in the rapidly developing new energy vehicle (“NEV”) industry. The segment actively expanded business in the NEV market and strengthened technological research and development (“R&D”), which resulted in a boosted strategic customer base and increased orders. In 2023, the segment gradually started production to meet the new orders landed, releasing progressively the production capacities of the industrial parks in Zhongshan, Wuhan and Mexico, thus helped push up segmental turnover steadily. The industrial park in Shenzhen is the Group’s centralised production base for automobile seat moulds, which are primarily exported to the US and European markets. During the year, turnover of the automotive component business in Shenzhen fell by a slight 5.6%, mainly due to economic development in Europe slowing down at the burden of high interest rates in 2023, ultimately affecting the Group’s mould export business. Despite that, the Shenzhen industrial park has been giving support to all automotive-related businesses of the Group on technological R&D, mould design and production.It received 6.4% more mould development orders than in 2022, for supplying mainly to the automotive component business of the Group’s other industrial parks, particularly the one in Mexico. In Zhongshan, the Group’s turnover increased by 2.2% year-on-year, mainly benefited by the booming NEV market in the first half year. Mass production began for orders of different projects of new“three-electric systems”(NEV battery, electronic control and motor systems) customers. However, with sales of Japanese vehicle brands such as Honda and Toyota shrinking in the second half, turnover of the segment for the period dropped and full-year growth slowed down. The conventional orders the Zhongshan industrial park receives were mainly from Brose, Aisin, Yachiyo and Faurecia. Apart from these orders, it has been focusing on developing the new“three-electric systems”market customers during the year, including certain in-vehicle electronics customers, from which new orders were secured. In the traditional automotive sector, the Group also took on a project order from its largest major customer Brose for export to Europe. At the same time, the Group continued to implement measures in Zhongshan to reduce costs and increase efficiency, so as to enhance the competitiveness of the Group’s automotive business. In Wuhan, the Group has been actively developing the energy storage business in 2023 and secured several mass production projects for NEV energy storage system-related products. With Great Wall Motors increasing progressively the scale of production for a number of its traditional and NEV projects and expanding market for its new projects, the Group’s business in Wuhan increased by 21.9% year-on- year. Facing fierce competition in the mainland automotive component industry, Wuhan Industrial Park has actively expanded overseas markets and the energy storage business, taking the Mexico Industrial Park as a bridgehead to develop relevant moulds to help it expand business overseas. During the year, Wuhan Industrial Park secured small orders related to new energy storage and also NEV-related orders for Lucid Motors’project in North America, with mass production to take place in 2024. The industrial park will continue to strengthen R&D of and make preparation for seat welding assembly and aluminum alloy welding assembly, plus make efforts on securing NEV orders from customers such as Great Wall Motors, Tesla and Lucid Motors to lay a solid foundation for future business growth. In Chongqing, primarily affected by the drop in fuel vehicle sales of a customer in the first quarter, the Group’s turnover fell by 14.1% year-on-year. In the second half of the year, turnover improved with the Group beginning delivery of NEV-related projects of Great Wall Motors and Changan Automobile.Chongqing industrial park is the Group’s automobile business development base in central and western China. It is equipped with advanced intelligent production equipment brought in from around the world, allowing it to simultaneously provide customers in the southwestern market with car body parts engineering joint development and ancillary service for delivery of functional components for car body assembly. It also deepened, strengthened and expanded the scope of strategic cooperation with quality automakers such as Great Wall Motors, Changan Automobile and SGMW. In 2023, the Group was deeply involved in the development of and affirmed commitment to a good number of NEV model and NEV hybrid model projects of Great Wall Motors. The Group believes, as the abovementioned models subsequently go into mass production, the Group’s automotive component business will see a major breakthrough in sales. At the same time, the Group continued its effort to improve cost control of the Chongqing industrial park and was able to raise cost management standard. In the future, the Chongqing operation will keep working on forging strategic cooperation with mainstream automakers in southwestern China. The main customers of the Mexican industrial park, such as Tesla and Faurecia, continued to maintain strong growth momentum. In 2023, with production gradually commencing for new project orders, turnover of the industrial park increased by 23.8%, which was the best performing region for automotive component business. With high hopes for the automotive component business in Mexico, on top of pushing for new orders, the Group has also worked on improving the team there to address inadequacies in relation to production efficiency and management system, so as to enhance effectiveness and profitability. During the year, to optimise management of the Mexico operation, the Group deployed some members of the management team from Wuhan Industrial Park to Mexico to render support. The management team in Mexico was eventually strengthened and became more stable, with localisation of management processes enhanced. While carrying out internal reforms, the Group also deepened its strategic partnership with customers such as Tesla, Faurecia, Brose, Adient and Yanfeng. The 1250T and 2500T presses, in which the Group invested during the year, are expected to start operation in 2024 to meet increasing orders from customers. In 2024, the Mexico operation, with access to the advantageous resources of the Group, will rally and secure new customer orders at full force, strive to diversify its customer base and products, so as to capitalise on the trend of US manufacturing moving back home, while also increasing capacity utilisation and efficiency of the industrial park. The Group expects its business in Mexico to continue to bloom with its encouraging business performance. Although the Group has actively expanded its traditional and NEV components business in the past few years, while growth potential and prospects are both looking positive, the automotive industry is still notably affected by uncertainties of the global environment. Geopolitics, the Russia-Ukraine war, inflation and high interest rates have hit hard global industrial chains, in particular that of the manufacturing industry. In mainland China, with the gradual transformation of the automotive industry, some traditional production lines are starting to have excess capacity, orders from many traditional automotive manufacturers are therefore reducing. In this transitional period of traditional orders decreasing and NEV orders increasing, performance of the Group’s automotive component business has been impacted to a certain extent. Overall, in 2023, the segment made profit of HK$108,727,000 (2022: HK$101,824,000). Apart from the impact of unfavorable factors in the macro environment, the Group also increased investment in R&D in the NEV realm and conducted trials and adjustments to prepare for mass production, hence the profit margin of the automotive component segment remained at 5.8% (2022: 5.8%). Business Outlook - For the year ended December 31, 2023 Stepping into 2024, although the world’s developed economies are seeing inflation easing, interest rates remained high. In February 2024, the Organisation for Economic Cooperation and Development (“OECD”) forecasted that global economic growth for the year would be 2.9%, slower than in 2023.In addition, such issues as geopolitical instability, environment and climate, natural resources and material prices etc. may continue to impact the global economy. The Group will persist with its prudent financial strategy and step up cost control efforts. In the difficult times brought by the pandemic in the past few years, the Group faced challenges with a cautiously optimistic attitude. Over the years it worked on stabilising its infrastructure and core advantages, reformed and optimised various internal procedures, actively implemented lean production, and fully embraced automation and digitalisation. At the same time, it also began to promote sustainability and arrange bank loans tied to such performance. In 2023, the Group added sustainability performance-linked terms to a large-scale syndicated loan previously secured. The Group believes promoting sustainability is crucial in demonstrating the potency of its businesses and realising its future value, allowing it to map out long-term operational and development plans. Although there are concerns relating to economic growth in the next few years, the Group still has confidence to a good extent in expanding the OA equipment market. On top of continuing to offer competitive services to its world-leading customers, the Group’s OA equipment business has started to expand into other markets. The information technology application innovation (“ITAI”) industry market will grow to around RMB1.56 trillion by 2027, with total penetration rate expected to reach 80.97%. Capitalising on its competitive advantages as a leader in the OA equipment sector, the Group will strive to capture the opportunities presented by the ITAI industry market. With the NEV market growing rapidly, seeing continuously increasing demand, the Group’s automotive component business, which boasts a strong strategic layout and relentless effort to innovate, has been growing steadily. According to China Association of Automobile Manufacturers (“CAAM”) data, a total of 30.09 million cars were sold in China in 2023, 12% more year-on-year, of which 9.495 million were NEVs, up by 37.9% year-on-year, with market share swelling to 31.6%. Looking ahead at 2024, CAAM is of the view that China’s automotive market will maintain a steady and positive growth momentum, with automobile sales volume expected to exceed 31 million, a 3% increase year- on-year, 26.8 million of which will be passenger vehicles, 3% more year-on-year, and 4.2 million will be commercial vehicles, 4% more year-on-year. Sales volume of NEVs is expected to reach 11.5 million, and their penetration rate as well as their market are also expected to continue to grow. That plus the consistently high overseas demand for China-made NEVs are conducive to growth of the Group’s automotive components business. The management has strong confidence in the prospects of the business. Facing an ever-changing macro environment and operating risks from geopolitical uncertainty, the Group has been able to make the best use of its global production layout, its formidable R&D team, premium quality production resources and highly synergistic supply chain network. On the foundation of its core stamping and automated processing technologies, together with its laser welding techniques, the Group has been able to develop services for new customers in the Internet and information industries.It has offered renowned Internet customers services including development, production and assembly of moulds for server control box and server case components, setting the stage for further diversification and injecting new impetus into the Group for more sustainable development. Currently, the Group’s server moulds development and production base is in Shenzhen. The Group has sufficient resources and production capacity at its Shenzhen Industrial Park for the new business, which is also a critical step for coping with the OA equipment business shifting to Southeast Asia. In 2023, it has developed seven server-related projects, and five are already in production. Looking into 2024, the high interest rate environment is expected to ease and that will help drive economic growth. The Group will strive to enhance its competitive edges and, with optimism and prudence, look for opportunities to expand capacity and its businesses, seize opportunities in the recovering market to expand market share and promote long-term business growth. Building on its years of experience in the industry, the Group will strive to consolidate its market leadership and realise sustainable business growth, so as to achieve the best returns for shareholders.DIVIDENDS The Board recommends the payment of a final dividend of HK1.99 cent per ordinary share, totaling approximately HK$34,644,000 for the year ended 31 December 2023. Subject to the approval of the directors’recommendation by the shareholders at the forthcoming annual general meeting to be held on 20 May 2024, the final dividend will be paid in cash on 12 June 2024. Including the interim dividend of HK$36,559,000 for the six months ended 30 June 2023 paid on 25 September 2023, the total dividends declared for the year ended 31 December 2023 will be approximately HK$71,203,000. Source: EVA Precision Ind (00838) Annual Results Announcement

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