Established in April 2007, we are a manufacturer and supplier of concrete-based building materials in Xiamen, Fujian Province of the PRC. Our principal products can be broadly categorised as (i) ready-mixed concrete; and (ii) precast concrete components (‘‘PC components''). During the Track Record Period and up to the Latest Practicable Date, all of our products were sold in the PRC with primary focus in Fujian Province. According to the Frost & Sullivan Report, our production volume for ready-mixed concrete accounted for approximately 7.2% of market share in Xiamen in 2019. Our Group accounted for approximately 0.04% of market share in terms of approximately 1,034,000 m3 production volume in the commercial ready-mixed concrete market in the PRC for the same year. According to the Frost & Sullivan Report, the size of the PC component market in Fujian Province and Xiamen to the overall PRC market in 2019 is 3.0% and 0.5% in terms of total production volume and 3.6% and 0.5% in terms of sales value, respectively.
As a midstream ready-mixed concrete and PC components manufacturer in the industry value chain, our Group principally supplies our products to construction companies for use in building and construction projects. With over 13 years of experience working with construction companies for various types of building and construction projects including (i) infrastructure, (ii) residential, (iii) commercial and industrial and (iv) municipal, we have established sound reputation in the construction industry in Fujian Province.
For a decade, we were predominately a manufacturer of commercial concrete products. Embarking on the rapid development and urbanisation of Xiamen and leveraging on our experienced management team, we grew successfully from a humble batching plant to a major ready-mixed concrete supplier in Xiamen under the leadership and visionary of Mr. Ye, our founder, chairman of our Board and executive Director. In September 2014, in the wake of advancement and maturity of prefabricated construction techniques in western countries and its penetration rate in northern China, we seized the opportunity and began our capital investments into the production of PC components for prefabricated constructions by acquiring the land use right of a parcel of land that was later used for the construction of our PC Plant and became amongst the first enterprises in Xiamen to expand into the PC component manufacturing industry. Our PC Plant was put into commercial operation gradually in the second half of 2017.
Our Group currently owns and operates two production plants, namely the RMC Plant and PC Plant and leases one production workshop, namely the Jimei Workshop, in Xiamen, with a current aggregate annual production capacity of approximately 1,439,000 m3 of ready-mixed concrete and approximately 119,800 m3 of PC components. During the Track Record Period, the utilisation rate of our RMC Plant was approximately 76.0%, 75.8%, 71.9% and 78.5%, respectively, while the utilisation rate of our PC Plant was approximately 12.6%, 42.9%, 70.1% and 84.7%, respectively. As our PC Plant was put into commercial operation gradually since the second half of 2017, the production scale was comparatively lower than the estimated production capacity and resulted in low utilisation rate. During the Track Record Period, the utilisation rate of the Jimei Workshop, which commenced production in October 2019, was nil, nil, approximately 28.6% and 61.2%, respectively. For details, please refer to the section headed ‘‘Business — Production facilities, capacity and utilisation'' in this document.
During the Track Record Period, our total revenue amounted to approximately RMB399.5 million, RMB511.3 million, RMB590.8 million and RMB602.2 million, respectively, while our sales volume amounted to approximately 1,086,382 m3, 1,129,299 m3, 1,104,321 m3 and 1,002,218 m3, respectively.
For the three years ended 31 December 2019, our overall gross profit increased from approximately RMB39.7 million for the year ended 31 December 2017 to approximately RMB76.5 million for the year ended 31 December 2018 and further to approximately RMB114.4 million for the year ended 31 December 2019. Such increase was mainly attributable to the overall revenue growth and overall increase in gross profit margin. The increase in gross profit margin of our ready-mixed concrete was primarily due to (i) our ability to transfer fluctuation of cost of production to our customers; (ii) our ability to negotiate better pricing terms for our ready-mixed concrete projects; and (iii) change in product grade mix (i.e. higher the grade strength generally yields higher gross profit margin). The increase in gross profit margin of our PC components was largely driven by the increase in gross profit margin of our other construction components. We recorded negative gross profit margin for other construction components for the years ended 31 December 2017 and 2018 as our PC component operation was still in its early ramp-up period and our PC component production scale had not yet reached the level for profitability. For the year ended 31 December 2019, the gross profit margin of our other construction components improved significantly to approximately 27.6%, which was mainly attributable to the increased production scale of our other construction components production lines. Please refer to the section headed ‘‘Risk factors — Our historical results, including segment results of our PC component business operation, may not be indicative of our future revenue and profit margin'' in this document for the risks associated with our negative gross profit margin of other construction components during the Track Record Period.
For the ten months ended 31 October 2020, our overall gross profit increased to approximately RMB119.0 million from approximately RMB85.9 million for the ten months ended 31 October 2019 mainly due to the increase in gross profit of PC components and overall revenue growth. Our Group's overall gross profit margin remained stable at approximately 19.6% and 19.8% for the ten months ended 31 October 2019 and 2020, respectively, which was attributable to the combined effects of (i) increased gross profit margin of our other construction components products as our production efficiency improved from the growth of our production scale of other construction components products; and (ii) decreased gross profit margin of our ready-mixed concrete products mainly due to the change in product grade mix.
During the Track Record Period, major components in our cost structure consisted of cost of raw materials, direct labour cost and outsourcing cost. During the Track Record Period, our cost of raw materials amounted to approximately RMB295.3 million, RMB351.0 million, RMB386.6 million and RMB374.8 million, respectively, which accounted for approximately 80.9%, 80.7%, 79.3% and 74.8% of our total cost of production, respectively. During the Track Record Period, our direct labour cost amounted to approximately RMB31.0 million, RMB38.0 million, RMB39.0 million and RMB38.4 million respectively, which accounted for approximately 8.5%, 8.7%, 8.0% and 7.7% of our total cost of production, respectively. During the Track Record Period, our outsourcing cost amounted to approximately RMB1.5 million, RMB6.0 million, RMB14.5 million and RMB40.2 million, respectively, which accounted for approximately 0.4%, 1.4%, 3.0% and 8.0% of our total cost of production, respectively.
The average selling price of other construction components decreased from approximately RMB2,317.5 per m3 for the year ended 31 December 2017 to approximately RMB1,575.2 per m3 for the year ended 31 December 2018. The decrease in average selling price of other construction components was mainly due to the change in our product mix by selling approximately 89 m3 and 12,455 m3 of square piles, representing approximately 3.7% and 73.0% of other construction components in terms of sales volume, for the two years ended 31 December 2018, respectively. Our square piles were on average priced relatively lower per m3 as its production process is less complex.
Source: Zhixin Group Holding (02187) Prospectus (IPO Date : 2021/03/16) |