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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

Auto parts supplier Songyuan Foodstuff Co., Ltd. (300893.SZ) has made significant progress in expanding overseas markets.

According to the announcement, Songyuan Automotive Co., Ltd. recently signed a supply contract with a well-known European automobile manufacturer, Customer S (whose name cannot be disclosed due to confidentiality requirements, hereinafter referred to as "Customer S"), agreeing to supply the manufacturer with passive safety system-related products worth approximately RMB 5.2 billion in the next eight years. The order amount of approximately RMB 5.2 billion is more than four times the operating income of Songyuan Automotive Co., Ltd. in 2023.

Songyuan shares stated that this business cooperation further improved the company's domestic and foreign customer layout and further deepened its overseas strategy and internationalization strategy.

Songyuan Co., Ltd. is one of the leading first-tier suppliers of automotive passive safety systems in China and has strong market competitiveness in the industry.

In recent years, Songyuan shares' operating performance has continued to grow. In 2023, the company achieved a net profit attributable to shareholders of the parent company (hereinafter referred to as "net profit") of 198 million yuan, a year-on-year increase of more than 60%. In the first half of 2024, the company expects to achieve a net profit of 120 million to 132 million yuan, a year-on-year increase of 90% to 110%. In this regard, Songyuan shares stated that the product structure was optimized and the scale effect was apparent, thus improving overall profitability.

Won huge overseas long orders

Songyuan shares signed a huge overseas order, which attracted great attention from the market.

On the evening of July 26, Songyuan shares issued an announcement stating that recently, the company signed a "supply contract" with a well-known European automobile manufacturer S customer. The company has obtained the customer's S platform and related project designation. As a qualified supplier of the customer, the company will provide passive safety system related products for the following platform models. They are: a certain project on the F platform, the supply products are front and rear seat belts, with a life cycle of 8 years, a total production of approximately 1.58 million units during the life cycle, and sales equivalent to approximately RMB 729 million; a certain project on the S platform, the supply products are front and rear seat belts, with a life cycle of 8 years, a total production of approximately 5.95 million units during the life cycle, and sales equivalent to approximately RMB 3.627 billion; a certain project on the S platform, the supply products are airbags, with a life cycle of 8 years, a total production of approximately 5.95 million units during the life cycle, and sales equivalent to approximately RMB 900 million. The company's above-mentioned order amount is approximately RMB 5.256 billion.

Customer S ranked fourth in global sales in 2023. In April this year, Songyuan Co., Ltd. signed a "Supply Agreement" for a project on the F platform with the above-mentioned customer S, and obtained a customer project for the first time.

There is no doubt that the above order is of great significance to Songyuan Shares. In terms of the amount alone, the order amount of 5.256 billion yuan is more than four times the operating income of Songyuan Shares in 2023.

Songyuan shares stated in the announcement that the successive project selections indicate that customers recognize the company's project research and development, production and manufacturing, quality management, etc. in passive safety systems. At present, with the changes in the global supply chain structure, major international car manufacturers are actively seeking leading independent brand suppliers, which has become a significant trend in recent years, gradually breaking the inherent oligopoly in the field of safety systems, and providing a favorable opportunity for my country's independent brand suppliers to participate in the international market.

Songyuan shares said that this business cooperation further improved the company's domestic and foreign customer layout and further deepened its overseas and internationalization strategies. The project platform of S customer is a global platform, and the project volume and industry influence are significantly higher than the domestic platform, which will have a positive impact on the company's long-term development.

Having won a large order worth more than 5 billion yuan, how does Songyuan ensure smooth fulfillment?

On the evening of July 12, Songyuan shares issued an announcement stating that due to the need for business development and increasing overseas production base layout, enhancing the company's international competitiveness and service capabilities, and improving the company's business layout and medium- and long-term strategic development plans, the company has established a Singapore subsidiary channel and wholly-owned Malaysia subsidiary to carry out project construction. The subsidiary is mainly engaged in the manufacture of automotive safety parts.

The establishment of subsidiaries overseas to build production capacity and the winning of large overseas orders indicate that Songyuan shares is actively entering the overseas market and has made breakthrough progress.

Net profit has increased for six and a half consecutive years

Having won huge overseas orders, if the orders are fulfilled smoothly, Songyuan shares' future may continue to improve.

The predecessor of Songyuan Shares was Yuyao Boyi Auto Parts Co., Ltd., which was established in 2001 with a registered capital of 1 million yuan. In March 2003, Boyi Auto was renamed Yuyao Songyuan Auto Safety Device Co., Ltd. In July 2016, it was renamed Zhejiang Songyuan Auto Safety Systems Co., Ltd., which has been used ever since.

Since its establishment, Songyuan has been deeply engaged in the field of automotive passive safety systems and has now become a leading company in the field of domestic independent brand automotive passive safety systems. The company said that with the comprehensive competitive advantages accumulated over the years, it has established a good brand image among many domestic mainstream domestic vehicle manufacturers.

Songyuan shares said that with the development of China's own brand vehicle manufacturers and the independence of China's auto industry parts, the company has broken the long-term technology monopoly of foreign brands through years of independent research and development and long-term cooperation with vehicle manufacturers, and achieved independent production of automotive safety system products. At present, the company has expanded from independent automobile brands to joint ventures and foreign brands, and has achieved certain results.

The company is optimistic that thanks to the optimization of its customer structure and the provision of high-quality passive safety overall solutions to customers, the company will stand out in the global automotive passive safety system industry in the future with its product cost advantages, first-mover advantages and overall supporting advantages.

The automotive safety system industry has high barriers, and the global automotive safety system market share is concentrated in foreign brands, and the industry presents an oligopolistic market structure. In 2023, Songyuan shares continued to increase R&D investment and technological innovation, relying on its advantages in high cost performance, product matching, service efficiency and flexibility, to achieve a breakthrough from point to surface, so that the three passive safety system modules of seat belt assembly, airbag and steering wheel go hand in hand, providing customers with a full set of passive safety system solutions.

In order to meet market demand, Songyuan shares actively expanded production. On the evening of July 18, the company's wholly-owned subsidiary Hefei Songyuan signed an "Investment Cooperation Agreement" with the Chaohu Municipal People's Government, intending to invest in the construction of a "3 million sets of automotive steering wheel assemblies and 40 million sets of key parts project per year" in Chaohu City, with a total investment of about 1 billion yuan (including working capital required for corporate operations).

In September 2020, Songyuan shares went public on the Shenzhen Stock Exchange's Growth Enterprise Market through an IPO. Before its listing, in 2018 and 2019, the company achieved net profits of 63 million yuan and 81 million yuan, respectively, up 26.83% and 26.92% year-on-year.

In 2020, the year of listing, Songyuan shares achieved operating income and net profit of 536 million yuan and 90 million yuan, respectively, a year-on-year increase of 15.25% and 11.71%. From 2021 to 2023, the company's revenue and net profit continued to grow. Among them, the company's net profit was 111 million yuan, 118 million yuan, and 198 million yuan, respectively, and the net profit in 2023 increased by 67.56% year-on-year.

Following the trend of net profit, the company's net profit after deducting non-recurring gains and losses (hereinafter referred to as "net profit after deducting non-recurring gains and losses") also grew continuously in the six years from 2018 to 2023.

Songyuan shares expects the company's net profit and non-net profit in the first half of the year to be approximately 120 million to 132 million yuan and 115 million to 127 million yuan, respectively, with year-on-year growth rates of 90% to 110% and 103.91% to 126.31%, respectively. If the median of the estimated figures is actually achieved, the company's net profit and non-net profit in the first half of the year will double year-on-year.

To date, the company's net profit has grown for six and a half consecutive years.

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