Huazhang Technology Turns loss into profit

2020/21 Interim Revenue Increased by 23.4%

Newly Signed Contracts grew by 26.8%

Strengthen R&D to catch up with future development of paper manufacturing industry

Result Highlights

  • Revenue increased by 23.4% to approximately RMB292.7 million
  • Gross profit increased by 4.6% to approximately RMB59.1 million
  • Net profit reached approximately RMB18.3 million, as compared to the loss of approximately RMB35.8 million over the same period last year
  • Newly signed contracts totaled approximately RMB253.8 million, representing an increase of approximately 26.8%
  • Precision Manufacturing Department becomes a new business driver, with the value of newly signed contracts increased from approximately RMB1.7 million to approximately RMB17.3 million
  • Paper Manufacturing Equipment Research Institute was evaluated and recognized by the Zhejiang Provincial Department of Science and Technology as an enterprise research institute at the provincial level
  • Participated in projects of four production lines in the paper production bases in Selangor, Malaysia

Financial Highlights

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HONG KONG, March 1, 2021 /PRNewswire/ — Huazhang Technology Holding Limited (“Huazhang” and its subsidiaries, together, the “Group”, stock code: 1673) announced its interim results for 6 months ended 31 December 2020 (“the period under review”). The Group’s revenue in the period under review amounted to approximately RMB292.7 million (6 months ended 31 December 2019RMB237.1 million), representing an increase of 23.4%. Profit attributable to owners of the parent reached RMB18.3 million (6 months ended 31 December 2019: loss RMB35.8 million). Net profit margin increased by 21.3 points to 6.2% (6 months ended 31 December 2019: -15.1%).

Business Review

Newly Signed Contracts Achieved Stable Growth

The value of the Group’s newly signed contracts grew by approximately 26.8% (as compared to the same period last year) from approximately RMB200.1 million for the six months ended 31 December 2019 to approximately RMB253.8 million for the six months ended 31 December 2020. Such growth was mainly attributable to (i) the recovery of the paper manufacturing industry that procured paper manufacturing enterprises to increase capital contribution and undergo equipment renovation, and (ii) the establishment of the precision manufacturing department by the Group in July 2019, which is a new business driver of the Group during the period.

The primary purpose for the establishment of the precision manufacturing department of the Group is to proactively respond to the national policy on the digitalization of industrial manufacturing, namely the “Industry 4.0” Program, by utilizing the advantage of intelligent control and big data, taking intelligent manufacturing as the core to develop advanced pulp and paper-making equipment with electromechanical integration technology, and replacing imported products with our self-developed products.

After the efforts made over the past year, the value of the department’s newly signed contracts increased by approximately RMB15.6 million from approximately RMB1.7 million for the six months ended 31 December 2019 to approximately RMB17.3 million for the six months ended 31 December 2020, and the growth rate was encouraging. Its core products, being conical refiners and pulpers with high efficiency and low energy consumption, combine the technological characteristics of high integration, high efficiency, intelligence, and low consumption in one. Such products have been highly recognized in the product market, with rapidly increasing market shares, which further solidified the leading position of our Group in the domestic paper-making industry in terms of intelligent manufacturing. The Group is currently developing products related to pulp and paper-making equipment, such as series of products (including paper-cutting machines with high speed and high-precision synchronization) that are in great demand in the market, and expects to launch such products on the market in the first half of 2021. The products mainly focus on the post-processing procedure of various paper types, such as printing and writing paper and duplex board.

R&D Capabilities were Recognized at the Provincial Level

In September 2020, the paper manufacturing equipment research institute of the Group was recommended by the Ministry of Science and Technology and evaluated and recognized by the Zhejiang Provincial Department of Science and Technology as an enterprise research institute at the provincial level in January 2021, namely Zhejiang Huazhang Technology Paper Manufacturing Equipment Research Institute. The research institute is mainly committed to the upgrade of industrialized technology of the traditional paper manufacturing industry and the development of environmental equipment with high efficiency and energy conservation for the paper manufacturing industry in order to achieve the localization of automatic equipment. Capitalizing on the rapid development capabilities of the research institute in terms of systematicity, professionalism, and practicality, the Group will continuously enhance the competitiveness of its core products and increase its market share in the industry in a moderate manner, which will promote the development of our peers in China and collectively push forward the economic development of the traditional paper manufacturing industry.

In addition, in December 2020, Mr. Zhu Gen Rong, the chairman of the Group, was awarded “the Fourth Cailun Technology Award” by China Technical Association of Paper Industry. The “Cailun Award” was created by China Technical Association of Paper Industry to recognize technology scholars who have made outstanding contributions to science and technology innovation and technology advancement in the paper manufacturing industry in China.

New Order for Overseas Business

In November 2020, the Group participated, together with other Chinese suppliers of paper manufacturing equipment, in the commercial operation of the PM23 project, one of the four production lines for 5600/900 wrapping paper machines in the paper production bases in Selangor, Malaysia, invested by a Hong Kong-listed paper manufacturing enterprise. The Group provided the drive control systems of paper machines and rewinders and the DCS/MCS control system for the four production lines. The success of the project further demonstrated the capability of China’s paper manufacturing machines to maintain a presence in the international paper manufacturing equipment market for their advancement, practicality, and cost performance.

As at 31 December 2020, most of the Group’s turnkey projects in Vietnam have been completed and are expected to duly commence in the second quarter of 2021. The overseas projects supplied by the Group commenced, which will definitely provide more references to promote China’s equipment manufacturing industry abroad and participate in international competitions.

Looking ahead, Mr. Zhu Gen Rongthe chairman of Huazhang Technology Holding Limited, said, “2021 represents the first year of China’s 14th Five-Year Plan when the paper manufacturing industry will also present new layouts and characteristics, including equipment with better energy conservation and higher efficiency, green and sustainable development, etc. Adhering to the principles of ‘Integrating Together, Creating Together, Benefiting Together’, the Group will ride on the wind and waves and forge ahead on the way of innovation while making more efforts in scientific research to catch up with the future development of the industry and creating more values for shareholders.”