Divest the marginal business and plan for the integration of Xidian, focusing on expanding the core products.
The company announced a few days ago that: 1) in order to solve the problem of inter-industry competition, Xi'an Electric Power Group intends to divest the company's medium and low voltage switch business. 2) using the funds obtained from the divestiture of assets, we will focus on the market development of the vacuum interrupter project with fixed pole column and the research and development of switchgear projects related to high-speed railway.
This information shows that: 1) the company will divest the marginal assets and focus on the R & D and production of the intelligent phase selection vacuum circuit breaker of the traditional strength vacuum interrupter and the future growth point of high-speed railway ground excessive phase devices; 2) the purchase price of Xi'an Electric Power Group has exceeded our expectations, which shows the group's attitude of full support for the development of listed companies. 3) this shows that XD's integration process of Baoguang has been officially on track, as we have previously reported, this integration process will provide strong support for Baoguang to become bigger and stronger.
Divest marginal assets and focus on superior products
Before 2006, Baoguang shares owned all three links of the medium voltage industrial chain, but the asset quality was mixed: 1) the upstream vacuum interrupter, the company occupied more than 25% of the domestic market share, was the first domestic brand, with a premium of 510% relative to the average market level, with a certain profitability and a high-quality asset. 2) Mid-stream medium voltage vacuum circuit breaker, the company is the first brand in domestic sales, with a market share of about 8%, but free market competition, product homogenization, gross profit margin of less than 20%; 3) downstream complete sets of equipment, that is, part of the assets to be spun off, the company's market share is less than 1%, the product is lack of characteristics, a serious lack of competitiveness and profitability, is a marginal asset.
In July 2006, Schneider Electric and Baoguang Group established a joint venture, the above mid-stream medium voltage vacuum circuit breaker link was stripped from the listed company and merged into the joint venture company. Baoguang Co., Ltd. has become the only supplier of vacuum interrupter products of the joint venture. The intelligent phase selection vacuum circuit breaker business of the high-speed railway ground phase-passing device is a key project of the "National Science and Technology support Plan", and its management right is transferred back to the listed company as a special case.
The divestiture of marginal assets will help the company to focus on superior products and vigorously expand new markets. If the divestiture is completed as scheduled, the joint-stock company has only two high-quality assets: 1) traditional products, vacuum interrupter. On this basis, the company will vigorously promote new products to seal the pole column, seize the opportunity of import substitution in the big market of smart grid construction, and greatly improve profitability; 2) the future growth point, intelligent phase selection vacuum circuit breaker for high-speed rail ground phase-passing device. According to our previous report, as the only domestic product with core technology and the key achievement of the localization of national high-speed rail key equipment, this product will enjoy the explosive demand for high-speed rail construction and bring an explosion of performance for the company.
Xidian integration into the track, long-term enhance the competitiveness of the company
Xidan Group's divestiture of Baoguang shares means that the group has changed from equity integration in 2009 to business integration. Xidan Group will provide a good platform for the company to take off: 1) Baoguang will be able to make use of Xipan's brand and channel resources; 2) the group's capital, technology and human resources will provide a solid foundation for the development of Baoguang shares.
