On September 6th, Kedey CNC achieved continued growth in performance despite the weak demand in the downstream machine tool industry and the unrecovered industry prosperity in the first half of the year.

Yin Zhongzhong, Chairman of Kede CNC, said at today's (September 5th) earnings conference that in the second half of the year, China's military industry in fields such as aviation and aerospace will continue to maintain a strong demand for five-axis equipment.

Kede CNC mainly engages in the design, development, production, and sales of five-axis linkage CNC machine tools and their key functional components and high-end CNC systems. Its downstream customers cover fields such as aviation and aerospace, automobiles, defense industries, ships, electronics, energy, and machinery and equipment.

In the first half of 2024, Kede CNC achieved operating income of 0.256 billion yuan, a year-on-year increase of 27.12%. Among them, the revenue from high-end CNC machine tool business was 0.237 billion yuan, accounting for 92.83%, a year-on-year increase of 27.22%; realized a net profit of 48.4409 million yuan, a year-on-year increase of 1.78%; realized non-net profit of 38.9571 million yuan, a year-on-year increase of 24.77%.

In terms of profitability, the company's main business gross margin was 43.40%, a decrease of 2.04 percentage points year-on-year.

Regarding the profitability, Yin Yunzhong, the CFO of Kede CNC, said that the main reason was the change in the structure of the confirmed revenue of the CNC machine tool models in this period. Among them, the order amount of five-axis horizontal machining centers accounted for 8% with an average gross margin of 51%. In the same period last year, the order amount accounted for 23%, significantly higher than this year. Therefore, the average gross margin in the first half of 2023 is higher than that in the first half of 2024.

"In terms of revenue by product, in the first half of 2024, the revenue from the five-axis linkage CNC machine tools accounted for approximately 93%, a year-on-year increase of approximately 27%; the revenue from functional components accounted for approximately 4%, a year-on-year increase of approximately 79%; the total revenue from high-end CNC systems and other sales accounted for approximately 3%." Juli Hua, the secretary of the Kede CNC board of directors, introduced.

In response to the current capacity utilization rate of the company, Yin Yunzhong said that during the reporting period, the company's production and sales rate reached close to 90%. Currently, the capacity utilization rate is close to saturation, and it is expected to achieve a production capacity of 1,100 five-axis machines by 2028.

It should be pointed out that in the first half of 2024, the entire machine tool industry is facing certain operational pressures and market challenges. The revenue and net profit growth rate of Kede CNC have also slowed down compared to the same period last year.

Kede CNC independent director Zhao Ming explained that the slowdown in revenue and net profit growth is mainly due to the impact of the company's own capacity expansion. At present, the company is orderly promoting the capacity expansion of fundraising projects, and will improve the scale of income and profitability in the future.

In July of this year, the National Development and Reform Commission and the Ministry of Finance issued the "Several Measures to Support Large-scale Equipment Renewal and the Replacement of Consumer Goods with Old Ones", which pointed out the need to increase the proportion of financial subsidies for equipment renewal loans and provide interest subsidy policies to eligible entities.

In response to this, Kede CNC General Manager Chen Hu said, "With the support of various policies, we believe that the industry's prosperity will gradually recover. The company will continue to intensify capacity construction at this stage, improve the processing performance and stability of machine tool products, and prepare for the production and processing needs of various fields."

At the earnings conference, Yu Benhong said when introducing the company's capacity construction, "At present, the expansion progress of Dalian plant is progressing steadily. The purchased horizontal machining production line has entered the trial operation stage, and the gantry line has been installed and debugged in the factory. After being put into use, it will further accelerate the capacity enhancement. Ningxia Kede (Yinchuan project implementation subject) and Shenyang Kede (Shenyang project implementation subject) have both purchased land and obtained real estate certificates, and are expected to be put into use successively by 2025."

An investor asked Kede CNC, "How much is the expected increase in capacity compared to last year?"

In response to this, Yu Benhong said that the company is advancing capacity expansion work according to established business objectives. Based on the calculation with the KMC800 vertical machining center as a reference, the annual capacity is expected to reach 450 units in 2024.

The reporter from the Science and Technology Innovation Board Daily found that while focusing on the aviation, aerospace, and military industries, Kede CNC has established close cooperation with customers in the civilian sectors such as energy, automobiles, and machinery equipment.

According to Yin Yunzhong, the growth rate of new orders in the automotive field increased by 54% year-on-year during the reporting period, and orders from universities and research institutes showed significant growth. In the first half of this year, the company's new contract orders increased by about 44% year-on-year, and the growth rate of new contract orders in the second quarter alone increased by about 56% year-on-year.

In addition, in terms of expanding into overseas markets, at the earnings conference, Zhu Lihua stated that in recent years, the performance of the company's high-end CNC machine tool products of various specifications and models has been recognized and repurchased by overseas users, and new orders have shown rapid growth compared to the same period. "In the future, the company will continue to explore the demand in overseas markets and expand into more regions and application fields.