1. Company profile: with the approval of Chongqing Municipal people's Government and Chongqing State-owned assets Supervision and Administration Commission, Chongqing Mechanical and Electrical Holdings (Group) Co., Ltd. is jointly established by Chongqing Yufu Asset Management Co., Ltd., Chongqing Jiangong Group Co., Ltd. and China Huarong Asset Management Co., Ltd., established on July 27, 2007. It was successfully listed in Hong Kong on June 13, 2008. When the company was founded, there are four major business sectors, namely, auto parts, electrical equipment, general machinery, CNC machine tools. At present, in addition to the above four entity businesses, the company also adds new trade and financial services business. In 2013, the above five businesses accounted for 12.9% of the revenue ratio of 35.5%, 14.8%, 9.6% and 27.2%, respectively, and contributed 18.6%, 23.3%, 32.1%, 19.7% and 6.3% of the gross profit respectively.

2. Brief introduction of auto parts business: auto parts business mainly includes diesel engine, braking and steering system, gear transmission system, automobile suspension system, clutch and so on. The two most important parts of the business are diesel engines and gearboxes, which are partnered with Cummins.

3. Brief introduction of diesel engine business: the joint venture with Cummins mainly produces diesel engine products, which contributes the most to the company's profits, accounting for 70% of the company's net profit last year. In 2013, the company sold 18460 diesel engines, compared with 19016 in 2012, down 2.9% from the same period last year; sales revenue in this sector was 3.15 billion yuan, down 4.3% from the same period last year; gross profit was 1.027 billion yuan, down 6.7% from the same period last year; gross profit was 32.6%, down 0.8% from the same period last year; operating profit was 890 million, up 0.8% from the same period last year. Although the company divides its diesel engine business into commercial vehicles, 64.2% of its sales are used in the power generation industry (backup electricity in urban high-rise buildings and enterprise-provided electricity). Another 26.1% is used for construction machinery (such as Shantui shares), 9% for river ships, and only 1.34% (278 units) for the automobile industry last year. Therefore, this part has little to do with car sales in China, and the key to the business is not to look at the automobile industry, but to look at the macro environment.

4. The diesel engine business has grown steadily in the past 14 years: the engine displacement produced by the company is divided into 11L, 14L, 19L, 38L and 50L specifications. The company has a 30-year joint venture with Cummins and signed an exclusive agreement that year. Judging from the current operating situation, Cummins has achieved a growth rate of 3% since the beginning of the year, and the sales target of 19000 units is expected to be achieved, and the year-on-year growth of 3% is expected to be achieved. 5. New expansion of diesel engine business: in August last year, the company announced the introduction of three more products, namely 50L, 60L and 72L diesel engines. The new project requires additional land, with an investment of US $180 million in the first phase, including the construction of land and plant equipment, which is expected to take a period of one and a half years. The business is expected to go into production by the end of 2015 at the earliest. At present, the construction plan is divided into two phases, and the first phase is expected to generate revenue and profits similar to the existing scale, that is, one year.

Revenue of $500 million and profit of $130 million. The target for 2017 is to reach US $1 billion in revenue and 260 million in profits, doubling on the current basis. After full production, the revenue will reach 2 billion US dollars in 2022.

6. Which industries are the expanded diesel engines mainly used: mainly used in power generation, construction machinery, shipping, automobile and other industries. Of course, there are also some new industries, such as more horsepower products may be used in the shale gas industry, urban mining large transport vehicles, wide-body vehicles and so on. In addition, there are new applications in the petrochemical industry.

7. The company's market share in diesel engines: the company ranks eighth in China's 200hp-2000 horsepower diesel engine market, with a long-term market share of 21% Murray 23%. It ranks first in China for a long time in the market above 500 horsepower.

8. The average selling price of the engine: 158300 per unit last year and 158000 per unit in 2012, rising in recent years because of the increase in the proportion of high horsepower.

9. Gross profit margin of diesel engine products with different horsepower: the so-called above 500 is called high horsepower. If you distinguish the gross profit margin, it is better from the perspective of the industry. At present, the highest gross profit margin is about 35% for diesel engines used in the power generation industry, 32% for marine power, 26% for construction machinery and 29.9% for the automobile industry.

10. The current production capacity of diesel engines: the current production capacity is 22000 units, with sales of 21777 units in 2010, the largest sales year; 19016 units in 2012, 18460 units in 2013, and 19000 units this year. Although the output value of the new high horsepower products is US $500 million, it actually produces only 15000 units. After it goes into production in 2015, if it is conservatively expected to produce 3000-5000 units that year, it is expected to be 10000 in 2016 and 15000 in 2017.

11. Gearbox business has entered new areas: another important part of the auto parts plate is the automobile steering system, which mainly produces gearboxes for medium-and high-grade passenger cars, accounting for more than 50% of China's medium-and high-grade bus market share. The company sold 87102 gearboxes in 2013, with a market share of 52.2%. In 2012, it was 81861; last year, the sector recorded 850 million revenue and a gross margin of 150 million. Sales in the bus industry fell 1.2 per cent to 167000 in 2013, compared with 169000 the year before last. With the gradual opening of high-speed rail, bus demand is declining, sales are expected to be 170000 this year, the company is expected to exceed 90,000. The downstream customers of this business are Chinese bus companies, such as Yutong, Jinlong, etc., a total of 10-20. This part of the market for passenger car transmissions will not grow in the future and may decline. In order to maintain its development, the company issued an announcement last year to invest in a truck transmission project. The project invested 700 million yuan to build a base of 400000 truck transmissions, with 200000 in the first phase, which was completed and put into production in October this year. Truck gearbox should not contribute much to the company this year, but this business will make a greater contribution to the company next year, as long as the market demand comes up and the company's products will compete directly with Shaanxi Fasters. If sales of 50-80,000 units can be reached in 2015, it is expected to contribute 500-800 million in revenue.

12. Power equipment mainly depends on hydropower products: power equipment mainly includes hydropower equipment, high voltage transformers, wires and cables and materials and non-ferrous metal materials. This part mainly looks at hydropower equipment products, the business production cycle is 1.5 years, so the order is the key. At present, the company has 800 million orders on hand, compared with 350 million of revenue in 2013, and is expected to generate 450 million yuan this year. This business is the focus of the company's development, and the profit this year is better than last year, because half of the orders are for export, and the export profit is good. At present, the sector is planning to relocate, with an estimated investment of 700 million yuan, which is planned to be completed in two years. The production capacity will double, and the business may grow from 450 million to 800-9 billion. This business is also the key development business of the company's power sector.

13. Competitors of hydropower equipment: in the hydropower equipment industry, the main production enterprises are Harbin Power, Tepco and Shangdian, which mainly produce products of 200000 kilowatts to 1 million kilowatts. The company mainly produces products of less than 200,000 kilowatts, which is the second echelon. In the second echelon, the market share of similar enterprises is smaller, and the market segment is more scattered.

General machinery plate pays attention to wind power blade business: general machinery mainly includes industrial pumps, gas compressors, centrifuges, refrigerators and industrial fans. This plate can focus on industrial pumps, industrial fans, wind power blades and refrigerators. From the perspective of wind power blade business, when the company just started its business, it ranked 50th among more than 50 enterprises in the country. in recent years, the wind power industry reshuffled, and the company reached 400 million in revenue from 3000 million, ranking fifth in China last year. It is expected to complete 700-800 million this year, and the ranking is expected to rise to third. The gross profit margin of this business is about 18%.

15. The performance of machine tools is stable: CNC machine tools mainly include gear cutting machines, complex precision metal cutting tools, CNC lathes and machining centers. This sector can focus on gear processing machine tools, due to the decline in the growth rate of national fixed asset investment, so the industry declines, so is the company. The year-on-year balance is expected to be the best result in 2014 and will not perform very well.

16. Rapid growth in the trade sector: it grew rapidly last year, but because of its low gross profit margin, which has a significant negative impact on the overall gross profit margin, the strategy of this part in 2014 is to slow growth in order to improve the level of comprehensive gross profit margin. The finance company was set up in the second half of last year. Since the operation only started in April last year, there will be more year-on-year growth this year; in addition, the business will continue to expand this year. Therefore, this part should have more than 100 million income this year.

17. Capital expenditure: 800 million in 2013, gearbox in production this year, machine tools in relocation, hydrogenerator units in relocation, fixed assets expenditure is relatively large. Cummins' investment is not included. Capital expenditure is expected to be 1.2 billion this year, and it will come down a little after the relocation is completed.

Business integration: so far, the company has two businesses that are still losing money, namely, the commercial vehicle steering plate business and the non-ferrous metal powder of power equipment. The company has two development strategies, which divide the enterprise into two categories, namely, focus on development and reform and integration. The focus is on the well-run business, and the company will reform and integrate several businesses that are losing money through the buyback of the parent company, or 100% transfer or joint venture in the future. Within this year, the company will certainly have an effect, and those who should withdraw should be withdrawn.

19. Summary and suggestions: it is expected that the company's revenue may decline slightly in 2014, as the company will divest some of its loss-making businesses, which will affect revenue. Profits will improve and may increase slightly by about 5%. Revenue is also expected to fall in 2015 for the same reason. The company's business breakthrough is expected to occur in 2016, mainly due to the contribution of Cummins diesel engine. The company's net profit in 2013 was 500 million, of which 350 million came from the contribution of the Cummins joint venture. After the new capacity is put into production at the end of 2015, it will begin to be released gradually in 2016. after all the capacity is released, it is expected to contribute another 350 million yuan to the net profit of listed companies, a substantial increase.