Lida — Annual Report 2017

Mar 27, 2018

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Ticker
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4552
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• • Leading player in the high end general purpose air compressor segment in China.

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Date of

Establishment

May 11, 2012

Chairman

Wu Chien-Neng (Representative of Yi Yuan Enterprises Ltd)

General Manager Chen Yi-Ping

Paid-in Capital

NT$1 billion

Business Scope

Engage in the research, development, manufacturing and marketing of self-branded air compressors through trade names mainly with "Luowei“.

Consolidated Revenue

NT$8.12 billion (2017)

Production Sites

1. Quanzhou City, Fujian Province - Lida (China) Machine Equipment Co., Ltd.

2. 九江, Jiangxi Province - Lida (Jiangxi) Machine Equipment Co., Ltd.

No. of Employees

1,504 (as of March 15, 2018)

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	Products	Products	Products	Products	Products
	Category		Revenue % (2016)	Revenue % (2017)	Attributes & Application
	Piston- type		45.6%	41.6%	Ease of use, high mobility, affordability. Wide range of users, from individuals to small- and medium- enterprises.
	Screw- type		40.7%	44.1%	Medium- to large-sized manufacturers, including but not limited to: industrial production, automobile, textile, packaging and petrochemicals. Higher operating efficiency, especially under continuous operation. Energy efficiency and ease of operation.
	Scroll- type		11.9%	12.2%	High quality compressed air. Particularly suitable in safety-conscious applications, such as medical, pharmaceutical, food and beverage, as well as precision industries Growing industry attention on scroll- type designs. Offers high operating efficiency and dependability, low noise levels, with reduced size and weight. 3

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Pressurized air, clean air
Petrochemical industry
Sandblasting
Air Tank
Pneumatic tools
Paint spray, electroplating,
injection molding
Power
Food & beverage
Air Compressor
processing
Application
Dehumidifier and
filter
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upstream midstream downstream material industry R&D and manufacturing Terminal application Industrial Manufacturing Case Food Cylinder Pharmaceutical Compressors Head Textile Crankcase Transport 原材料產業 Motor Chemical Iron Plate Petrochemical Iron Core Refrigeration Rotor Gas Separation Mining & Metallurgy

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Unit: NT’000

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2,500,000 2.82 3.00
2,214,705
2,131,003 2,133,141
 YoY+0.1%
1,986,947 2.67 2.50
2,000,000 2.31  QoQ-3.7%
1,789,039
2.33
2.00
1.93
1,500,000
 YoY-5.9%
1.50
 QoQ-13.9%
1,000,000
1.00
500,000 357,352 281,455 303,926 355,104 232,610 390,640 266,735 336,252 231,327 0.50  YoY-17.8%QoQ-13.3%
193,211
0 0.00
2016Q4 2017Q1 2017Q2 2017Q3 2017Q4
Revenue Operating Profits Net Profits EPS
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30.0%

Sales price of products have been raised on Jan.2018 to release cost pressure.

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24.5% 24.2%
25.0% 23.7%
23.1%
21.8%
20.0%
17.9% 17.6%
16.8% 17.0%
15.8%
15.0%
13.2%
12.1%
10.0% 11.7%
10.8% 10.8%
5.0%
0.0%
2016Q4 2017Q1 2017Q2 2017Q3 2017Q4
Gross Margin Operating Profits Margin Net Profits Margin
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100%
8.8% 10.5% 12.3% 9.6% 11.8%
90%
80%
70%
60%
50%
91.2% 89.5% 87.7% 90.4% 89.2%
40%
30%
20%
10%
0%
2016Q4 2017Q1 2017Q2 2017Q3 2017Q4
China Other Regions
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100%
1.9% 2.2% 1.8% 2.0% 2.3%
11.9% 12.1% 12.0% 12.0% 12.7%
90%
80%
70%
41.7% 42.0% 43.2% 43.9%
46.8%
60%
50%
40%
30%
20% 44.5% 43.7% 43.0% 42.1%
38.2%
10%
0%
2016Q4 2017Q1 2017Q2 2017Q3 2017Q4
Piston Screw Scroll Others
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➢ Ability to set air pressure at any desired level and output at constant pressure, providing greater energy savings

	providing greater energy savings
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%		1.9% 14.2% 25.8% 25.9%			24.6% 26.4%
		2015 2016			2017
			F-variable Screw Type

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Progress

• ➢ The board of directors 'meeting has been passed in June 2017 to invest RMB94 million for self-production of screw head

• ➢ Purchased related equipment on March 2017; Plan to start production in 2018Q2 and nearly reach full capacity in 2 years.

• ➢ Purchase of high quality equipment from Germany and Japan in order to maintain good precision, stability and efficiency of screw heads

Expected Benefits

• ➢ Reach 100% self-production of core accessories; continue to consolidate the supplies and enhance R&D

• ➢ The weighing of screw compressors are in increasing trend; self-production of screw head can ensure the stable supplies , quality and stability of the products

• ➢ Self-production can lower the costs of production and increase the profits of the Group

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2015年度 2016

2016 年首三季2017

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Others, 10.1%
Others,
8.8%
Industrial Food Processing, Industrial
Food Processing,
9.9%
Manufacturing, Manufacturing,
9.6%
33.8% 34.8%
Pharmaceutical, CAGR Pharmaceutical,
9.4% 9.7%
Electronics, 7.1% Electronics, 7.1%
Package Package Auto
Auto
printing, 4.7% Mining & Metallurgy, printing, 4.0% Mining & Manufacturing,
Manufacturing, 4.9%
8.1% Metallurgy, 9.3%
5.8%
Textile&Apparel
Textile&Apparel, Chemical & Petrochemical,
Chemical & Petrochemical, , 6.4%
7.4% 5.1%
4.0%
Source: Lida 12
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Lida end users
Main building of
Beijing 2008 Olympic Games
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 The of is sensitive and gross margin piston-type compressors high relative to peers competition and steel price

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29.0%
27.5%
26.9% 27.0% 27.0%
26.7%
27.0%
26.8% 26.5%
26.4%
26.7%
25.0%
25.7%
23.0%
21.0%
20.7%
20.4%
21.0%
19.9%
19.3%
19.0%
17.0%
15.0%
2016Q4 2017Q1 2017Q2 2017Q3 2017Q4
Piston Screw Scroll
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Steel Prices in China

Steel pricing continued to rise on July 2017

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• ➢ Made in China 2025 contrast industrie 4.0 concept. The focus of industrial automation is automation and intelligence during manufacturing process, inhered to the energy savings policies encouraged by the government. This will have positive effects on development of air compressor industry.

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CAGR
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Information source：Research Institute of Soochow Securities Soochow Securities

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Focus on high-end market and increase gross profits market of products

 Made in China  To increase the intelligence of products; and follow the trend of the market to differentiate the quality of our products

Small to medium-size generic compressors 、 、 Ex: Piston screw scroll

Screw Type

High-end generic compressors Ex: F+frequency scew 、 oil/oil-free scroll 、 Two-stage screw F Type

CAGR F F+ F Variable Variable two-stage - Oil Scroll Type Oil Free Type Oil-Free Oil-Free Scroll Type Screw Type

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Competitive	Competitive	Competitive	Competitive	Advantages	Advantages	Advantages
	Brand			R&D		Channels		Focus
➢	China Famous		➢	Independently	➢	Mature and	➢	Focus on
	Trademark			developed scroll		stable		general-
➢	Over 20 years of			air compressor		distribution		purpose air
	continuous		➢	F-Variable		network		compressors.
	production			Frequency	➢	Network of 70	➢	Not easily
➢	High C/P Value。			compressor has		distributors in 25		affected by
				industry leading		provinces		single industrial
				efficiency				trend.
			➢	Two-stage Screw					18
				Air Compressors

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INCREASE OF MARKET COVERAGE
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Existing modes of competition in the industry

Spread and large in no. of players Mastering core competence in R&D

Mastering core competence in R&D can enhance the brand image

Small differentiation in products Solution

CAGR Enhance “3 highs” of products Maintain good brand, enhance 3 highs of products(High efficiency, intelligence and energy savings)

Price competition in low to medium end products

Competitiveness in products and servcies

More differentiation in product quality and after sales services to maintain the stability of selling prices and market shares.

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CONTINUOUS OUTPERFORMANCE
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Existing development of compressors’ industry

Little differentiation of products

Demand from industrial upgrade

Enhancement of environmental policies

• Air compressors extended to wider scopes and more complicated applications

• Trend to increase the level of intelligence

Demand in air compressors are in expanding cycle due to the increase in level of automation

• Enhancement of environment policies and control in China

• Increasing demand for products inhered to such polices

Estimated size of air compressors’ industry

• The Group is continually inhered to the related policies encouraged by the government in order to master and layout the long-term development of industry. We target to outperform

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the growth of industry average. 5Y CAGR 約7%
600 507
477
447
416
386
360
400 325
288
262
240
200
0
2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E
Market size(unit:100 million RMB)市場規模(人民幣億)
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Unit: NTD’000

Items	2016	2017	YoY(%)
	Amount ％	Amount ％	TWD RMB
Revenue	8,266,171 100.0%	8,123,832 100.0%	-1.7% 5.7%
Gross profits 1,980,860 24.0%		1,910,269 23.5%	-3.6% 3.8%
Operating profits 1,443,630 17.5%		1,385,923 17.1%	-4.0% 3.3%
Income before tax 1,518,620 18.4%		1,390,411 17.1%	-8.4% -1.5%
Income tax (496,789) -6.0%		(466,528) -5.7%	-6.1% 1.0%
Net profits 1,021,831 12.4%		923,883 11.4%	-9.6% -2.7%
EPS 10.8		9.24

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Unit: NTD’000

Items 2016	2017
Cash 2,853,285	2,331,573
Trade receivables 925,129	950,824
Inventories 253,759	284,466
Other current assets 1,627,634	1,996,505
Fixed assets 445,417	669,336
Other assets 47,154	64,507
Total assets 6,152,378	6,297,211
Short-term borrowings 96,957	50,215
Tradepayables 569,760	626,238
Other current liabilities 621,669	691,711
Total liabilities 1,288,385	1,368,164
Share capital 1,000,000	1,000,000
Capital reserves 1,548,200	1,548,200
Retained earnings 2,582,641	2,706,524
Other reserves -266,848	-325,677
Total equity 4,863,993	4,929,047

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Thank You.

Q&A

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