ZENG HSING — Annual Report 2021

Jun 22, 2021

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Disclaimer

1. The information and the future prospects provided in this presentation reflect our perceptions towards the future currently. The is not liable for notice or if or Company update any change . adjustment

2. The Company doesn’t announce financial prediction. The financial and business information of the related companies in this presentation might be slightly different from the actual results in the future. The possible reasons include the variation of market demands, fluctuation of raw material price, exchange rate, and other risk factors. Therefore, the Company is not liable for any loss caused by the data in this presentation, and the direct or indirect actions taken based on such data.

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Agenda

I. Company Overview II. Business and Financial Situation III. Analysis on Competitive Advantages IV. Future Prospects

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I. ZH Group Overview

1. Company Profile

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1. Company Profile – Basic Informaiton

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Time of establishment
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-
Amount of paid in capital
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Chairman
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General Manager
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Spokesman
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Number of employees
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Major products
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Address of Company/Plant
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Jan 3, 1975

NTD 605 million

• Lin Chih Cheng - Tsai Ming Yu

• Chou Chun Shen

4,147 (as of MAY ,2021 )

1. Household sewing machine, related parts and components

2. Vacuum cleaner, related parts and components 3. Aluminum die casting

No. 78, Yongcheng Rd., Taiping Dist. Taichung City 5

Mile stone(1/2)

1968

1975

1998

2004

• Company was founded and named Shinco Ind. Co. Ltd. with a capital of 400,000 NTD and 30 employees

• Renamed to Zeng Hsing Ind. Co. Ltd. with capital amount 14 million NTD

• Est. China Zhangjiagang Factory

• Est. 1[st] Vietnam Factory and start production in December

• Go public in stock market in December

2007

• Est. Vietnam Shinco subsidiary Company Specializing in die casting and precision machining of aluminum alloy parts

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6

Mile stone(2/2)

2013

2014

2017

2018

2019

• Est. 2[nd] Vietnam Factory groundbreaking ceremony and started production in 2014.

• Listed in Taiwan stock market in December

• Taiwan Operational Headquarters Building groundbreaking ceremony

• Zeng Hsing 50th anniversary

• Thmplete Coion Of Taiwan Operational Headquarters Building

• Company implemented the AEO certification

2020

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1. Company Profile - Infrastructure

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ZHANGJIAGANG ZENGHSING MACHINERY &
ZENG HSING Head Office(TAIWAN) ELECTRONICS(CHINA)
ZENG HSING INDUSTRIAL –Factory 1 CHINA
(VIETNAM)
ASIA
TAIWAN
VIETNAM
SHINCO TECHNOLOGIES –Die Casting
(VIETNAM)
ZENG HSING INDUSTRIAL –Factory 2(VIETNAM)
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Factory location

Vietnam-F1 & F2 Factory

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Est.：F1 Since 2004、F2 Since 2014
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40 mins drive

Est.：F1 Since 2004、F2 Since 2014 Capital：US$ 25 million Capital Area：F1 12,300M[2] 、F2 80,000 M[2] Production Line：Die cast、CNC、Injection molding machine and assembly line Capacity：Max. 4,500,000 sets/year Certificate：ISO9001 Main products：Mechanical Sewing Machines

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1. Company Profile - Infrastructure

ZENG HSING INDUSTRIAL –Factory 2(VIETNAM) (2014)

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2 Land：80,000 m

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1. Company Profile – Number of Employees

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TAIWAN
471
11%
ZNEG HSING
GROUP
4,147
VIETNAM CHINA
3,425 251
83% 6%
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II. Business and Financial Situation

1. Sales Performance

2. Dividend Distribution Over the Past

Decade

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1. Sales Performance(1)

2017-2021Q1 Income Statement

2017-2021Q1 Income Statement	2017-2021Q1 Income Statement	2017-2021Q1 Income Statement	2017-2021Q1 Income Statement	2017-2021Q1 Income Statement	2017-2021Q1 Income Statement
Unit：In Thousands of NTD
Item\Year	2017	2018	2019	2020	2021Q1
Revenue	5,994,144	6,669,964	5,935,948	6,965,819	2,545,221
Gross Profit	1,514,515	1,688,206	1,489,275	1,960,012	633,165
Gross Margin(%)	25%	25%	25%	28%	25%
Net Profit	538,289	940,861	688,006	845,641	328,291
EPS(NTD Dollar)	8.68	15.26	11.16	13.76	5.42

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1. Sales Performance(2)

2011-2021Q1 Sales Volume of Household Sewing Machine units (Million)

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4.00 3.58
3.41
3.31
3.50 3.11 3.12 3.07
[2.95] 3.00
3.00 2.61 [2.74]
2.50
2.00
1.31
1.50
1.00
0.50
0.00
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Q1
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1. Sales Performance(3)

Proportion of Sewing Machines Sales by ZENG HSING to Global Regions in 2021Q1

Unit：10K

Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %	Continent 2017 % 2018 % 2019 % 2020 % 2021Q1 %
Europe	146	47.56%	164	48.09%	138	46.01%	152	42.45%	57	43.51%
North America	58	18.89%	74	21.70%	63	21.00%	103	28.77%	28	21.37%
Asia	55	17.92%	52	15.25%	52	17.33%	58	16.20%	23	17.56%
South & Central America	28	9.12%	33	9.68%	34	11.33%	35	9.78%	16	12.21%
Oceania	6	1.95%	7	2.05%	7	2.33%	6	1.68%	5	3.82%
Africa	4	1.30%	5	1.47%	4	1.33%	4	1.12%	2	1.53%
Middle East	10	3.26%	6	1.76%	2	0.67%	0	0.00%	0	0.00%
Total	307	100%	341	100%	300	100%	358	100%	131	100%

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1. Sales Performance(4)

				2011-2021Q1	2011-2021Q1	2011-2021Q1	2011-2021Q1	2011-2021Q1	2011-2021Q1	2011-2021Q1	Consolidated Sales	Consolidated Sales	Consolidated Sales	Consolidated Sales	Consolidated Sales	Consolidated Sales	Consolidated Sales	Consolidated Sales	Revenue &EPS	Revenue &EPS	Revenue &EPS	Revenue &EPS	Revenue &EPS	Revenue &EPS	Revenue &EPS	Revenue &EPS
	80.0																											30.00
	70.0									62.5 60.2 60.4 59.9 66.7 59.4 69.7																		25.00
	60.0							55.6
	47.5 50.6 50.0																											20.00
	40.0																											15.00
	12.60 30.0							13.0013.65 14.19 14.06										15.26				25.5 13.76						10.00
	20.0				11.08															11.16
																8.68												5.00
	10.0																								5.42
	0.0																											0.00
									Revenue(100million)									EPS(Shares/NT$)

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1. Sales Performance(5)

Capital expenditures

Unit: k NTD

Assets	2016	2017	2018	2019	2020	2021F
Buildings & Facilities	9,811	0	5,840	448,179	51,825	162,118
Machinery equipment	115,803	84,268	38,652	107,150	103,358	200,645
Tooling equipment	37,341	87,065	115,295	99,135	72,614	98,352
Delivery equipment	1,397	1,667	2,967	2,324	1,473	4,942
Others(not include construction)	7,033	10,329	17,407	106,960	193,487	100,028
total	171,385	183,329	180,161	763,748	422,757	566,085

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2. Dividend Distribution Over the Past Decade(1)

2011 2020 EPS & Dividend Distribution

Unit：NTD/share

Period	2011	2012	2013	2014	2015	2016	2017	2018	2019	2019	2020	2020
EPS (Shares/NT$)	12.64	11.13	13.05	13.70	14.19	14.06	8.68	15.26	11.16		13.76
Cash dividend	8	7.5	9	9	9.5	9.5	8.5	11	8.8		9.5
Stock dividend	0	0.5	0	0	0	0	0	0	0
Total dividend	8	8	9	9	9.5	9.5	8.5	11	8.8		9.5
Dividend distribution rate	63.29%	71.88%	68.97%	65.93%	66.95%	67.57%	97.93%	72.08%	78.85%		69.04%

• The 2020 cash dividend has not yet been approved by the 2021 shareholders meeting

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III. Analysis on Competitive Advantages

1. Prospective business philosophy 2. Various model types and complete product line 3. Divide manufacturing capability in cross-strait and Vietnam

4. Settle ODM model, win high recognition from customer

5. Powerful R&D capability and technical application 6. Future development directions

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1. Prospective business philosophy

The Company upholds the business philosophy of “being honest and practical, polling all wisdoms and efforts, reform and innovation, and pursuit of wellbeing”. We request following the facts, and value integrity and dedication, so as to win trust from customers and partners. Moreover, we integrate resources, make improvements and innovations constantly, improve manpower characters and establish high-quality and steady operation abilities.

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•
• 1~3 years • 3~5 years 6~10 years
Middle
Short Long
Vision Vision • Strengthen -term • Global • Create
-term -term
competitiveness deployment quality life
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• • • •	Deep plough in the industry Innovate business models Development of new businesses and new markets Become the world-class group leading the industry	• Strengthen core technologies • Deploy KT/KC, technical blueprint • Deep plough in the target market, and diverse sales • International purchasing • Fully reduce production cost • BU QCD enhancement • Cultivate international management talents • Expand plant in Vietnam	• Cross-industry alliance and expand emerging market • Establish the third production base • Extend development of new businesses and products	• Service diversification • Business cluster diversification 20

2. Various model types and complete product line

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High price
Mechanic type Electronic type Computer type Overlock /Embroidery
Embroidery
Overlock
series
S
series
9000
H series
900HC series
series
Q
K series
series
8000
series
series
Low price MINI series
Basic models Advanced models
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Product Category

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High-end Embroidery Machine Overlock

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Middle-end Computerized

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Low-end Mechanical

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3. Divide manufacturing capability in crossstrait and Vietnam(1)

We set up production bases in Mainland China and Vietnam with cost advantage, which greatly improve the capacity, increase the self-manufacture rate of parts and reduce product cost. As a result, the products made by the Company possess higher competitive advantage in price. Production Management: Vertically integrate supply chain -  One stop production

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Raw Die CNC Plastic Finished
Printing Assembly
material casting processing injection products
 Supplier management:
Reliable
Strict Risk Quality Continuous Group
screening control assurance delivery time supply power Supplier purchasing
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3. Divide manufacturing capability in crossstrait and Vietnam(2)

2011-2021Q1Production Allocation

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120%
2% 2% 2% 2% 1% 1% 2% 1% 1% 1% 1%
100%
8% 7% 7%
17%
25% 22% 21%
29%
80%
43% 40%
60%
60%
91% 92% 92%
40% 82%
74% 77% 77%
69%
55% 58%
20% 38%
0%
ZH-VIETNAM ZH-CHINA ZH-TAIWAN
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4. Settle ODM model, win high recognition from customer

With more than 50 years of rich experience, it formulates flexible production and sale strategies, invests into R&D work proactively, and can master the changes on market demands accurately. It has successfully transformed from OEM model into ODM model. The customization ability is highly recognized by the globally renowned manufacturers.

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5. Strong technology research and development capabilities We integrate the computer technology with the mechanical technology to improve the product quality and functionality. Especially the development of computer sewing machine takes the driving devices such as micro processor and step motor as the core. The technical development is focused on the simplification of mechanical structure, multi-function and automation.

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6. Future development directions

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Improve R&D niche through the technical cooperation between industrial, governmental and academic circles. In terms of the development direction, it will mainly improve the driving method and functionality, and make some technical breakthroughs, with the highly-potential models such as those with high unit price, high technical requirements and high value added as targets.

The technology of mechanical structure is getting mature. The development will be focused on the cutting-edge functions, so as to improve value added of products.

In terms of electronic control, it will combine the sewing machine with other functions such as the network or USB, so the product will get higher scalability and brighter future. It will turn to the development of more advanced computer sewing machine. In the future, it will step towards the computer sewing 27 machine with embroidery function.

R&D Achievements

Advanced sewing machine Computer models ( with WIFI function) /Household embroidery /Commercial embroidery

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IV. Future Prospects

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Product service in manufacturing industry from supplier
instruction to dedicated service team on customer end
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Develop new market, seize emerging markets in
China and India.
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Release new products, enhance R&D technology &
industrial-academic cooperation.
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Build regional market channels and combine with
e-commerce
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Thanks!

Q&A