() The record of investor relations activities was released on August 1, and the company was investigated by 23 institutions on July 29, 2022. The types of institutions are other institutions, fund companies, overseas institutions, securities companies and sunshine private equity institutions.
The main contents of investor relations activities are introduced:
I. Introduction of the Company’s Operation by the Secretary-General At present, the company’s development is in a state of gradual recovery after a series of storms. To sum up the storms experienced by the company in the past few years, first of all, the relatively radical expansion before 2018 left a certain financial pressure on the company, which is also the core reason for the company’s poor performance in recent years; Secondly, the impact of the epidemic on the company’s overseas business development, including the limitation of business activities and the tilt of customer budget to fight the epidemic, led to the delay of projects in some countries and regions; Third, the intellectual property and trade secret litigation has consumed a lot of energy of the company, including management energy, resource investment in product renewal, legal expenses, and the financial pressure brought by some financial institutions in the past.
Today, looking back, the company has made some achievements in the process of gradually stabilizing its operations.
On the product side, the company has defined the product strategy of "2+3+1", and "2" stands for the basic disk business of narrowband digital trunking. The company has the world’s leading products and brands in the three mainstream digital standards of DMR/PDT/TETRA. With the gradual recovery of the industry in the post-epidemic era, the basic disk business will achieve steady growth. "3" stands for the company’s growth business, which realizes the upgrade from narrowband to broadband and the integration from private network to public network under the trend of broadband, intelligence and platform, and meets the needs of customers such as unified communication, multimedia command and dispatch and video application, mainly including unified communication, command and dispatch platform, 4G/5G broadband and other products. After years of investment, the company’s growth business has been continuously optimized and adapted to customers’ needs, and it has entered a stage of rapid growth. Last year, its revenue increased by 60%, accounting for more than 10% of the total revenue. Among them, the integration business of public colleges and universities doubled, and it also maintained a good growth trend in the first half of this year, which is expected to become a new growth curve outside the narrow-band basic disk business.
On the marketing side, the company has comprehensively promoted the reform of the marketing system, shifting from leading large-scale projects in the past to exerting strength through channels, and expanding the industry market by developing more industry partners and agents. In the past few years, the company’s big project strategy has helped the company to establish cooperation and recognition covering high-end public safety and key industry customers around the world, become the world’s leading private network brand, and achieve rapid growth in revenue. However, the epidemic situation has brought some uncertainties to the expansion of the company’s large projects, which led to the delay of some projects, and the impact was more significant than that of the channel business. The company adjusts its marketing strategy in time, in order to further consolidate its business foundation, vigorously develop channel partners and industry partners, expand the ecological circle of business cooperation, realize better operating cash flow, and also contribute to the promotion of new products such as growth business. In addition, the company continued to promote digital transformation, fully implemented digital marketing and digital operation, opened up the whole L2C process, and improved the overall operational efficiency.
On the financial side, in the years of rapid growth in 2015-2017, the asset-liability ratio and the period expense ratio increased rapidly, which also exposed the financial deficiencies of the company at this stage, which was the main reason for the unsatisfactory performance in the following period. Since 2018, the company has implemented management reform, promoted refined management, paid close attention to business quality and cash flow, and gradually optimized its financial situation. However, in the process, it encountered different degrees of influence and challenges brought by epidemic and litigation, which prolonged this change cycle. In recent years, the company’s operating cash flow has taken the lead in improving, which has been positive for ten consecutive quarters, and has recovered nearly 2.8 billion in cash in the past three years. At the same time, the asset-liability structure has been gradually optimized, and the asset-liability ratio has dropped from nearly 63% at the peak to below 55%. After the sale of Sepura, it is expected to further drop below 50%, which will also bring down the overall financing cost of the company and reduce interest expenses. In terms of expenses, through continuous refined management and personnel structure optimization, the company’s operating expenses are decreasing year by year and are currently in a relatively stable state. If this trend is maintained, the revenue side is confident to gradually recover and improve its profitability by relying on the recovery of the main basic disk business and the pull of the growth business.
In addition, in the future, the company will strive to resolve risks and reduce the impact of external factors such as litigation on the company on the basis of sustained growth in performance. At the same time, strengthen compliance and internal control management, strictly follow the four "high-quality" development principles, and constantly improve their ability to resist risks through high-quality talents, high-quality customers, high-quality products and high-quality orders.
Second, the exchange and interaction links
Q: How does the company view the future development trend of the industry? What are the advantages of the company compared with its competitors?
A: Private network communication belongs to the subdivision of network communication, and provides daily work communication, emergency communication and command and dispatch in key scenarios for industry customers. Similar to the public network, the customer demand of the private network industry is also upgrading with the technology upgrade. China’s private network industry experienced a technological upgrade from "analog to digital" from "Twelfth Five-Year Plan" to "Thirteenth Five-Year Plan". The company seized the development opportunity and made some achievements in combination with the internationalization strategy.
At present, the public network has developed to 5G, and the private network is also developing from narrowband to broadband. The application scenarios of 5G are more reflected in the industry market, and the terminal products are also developing in the direction of intelligent terminals and the Internet of Things. At the same time, the requirements for the unified communication platform have been improved, and the company’s entire products are laid out around the evolution direction of the private network communication industry. As a specialized communication equipment and solution enterprise in China, compared with overseas manufacturers, the company has more advantages in new fields such as 5G and AI in the process of broadband upgrade, and at the same time, our supply chain support capability is more perfect. In the new business field, the company has achieved technological leadership, taking the lead in releasing a number of industry-leading systems, platforms and terminal products, and will continue to maintain industry leadership in the future.
Q: The company turned losses into profits in the first half of the year. What changes have been made in management? Can it continue the trend of improvement?
A: Last year’s performance loss was mainly due to the epidemic, which affected overseas business income. This year, business activities in overseas areas gradually recovered. At the same time, the company implemented marketing changes and proactively strengthened the localization layout, especially in the expansion of industry channels and distributors. By developing more partners, it helped the company to expand overseas customers, and through some targeted incentives, it stimulated internal enthusiasm and guaranteed the goal. Thanks to the promotion of the company’s channel strategy and the promotion of new products, the company’s European and American channel industry achieved rapid growth in the first half of the year.
In addition, the company examines the completion of objectives through regular meetings and promotes the achievement of objectives through process management. In the first quarter, the company’s revenue achieved an increase of nearly 20%, and it also maintained a stable growth trend in the second quarter. This year is a crucial year for the company to lay the foundation for its subsequent development. The company will strive to maintain a good trend of financial indicators, further consolidate the narrow-band basic disk business on the product side, and gradually increase the proportion of growth businesses.
Q: In what ways has the company’s cash flow improved? What are the specific measures?
A: From the perspective of enterprise management, cash flow is the most critical. In the past few years, the company has effectively responded to and alleviated the challenge of tight capital by disposing of some fixed assets and combining good operating cash flow.
Throughout the whole industry, private communication is a business with good cash flow, which was in the stage of rapid expansion before, paying more attention to the growth of scale and ignoring the attention to cash flow. Since 2018, the company has turned to high-quality development, promoted refined management, put forward higher requirements for business profitability and payment return, and included accounts receivable management in sales assessment. Affected by external factors, the company’s revenue has not increased in the past two years, but it has ensured the healthy and stable revenue quality and cash flow, and the net operating cash flow has reached an average annual level of 600-700 million.
Q: Has the current tension in the upstream supply chain eased? What is the trend of gross profit margin?
A: In terms of supply chain, affected by the international environment, there was some tension from the second half of last year to the first half of this year. In the fourth quarter of last year, the company’s gross profit margin declined due to exchange and the price increase of upstream raw materials. Thanks to the company’s previous strategic stocking and domestic substitution strategy, the company has been well protected in the supply chain this year, and we judge that the upstream supply pressure will be significantly alleviated in the second half of the year.
Q: What is the company’s future R&D investment plan?
A: In terms of R&D, the company has optimized its product strategy around "2+3+1", which is more focused than in the past. In the past two years, we have focused on the research and development of growth-oriented business products, made some domestic substitutions and adaptations, and released H series products of a new generation platform. The core of the company’s follow-up research and development will still focus on the optimization of growth business, 5G application, new intelligent terminal products, etc., and keep certain industry tracking and related investment in unmanned equipment and low-orbit satellites in a forward-looking manner.
Q: What is the control goal of the company’s expense rate? What is the specific strategy to control expenses?
A: The company’s overall cost target this year is not to increase in absolute value, and all departments are also allocating and implementing it according to this principle.
In 2021, the overall expenses of the company will be around 3 billion, including more than 600 million non-operating expenses such as interest, exchange, impairment and legal fees. After the company sells Sepura, it will repay some high-cost loans, and the interest-bearing liabilities, financing costs and interest expenses will be greatly reduced. Last year, the company generated about 149 million exchange losses, and the exchange in the first half of this year has achieved positive gains. The legal expenses were more than 100 million yuan last year, and this year the whole will remain within the controllable range.
In the past two years, compared with the peak period, the company has reduced its staff by about one-third, and its operating expenses have been continuously reduced.
At the same time, the company has increased the proportion of front-line sales personnel within the marketing system and made efforts. With the future revenue growth, the sales expense ratio will gradually decrease. Looking at the whole year, we hope that while the absolute value of operating expenses will not increase, the overall expense rate will be improved through the growth of income.
Q: What are the company’s business objectives for the whole year, and what are the changes compared with the beginning of the year?
A: Last year, due to the epidemic, the company’s income failed to meet expectations, and at the same time, it suffered losses due to the impairment of goodwill and exchange.
At the beginning of this year, the company’s business goal was to achieve profitability throughout the year. At present, the company has achieved the profitability goal in stages in the first half of the year. In the second half of the year, according to the seasonal practice of the industry, the revenue will increase compared with the first half of the year. At the same time, the sale of Sepura in the third quarter is expected to bring about an investment income of about 290 million yuan. The new annual target company will be further defined internally, and the specific performance can be paid attention to the company’s regular report.
Q: How is the company’s EMS business going?
A: The company’s EMS business earned about 700 million yuan in 21 years, and its main businesses include automotive electronics, robotics, blockchain, communications and other businesses. Among them, the robot business accounts for a relatively high proportion, and its main customers include some domestic head manufacturers such as service robots, drones and balance cars. Automotive electronics is an important module cultivated in recent two years, and its customers include the world’s leading power battery manufacturers and new energy automobile manufacturers such as Geely, GAC and Jin Kang.
At present, the company’s EMS business has entered a period of stable development. The year-on-year decline in EMS revenue in 2021 is mainly due to the divestiture of some optical communication services in 2020. Excluding this impact, the EMS revenue of the same caliber achieved a slight growth last year and will continue to maintain a steady growth trend this year.
Q: What is the current progress of the company’s broadband business?
A: At present, the public network has entered the 5G stage, and the private network is also developing from narrowband to broadband. The company’s broadband service BU is integrating 4G and 5G technologies to provide high-performance 4G boards and 5G industrial Internet solutions in China; In the past two years, the company has had some project opportunities in overseas operators and industry markets, including the emergency communication network project jointly won by the company and Telefonica, which includes some broadband products. Repeated outbreaks have delayed some projects. With the focus of domestic head equipment manufacturers’ business, the company has more opportunities to grasp in overseas operators’ markets. The company is still optimistic about such opportunities and will continue to follow them.
Hainengda Communication Co., Ltd. is a major provider of professional wireless communication equipment in the world. The company is mainly engaged in the research and development, production, sales and service of professional wireless communication equipment such as walkie-talkie terminals and trunking systems, and provides overall solutions. The main businesses are narrow-band private network products and solutions, 4G/5G broadband private network products and solutions, public-private integration products and solutions, command and dispatch intelligent integration and emergency communication solutions, satellite communication products and solutions, AI products and solutions, public safety industry, government emergency, transportation, energy industry, industry and commerce, integrated communication and modified vehicles, intelligent manufacturing, etc. The company is a leading enterprise in the domestic professional wireless communication industry. The company has applied for 2,030 patents, including 372 overseas patents and 851 authorized patents, most of which are invention patents, and has a number of core technologies and independent intellectual property rights that have reached the leading level in the industry. The company has successively won important honorary titles such as Key Software Enterprise in National Planning, National High-tech Enterprise, National Innovation and Technology Demonstration Enterprise, National Enterprise Technology Center, Guangdong Provincial Government Quality Award, Guangdong Intellectual Property Demonstration Enterprise, Shenzhen Engineering Laboratory and China Industry-University-Research Cooperation and Innovation Award.
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