How to innovate and develop in a low-key segmented track, become an invisible champion, and then achieve new growth poles through the layout of future industries?
More than 1,000 representatives from the government, investment institutions, academia, listed companies, and start-ups discussed the issue of new growth poles at the 2nd China Listed Companies Industry Development Forum held on June 21-23, 2024.
In 2024, growth will be a hurdle for most businesses. What are the companies that have done the growth right? At this development forum, for the first time, a low-key enterprise appeared, an enterprise from Weifang, Shandong Province, and the invisible champion of China's chemical fiber industry - Hengtian Hailong (000677), which also attracted the attention of public opinion.
After all, the company's performance in the first quarter was very bright, with revenue of 277 million, a year-on-year increase of 15.59%, and attributable net profit increased by 14.06% year-on-year. Revenue and net profit both rose, and at present, it is already a very good data.
And how can Hengtian Hailong, which rarely participates in public activities, be awarded the "Star Listed Company of the Future Space Industry" at the authoritative forum held by the organization? According to external analysis, this may be related to Hengtian Hailong's entry into the low-altitude economic track.
1. "Flying" up new growth
On June 11, Hengtian Hailong announced that it plans to carry out self-research and development of flight control systems through its newly established wholly-owned subsidiary, Beijing Duofu Hailong Flight Control Technology Co., Ltd., and cut into the low-altitude economic industry.
The flight controller is the "brain" of the aircraft, the foreign flight control system developed earlier, the United States, Europe has a high degree of technical maturity, the United States Honeywell (Honeywell), France Safran (Safran), France Thales (Thales) are all well-known enterprises in the industry.
With China's increasing attention to the low-altitude economy and the rapid development of the market, the "Research Report on China's Low-altitude Economic Development (2024)" shows that the scale of China's low-altitude economy will reach 505.95 billion yuan in 2023, with a growth rate of 33.8%. It is estimated that by 2026, the scale of China's low-altitude economy is expected to exceed one trillion yuan. This rapid growth trend shows that the low-altitude economy is becoming a new growth point for China's economy.
The outbreak of low-altitude economy has also greatly driven the upstream and downstream industries, the market demand for flight control systems has increased rapidly, and the research and development of flight control systems has become a hot spot for investment. DJI's Nano and Ace series flight control systems, and Beihang University's F-One flight control system are all products with independent intellectual property rights.
What has attracted the attention of the general aviation industry is that the business scope of Duofu Hailong Flight Control includes "artificial intelligence basic software development; Artificial Intelligence Theory and Algorithm Software Development; information system integration services" and a large number of AI-related businesses. Aviation experts pointed out that this may mean that the flight control system of Duofu Hailong will be combined with the most cutting-edge artificial intelligence technology to seek industry leadership.
Flight control, low-altitude economy, such hot words focus on a chemical fiber company, stirring up thousands of waves, and there are many speculations in the capital market. There is a consensus that this may create an effective synergy with the aviation business of its major shareholder. As of press time, Hengtian Hailong has not directly responded to this. It is only said that this is the need to enhance the company's core competitiveness and overall profitability, help the company's technological innovation and progress, promote the company's industrial transformation and upgrading, and have important strategic significance for the layout of the low-altitude economy.
Facts have proved that the new track of Hengtian Hailong does have a positive effect on enhancing market confidence, and the market responds quickly.
For Hengtian Hailong, it dares to choose a new track, carries out technological innovation and lays out a strong support for new economic industries. From the publicly disclosed financial data, the author verifies that its confidence lies in the relatively abundant cash on the books (nearly 400 million), while maintaining a very low debt ratio. After all, this is an era when cash is king.
Hengtian Hailong's 2023 annual report shows that as of the end of the year, the net operating cash flow was 103 million yuan, an increase of 5.78% from 97.7 million yuan in 2022. In 2021, the figure was $81.4 million. In a special period, it is rare for a company to achieve growth for three consecutive years.
It can be seen that while actively expanding domestic and foreign markets, while comprehensively improving quality and efficiency, Hengtian Hailong has maximized the abundant book cash and brought growth potential and investment value.
2. The innovation gene behind the growth
With the advantage of cash on paper, it is not surprising that Hengtian Hailong chose to enter the future industry with strong R&D attributes and innovation attributes. It is widely believed that Hengtian Hailong is looking for its own "second growth curve".
From chemical fiber to aviation, although on the surface it looks very cross-border. However, from the analysis of enterprise genes, Hengtian Hailong has chosen its own long-term doctrine - to empower industrial development with scientific and technological innovation. Public information shows that Hengtian Hailong's corporate development history has also had many twists and turns, but what finally led it out of the trough is the innovation gene, which is also the core competitiveness of Hengtian Hailong today.
Hengtian Hailong started in Hanting District, Weifang City. As one of the core cities of the Jiaodong Economic Circle, Weifang is also an international power city and a high-end equipment manufacturing industrial base in the Bohai Rim region. Such a manufacturing-based city, its capital market for 28 years, is closely related to Hengtian Hailong. On December 26, 1996, the main body of Shandong Weifang Hailong Co., Ltd. was the first to land on the main board of the Shenzhen Stock Exchange, which opened the prelude for Weifang enterprises to enter the capital market.
From the shareholding reform in 1988 to the A-share listing in 1996, Hengtian Hailong has experienced 8 years. From listing to turning losses into profits in 2013, and being strongly empowered by new shareholders in 2019, focusing on innovation, it will enter the flight control track across borders in 2024. Every step of Hengtian Hailong is to seek development through innovation.
Shandong Hailong Bolaite Chemical Fiber Co., Ltd., the backbone enterprise of Hengtian Hailong, is the head enterprise of high-modulus and low-shrinkage impregnated polyester cord fabric and canvas. Rubber tires, V-belts, conveyor belts, hoses, bulletproof clothing, these products, all have Bolaite's industrial chain participation, scale, variety, equipment and technology in the domestic industry leading level, to a certain extent, has been the "invisible champion" of the chemical fiber industry.
As for what is the concept of "hidden champion", the proposer of this concept, the famous German management scientist Hermann Simon explained that "invisible" refers to the fact that these companies are almost not noticed by the outside world, while "champion" refers to their focus and excellence in a certain segment, and are in a leading position.
Behind the leading position in the market, it is closely related to Bolaite's perfect industry-university-research innovation model and innovation system. As a production-oriented enterprise, Bolaite has also created the only professional scientific research institution in the domestic fiber skeleton material industry to lead the progress of the industry with innovation.
After more than 30 years of repeated setbacks, we have adjusted our direction, always focused on market segments, and become a leading industry leader in China. The hidden champion Hengtian Hailong survived and lived well, and I have to say that it is innovation that creates growth, and it is also growth that empowers innovation.
Innovation is the first vitality of an enterprise, and it is also the driving force for the development of an enterprise. Hengtian Hailong, which seeks the "second growth curve", chooses to cross over into the field of flight control system, which will greatly promote the company's technological innovation and progress. After all, the flight control system is a key component of UAVs and aircraft, involving key technologies such as intelligence, automation, communication, sensing, control algorithms, and data links.
A veteran of the general aviation industry told the author that the new track of the trillion-level low-altitude economy is a new growth point of the national economy in the future. This is a good opportunity for any traditional enterprise to transform and upgrade. Taking the flight control system as an example, enterprises can gradually get rid of their dependence on traditional products through continuous technological innovation and product upgrading, and turn to fields with higher added value and higher technical content. This will help promote the industrial upgrading and transformation of the entire company's business, and lay a solid foundation for long-term development.
Hengtian Hailong, which cuts into the flight control system, is facing a brand new track after all. Whether it can once again become a "hidden champion" of the future industry is still uncertain. However, the innovative practice of a long-term enterprise is worth paying attention to.
3. Internationalization brings market growth
Let's take Germany as an example, where there has been a significant increase in long-termist "hidden champions", largely due to globalization and innovation.
Hengtian Hailong, which is on the road of innovation, also adheres to the globalization strategy.
Hengtian Hailong's 2023 annual report shows that its export results are 509 million, accounting for 49.51%. In the international marketing model, the high-modulus and low-shrinkage polyester skeleton material has passed the certification of most of the well-known rubber and tire companies at home and abroad, has a fixed sales channel, and has achieved a leading advantage in the same industry.
Tires are a must-have consumer product for car users, and Michelin's annual report data shows that global tire sales in 2023 will be 1.785 billion, a year-on-year increase of 2%. From 2008 to 2023, the average annual growth rate of global tire consumption is 2.3%. In 2022, the global tire market sales were $190 billion.
With the increasing cost advantage of new energy vehicles, as well as the continuous enhancement of the global new energy vehicle market, it has brought space for the matching of tires. Among them, the consumption of skeleton materials is huge, which is self-evident for the upstream and downstream industrial chains.
For the new overseas expansion of Chinese enterprises, some voices believe that compared with the previous overseas expansion, this round of overseas has some new changes, not simply communicating technology and products, but using China's industrial chain and supply chain to lay out the world.
Hengtian Hailong is also a key part of the industrial chain. According to public information, Hengtian Hailong has established good cooperative relations with a number of world-renowned tire companies, providing products and technical services to hundreds of customers in more than 30 countries and regions around the world. This is not only conducive to improving the company's international level, but also opens up new growth space for the company's development.
4. The future industry seeks non-linear growth
With the dividends of continuous growth, how does Hengtian Hailong seek non-linear growth for the future? In the 2023 annual report, the company looks forward to 2024 as follows: This is an important year for the company's high-quality development, and it is necessary to cultivate new benefit growth points. The outside world has been speculating before, where is the new benefit growth point? Looking at it now, the future industrial low-altitude economy has become a big chess piece for Hengtian Hailong.
At the beginning of this year, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the Ministry of Transport, the Ministry of Culture and Tourism and other departments jointly issued the "Implementation Opinions on Promoting the Innovation and Development of Future Industries", marking China's great importance and forward-looking planning for future industrial development. The implementation opinions clarify the six key directions of the future industry, including future manufacturing, future information, future materials, future energy, future space and future health, and put forward specific goals and measures for the development of these fields, some of which have reached the international advanced level, and the industrial scale has been steadily improved; By 2027, the comprehensive strength of the future industry will be significantly improved, and some fields will achieve global leadership.
At the 2nd China Listed Companies Industry Development Forum, Cui Bin, founding partner and president of Huamin Investment, pointed out: "Economic restructuring and industrial upgrading depend on two efforts: first, the integration of stock, that is, the integration of industries through market-oriented means such as mergers and acquisitions; The second is the discovery of increments, the development of future industries, and the injection of new quality productivity. ”
The development of the future industry is centered on scientific and technological innovation, and innovation is the corporate gene of Hengtian Hailong. Hengtian Hailong, which was awarded the "Star Listed Company of the Future Space Industry", chose the low-altitude economy as an increment and is committed to the development of the future industry of flight control, which may be an important opportunity for it to take advantage of the momentum and gain new competitive advantages in the future.