Kosen Technology: HnB Structural Parts Business Develops Steadily, New Plant in Vietnam Put Into Production in July

Kosen Technology: HnB structural parts business develops steadily, new plant in Vietnam put into production in July

On July 12, Kunshan Kesen Technology Co., Ltd. (603626) issued the "Reply Announcement on the Information Disclosure Supervision Work Letter on the 2023 Annual Report", introducing the company's layout and current market performance in the HnB business. Kesen Technology disclosed that it has cooperated with Technocom Systems Sdn. Bhd. since 2021 to supply heat-not-burn e-cigarette structural parts, and its business volume has increased year by year. In addition, the new plant in Vietnam is expected to be put into use in July 2024, with annual revenue expected to reach 60 million yuan.

 

On July 12, Kunshan Kesen Technology Co., Ltd. (603626, hereinafter referred to as "Kesen Technology") issued the "Reply Announcement on the Information Disclosure Supervision Work Letter on the 2023 Annual Report". Previously, the work letter issued by the Shanghai Stock Exchange required Kesen Technology to verify and reply to six issues one by one. The two supremes noted that in its reply, Kesen Technology introduced the company's layout and current market performance in the heat-not-burn tobacco (HnB) business.

 

HnB structural parts business develops steadily

 

According to the report, Kosen Technology has maintained stable cooperation with Technocom Systems Sdn. Bhd. since 2021, supplying it with HnB structural parts. The transaction amount in 2021 was 194.2752 million yuan, 134.4475 million yuan in 2022, and 136.4570 million yuan in 2023.

It is understood that Technocom Systems Sdn. Bhd is a manufacturer of diodes, transistors and similar semiconductor devices headquartered in Malaysia, which can provide a full range of electronic manufacturing, original design manufacturing and electronic manufacturing services.

 

It is worth noting that Flextronics Mechanical Marketing (L) Ltd is also one of the company's important HnB structural parts customers in 2021, with a transaction amount of 144.8002 million yuan, but the company did not appear in the company's top five customer list in 2022 and 2023.

 

Flextronics Mechanical Marketing (L) Ltd is part of the Flextronics International Ltd group, a world-renowned electronic manufacturing services (EMS) and original design manufacturing (ODM) company.

 

In terms of supply chain management, Jiangsu Tri-Liang New Materials Technology Co., Ltd. is its important HnB structural parts partner, and has been the company's products and outsourced processing from 2021 to 2023. In the three years, the transaction amounts were 55.3765 million yuan (2021), 84.0517 million yuan (2022), and 38.3752 million yuan (2023).

 

It is understood that Jiangsu Tri-Liang New Materials Technology Co., Ltd. is located in Hudai Industrial Park, Wuxi, Jiangsu, with a total investment of 400 million yuan. The company's main business covers vacuum coating, surface treatment and other fields, mainly used in digital 3C electronic products, home appliances, white appliances, automotive parts and other industries.

 

The new plant in Vietnam will be put into use in July

 

In April this year, Kosen Technology mentioned the progress of its Vietnam factory in the report. Kosen Technology said that the Vietnam factory is an effort of the company to take the initiative to go out from the perspective of the long-term development trend of the industry. The Vietnam factory is expected to start trial production in May 2024, and the first production project will be HnB products.

 

In this report, it stated that the plant is expected to be put into use in July 2024, and the annual revenue is expected to reach 60 million yuan.

Kosen Technology gave a rational explanation for investing in the Vietnam factory, saying that the company's current overseas business accounts for a large proportion. Taking 2023 as an example, overseas revenue is 1.668 billion, accounting for 64%, while production capacity is mainly concentrated in China.

 

"On the one hand, it can better develop and meet the multi-faceted needs of overseas customers; on the other hand, the company's asset scale, industry competitiveness, overseas market share and the company's overall risk resistance can also be effectively improved, which is in line with the company's strategic planning.

 

The initial plan of the Vietnam plant is to mainly produce heat-not-burn electronic cigarette structural parts, and the market demand for such products is currently stable."

 

Intensified competition: gross profit margin decreased by 36.6 million yuan

 

Despite the steady progress of business development, Kosen Technology is also facing the challenge of intensified market competition. The report shows that in 2022 and 2023, due to intensified market competition, customers' price cuts caused the gross profit margin of the HnB structural parts business to decrease by 35.7 million yuan and 36.6 million yuan respectively. In addition, the gross profit margin of overseas business in 2023 decreased by 4.99 percentage points compared with the previous year, and the equipment utilization rate decreased, which increased the fixed cost allocated per unit product.

 

In the face of market changes, Kosen Technology said that it will actively adjust its strategy, try to develop new e-cigarette customers, and layout businesses such as graphite heat dissipation modules to improve the capacity utilization of assets. Continue to optimize product structure and business layout to enhance market competitiveness and profitability.