The first showcase of CIMC-TianDa (0445.HK) Firefighting & Rescue Business in International Fire Protection Exposition gained attention with its champion strength

1. Biggest “International Fire Protection Exposition" in history, China's leading fire-fighting enterprises show "championship strength"

Approved by the National Emergency Management Department and the Ministry of Commerce, the 18th China International Fire Protection Equipment Technology Conference & Exposition (“International Fire Protection Exposition”) hosted by the China Fire Protection Association officially opened in Beijing on October 16, 2019, attracting more than 800 firefighting enterprises and scientific research units from nearly 30 countries and regions including China, the United States, and Germany to participate. This year's International Fire Protection Exposition is the largest, most influential and highest-level international fire show since its inception in 1986. It also attracted the largest number of participating countries (regions) and manufacturers in China. The leading enterprises which represent the highest level of China's fire protection industry are repeatedly showing their advantages and extraordinary “championship strength” to the world by virtue of their home courts.

As the largest fire protection equipment company in China and the fifth largest in the world, CIMC-TianDa Holdings Company Limited (stock code : 0445.HK or "CIMC-TianDa") brings its four major brands German Albert Ziegler GmbH, Sichuan Chuanxiao (and Allied Best), Shanghai Jindun, Shenyang Jietong, , as well as the newly established CIMC Anfang, made their debut at the International Fire Protection Exposition, demonstrating the fire truck products and other fire rescue equipment. In this exposition, CIMC-TianDa's overall firefighting equipment solutions and global perfect after-sales service system have become the focus of the industry.

Zheng Zuhua, Executive Director and CEO of CIMC-TianDa, commented, “At the world's largest fire show, CIMC-TianDa has shown its fruitful achievements in firefighting industry for many years, which also an important step for CIMC-TianDa to become the world's number one.”

At the current International Fire Protection Exposition, the high-profile appearance of CIMC-TianDa signs a clear signal of its strategic goal to become world No.1. Together with the results from the series of acquisitions and integrated capital operations, the company’s comprehensive strength in the fire protection industry has been rapidly consolidated and upgraded. Currently, CIMC-TianDa has more than 10 production bases around the world, and its global sales and service network has laid a solid foundation for realizing this noticeable strategic goal.

2. Domestic fire protection industry sees great prospects, urbanization and policy support bring new global space

China's economy has maintained steady development in recent years, and the growth rate of total fixed asset investment in the whole society has continued to run at a high level. The fire protection industry is closely related to the national economy and fixed asset investment. Generally speaking, the growth of the fire protection industry matches the growth of fixed asset investment. According to the "2019-2025 China Fire Safety Industry Market Supply & Demand Forecast and Investment Strategy Research Report" released by Zhiyan Consulting (“智研咨询”), the overall scale of China's fire protection industry is expected to exceed RMB 500 billion by 2025. From the perspective of the entire industrial chain composition, the fire protection industry can be divided into fire protection products and fire protection projects. In terms of scale, fire protection projects account for about 75% of the market, fire protection products account for about 25% of the market, but fire protection products are always the core of the entire industry chain.

Against the background of increasing global macroeconomic uncertainty, this year's International Fire Protection Exposition is in full swing. To a large extent, it is brought about by the incremental expectations of the Chinese market. China's fire protection industry is of great attractiveness, benefiting from the drive of urbanization and stock replacement (including upgrading). The potential of China's market scale is being further explored.

According to the latest data from the National Bureau of Statistics, at the end of 2018, the urbanization rate of China's permanent population reached 59.58%, and there is still a large gap with the general urbanization rate of 80% in developed countries. The potential space of China's urbanization to be further enhanced brings huge support to the continued growth of the fire protection industry. According to the data of Anxinrong Firefighting Market Research (“安信融消防市场调研”), the scale of the fire protection industry exceeded RMB 300 billion in 2018. Based on the improvement of urbanization rate and the stability of infrastructure construction, the annual growth rate of China's fire protection industry will reach approximately 15%-20%. The enhancement of urbanization rate has also led to a significant increase in the demand for new additions and replacements for fire trucks and fire-fighting equipment.

For a long time, the State has attached great importance to fire protection work and became more supportive to the fire protection industry. This is because fire safety is related to the safety of people's lives and properties, the continuous growth of urbanization rates, and higher requirements for the country's ability to comprehensively reduce disasters. Municipal demand dominates the global fire truck market by nearly 80% of the consumer share.

According to national policy requirements, the area under the jurisdiction of a fire station should not exceed 7 square kilometers, and the fire brigade must reach the edge of the jurisdiction within 5 minutes after receiving the dispatch instruction. According to this regulation, there should be at least 79 large fire stations in Shenzhen. But the completion of the fire station is only half of the prescribed number. In order to quickly fill the gap and increase the coverage, the small fire station built by the community will realize the full coverage of 659 communities in Shenzhen, about 3 such as each square kilometer. The small fire station, because a new fire station needs to be equipped with at least 1-2 fire trucks, based on the measurement figures of Tsinghua University, the built-up area of China's cities is about 146,000 square kilometers, which can be calculated. Based on this, it can be estimated that the total demand for fire trucks is conservatively estimated to exceed 430,000. It may be surprising to compare this figure with the stock data of the current fire truck as the gap is too big, but it is reasonable to compare it with the number of fire vehicles that are dispatched each year. We have seriously neglected this issue and greatly underestimated the "demand" of fire trucks in the past. In 2018, the national fire rescue team dispatched 1.157 million police officers and dispatched 2.193 million fire-fighting vehicles. It has exceeded 2.1 million vehicles for three consecutive years.

It is understood that the new demand from small fire stations will not be considered. According to estimates based on previous development, the gap in domestic fire truck configuration is about 21,000, and the market value is close to RMB 21 billion. According to national and policy planning, this demand gap will gradually be replenished in the next few years. Therefore, it is expected that the annual demand for fire truck market in China will be between 7,500 and 8,000 vehicles (corresponding value around RMB 7.5-8 billion) which will increase the proportion of fire trucks in fire protection products from the past 4% to 8-9%.

As far as the global market is concerned, according to the incomplete statistics of relevant institutions, global fire trucks recorded a sales amount of 21,000 vehicles in 2018, equivalent to a value of RMB 32-35 billion. Comparing this data with the above predicted data, we can see that the demand gap in the Chinese fire truck market will be the most important factor driving the growth of the global fire truck market.

“As the urbanization process continues to accelerate, the market space of the global fire protection industry will further expand, which will lay a good foundation for CIMC-TianDa’s road to world champion.” Zheng Zuhua, Executive Director and CEO of CIMC-TianDa firmly believes that CIMC-TianDa has a rich product line, covering urban fire safety and emergency management related types of fire trucks. From the perspective of product strength, it will perfectly match China's urbanization trend in terms of production, service scale and coverage.

3. Scattered industry competition, calling for integrators and leaders

In addition to the large market scale and the rapid development, China's fire protection industry is highly fragmented. There are thousands of manufacturers in China's fire protection industry, of which mostly are private enterprises. More than 50% of these enterprises have a revenue of less than RMB 5 million. The industry is calling for leading enterprises and integrators to increase market concentration.

China's fire protection industry truly reflects the market structure characteristics of “big industry, small companies”, and the market concentration is extremely low. The market share of a single large-scale fire-fighting enterprise under the huge market scale is less than 2%, and the market share of CR30 is less than 10%. In contrast, in the mature fire protection market in the United States, the market share of CR3 has exceeded 30% in total, reflecting a relatively high market concentration.

The fire protection industry (especially the fire truck industry) is an industry that is supported by national policies and with entry barriers. Companies which can establish full industrial chain advantages or provide comprehensive one-stop solutions and a full-product lifecycle service system are rare. CIMC-TianDa is the most dazzling pearl in this crown.

How is it done? The core secret lies in the “CIMC model” led by mergers and acquisitions. Under such a strategic guidance, CIMC-TianDa has formed a very good global regional layout, and it has become the only fire truck company in the world with a global layout outside the United States. The internationalized operation management experience and the advanced nature of the international vision are a kind of dimensional reduction for domestic competitors.

Zheng Zuhua, Executive Director and CEO of CIMC-TianDa, said: "With a series of strategic actions and integrations, CIMC-TianDa has changed the competitive landscape of the domestic fire protection industry and rapidly created a scalable enterprise with comprehensive product line and strong competitiveness. We believe this is the only way for the company to become the champion of the global fire truck industry." CIMC-TianDa does not see competitors of the same level within China. The company's large-scale advantage has led to its strong profitability, whether it is from the sales side, the server side, or the production side.

CIMC-TianDa is striving to become the industry benchmark and be an industry integrator. Combined with the great opportunities brought about by urbanization, its future development is boundless.

CIMC-TianDa not only keeps up with the most favorable opportunity to flourish, but also takes the lead in its subdivided fire truck field. Coupled with the company's incomparable competitive advantage, under the conditions of "time, location, and people", the company will become the leader in the industry.

4. Being China No.1 and World no.5, what are the advantages of CIMC-TianDa?

CIMC-TianDa 2019 interim report shows that revenue and net profit of CIMC-TianDa's firefighting and rescue business doubled in the first half of 2019, with its market sales ranked first in China, fifth in the world.

In the first half of 2019, the firefighting and rescue business of CIMC-TianDa accounted for approximately 31% of the total revenue. In order to further increase the scale of the company's firefighting and rescue business, after the completion of Shanghai Jindun and Shenyang Jietong, CIMC-TianDa finally announced on September 26, 2019 that its intention to acquire the remaining 60% equity interest in Albert Ziegler GmbH in Germany to optimize the fire protection business. After the completion of the matter, its affiliated company Albert Ziegler GmbH Germany will become a 100% wholly-owned subsidiary of CIMC-TianDa. Upon completion and consolidation, it is expected that the scale and business performance of the company's firefighting and rescue business will be greatly improved, which further consolidated the company’s development strategies and further enhances CIMC-TianDa's global ranking.

CIMC-TianDa made a comprehensive and high-profile appearance at this International Fire Protection Exposition,its product categories displayed on the spot topped the industry, with world-leading new technologies and new techniques. The company's deep understanding of the domestic and international fire protection industry has also been highly accredited by customers around the world.

The four major fire protection brands and the newly established CIMC Anfang, which are brought together by CIMC-TianDa, demonstrated the company's layout advantages in the fire protection industry chain, its complete category advantages, technology and craftmanship advantages, and regional coverage and radiation capabilities.

Brands under CIMC-TianDa at the exhibition:
Albert Ziegler GmbH is a high-value fire truck brand with more than 127-year history. Its products have been sold to over 100 countries and areas,and it is also the fire truck manufacturer and seller with the largest market share in Germany. It ranks among top of global fire truck enterprises, and its core competitiveness and distinctive design enabled the products to stand out among other brands.

The annual production and sales volume of Sichuan Chuanxiao, which has more than 50 years of history, has long been in the forefront of the domestic industry. The company's fire protection products cover various fields such as fire prevention equipment and civil construction fire equipment, with strong competitiveness and popularity in domestic market.

Shanghai Jindun, specializes in the R&D of high-end fire trucks, has more than 90 national high-tech industrialization projects. Core products such as the anti-chemical washing truck and multi-national chemical detection debuted at the exhibition, while the performance has attracted attention globally.

As the founder and most reputable aerial fire trucks company, market share of Shenyang Jietong reaches over 50% in domestic market.

The focus of CIMC Anfang is to provide a comprehensive modular fire station solution for China's fire departments, which will further expand the company's business from fire prevention products to the field of fire prevention projects, which has also made some breakthroughs for becoming general contractor and exploration of new models.

In October 2017, Fire Department of Ministry of Public Security issued “Guiding Opinions on Comprehensively Promoting the Construction of Smart Fire”, bringing new requirements on new information technologies such as IoT, cloud computing, big data and mobile internet, and accelerate the construction of smart fire. The core requirement of conducting “smart fire control” system is the intelligentization of firefighting equipment, as well as the improvement on the emergency capability of city fire control through the full coverage of fire prevention networks. In recent years, CIMC followed the development trend of “smart fire” and built its own leading and comprehensive smart fire protection system. On one hand, the company actively exerts the advantages of container modular construction and fire prevention equipment industry to establish CIMC Anfang to set up modular fire stations of quick response. On the other hand, CIMC Tianda also focuses on the comprehensive improvements of fire truck intelligentization and digitalization level. Fire trucks of the company achieve high level of intelligentization, and the company has successfully launched its self-developed “smart IoT platform”, which helped fire departments and fire enterprises analyze and summarize useful information, enhance operational efficiency and security surveillance level to achieve the smart management of fire trucks. CIMC- TianDa's exploration of “Smart Fire” is in an absolute leading position in China.

The three major brands under CIMC-TianDa are located in Northeast, East and Southwest China. The triangular layout basically covers China as a whole, while the overseas brand Albert Ziegler GmbH has taken the leading position for the company in Germany. The layout has laid a foundation for company’s radiative capabilities in North America and emerging markets, as well as its output capabilities of “product, technology and service.”

From global fire trucks market perspective, the largest single countries are the U.S., China and Germany. CIMC-TianDa currently has the largest market share in China and Germany. TianDa has also setup more than 10 production bases with sales and service network, comprehensive product types and technological advantages. The complete competitive advantage matrices will enable CIMC-TianDa to take advantages to rapidly increase market penetration in North America.

Benefitting from the huge market demand in China and Germany, and the expected breakthrough in North America as well as emerging markets overseas, CIMC-TianDa’s fire truck business is getting closer to world championship.

5.How will CIMC-TianDa put effort into becoming industry champion?

Strategic tasks and goals of CIMC Tianda have almost been accomplished in 2019.

With support from its parent company, CIMC-TianDa has formed the three major brands in China through acquisitions, which are located in the southwest, east China and northeast of China. The triangular layout basically covers China as a whole, which is also a successful copy in China from its international M&A capabilities. Taking Albert Ziegler GmbH case as an example, the company can be able to turn loss into profit and achieve quality growth. Therefore, we believe that CIMC-TianDa will do a better job in the acquisition and integration in China's domestic market.

We have summarized the below points to analyze how CIMC-TianDa transformed its advantages to company development trend.

Setting up firefighting department is a good start for its integration and coordination. CIMC-TianDa aims at consolidating all brands and integrating its competitive advantages of industry chain. By comprehensively unifying marketing, technology, procurement, manufacturing, and service, and forming a shared overall operation management system, the overall brand advantage and scale effect will be exerted to further enhance the competitiveness and profitability of sales, which will help CIMC-TianDa further strengthens its position in the firefighting &rescue business. The Company's growth is boundless with this acquisition and integration capability. In the next step, the company will quickly integrate the domestic and industry market dispersal through the “dimensional reduction” and to target North American and some emerging markets with rapidly growing demands.

The establishment of CIMC Anfang is to expand the business from firefighting products to fire prevention engineering projects, therefore to form all-round fire rescue business capabilities. The injection of the remaining equity interest of Albert Ziegler GmbH has started. It is expected that the firefighting and rescue businesses of CIMC-TianDa will become its core segment after the acquisition.

Looking ahead, we believe CIMC-TianDa will focus on product, model upgrades and global leadership in technology. The essence is a process of upgrade and evolution, to achieve innovations in products and technologies, models and platforms. Looking into the future, we may see some details in the following aspects.

(1) Product and technology innovation: CIMC-TianDa showcased the most diversified products at the International Fire Protection Exposition. Among them, the self-developed innovative car series received attention globally, including fully-automated airport fire trucks, multi-functional aerial platform trucks, the world's largest air-volume exhaust trucks, tunnel rail dual-purpose rescue vehicles, positive pressure protective chemical decontamination vehicles, etc. In addition, the most cutting-edge products -- innovative series, fire drones, fire robots and remote water supply fire trucks, as well as some innovative firefighting equipment, etc., reflect the company’s leading position in terms of new technology and new craftsmanship. Because of the continuously integrated “innovative genes” and “outer resources”, CIMC-TianDa is able to develop and create new product lines and develop new trends in the industry.

(2) Model innovation: CIMC-TianDa adheres to the integrated development mode of “Manufacturing + Finance + Services” and explores innovative mode of “Equipment + Finance + Services”. CIMC-TianDa integrates all the manufacturing capabilities of the leading high-end fire apparatus under CIMC (the major four brands), comprehensive service capabilities of the industry chain, and professional financial products and resources, to fully support and serve the upgrade of domestic firefighting industry. Through the innovative thinking of industry and finance, TianDahas developed a unique business cooperation model suitable for the development trend of the industry, and further expand the market space through the output of comprehensive fire rescue capabilities.

In April 2018, General Fire Brigade of Guangdong and CIMC signed a strategic cooperation framework agreement for fire truck innovation and lease, which opened a new model for government and enterprise cooperation in fire prevention field. CIMC-TianDa proactively makes full use of its advantages, provides fire prevention equipment and maintenance services for Guangdong Provincial Fire Brigade. Through the cooperation with CIMC Financial Leasing under parent company CIMC, CIMC-TianDa set up an innovative model combining financial leasing and firefighting equipments general contracting, thus creating cost-saving maintenance budget for customers within regular budget, and increased efficiency through smart fire prevention system.

(3) Platform innovation: CIMC-TianDa innovatively developed two major platforms: Globally integrated firefighting and rescue solutions and after-sale service platform + Smart Fire prevention platform of the Ubiquitous IoT. The two innovative platforms differentiated company from other competitors. To be specific, the innovative platforms provide complete fire trucks and fire prevention equipment products and provide customers with full-product lifecycle maintenance services and system upgrade services by using its global business coverage. To put it simple, it aims at providing one-stop fire prevention and fire rescue services for urban city safety and continuous development, as a result of big trend under the 5G era. To welcome the Ubiquitous IoT, CIMC-TianDa has preliminarily established smart fire prevention system with connected products, to lay a foundation for further improvements on products and customer value through big data and artificial intelligence. The development trend of smart fire prevention platform has redefined the value of the company service to customers and continuously driven the company’s development mode to a light asset model.

As commented by Zheng Zuhua, Executive Director and CEO of CIMC-TianDa, “A strategic milestone goal of our firefighting & rescue business is to become the worldchampion!” Since the acquisition of Albert Ziegler GmbH in 2013, we are determined to make progress and take the leadership in the industry.

All the fire trucks at this Expo demonstrate our determination in becoming world champion, which is also the belief of “stay true to the original self” every CIMC-TianDa staff bears in mind. With this strong will, our business is on the road to success!”