SMEIC Proposes to Acquire Shanghai Prime, a Good Catalyst for Building a Development Pattern Featuring Dual-wheel Driver

HONG KONG, May 14, 2024 - (ACN Newswire) - On the evening of 13 May 2024, Shanghai Mechanical & Electrical Industry Co., Ltd. (“SMEIC” or the “Company”, stock code: 600835.SH) announced that in order to enhance the sustainable development capability of the Company and to increase the return to shareholders, SMEIC proposed to acquire the 100% equity interests held by Shanghai Electric Group Company Limited (“Shanghai Electric”), Shanghai Electric Hong Kong Co., Ltd. (“SEHK”) and Shanghai Electric Group Hongkong Company Limited (“SEG HK”) jointly in Shanghai Prime Mingyu Machinery Technology Co., Ltd. (hereinafter referred to as “Shanghai Prime”, the “Target Company”), the appraised value of the relevant equity interests was RMB5,318 million, and the final transaction price will be subject to the confirmation by the competent state-owned assets administration department. Upon completion of the transaction, Shanghai Prime will become a wholly-owned subsidiary of SMEIC.

It is understood that Shanghai Prime is a large-scale industrial group specialising in the manufacturing of industrial basic parts and key components and parts and related services, and is a subsidiary of Shanghai Electric, a Chinese equipment manufacturing group, which integrates multiple advantages such as R&D, production and trade and is dedicated to provision of mechanical components and parts and overall solutions for various industrial markets and areas, boasting business segments such as bearings, fasteners, blades and metal cutting tools. Shanghai Prime subdivides its business segments into various sub-segments and cultivates them strenuously, and its main subsidiaries/branches at home have been recognised as “professional, refined, featured and innovative” enterprises at national, provincial and municipal levels, while its blade and industrial fastener segments have been awarded the title of “Championship in Single’s in National Manufacturing Industry” for consecutive times. Through years of development, Shanghai Prime's business footprint has expanded to over 10 countries, with its products being exported to more than 70 countries and regions around the world, and it has accumulated a rich and high-quality customer base in energy, industrial application and service, automotive, aerospace, rail transit, railway and other industries.

With the accelerating reshaping of global industrial chain, adhering to innovation-driven development and consolidating the independent and controllable capability of the key and core technologies of industrial chain has become increasingly important for the security and stability of manufacturing industry. Furthermore, the rapid development of the digital economy and the promotion of the “dual-carbon” goal have also brought forward new requirement for the development of China's manufacturing industry. Against such backdrop, the traditional manufacturing industry is accelerating its transformation towards being independent, high-end, intelligent and green, and new development opportunities have been created. SMEIC’s acquisition of Shanghai Prime will significantly enhance SMEIC’s overall business scale and core competitiveness in industrial basic parts business, enabling it to actively grasp the opportunities for transformation and development in the manufacturing industry.

This transaction will boost the strategic upgrade of SMEIC, clarify the positioning of the Company as a “professional, refined, featured and innovative” industrial platform, further broaden its industrial basic parts, key components and parts, sub-system and mechatronics products, build a diversified product portfolio, and give full play to the attribute of SMEIC as a listed company capital platform as well as the advantageous position of Shanghai Prime in the field of industrial basic parts and key components and parts, to help the Company to rapidly realise the product extension for its “professional, refined, featured and innovative” businesses along the current industrial chain, reinforce the industrial basic parts business portfolio, push the “professional, refined, featured and innovative” industrial segment of the Company's industrial basic parts business to develop towards being high-end, serialised and integrated, and accelerate the upgrade of the domestic industrial basic parts industry, serving the manufacturing power strategy of our country.

Besides, this transaction will help SMEIC to gradually expand its business scope from lift industry with stable development to basic parts aerospace, new energy automobile, robotics, medical equipment and other industries with more promising growth prospects. After the resource integration, SMEIC will strive to achieve the “three new” development, namely new technology, new products and new markets, through continuous technological innovation, the extension of upstream “professional, refined, featured and innovative” business line, and the development of domestic strategic application and overseas “new” markets of the Belt and Road Initiatives, helping SMEIC to build the “second growth curve” based on the “professional, refined, featured and innovative” with the synergy through the diversification of the products and markets while maintaining the healthy and steady development of the primary industry, forming a new development pattern featuring dual-wheel driver.

Furthermore, this transaction will also be conducive to the adjustment and optimisation of the Company's industrial structure. After the completion of this transaction, SMEIC will become one of the world's largest comprehensive industrial basic parts conglomerates by virtue of a relatively wide range of products offerings and a relatively large scale of operation, continuously improving its assets quality and profitability, creating further room for its future development as a listed company, further enhancing its value in the capital market and creating more returns to shareholders.

According to the data, Shanghai Prime has sound main business and operating condition. In 2022 and 2023, the revenue of Shanghai Prime amounted to RMB8,980 million and RMB9,585 million, respectively, and its net profit attributable to parent company amounted to RMB349 million and RMB237 million, respectively. As at 31 December 2023, the total assets of Shanghai Prime amounted to RMB11,263 million.

If Shanghai Prime is merged into SMEIC, the earnings per share of SMEIC for 2022 and 2023 will represent an increase of 35.42% and 23.47% respectively over that before the merger. In terms of revenue sources, in 2022 and 2023, the proportion of revenue of SMEIC from its “professional, refined, featured and innovative” related businesses will significantly increase from 1.94% and 2.61% before the merger to 29.00% and 31.87% after the merger, resulting in obvious optimisation of its business structure.

SMEIC said that in the future, the Company will fully leverage the integration and synergy effect with Shanghai Prime, to achieve seamless business connection and consolidate its leading position in the industry. In terms of market development collaboration, it will focus on the common downstream market for the two sides, through joint development, improve the overall performance of products, while expand common customers and services, forming a package of comprehensive solutions, to enhance customer stickiness and improve the value of services. In terms of scientific and technological innovation collaboration, it will strengthen the research on common technologies and processes of the two sides, to deepen the scientific and technological research and development reserves, and enhance the digital and intelligent synergy. In terms of resource allocation, it will actively promote the sharing of high-quality resources between the two sides, and leverage the listing platform to select upstream and downstream strategic investment opportunities for capital operation, etc., to continuously enhance the global competitiveness of the Company's industrial basic parts business.