Changchai plans B-share sale to cash in on farm growth
Changchai Co, which makes diesel engines for tractors, is planning a B-share sale to capitalise on the development of agriculture on the mainland.
'Agriculture development is the long-term policy of China, and the development of agricultural machinery should in no way fall behind,' chairman Shen Tieping said yesterday.
Mr Shen said the company was to pitch a price-earnings multiple of about seven times in its proposed listing on the Shenzhen Stock Exchange.
The share sale is expected in the latter half of this month.
The company already has A shares listed in Shenzhen.
Changchai, based in Changzhou, Jiangsu province, will become the first agriculture-related concept B stock to list on mainland stock exchanges.
Last year, profit rose 433.2 per cent to 203.13 million yuan (about HK$188.9 million), from 38.09 million yuan in 1994, lifted by an aggressive joint-venture programme with other engine makers and the expansion of its distribution network.
Turnover more than doubled to 2.16 billion yuan last year.
Changchai makes diesel engines for use in agricultural machinery and machinery for processing agricultural products primarily for the domestic market.
The company's products are mostly single-cylinder diesel engines, which are particularly suitable for small-scale agricultural operations in developing countries such as China.
Gao Yuanen, a director at the Ministry of Machinery Industry's agriculture equipment department, said that while the technology employed in single-cylinder diesel engine manufacturing was primitive, it was better suited for the agricultural development on the mainland.
'China's rural farming is still characterised by small-scale farms, where an advanced level of technology is not required. This differs from that of large-scale farming in Western countries,' Mr Gao said.
Changchai, the largest producer of single-cylinder diesel engines in China, sold more than 1.2 million engines last year.
This year the company is targeting sales of 1.8 million engines.
The company has plans to achieve production capacity of more than three million engines by 2000.
