Recently, listed companies in the machine tool industry are also the two leading companies in the industry. Shenyang Machine Tool and Qinchuan Development respectively announced the 2010 annual report. Despite the favorable policies in the equipment manufacturing industry, the performance of the machine tool sector was active, but the performance of the two companies' annual reports was lower than expected.

Shenyang Machine Tool Performance Analysis Shenyang Machine Tool From January to December 2010, the company realized operating income of 8.047 billion yuan, an increase of 32.62%; operating profit of 29.6 million yuan, a year-on-year decrease of 4.38%; attributable to the parent company owners net profit of 1.42 billion yuan, year-on-year growth 427.54%; basic earnings per share of 0.26 yuan/share, lower than the investment bank expectation.

Shenyang machine tool revenue increased significantly but was below the industry average. In 2010, the machine tool industry recovered completely. The annual output of gold cutting machines in the industry was 72,000 units, an increase of 34% year-on-year, of which the output of CNC machine tools was 220,000 units, an increase of 54% year-on-year. However, sales of Shenyang machine tools were slightly lower than the industry average. In 2010, the company achieved sales of machine tools of 68,000 units, an increase of 20% year-on-year, including 21,000 CNC machine tools, an increase of 39% year-on-year.

Some industry analysts believe that the growth rate is lower than the industry mainly because of the large number of Shenyang machine tools as the industry giant.

The gross margin of Shenyang Machine Tool is basically stable. In 2010, the company's consolidated gross profit margin was 21.54%, a slight decrease of 0.08 percentage points year-on-year. Although the gross profit rate of ordinary machine tools has increased, the gross profit margin of CNC machine tools has dropped by 6.2 percentage points year-on-year. In 2011, the gross profit rate of CNC machine tools in Shenyang is expected to rebound, mainly because on the one hand CNC machine tools and vertical machining center industrialization projects will be completed and put into operation in 2011, which will significantly reduce the procurement costs of functional components and vertical machining. The center has a higher gross margin; on the other hand, the company will increase the production schedule of CNC machine tools and plan to increase the numerical control rate by another 4 percentage points to 64%.

Shenyang Machine Tool stated that in the future, China will maintain its position as the world's largest machine tool production and sales country for a long time. The extremely high industrial proportion shows that the demand for machine tool market is huge, and it is also driven by the demand of automobiles, energy industry and the process of urbanization and industrialization in China. With the increase in demand, the Chinese machine tool industry will continue to maintain rapid development for at least 10 years.

The major operating indicators of Shenyang Machine Tool in 2011 were sales revenue of 10.8 billion yuan, a year-on-year increase of 34%, of which overseas market revenue was US$0.6 billion, a year-on-year increase of 94%.

Qinchuan Development Performance Analysis Qinchuan Development achieved operating revenue of 1.432 billion yuan in 2010, an increase of 25.76% year-on-year; operating profit of 125 million yuan, an increase of 27.57%; and a net profit of 107 million yuan, a year-on-year increase of 14.94%. Among them, the machine tool products achieved operating revenue of 771 million yuan, an increase of 16.44% year-on-year, and the gross profit margin was 31.41%, a decrease of 1.48 percentage points. Earnings per share were 0.3055 yuan.

The gross margin and revenue share of Qinchuan's development machine tool products decreased, and the annual results were slightly lower than expected.

The core product grinding machine is affected by slower production growth and slower revenue recognition. Revenue growth is slower. Low-margin products have a relatively rapid recovery at the bottom. The company’s machine tool products accounted for only 55.56% of revenues, a decrease of 4.38 percentage points from 2009. The gross profit rate of machine tool products was 31.41%, but was dragged down by the weaker profitability auxiliary business. The comprehensive gross profit rate was only 21.50%, which was 1.7 percentage points lower than that of 2009; although the period expense rate was 1.37 percentage points lower than that of 2009, the whole year Performance is still slightly lower than expected.

In response to an increase in gear accuracy requirements, Qinchuan has a good outlook for the development of gear grinding machines. In 2010, the domestic automobile and construction machinery industry increased investment, and the company's orders grew rapidly. From April to June, orders were continuously received over 100 million yuan, and the contract took another record high. The gear grinding machine accounts for approximately 70% of the company's machine tool business, accounting for approximately 40% of the total revenue; benefiting from the historical opportunities of upgrading the automobile industry and the technological innovation of the car gear, the company's gear grinding machines entered the automotive industry in batches and began to import and replace. At the same time, the precision requirements for gears used in machinery such as construction machinery, ships, and wind power are constantly being upgraded. The application range of the company's gear grinding machines is expected to further expand, and the business of gear grinding machines is promising.

Qinchuan continued to develop high-end products and continuously strengthened its leading edge in technology. In the whole year, 12 new product development tasks were completed; 2 national major science and technology projects in 2011 and 1 1315 technological innovation projects in Shaanxi Province were successfully declared. In 2009, the company announced that the state of the art “high-end CNC machine tools and basic manufacturing equipment” major science and technology projects have made some progress. At the end of the year, the Shaanxi Provincial Party Committee decided to establish the Shaanxi Provincial Academician Expert Workstation at the company, which will further enhance the company's R&D capabilities. With the promotion of high-margin new high-precision machine tools, the company's competitiveness and profitability are expected to increase further.

Industry analysts believe that the machine tool is one of the seven strategic emerging industries that China will focus on during the “Twelfth Five-Year Plan” period. Qinchuan Development will benefit from the policy support for the machine tool industry. The main performance drivers in the future include: First, With the support of car gear grinding machine orders, the company's gear grinding machine production plan is already full in 2011. It is expected that the company’s core gear grinding machine sales will continue to grow, eventually achieving import substitution; secondly, some major early-stage projects such as heavy-duty joint workshops will be implemented. Entering into the formal production stage, New Products such as large-scale grinding machines, gantry compound machining centers, floor boring machines, and gantry milling machines will contribute incrementally; thirdly, major technological special projects such as spur gear grinders, bevel gear grinders and blade CNC grinders will advance. Smoothly, it is expected to become the company's new profit growth point in the future. Fourthly, in 2010, the Group’s capital increase and expansion will help the company accelerate the overall listing of the Group, and the Group’s other assets will significantly increase its earnings.