After a nationwide expansion, Jifeng Agricultural Machinery (300022), the only listed company in China's agricultural machinery circulation industry, is undergoing strategic adjustments to seize opportunities in the golden decade of agricultural machinery development. Recently, Wang Xinming, Chairman of Jifeng Agricultural Machinery, said in an exclusive interview with reporters that the company is firmly optimistic about the prospects of the agricultural machinery industry. Currently, the company is making strategic adjustments, strengthening the construction of flagship stores, improving risk control in the construction machinery sector, and planning to establish an agricultural machinery industry integration fund, extending the industrial chain in due course, and transforming into a comprehensive agricultural machinery service provider.

 

    Optimistic about the development prospects of the agricultural machinery industry

 

    How do you view the development prospects of the agricultural machinery industry?

 

    Wang Xinming: We are firmly optimistic about the development of agriculture. The agricultural machinery industry is definitely not dispensable; this is determined by the process of China's agricultural modernization. If many people born in the 1970s could do without agricultural machinery in agricultural production, those born in the 1980s cannot do without it. With the acceleration of urbanization, the transfer of rural labor, and agricultural modernization, China's agricultural mechanization level will continue to improve. At the time of the company's listing, China's agricultural mechanization level was less than 50%, and by 2013 it had gradually risen to nearly 60%. Looking at the development of agricultural machinery abroad, the mechanization level in developed countries in Europe and America has reached over 95%, and China has also proposed to achieve a domestic agricultural mechanization level of 70% by 2020. The industry expects that in the next 5-10 years, China's agricultural machinery industry will enter a stage of accelerated catch-up, and the industry will enter a golden period of development.

 

    The company's performance has declined in recent years. What are the main reasons?

 

    Wang Xinming: Mainly dragged down by the construction machinery business. After listing in 2009, the company hoped to expand new businesses in areas related to its main business to further improve performance. In 2010, it entered the construction machinery field through new establishment and integration. At that time, the industry was in a period of rapid development. Due to the excessive dominance of manufacturers, downstream companies generally adopted aggressive sales strategies. Since the second half of 2011, affected by the macroeconomic and industry environment, demand for construction machinery has severely declined, and the industry has been in a state of alarm. The company then strengthened risk control and moderately contracted to avoid risks, but it still dragged down the main business. However, after several years of digestion, the negative impact of the construction machinery sector on the company's overall performance will become smaller and smaller. The company believes that after years of adjustment in the construction machinery industry, some circulation enterprises with small scale, weak strength, and poor service have been forced out, which is conducive to the development of circulation enterprises with big brands, strong strength, and good service.

 

    Transforming into a comprehensive agricultural machinery service provider

 

    How does the change in the agricultural machinery subsidy model affect the company?

 

    Wang Xinming: Starting from 2011, some regions in China began piloting the "full-price purchase" model (i.e., "full-price purchase, fixed subsidy, county-level settlement, direct subsidy to card"), and in 2014, the full-price purchase was basically implemented nationwide. Under this model, although farmers have greater autonomy in choosing machinery and their bargaining power with dealers will increase, the pressure on farmers to raise funds has increased, and the supporting credit policies are lacking, which will reduce farmers' enthusiasm for purchasing machinery in the short term and affect the company's sales. But in the long run, under the "differential purchase" policy, the company needed to advance funds, putting greater pressure on funds. The new model will ease the company's financial pressure and capital costs, and will play a positive role in promoting the overall operational efficiency of the company. Overall, the implementation of this policy is expected to benefit the industry and enterprises, with more advantages than disadvantages, and will have a relatively positive impact on the company's agricultural machinery operating income and expense structure.

 

    In fact, in response to the new policy, the company has also actively made adjustments, vigorously developing the cooperative market, exploring rural finance, cooperating with financial leasing companies, deeply developing the domestic mid-to-high-end product market, improving customer stickiness, and promoting the sales of the company's agricultural machinery products.

 

    How will the company position itself in the future?

 

    Wang Xinming: Through years of accumulation and market research, we have found that farmers generally face difficulties in choosing and obtaining services when purchasing agricultural machinery. Due to the uneven quality of agricultural machinery distributors, farmers do not know where to buy agricultural machinery, what kind to buy, or where to repair it if it breaks down after purchase. We believe that the key to solving these problems lies in "service". The company will use service as an entry point to comprehensively transform into an agricultural machinery service provider and platform provider. This year, the company will increase the construction of flagship stores, further enhance the company's brand image, gather a large number of high-quality agricultural machinery products and parts resources, provide "one-stop" services, and solve the difficulties of "where to buy and what to buy" for farmers. At the same time, the company has set up a 24-hour service hotline and opened the "Jifeng Yigou" e-commerce platform to provide package services for specialized and organized customers. Through Jifeng Agricultural Machinery's 223 direct-sale stores and more than 2,500 agency dealerships, we provide customers with "closer, better, and more economical" services.

 

    Timely intervention in industrial chain integration

 

    At present, some mid-to-high-end agricultural machinery markets in China are basically occupied by foreign brands. Does the company have plans to extend to upstream industries?

 

    Wang Xinming: We are relatively cautious about extending the industrial chain, but if there are good opportunities, the company will intervene in due course. China's agricultural machinery manufacturing industry started late, and domestic manufacturers rush to produce main machines, leading to fierce homogeneous competition. Take micro-cultivators as an example; in the Sichuan-Chongqing region alone, there are more than 300 manufacturers, with severe overcapacity and per-unit profits tending to zero. But on the other hand, some truly core niche markets in the agricultural machinery field are rarely entered by manufacturers. Objectively, this is related to the serious disconnect between industry, academia, and research in agricultural machinery manufacturing and the weak manufacturing capacity; but on the other hand, in the next 10-15 years, the agricultural machinery market with Chinese characteristics will usher in a golden period of development. If Chinese agricultural machinery enterprises do not seize this rare opportunity, the domestic agricultural machinery market will inevitably be occupied by foreign capital.

 

    Therefore, we intend to try to establish an integration fund and transformation fund for small and medium-sized agricultural machinery industries suitable for hilly and mountainous areas, integrate agricultural machinery R&D and lightweight manufacturing resources, and thereby extend the industrial chain, leading large-scale manufacturing through large-scale circulation, and promoting the development of China's agricultural machinery industry.