Investment proposal of
JSC «Sino»
Sections
1. Resume
(overview of
the essence of
the investment
proposal)
2. Company
profile
Brief summary
1. General information about the company - JSC «Sino» - a company, specialized in the production of refrigeration and freezing equipment
and split air conditioners.
Location - Samarkand, str. Spitamen 270.
The company was established in 1973. In 2013-2014, a large-scale modernization, technical and technological re-equipment of production
was carried out. Production line for air conditioners with a capacity of 50 thousand units per year was delivered and installed.
All conditions for the production and selling of modern and high-quality household appliances, demanded in both domestic and foreign
markets, are available at JSC «Sino».
2. Rationale for the development of the enterprise - Underlying the growth is further diversification of new industries, and therefore, the
purpose of the project under consideration is:
- Update of outdated technological structures and the diversification of the production of new products, to increase the production
efficiency of already developed products;
- increase the economies of scale based on the country's potential and technological structures, which together with technical methods of
production of goods and services is the most appropriate at the given organizational and economic forms of economic activity;
- Expansion in the Republic of Uzbekistan the technology-intensive and export-oriented products;
- The development of related industries;
- Expanding the range of products in the electrical industry, as well as providing new jobs.
The above measures will help to improve the efficiency of enterprises, including the «Sino», as part of the overall development of the
national economy of Uzbekistan.
3. The need for investments - now to ensure the continuous production, there is a need for working capital in the amount of 10 billion
soums.
4. Transferable share of the enterprise to the investor - the share provided for in accordance with the decree of the President of the Republic
of Uzbekistan for the sale to strategic foreign investors - 88.8% of the shares transferred to the formation of the authorized capital of JSC
"Uzeltexsanoat."
5. Marketing - sales strategy assumes several major dealers, ensuring the sales and maintenance of products of «Sino» in all regions of the
republic. Delivery to the territorial centers possible at the expense of the plant using its own fleet of trucks Isuzu.
6. Forecast of key financial indicators - is shown below.
7. Key benefits and risks of the project - the project is to benefit by production capacity for high-quality and popular products on the
market. The main risk is prolonged production stoppage due to lack of working capital.
8. Key indicators of investment attractiveness of the project - information on projected net income in case of project implementation are
shown in tabular form below.
1. History of the enterprise - The factory was put into operation on December 25, 1973 having 5 models of refrigerators and capacity of
250,000 refrigerators a year. Today, 40 years later, the factory manufactures 16 different models of refrigeration equipment, and annual
production capacity of 100 thousand units per year, also the facilities for the production of 50.0 thousand units of air conditioners per year.
Year 1966 — Penza State Institute for Engineering of machine-building factories "Gipromash" had developed the project of the first
refrigerator factory in Uzbekistan.
Years 1967—1973 — construction of a factory
December 25, 1973 — the plant was put into operation, the capacity 250 thousand household refrigerators per year.
January 12, 1974 — the first refrigerator "Yulduz" (later renamed "Samarkand") was produced and introduced
December 20, 1991 — the plant was transformed into the joint-stock company Sino, based on the decision of the First Constituent conference
of the labor collective and the Uzbek State Mechanical Engineering Association. Since then, the new model of refrigerator, named “Sino” was
accepted for serial production.
Years 2012—2014 — a project, aimed to expand the production of household appliances with the total cost of 15 million US dollars was
realized. As a result, the factory acquired the technological equipment for the development of two new models of refrigerators and three
models of air conditioners with increasing the production capacity of refrigerators to 100 thousand units and commercial production of 50,000
air conditioners per year.
2. Information about the owners - Until 2014,the main stake in the company belonged to the state. In 2014, in accordance with the decree
of the President of the Republic of Uzbekistan, the shares owned by state in the amount of 88.8%, were transferred to the authorized capital of
the newly formed joint-stock company "Uzeltehsanoat". The remaining 11.2% of shares belong to 56 individuals.
3. Organizational and legal scheme. The scheme involves 25 departments. It is given in the appendix.
4. The management - Director, First Deputy Director, Deputy Director for Production, Deputy Director for General Affairs.
Summary of key managers of the company are listed in the appendix.
5. Staff - The total number of employees of JSC «Sino» makes up 75 people, including management staff – 19 people, specialists -19
people, technician – 1 and production staff – 36 people. Also, there are two subsidiaries, with the sole founder - JSC «Sino»: JSC «Sino Eco
Plast» - for the production of plastic parts and products made from PVC; JSC «Sino Steel» - for the production of metal products. Number of
employees at these companies: 178 and 198 people, respectively.
- the wages(breakdown by category) - The average monthly salary in the company amounts to 1 079.7 thousand sums, including specialists - 1
119.3 thousand sums, production staff- 658.4 thousand sums.
The main indicators for the last 5 years:
Indicator
Year 2010
Year 2011
Year 2012
Year 2013
Year 2014
Production
volume
(thous.pcs/billion
19,04/11,21
19,14/12,87
17,84/14,75
6,03/5,51
11,37/9,58
sums)
Sales
volume
16,34/9,87
17,43/10,91
19,73/14,12
8,55/9,1
11,82/9,54
(thous.pcs/billion
3. Production
organization
4. Description
of services /
products
sums)
Net profit
2,46
24,6
17,7
19,24
58,22
(mln/ sums)
1. Technology - As a result of modernization, technical and technological renovation carried out in 2014, JSC «Sino» has a modern hightech production process of production of refrigerating equipment and split air conditioners. New technological equipment and production line
of air conditioners installed during 2013-2014, supplied by “Guangzhou Kinte Industrial Co., Ltd” (China). New equipment: the final assembly
line, automatic powder coating line, vacuum molding machines, 12 sets of injection molding machines, new presses, assembly line of internal
and external units of air conditioners, etc..
2. Production assets, capacities, infrastructure The company has a production capacity of 100.0 thousand units of refrigerators and 50.0
thousand units of conditioners per year. JSC «Sino» has advanced internal and external infrastructure, including the system of water and gas
supply. In order to improve the logistics in terms of imported the customs warehouse and branch line was built on the site of factory.
3. The need for new / additional manufacturing equipment. During 2015 – 2016, the second phase of modernization, which includes the
development of production of refrigerators and freezers of air cooling «NoFrost» and production of outdoor unit of the air conditioner
(evaporators and condensers), is planned.The factory has developed the plans of acquisition of additional and new equipment. In case of
sufficient financial resources the purchasing will be carried out.
4. Sources of raw materials - Component parts, raw materials and spare parts for the production of refrigeration and freezing equipment
purchased both in foreign and domestic markets. In the domestic market, in the own production facilities and through production cooperation a
number of plastic and metal parts, wires, paint, and others are acquired. Permanent work is underway to expand the range of goods procured
from domestic producers.
5. Impact on the environment - The manufacturing process is a low-waste. The factory follows all the requirements of current legislation
on environmental protection.
1. Product assortment - JSC «Sino» has the facilities for the production of household refrigerators and freezers, refrigeration show-cases
and split air conditioners. Products of JSC «Sino» are quality products with a modern design and acceptable price. The target market of the
products - the population with low- and middle-income.
All necessary conditions for production are created (if raw materials and components are available).
Products of JSC «Sino» pass, in the established order, all the certification procedures. For each product has been developed and approved
the technical specifications.
In 2014, the production of 4 new models of refrigerators has started, in 2015 were introduced 3 more models. Work is underway to improve
the usability and visual appeal of the individual elements and components of refrigerating equipment.
2. Main characteristics, function and application scope - One and two-chamber refrigerators and freezers of different sizes with the
temperature in the refrigerator compartment from 0 to 10 degrees C °; in a freezer from -12 degrees to - 18 ° C or less. Appliances for the
storage of food and non-food non-agressive products. Refrigeration equipment of different volumes for display and storage or sale of food
5. Market
overview
products in trading companies or catering industry with temperature in the storage compartment from + 1 to + 10 ° C. Air conditioners cooling
home space up to + 16 ° C and heating up to + 32 ° C.
3. The features, benefits / benefits customers - by buying the products of «Sino», the consumer receives a good quality product at an
affordable price.
5. The availability or the need for licensing – the manufacture and sale of refrigerators and air conditioners do not require special licensing.
6. The degree of readiness for production and sales of products at «Sino» plant - all the conditions for the production of refrigerating
equipment and household air conditioners are created. There is a well-established marketing system of selling its own products.
7. The need for certification, the availability of certificates - All products (refrigerators, freezers, refrigerating equipment and air
conditioners) subject to mandatory certification.
8. The need for and the possibility of upgrading the production - in 2014-2015 commercial production of 7 new models was mastered. In
accordance with the short-term strategy, in 2015-2016 it is planned to master the production of two additional new models of refrigerators and
one model of air conditioner.
9. Terms of delivery and packaging - According to standard contract of delivery, products are shipped from the warehouse factory in
Samarkand. At the same time, the company has its own fleet of trucks brand Isuzu, which allows, if necessary, the delivery of goods to all
regions of the country. Packaging of goods is made in accordance with the requirements of ensuring safety of the goods during storage and
transportation, including wooden pallets, cardboard boxes with foam seals.
10. Warranty & Service - All products of JSC «Sino» have warranty from 1 year to 5 years, depending on the model. There are masters for
repair and warranty service, working on a contractual basis in big regional centers of the country.
According to the statistics the population of the republic in 2014 was 30 million people. Considering the average family with 6 members,
the number of households makes up 5,000,000., of which 60% have average or above average income and can afford a second fridge. In
addition, every year by about 300 thousand new families are created, and they also need the refrigerator. Total Estimated demand for domestic
refrigerators makes up 800 thousand units per year. Taking into account the existing total production capacity of refrigerators in the country,
there is a demand on the market, which requires coverage with domestic products.
JSC «Sino» is located in Samarkand. An adequately developed transport network of the country will allow the quick delivery of products
to customers from the regions. Increased demand is expected from the densely populated regions of the country, such as the Ferghana valley.
In order to promote the company's products, marketing costs, including advertising, warranty service, etc are taken into account the annual
business plans. The most important criteria for many families, especially in rural areas, when buying household appliances is the price of the
product. The market of refrigerators and air conditioners today has the wide range of models with different technological solutions and quality.
As a result of the recent monitoring of the trading conditions on the market of refrigerators and freezers of different types and brands, it was
found that there is a wide range of refrigerators and freezers imported from Russia, Belarus, Ukraine, Turkey, China, Poland, Germany, Spain,
Italy, Japan etc. The presented products on the market can be divided into the following categories:
the superior group - ultramodern refrigerators "Side-by-side" with electronic control systems, with high volumes (total usable volume of
more than 500 liters), advanced technological solutions (brands Bosch, Sharp, Toshiba, LG, Samsung, Beko, Daewoo);
the second category - mainly two-chamber refrigerators with electronic or electro-mechanical control, automatic defrost or using the
system No Frost;
the third group - mostly of the production of CIS countries using modern European technologies, electro-mechanical or mechanical
control, automatic defrosting, etc. The main brands - Indesit, Atlant, Ariston. This group can also include products of JSC «Sino», which
meets or even slightly exceeds on technological aspects.
the last group - Nord, Birusa. Minimum technological solutions outdated cooling system, manual defrost are used.
The products manufactured by JSC «Sino» occupies a niche in the low-price range, where it has a fairly strong position. Wherein, JSC
«Sino»’s products have satisfactory quality and functionality. Sales of household refrigerators and freezers is not difficult, since the products
are of high quality at competitive prices, and there is a pent-up stable demand for a household appliances.
In the domestic market, in addition to imported goods, there are also the products of the domestic producers: Roison, Artel, AZN.
Competition from their side gradually increases with the volume of production of these brands. However, despite of the total volume of
production of domestic producers, there is a rather high level of import of refrigerators and air conditioners. This fact speaks about having a
large potential market. When conducting proper marketing strategy, products of JSC «Sino» will be provided with markets for many years.
Demand for the products of “SINO for the period 2009-2020 г.г.
№
6. Financial
plan
Item
Estimated
owners for 100
households, in
2009, pieces
Estimated
quantity in
households,
in thousand
pieces
Average
period for
replacing the
household
appliances
Estimated annual demand, taking into account
the newly created families, thousand pieces
Расчетная годовая потребность с учетом
2009
2010
2015
2020
1
Refrigerators and freezers
93
5040
8
250
368
726
871
2
Air conditioners
17
1404
7
145
284
393
1354
1. The assumptions used in the construction of financial models. In 2015, it is planned to attract credit funds of commercial banks to
replenish the working capital of the factory.
The company has a number of customs and fiscal privileges and preferences. JSC «SINO» is exempt from property tax, income tax, from
customs duties when importing components and materials necessary for the production of localized products - refrigerators and air
conditioners up to 2017.
2. The financing structure of the enterprise includes the attraction of credit funds of commercial banks, as well as reinvestment of profits
obtained from the sale of products.
3. The results of the financial model and the analysis of the investment attractiveness of the project:
Company business plan
Projected performance indicators for the 2014 - 2019 years in the post forecast period (million soums))
Net revenue from sales of products (goods and services)
Cost of goods sold (goods, works and services)
Gross profit (loss) from sale of goods (goods, works, services)
9 761 527
6 669 256
Forecasting period
2015
2016
2017
2018
(forecast) ((forecast) (forecast))
(forecast)
66 336
96 810
112 019
147 719
45 322
66 142
76 534
100 924
3 092 271
21 014
30 668
35 486
46 795
50 973
Expenses of the period, total
Sales expenses
Administrative expenses
Other operating expenses
The costs of the reporting period that are excluded from the tax base in the future
2 961 378
296 747
875 198
1 789 433
11 784
1 360
3 173
7 252
17 197
1 984
4 630
10 583
19 899
2 296
5 357
12 245
26 240
3 028
7 065
16 148
28 584
3 298
7 696
17 590
249 297
380 190
509 185
1 990
11 220
-
2 904
16 375
-
3 361
18 947
-
4 432
24 986
-
4 827
27 217
-
509 146
39
820 585
1 133
1 654
1 913
2 523
2 748
420 019
400 566
1 133
1 654
1 913
2 523
2 748
68 790
10 087
14 721
17 034
22 463
24 469
68 790
5 503
5 063
10 087
14 721
17 034
22 463
24 469
3 317
6 771
4 840
9 881
5 601
11 433
7 386
15 077
8 046
16 423
Indicators
Other operating income
Profit (loss) from main operations
Income from financial operations, total
Dividend income
Interest income
Revenues from long-term lease (financial leasing))
Income from currency translation differences
Other income from financing activities
Expenses from financial activities, total
2014
In fact
2019
(forecast)
160 910
109 937
Post forecast period
Interest expenses
Interest expenses on financial leasing
Losses from foreign exchange differences
Other expenses for financing activities
Profit (loss) from general economic activity
Extraordinary gains and losses
Profit (loss) before tax on income (profit)
Tax on income (profit)
Other taxes and fees on profit
Single tax on profitsНП
Net profit (loss) of the reporting period
7. Analysis of
the main risks
58 224
1. Characteristics of the main risks. The updated calculations show that the company belongs to the group of "conditionally economically
affluent", subgroup "conditionally solvent." Since the company is insolvent, low-profit, with the presence of financial risks, respectively, it has
lack of its own working capital, but with a slight depreciation of fixed assets.
Given the state of the production capacity, technical and technological resources, as well as the capacity of the market, the main risk is
the lack of working capital for the purchase of all necessary materials, raw materials and components.
2. The Analysis of the degree of influence of the risks on the economic efficiency for different participants of the project and options to
minimize these risks. At insufficiency of working capital for the purchase of components and raw materials needed in the production process,
there is a risk of stopping the production and sales respectively. As a result, the company will not be able to fulfill its current obligations
before suppliers, as well as to cover the principal and interest on previously attracted loans.
One possible option to minimize the risk of stopping production without increasing the credit load of the enterprise, is to increase the
Fund authorized fund through the investments.
3. Conclusions and recommendations. In order to ensure financial and economic stability of the enterprise and to obtain the planned
profit, it is necessary to ensure continuous and uninterrupted production, taking into account the availability of working capital.
8. Appendices.
1. Disclosing information about the company; 2. The organizational structure of the factory; 3. Certification of products; 4. Summary of
the leaders; 5. Photos of industrial sites; 6. Presentation of JSC «Sino».