Judging from this fundraising plan, Jiahua has not invested in research and development on a large scale, and the company's two fundraising projects are expanding existing production capacity.
Shandong Jiahua Biotechnology Co., Ltd. (“Jiahua Co., Ltd.”), which focuses on the deep processing of agricultural products, entered the meeting. Can this agriculture-related enterprise specializing in the deep processing of soybeans pass the customs smoothly?
"There are many difficulties in the listing and financing of agricultural enterprises." Tong Tiehan, a specially-appointed professor at the School of Management of Xi'an Jiaotong University, commented on the difficulty of listing agricultural enterprises, and believed that the difficulty in listing agricultural enterprises was mostly due to the lack of fundamentals of the enterprise, including the impact of natural conditions. Industrial risks, the relatively poor continuity and stability of corporate income, and the lack of standardization of corporate operations are restricted by various factors.
The Issuance Examination Committee of the China Securities Regulatory Commission is scheduled to review the IPO application of K. Wah on June 9, 2022.
21st Century Business Herald reporters noticed that Jiahua has changed its name several times during its preparation for listing. Since the end of 2017, the company has been in the capital market for many years.In terms of business, it still focuses on the production of soy protein products and focuses on the agricultural field.
The business of Jiahua Co., Ltd., which has been cultivated for 20 years, still focuses on soybean protein and soybean oil products. The two businesses together account for more than 90% of the company's revenue.-Visual China
Can a single product avoid industrial risks?
"The company is about to go public, is there a similar risk in the field of agriculture?" With questions about the industry, a reporter from the 21st Century Business Herald called Jiahua, but as of press time, there was still no answer.
According to public information, Jiahua shares, formerly known as Shandong Ahua Health Products, was established in December 2000.
Although the name is health care products, in fact, the company has been mainly engaged in soy protein-related business since the 1990s.With more than 20 years of experience in soybean deep processing R&D and production, the main products of Jiahua Co., Ltd. are still soybean protein, soybean oil, soybean dietary fiber and so on.
During the reporting period from 2018 to the first half of 2021, K. Wah achieved revenue of 828 million yuan, 870 million yuan, 969 million yuan, and 630 million yuan respectively, and realized net profit attributable to the parent of 73.1387 million yuan, 73.9482 million yuan, and 74.0885 billion yuan respectively. 10,000 yuan and 40.7708 million yuan, of which soy protein revenue accounted for 70.45%, 71.74%, 73.11% and 71.28% respectively, which is the company's main source of income.
According to the prospectus, another major business of K. Wah is soybean oil products, accounting for 16.70%, 15.57%, 16.94% and 18.04% of revenue during the reporting period.
In addition, the business that Jiahua has cultivated for 20 years still focuses on soybean protein and soybean oil products, and the two businesses together account for more than 90% of the company's revenue.
"The company's products are still dominated by soybean protein isolates. Compared with international giants, the product structure is relatively simple, and the industrial chain still has a large room for extension." For a single product structure, Jiahua shares frankly faced with both upstream and downstream risks.
The main raw materials of Jiahua Co., Ltd. are non-GMO soybeans. During the reporting period, the company's purchases of soybeans accounted for 74.54%, 72.73%, 77.37% and 79.47% respectively. The dependence on a single raw material is easily affected by price factors.
The average price of soybeans rose in 2020 and has remained at a high level so far.During the reporting period, the price of soybean raw materials that Jiahua Co. relies on has risen from 3,500 yuan / ton at the beginning of the period to 5,500 yuan / ton, which has compressed the company's profit space.
"In the future, if there are macroeconomic fluctuations, intensified competition in domestic and foreign markets, sharp rise in raw material prices, the company's failure to effectively pass on corresponding costs, and the company's failure to adjust its product structure in a timely manner, it will directly affect the stability of the company's profitability." Hua shares reminded the risk.
In fact, during the reporting period, K. Wah has already experienced the phenomenon of increasing revenue but not profit. Although the company's revenue has risen slightly, its net profit has stagnated. During the reporting period, the gross profit margin of K. Wah's main business continued The decline was 17.98%, 17.44%, 13.98% and 12.60% respectively.
Jiahua shares said that if there is a sharp slowdown or decline in consumer demand in the downstream market, increasingly fierce competition in the industry, and falling product prices, it will have an adverse impact on the company's operations and may lead to a decline in the company's performance.
"It is difficult for companies in the field of agriculture to go public. The root cause is that there are many uncontrollable influencing factors faced by companies in the industry, and the company lacks operational stability and core competitiveness." A securities company sponsor said when receiving a consultation from a reporter from the 21st Century Business Herald that most sponsors were previously Listed companies that are unwilling to accept agriculture-related sponsorship business are prone to operating risks, and the internal control management system is not perfect, which is prone to normative problems.
"In recent years, the country has strongly recommended the rural revitalization strategy. It may be easier for agriculture-related companies to go public, but they must have the advantages of technology, models, and markets." The above-mentioned brokerage said.
The 21st Century Business Herald reporter learned that Jiahua has changed its name several times since its establishment.In 2009, the company was restructured, and the company was renamed Shandong Jiahua Health Products. Before the listing in January 2021, the company was renamed Shandong Jiahua Biotechnology.
Jiahua explained that the basis for the name "science and technology" is to focus on the deep processing of soybean protein, to continuously accelerate the transformation of product research and development results and to improve the technical content of products, and to continue the research and development of soybean deep processing products.
How industry homogenization highlights competitiveness
According to the 21st Century Business Herald reporter, there are currently nearly 20 major soybean protein producers in my country, with a high degree of marketization and increasingly intensified market competition.
Taking Shandong Province, where Jiahua Co., Ltd. is located, as an example, from the perspective of the distribution of enterprises in the soybean protein processing industry, Shandong Province is the main gathering place for soybean protein production enterprises in my country. Large-scale enterprises in industries such as biology gather.
According to the survey data of the Soybean Protein Branch of the China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce and Animal Husbandry, by the end of 2020, the actual production capacity of my country's soybean protein market is about 600,000 tons, of which more than 80% of the production capacity is in Shandong Province. The top four producers in the industry are Yuwang Ecology and Linyi. Shansong, Yuxin Bio and Jiahua shares accounted for more than 60% of the total market share.
As of 2020, Jiahua's soybean protein sales volume is 44,000 tons, accounting for only 10.99% of the national market. In comparison, Jiahua's market share has no obvious market advantage among the four major manufacturers, and it is not as good as the top average for producers.
In addition, the prospectus of Jiahua shares also shows that the main competitors of Jiahua shares in the same industry include American ADM Company, American IFF Nutrition & Biosciences, Yuwang Ecology, Shansong Biology and Yuxin Biology.
At the end of 2020, ADM owned trademarks, brands, formulations and other intellectual property (including patents) with a book value of $903 million; IFF N&B owned more than 9,000 patents.
From the perspective of domestic counterparts, as of the first half of 2021, Yuwang Ecology has 43 invention patents and 4 utility model patents; Shansong Bio has 3 invention patents and 7 utility model patents; Yuxin Bio has 1 invention patent, 61 utility model patents.
As of the signing date of the prospectus, K. Wah and its subsidiaries only have 2 invention patents and 13 utility model patents, of which K. Wah's two invention patents were obtained in 2007 and 2008 respectively.As an enterprise with an annual revenue of nearly 1 billion yuan, the research and development expenses of Jiahua Co., Ltd. during the reporting period were less than 10 million yuan. From 2018 to 2020, it was only 5.8852 million yuan, 9.8946 million yuan and 8.4222 million yuan respectively.
"The unfavorable factors faced by the company are mainly the homogenous competition of products, which affects the improvement of the overall profit level of the industry." Jiahua Co., Ltd. believes that in some traditional application fields of soybean protein, there is still a single variety of demand and low quality requirements, resulting in the industry's soybean protein. Product homogeneity is serious.The overall R&D and technical capabilities of the industry are not strong, and the R&D capabilities need to be further improved.
Judging from this fundraising plan, Jiahua shares obviously did not invest in research and development on a large scale, and the company's two fundraising projects are expanding existing production capacity.
How to realize the fundraising project
In this IPO project, K. Wah plans to raise 391 million yuan to build a high-end soybean protein production base and a 20,000-ton isolated protein expansion project in the east factory area.
According to its prospectus, the high-end soybean protein production base has a total investment of 453 million yuan, and plans to use the raised investment of 218 million yuan. The construction period is two years.According to the forecast and analysis, the project can increase the revenue by 1.051 billion yuan, the new net profit is 80.67 million yuan, the after-tax internal rate of return is 17%, and the investment recovery period (including the construction period of 2 years) is 6.82 years.
The total investment of the 20,000-ton protein isolate expansion project in the east plant area is 173 million yuan, all of which use the raised investment funds. According to the forecast and analysis, the project will increase the annual revenue by 332 million yuan, with a total annual profit of 39.83 million yuan and a net profit of 29.87 million yuan. RMB, the after-tax internal rate of return is 17.10%, and the investment recovery period including the construction period is 6.85 years.
After the completion of the two fundraising projects, Jiahua will increase the designed production capacity of soybean protein by 60,000 tons, soybean oil by 30,000 tons, and soybean dietary fiber by 16,000 tons.
21st Century Business Herald reporters found that among the existing design production capacity of Jiahua in 2020, the production capacity of soybean protein products is only 60,000 tons, the production capacity of soybean oil is only 30,000 tons, and the production capacity of soybean dietary fiber is 24,000 tons.According to the current production capacity operation, the annual revenue of Jiahua shares will only reach 969 million yuan in 2020, and the net profit attributable to the parent is 74.0885 million yuan.
According to the fundraising plan described by Jiahua Co., Ltd., the company plans to use 100% new soybean protein production capacity and soybean oil production capacity, and 66.67% new soybean dietary fiber production capacity to achieve an annual revenue of 1.383 billion yuan and a net profit of nearly 110 million yuan.
From the perspective of the industry market, the company is currently facing multiple challenges from other leading companies in the industry, new entrants in the industry, and strong overseas soybean protein manufacturers. The company is facing fierce competition in the domestic and overseas soybean protein markets. How to ensure the realization of Existing business capabilities are put to the test.
According to a reporter from the 21st Century Business Herald, there is no company whose main business in the A-share market is to use non-GMO soybeans as raw materials to produce and sell soybean protein to achieve listing. Whether Jiahua shares can rely on a single agricultural product to be successfully listed will also be Provide pathfinding experience to the industry.(Author: Han Yi Editor: Li Xinjiang)
(Editor in charge: Guan Jing)
