Huayang New Materials intends to terminate the fixed increase of 550 million yuan to develop new businesses, and performance may continue to be under pressure

On August 14, Huayang New Materials announced that it will terminate the issuance of A shares to specific targets in 2021 and apply to withdraw relevant application documents due to changes in the capital market and related policies and the actual situation of the company.

Previously, Huayang New Materials disclosed that it planned to increase 550 million yuan for the construction of 3 projects. This must increase has been disclosed since September 2021, and it has taken nearly two years so far.

Huayang New Materials did not explain the specific changes in the capital market and policy changes, as well as the actual situation of the company. According to its 2023 semi-annual performance forecast disclosed in mid-July, Huayang New Materials has continued to lose money in recent years. The net profit in the first half of this year has dropped sharply compared with the same period last year, and its new business is not unrelated to the declining performance.

The fixed increase of 550 million yuan will be terminated after nearly two years

After the market closed on August 14, Huayang New Materials disclosed that it planned to terminate the 2021 fixed increase, and applied to the stock exchange to withdraw the relevant application documents.

As early as September 27, 2021, the company held a board meeting to consider and approve the proposals related to fixed increase. On July 12, 2022, the company received the acceptance form issued by the China Securities Regulatory Commission. On March 15, 2023, the company held an extraordinary general meeting of shareholders to review and approve relevant proposals.

On March 18, 2023, Huayang New Materials disclosed the reply to the inquiry letter for the review of the application documents for fixed increase. On May 19, 2023, Huayang New Materials disclosed the "Shanxi Huayang New Materials Co., Ltd. Issuing A Shares to Specific Objects in 2022 Prospectus (Draft for Application) (May 2023)" (hereinafter referred to as the Prospectus), etc. Related documents.

According to the prospectus, the total fixed increase will not exceed 550 million yuan (including issuance expenses), which is planned to be used for the 60,000 tons/year PBAT project of new materials, 20,000 tons/year of biodegradable modified materials and plastic products projects and 20,000 tons/year For the whole series of biodegradable new material projects in 2019, the proposed investment amount of raised funds is 400 million yuan, 70 million yuan and 80 million yuan respectively.

The prospectus stated: "After the smooth operation of this fundraising project, the company plans to further expand investment in the field of biodegradable plastics in the future, and plans to expand the total production capacity to 300,000 tons per year in stages."

The performance of the biodegradable new material industry is under pressure

Huayang New Materials was formerly known as Taiyuan Chemical Co., Ltd. On February 26, 1999, Taiyuan Chemical Group established Taiyuan Chemical Co., Ltd. with its subsidiary fertilizer plant, chemical plant, coking plant and other assets.

At present, Huayang New Materials is mainly engaged in the recycling and processing of precious metals and biodegradable plastics. Among them, the precious metal recycling business is the traditional advantageous business of Huayang New Materials, which has a history of more than 20 years, while the biodegradable plastic business is an emerging business. It has only established a sales branch since 2022 and made efforts to expand the market. The above-mentioned fixed increase to be terminated is exactly the expansion plan of Huayang New Materials in the field of biodegradable plastics. It is worth mentioning that the "new material 60,000 tons/year PBAT project" included in the fixed increase project has entered the production and commissioning stage in September 2022.

Judging from the 2022 annual report, the gross profit margin of these two main businesses is not optimistic-the gross profit margin of precious metal recycling is 9.83%, and that of biodegradable materials and products is -45.07%.

Huayang New Materials is firmly optimistic about the development of the biodegradable new material industry, and plans to "start in one year, prototype in three years, and finalize in five years" as its strategic goal. Among them, "one-year start" refers to ensuring that the construction of biodegradable new materials projects is successfully completed in 2023, and smoothly transferred to normal production and operation, ensuring that the main raw material consumption, catalyst consumption and product quality of the PBAT device reach the advanced level in the industry; establish an efficient Production and operation management procedures and a high-quality production team will lay a solid foundation for the development of the biodegradable new material industry.

According to the annual report, although Huayang New Material’s operating income in 2022 is 328 million yuan, an increase of 17.09% over the previous year, the net profit attributable to shareholders of listed companies is -37.0999 million yuan; The net profit was -38.6537 million yuan.

Huayang New Materials introduced in the financial report that the payment of biodegradable new material project engineering funds caused the company's currency cash to shrink by half in 2022, and the payment of PBAT projects and product project engineering funds and equipment payments caused the net cash flow generated by investment activities to decline by 883.07%. Developed PBAT business, increased sales staff and marketing expenses, resulting in a 46.16% increase in sales expenses.

The performance pressure brought by new business development continues. According to the performance forecast of Huayang New Materials, the company expects to achieve a net profit attributable to the parent of -105 million to -80 million in the first half of 2023, and the estimated non-net profit attributable to the parent is -106 million to -81 million. In the same period of 2021, the non-net profit attributable to the mother and deduction of 1.0254 million yuan can still be maintained.

"In the first half of the year, the biodegradable new material business (60,000 tons/year PBAT project and 20,000 tons/year full range of biodegradable new material projects) lost about 52 million yuan, of which 15 million yuan was affected by fixed expenses, and the PBAT in April During the trial production period of the project, the cost of the product was relatively high, and at the end of the period, 21 million yuan of impairment losses were accrued for the inventory goods.”