afterburnerarcade| Sanyuan Biotech suffers from price war, revenue drops nearly 1.2 billion in two years The progress of IPO fundraising projects is only 57% or overcapacity

Changjiang Business Daily News ● Changjiang Business Daily reporter Xu Jia

Industry competition intensifies, erythritol leading enterprise ternary biology (301206Afterburnerarcade.SZ) quite injured.

According to the annual report, in 2023, Sanyuan Bio realized operating income of about 500 million yuan, a decrease of 25.99% over the same period last year, belonging to shareholders of listed companies.AfterburnerarcadeThe net profit (net profit, the same below) was 58.8744 million yuan, down 64.03% from the same period last year; the net profit after deducting non-recurrent profit and loss (deducting non-net profit, the same below) was 57.6826 million yuan, down 64.47% from the same period last year.

A reporter from the Yangtze River Business Daily noted that as a producer of erythritol, the sales volume of ternary organisms has been greatly affected in the price war of erythritol in the past two years, and the performance has declined sharply for two consecutive years. Compared with the peak in 2021, the operating income and net profit of ternary organisms decreased by 1.175 billion yuan and 476 million yuan respectively during the two years.

With the sharp decline in the price of erythritol and the intensification of competition in the industry, by the end of 2023, the investment progress of the IPO fund-raising project "annual output of 50000 tons of erythritol and technology center project" is 57.87%, and the progress of project construction is 80%, which is quite different from the expected income.

On May 21, the Shenzhen Stock Exchange issued an inquiry letter on the annual report of Sanyuan Bio, inquiring in detail about the reasons for the sharp decline in the company's operating performance for two consecutive years and whether there is a risk of excess capacity related to the above-mentioned investment projects.

Gross profit margin of core products reduced to-1.11%

The data show that ternary organisms are mainly engaged in the research, development, production and sales of functional sugar erythritol and aloxetose products. In February 2022, ternary biology was listed on the gem.

In recent years, functional sugar alcohols, represented by erythritol, have developed rapidly. At present, China has become the largest producer of erythritol in the world. When it first appeared on the market, Ternary Biology has become the largest erythritol production enterprise in the world.

With the growth of market demand, before IPO, from 2018 to 2021, the operating income and net profit of Sanyuan increased from 292 million yuan and 68.0885 million yuan to 1.675 billion yuan and 535 million yuan respectively. Among them, the profitability of Sanyuan reached an all-time high in 2021, the year before it went public.

However, around 2021, affected by the surge in market demand and good profits, the original erythritol manufacturers have expanded their production capacity, and many cross-border enterprises have also begun to invest in the industry. In the second half of 2022, a large number of new production capacity began to be put into the market one after another. Affected by many factors such as increased market competition, falling prices and accelerated industry integration caused by excess capacity of erythritol, the profitability of ternary organisms, as the industry leader, has also been greatly weakened.

In the first year of listing, Sanyuan Bio realized operating income of 675 million yuan in 2022, down 59.71% from the same period last year. Net profit and deducted non-net profit were 164 million yuan and 162 million yuan, respectively, down 69.43% and 69.27% from the same period last year.

According to the annual report released by Sanyuan Bio a few days ago, in 2023, the company achieved operating income of 500m yuan, down 25.99% from the same period last year; net profit and deducted non-net profit were 58.8744 million yuan and 57.6826 million yuan respectively, down 64.03% and 64.47% from the same period last year. Compared with the peak in 2021, the operating income and net profit of ternary organisms decreased by 1.175 billion yuan and 476 million yuan respectively during the two years.

As for the decline in performance again in 2023, Sanyuan said that the price of erythritol continued to fall, squeezing the profit space of companies in the industry. At the same time, some dealers and downstream customers have been digesting the high-priced inventory that was snapped up when erythritol was in short supply, new demand slowed and orders declined. Under the dual effect of price and sales volume, the company's product sales revenue and profits declined compared with the same period last year.

A reporter from the Yangtze River Business Daily noted that in 2022 and 2023, the three-yuan comprehensive gross profit margin was 14.06% and 3.05% respectively, a decrease of 27.93 percentage points and 11.01 percentage points respectively over the same period last year. Among them, the gross profit margin of erythritol in 2023 was-1.11%, down 11.61 percentage points from the same period last year.

In the inquiry letter, the Shenzhen Stock Exchange first asked Sanyuan Bio to explain the reasons for the sharp decline in the company's operating performance for two consecutive years, and to explain the reasons and rationality of the sharp decline in gross profit margin and net profit in the past two years.

The late landing income of the production expansion project is lower than expected.

Market competition has intensified, and Sanyuan's plans to use IPO to raise funds to expand production capacity have also been affected.

A reporter from the Yangtze River Business Daily noted that at the initial stage, Sanyuan issued 33.721 million new shares at a price of 109.3 yuan per share, raising a total of about 3.686 billion yuan. After deducting related fees, the net raised was about 3.547 billion yuan, of which 2.786 billion yuan was overraised.

According to the plan, Sanyuan Bio plans to use IPO to raise 770 million yuan and 130 million yuan respectively to invest in the annual production of 50000 tons of erythritol and technology center project and supplement working capital.

By the end of 2023, the annual output of 50000 tons of erythritol and the technology center project had invested a total of 446 million yuan, the investment progress was 57.87%, and the project construction progress was 80%. By the end of the reporting period, the cumulative benefit of the project was-20.2084 million yuan.

In the inquiry letter, the Shenzhen Stock Exchange requires the ternary biological combination of industry changes and development trends, changes in the downstream demand for erythritol, the company's on-hand orders, and the capacity utilization of the relevant production lines to explain whether there is a risk of excess capacity.

In addition, by the end of 2023, another major IPO fund-raising project of Sanyuan Biology has not yet invested funds, but Sanyuan Bio has used 790 million yuan of excess funds to permanently replenish liquidity.

In addition to the slow progress of the erythritol capacity expansion project, in July 2022, Sanyuan Bio also planned to invest in an intelligent biomass energy project with a total investment of 200 million yuan and a construction period of 18 months. But by the end of 2023, the project was on schedule at 0%.

In this regard, the Shenzhen Stock Exchange requires Sanyuan to explain the reasons and rationality of the slow progress of the above project construction, whether there are major changes in the feasibility and necessity of the project construction, and the relevant measures to be taken by the company.

It is worth noting that the IPO fundraising project of Ternary Biology also involves the construction of a technology center. However, the Shenzhen Stock Exchange pointed out that in 2023, the investment in Sanyuan biological research and development was 50.6615 million yuan, an increase of 48.66 percent over the same period last year, and the number of R & D personnel was 54, 6 fewer than the previous period.

In the inquiry letter, the Shenzhen Stock Exchange asked Sanyuan to explain the reason and rationality of the substantial increase in R & D investment due to the decline in the number and proportion of R & D personnel in the company during the reporting period, and combined with the progress of the construction of the technology center and the specific needs of the company's R & D projects to explain whether there have been major changes in the feasibility and necessity of the construction of the technology center.

Editor: ZB