On February 10, 2022, with the sound of a gong on the Shenzhen Stock Exchange, it was announced that Shandong Sanyuan Biotechnology Co., Ltd. (hereinafter referred to as "Sanyuan Biotechnology") (301206), in the research and development, production and sales of high-end natural sugar erythritol products, has been immersed in more than ten years of deep cultivation in the whole industry chain, and finally repaired the positive results and successfully landed on the A-share ChiNext board.
Located in Binzhou, Shandong Province, Sanyuan Bio is one of the earliest professional manufacturers in China to start industrial production of erythritol, and is currently the hidden champion of erythritol in the world. Since its establishment in 2007, Sanyuan Bio has focused on deeply cultivating erythritol products, and has overcome the process problems of bacterial breeding, formula optimization, fermentation control, crystal extraction and other links. Since 2017, Tsnbiox has been seeking the expansion of erythritol production capacity, from 2018 to 2020 its erythritol production increased from 17,400 tons to 48,900 tons, as of the end of 2020, Ternary Biologics has a capacity of 60,000 tons of erythritol, erythritol production accounted for 56.21% of the total domestic output, accounting for 39.12% of the global total output, becoming the world's largest production enterprise in the erythritol industry.
But the ternary creatures don't seem to be satisfied with this. It is reported that the goal of Ternary Bio impact A shares is to raise 900 million yuan. Of the 900 million yuan of funds, 770 million yuan will be invested in the "annual output of 50,000 tons of erythritol and technology center project", the construction content is to purchase relevant research and development, production equipment, the construction of a new production line and technology center with an annual output of 50,000 tons of erythritol.
Behind the banner of production expansion held high by Ternary Biologics for many years is the continuous pushing up of prices by the supply and demand of erythritol. Huaan Securities Research Report shows that it is expected that in the next few years, erythritol production will continue to climb. Statistics from relevant market research reports show that for some time, the continuous growth of demand has been driving the price of erythritol, and the market price of erythritol on December 9, 2021 was about 23,000 yuan / ton, although it was lower than the price high of 36,000 yuan / ton in the second quarter, but the price was still more than 50% higher than the beginning of the year.
The rise in prices did bring the expected profit to Ternary Bio. In the previous few years, the good performance of Tsnary Bio also verified the market value of its production capacity advantage. From 2018 to 2020, the revenue and net profit of Ternary Biologics achieved substantial growth, of which the operating income was 292 million yuan, 477 million yuan and 783 million yuan, an increase of 144.35%, 63.95% and 64.27% year-on-year, and the net profit attributable to the mother was 0.68 billion yuan, 136 million yuan and 233 million yuan, an increase of 260.98%, 98.71% and 70.62% year-on-year, and the annual compound growth rate was as high as 130.6%.
Even, with strong market demand and strong production capacity as a support, as the world's largest supplier of erythritol, Ternary Biology has firmly grasped the right to speak in the erythritol market. In its prospectus, Sanyuan Bio mentioned that although the price of raw materials rose in the first half of 2021, the company increased the order price of subsequent erythritol products through consultation with downstream customers, thereby passing on the impact of the rise in raw materials and keeping the gross profit margin at a high level. Due to the shortage of market supply, the company's sales pressure is low, almost waiting for customers to find the door, Sanyuan Bio has also saved a lot of sales costs, and the company's sales expenses in 2020 even fell by 76.84% year-on-year.
The continuous rise in prices and huge profits have pushed up the confidence of the whole industry in expanding production. Moreover, the expansion of production has indeed generally benefited companies that have become erythritol. For example, Baolingbao (002286) expects its net profit attributable to shareholders of listed companies in 2021 to be 190 million yuan to 210 million yuan, an increase of 281.05% to 321.16% year-on-year; net profit after deducting non-recurring gains and losses is 160 million yuan to 180 million yuan, an increase of 341.23% to 396.38% year-on-year.
As the leader of the erythritol industry, Ternary Biology has been "carrying out the expansion to the end" for several consecutive years, which has produced a demonstration effect in the whole industry to a certain extent, making the expansion of production a consensus and the only choice for the whole industry. In 2019, Fengyuan Pharmaceutical (000153) announced that it intends to build a new project with an annual output of 30,000 tons of erythritol; in May 2021, Huakang Co., Ltd. (605077) announced that it will raise funds to invest in the "construction project of high-purity crystalline erythritol with an annual output of 30,000 tons", which has started construction; in August 2021, the 40,000 tons of erythritol project in Yufeng Group's Big Health Biological Industrial Park was officially put into operation; Bowling Bao (002286) also said in its 2021 performance forecast. Its 13,000-tonne erythritol expansion project can be completed and completed.
It is worth noting that in China, the concentration of erythritol industry is very high, with CR3 reaching 74% and CR5 approaching 95%. China has become a global manufacturing center for erythritol, and China's erythritol production will account for more than half of the world's total production in 2020. With the success of landing on the ChiNext board, the position of the leader of the ternary biological world is bound to be more stable.
In the downstream of the industrial chain, driven by the strong demand for sugar substitute products in the market, especially in recent years, the sales volume of sugar substitute beverages has risen, and the supply and demand of erythritol products will continue. It is not difficult to foresee that domestic erythritol enterprises will calmly enjoy a period of "sunny days" brought about by the expansion of the market cake in this wave of expansion led by ternary biology. The length of this period will depend on when the balance between market demand and capacity expansion occurs. Before this balance point appears, domestic erythritol enterprises are expected to harvest market dividends.