Recently, Nanjing Xuankai Biotechnology Co., Ltd. (hereinafter referred to as Xuankai Biotechnology) submitted a prospectus, and the company intends to list on the Science and Technology Innovation Board.
According to the official website of Xuankai Biotechnology, its predecessor is Nanjing Xuankai Biotechnology Co., Ltd., established in April 2010, integrating biotechnology research and development, manufacturing and service, with four platforms of "functional microorganisms, bacterial secretions, fungal secretions, enzyme catalytic products" for the research and development and production of core raw material varieties, and product development around "plant nutrition, daily chemicals, animal nutrition, food" and other application fields, forming a closed loop from research and development to industrialization.
Xuankai Bio's business involves plant nutrition, daily chemicals, animal nutrition, food, etc., mainly engaged in the supply of microbial biostimulant raw materials and preparation production; Focusing on polyglutamic acid, microbial agents, chito-oligosaccharides, cell enzymatic hydrolysate and other self-developed and produced biostimulant core raw materials.
Gross margin continued to decline
According to the financial report, from 2019 to 2021 and the first half of 2022, the operating income of Xuankai Biotech was 112 million yuan, 142 million yuan, 253 million yuan and 190 million yuan, respectively, and the net profit in the same period was 28.9811 million yuan, 27.9349 million yuan, 45.5286 million yuan and 29.6752 million yuan, respectively.
From the data point of view, Xuankai Biotech's revenue growth is fast, but the net profit growth is slow, indicating that the comprehensive gross profit of its products is declining.
The data shows that from 2019 to 2021 and the first half of 2022, the comprehensive gross profit margin of Xuankai Biotech was 57.29%, 48.58%, 41.99% and 39.41%, respectively, and the gross profit margin of its main business was 57.51%, 48.6%, 42.26% and 39.52%, respectively, showing a continuous downward trend.
It is understood that Xuankai Biotech's products are mainly divided into two types: biological agents and biological additives. The biostimulant-macroelement combination biologics products launched by Xuankai Biologics were greatly affected by the sharp rise in raw material prices, and the gross profit margin was lower than that of the company's other categories of products. With the increase in the sales amount and proportion of products in this category, the gross profit margin of biologics products has shown a downward trend. In 2020, 2021 and the first half of 2022, the revenue of such products accounted for 1.06%, 22.79% and 36.87% of the main business revenue, respectively.
Although Xuankai Biotech has taken a variety of measures to cope with the downward pressure of gross margin, including increasing process links and launching high value-added and high gross margin products, if the purchase price of raw materials continues to change unfavorably, or the price of the company's products continues to decline due to the intensification of market competition, the company will face the risk of further decline in gross profit margin.
For the production of additives, Xuankai Biotech explained that at the beginning of the reporting period, the company's output scale was small, the price of biological additives products was higher, and the gross profit margin was higher. With the rapid increase of production capacity, in order to strengthen market development, the average selling price of biological additive products has generally shown a downward trend, and the gross profit margin has also decreased.
Therefore, compared with the gross profit margin of peer companies, the downward trend is more obvious, and since 2020, the gross profit margin has begun to be lower than the average of the same industry.
According to the prospectus, from 2019 to 2021 and the first half of 2022, the average comparable gross profit margins of the same industry were 46.76%, 49.9%, 44.98% and 42.28%, respectively; During the same period, the gross profit margin of Xuankai Biotech was 57.29%, 48.58%, 41.99% and 39.41%.
In Qingyangjun's view, the gross profit margin of Xuankai Biotechnology is declining, and the decline rate is faster than the average gross profit margin of comparable in the same industry, indicating that the core competitiveness of Xuankai Biotechnology is declining, and the net profit will continue to be eroded in the future.
Product overly concentrated risk
In terms of products, Xuankai Biotech's products are mainly concentrated in the downstream plant nutrition field.
From 2019 to 2021 and the first half of 2022, the proportion of main business income formed by Xuankai Biologics' products in the field of plant nutrition was 96.10%, 98.17%, 98.53% and 98.89%, respectively.
Although Xuankai Biotech actively expands its business into other application fields such as animal nutrition, the cultivation of new product markets requires a certain cycle, and the proportion of revenue contributed by Xuankai Biotechnology in other application fields is still low, so Xuankai Biotechnology has the risk of concentrated downstream application fields of products. Once the market demand in the field of plant nutrition changes adversely, or the product quality and production capacity of competitors in the same industry are greatly improved, it may lead to increased market competition in this field, which will adversely affect the growth and profitability of its company.
Dealer-managed risks
Xuankai Biologics mainly adopts a distribution-based sales model, and the proportion of revenue has increased year by year.
From 2019 to 2021 and the first half of 2022, the proportion of revenue achieved by Xuankai Biotech through distribution to the main business income was 45.78%, 58.67%, 69.11% and 74.85%, respectively.
Due to the continuous expansion of dealer scale and dealer distribution area, higher requirements are put forward for Xuankai Biologics' dealer management capabilities. If the management ability of Xuankai Biologics distributors is insufficient, it may lead to confusion in the management of distributors or the loss of major distributors, which will adversely affect their business development.
The risk that the expansion of product application areas will not meet expectations
In addition to the field of plant nutrition, Xuankai Biotech also actively invests in R&D and product layout in the field of animal nutrition. At present, Xuankai Biotechnology has obtained 2 feed additive production licenses and 11 feed additive approval numbers, and formed new feed additive products through microecological combined immunity technology for animal nutrition and gradually formed large-scale sales.
Due to the fact that other application fields such as animal nutrition are quite different from the plant nutrition field in terms of product formula requirements, sales channels, customer structure, etc., there is still great uncertainty in the business development of Xuankai Biotech in the above fields. If the business expansion in new areas does not meet expectations, it may adversely affect the revenue and profit development trend of Xuankai Biologics.
Environmental pollution risks
According to enterprise investigation data, in the third quarter of 2021, the Ecological Environment and Water Bureau of the Administrative Committee of Nanjing Jiangbei New Area found that the problems existing in Xuankai Biotech in the "Administrative Inspection of the Environmental Impact Generation of Construction Projects Produced or Used after Follow-up Inspection" and "Supervision of the Preparation of Environmental Impact Reports (Forms) of Construction Projects" have been ordered to be corrected, and the completion date is August 30, 2021.
According to the administrative penalty document "Ningxin District Guanhuan Penalty [2018] No. 125", on November 6, 2018, Nanjing Xuankai Equity Investment Enterprise (Limited Partnership), which holds 23.17% of the shares of Xuankai Biotechnology, was approved by the Environmental Protection and Water Bureau of the Administrative Committee of Nanjing Jiangbei New Area in accordance with the second paragraph of Article 63 of the Nanjing Water Environmental Protection Regulations "In violation of the provisions of the second paragraph of Article 29 of these Regulations, industrial enterprises and other pollutant discharging units discharge sewage through rainwater outlets, The competent administrative department of environmental protection shall order corrections within a time limit, impose a fine of between 50,000 and 200,000 yuan, and finally impose a fine of 69,000 yuan.
In addition, Jiangsu Huifeng Biological Agriculture Co., Ltd., which holds 7.48% of the shares of Xuankai Biotechnology, has also been administratively punished several times because of environmental protection issues.
It can be seen that the risk of environmental compliance is very important for Xuankai Biotechnology. For example, Xuankai Biotech produces certain amounts of wastewater, waste gas and waste residue in the production process. If a major environmental pollution accident occurs due to poor management or force majeure factors, Xuankai Biotech may be punished by the environmental protection authority, and may even be required to stop production and rectify, which will adversely affect the company's production and operation.
In addition, as the state further formulates and implements stricter environmental protection policies, Xuankai Biotech will also face the risk of increasing environmental protection costs.