Bolong Technology: A leading enterprise in the field of pneumatic conveying in the field of synthetic resins, grasping the opportunity of the "Belt and Road" and actively exploring overseas markets

This article is the "Bolong Technology: A Leading Enterprise in Pneumatic Conveying in the Field of Synthetic Resin, Grasping the Opportunity of the "Belt and Road" and Actively Exploring Overseas Markets" of the "Company Depth" series produced by the Securities Times and China Capital Market Research Institute

Summary of the report

A leading company in the field of pneumatic conveying in the field of synthetic resins. The company is a professional supplier of powder and granular material handling system solutions with pneumatic conveying as the core, and is a state-level specialized and special new small giant enterprise and a high-tech enterprise in Shanghai. Among them, the revenue of complete system products accounted for more than 80%, and the revenue of single-function system products grew rapidly. On November 9, the China Securities Regulatory Commission approved the company's application for registration of initial public offerings.

Break the international monopoly and realize the import substitution of pneumatic transportation. At present, the domestic pneumatic conveying system industry presents a small and scattered situation, the company continues to improve the technical capabilities, break the monopoly of internationally renowned enterprises, achieve import substitution, and become one of the few companies in the international market that can provide large-scale polyolefin pneumatic conveying systems. According to the "Market Share Certificate" of the Petrochemical Technology and Equipment Professional Committee of the China Petroleum and Petrochemical Engineering Research Association, the company's total market share in the domestic synthetic resin field from 2020 to 2022 will be more than 30%, ranking first in the industry.

It has the ability to integrate large-scale systems and has significant advantages in the management of large-scale project implementation process. The company covers a complete technical system in the field of pneumatic conveying and other systems, and can organically integrate dozens or even hundreds of stand-alone equipment and single-function systems provided by multiple manufacturers into a complete set of systems according to system requirements and in-depth understanding of the performance of key equipment and core components, so as to meet the "one-stop" docking needs of customers and have significant advantages in the management of large-scale project implementation process. This also enables the company to become a qualified supplier of large enterprises such as Sinopec, PetroChina, CNOOC, China Shenhua, and China Coal Group.

The ability to repay debts is good, and the ability to repay debts continues to improve. The company's cash flow is abundant, and the company's net cash flow from operating activities from 2020 to 2022 and from January to June 2023 is relatively stable, reaching 181 million yuan from January to June 2023, which continues to exceed the average of comparable companies. Relying on endogenous development, the company's asset-liability ratio continued to decline. The company expects the highest growth rates of revenue and net profit attributable to the parent company in 2023 to be 34.49% and 47.92% respectively.

Actively contract foreign large-scale pneumatic conveying system projects, and increase the application of new energy materials and other industries. With the upgrading and transformation of the global manufacturing industry structure, as well as the improvement of intelligent and automation technology in the manufacturing industry, the application field of pneumatic conveying equipment will continue to expand and has a large space for development. The products take synthetic resins in the petrochemical and chemical industries as the main application fields, and will gradually enter the fields of new energy materials, modern intensive breeding, recycling of renewable resources, environmental governance and green production in the future;

1. Company profile

Shanghai Bolong Equipment Technology Co., Ltd. (hereinafter referred to as "Bolong Technology" or "the Company", code 603325. Founded in 2001, the company is a professional supplier of powder and granular material handling system solutions with pneumatic conveying as the core, the company's main products include complete sets of powder and granular pneumatic conveying technology as the core, metering and batching, functional silos, filtration and separation, purification and dust removal and other single-function systems, as well as related equipment and components.

At present, the company has the independent production capacity of some core equipment and the import substitution of the whole system product line, and a number of products and technologies are at the leading domestic and international first-class level. The company has been awarded the titles of "National Specialized and Special New 'Little Giant' Enterprise", "Shanghai High-tech Enterprise", "Shanghai Science and Technology Little Giant Enterprise", "Shanghai Specialized and Special New Small and Medium-sized Enterprise", and the company has successively won the titles of "Top 100 Outstanding Enterprises in Qingpu District" and "Outstanding Talent Team for Innovation and Entrepreneurship in Qingpu District". The "Solid Powder and Granular Pneumatic Conveying and Blending Device" independently developed by the company's team has been listed on the list of "Top 100" of Shanghai's high-tech achievement transformation project.

The company's main customers are concentrated in coastal cities, northwest and north China coal chemical and petrochemical enterprises, including Sinopec, PetroChina, CNOOC, China Shenhua, China Datang, China Coal Group, Shaanxi Coal, Sinochem Group and other well-known enterprises.

Financial data show that the company's operating income has increased year by year. In 2022, the company's main business income will be 1.041 billion yuan, a year-on-year increase of 6.43%, mainly contributed by the revenue of a single-function system increased by nearly 27%. In terms of products, the revenue of complete systems continued to account for more than 80%, the proportion of revenue from single-function systems increased from 8.72% in 2020 to 14.8% in 2022, and the proportion of revenue from some accessories and services showed a downward trend, reaching 2.98% in 2022, a decrease of 2.29 percentage points from 2020.

Shareholding structure and actual controller: The company, formerly known as Shanghai Bolong Powder Engineering Co., Ltd. (hereinafter referred to as "Bolong Co., Ltd."), was established in November 2001 after four equity transfers and four capital increases, and in October 2020, Bolong Co., Ltd. was changed to a joint-stock company as a whole. According to the company's current shareholding structure, the company's largest shareholder is the listed company Harbin Boshi Automation Co., Ltd. (Boshi shares, code 002698. SZ) holds 19.20% of the shares, and the shareholding ratio of Boshi shares has always been less than 30% during the historical period, and the controlling shareholders and actual controllers of the company are Zhang Linglong, Peng Yunhua, Lin Kai, Lin Hui, Liu Changlin, Chen Jun and Liang Qing, with a total of 55.17% of the shares, and Zhang Linglong, chairman of the board, holds 13.92% of the shares.

As of the signing date of the prospectus, the company has a total of 5 wholly-owned subsidiaries, including Jiangsu Bolong Machinery Technology Co., Ltd., Italy Gwani, Gwani Powder Engineering (Shanghai) Co., Ltd., etc., and there are no shareholding companies or branches.

Proposed to be listed on the main board of the Shanghai Stock Exchange: According to the financial situation, the company chose the listing standard (1) of the main board of the Shanghai Stock Exchange, and on November 9, the China Securities Regulatory Commission approved the company's registration application for initial public offering of shares. At present, the domestic pneumatic conveying industry presents a relatively scattered pattern, the company relies on years of experience accumulation, to maintain the leading market position in the domestic industry, and has become one of the few companies in the international market that can provide large-scale polyolefin plant pneumatic conveying system. After listing, the company is expected to become a leader in the field of pneumatic transportation on the main board of the Shanghai Stock Exchange.

Second, the company's core competitiveness

Since its establishment, after years of industrial practice and independent innovation, the company has not only mastered the accurate special system algorithm, but also has the advantages of large-scale system integration capabilities and large-scale project implementation process management, accumulated a good reputation in the industry, and maintained a leading market position in China. The "Solid Powder and Granular Pneumatic Conveying and Blending Device" independently developed by the company's team has been listed on the list of "Top 100" of Shanghai's high-tech achievement transformation project.

Covering a complete technical system in the field of pneumatic conveying and other systems, we have continuously made breakthroughs

The company is deeply engaged in pneumatic transportation, and its core technology is the fluid flow technology in the pipeline based on chemical process and chemical engineering, which is an important part of chemical production operations. The core products in the history of the company are pioneering, through years of research and development and project practice to achieve a breakthrough in the domestic large-scale pneumatic conveying system from scratch, and gradually realize the independent research and development and creation of some key components and equipment, forming a relatively complete R & D and innovation platform.

According to the disclosure in the prospectus, the company's main technical personnel have served in the company for more than 10 years, and the high-quality technical research and development team and human resources have laid the foundation for the company's continuous independent research and development. At present, the company has core technologies such as pneumatic conveying system design and calculation algorithm, powder and granular material handling system integration technology, granular material blending technology, powder air flow homogenization technology, design and production technology of key equipment, and automatic control procedures for system operation, which not only covers the core technology of powder and granular material processing such as pneumatic conveying, blending, homogenization, and core equipment manufacturing, but also covers the automatic control system and other human-computer information interaction technology. These core technologies are independent research and development, which are mature technologies and have been widely used in the projects undertaken by the company.

As of June 30, 2023, the company has obtained 7 invention patents and 58 utility model patents. The invention patents include "solid powder pneumatic conveying and blending device", "powder homogenizer and powder gas flow homogenization device", etc., and the utility model patents include "self-cleaning slide valve", "a continuous gravity block removal equipment", etc.

Accurate dedicated system algorithms and simulations can achieve the goals of low system investment, low energy consumption and high efficiency

The system algorithm is the core of the design of the pneumatic conveying system, which is based on the physical property data of the material, calculated according to the characteristic values of the project, and calculated through the appropriate design formula, to obtain the core design values of the system, and then determine the most important basis for the selection of system equipment.

Since its establishment more than 20 years ago, the company has established a proprietary dynamic physical property database of hundreds of materials with different particle size distributions and temperature conditions such as bulk density, suspension velocity, fluidity and other parameters through a large number of material characteristic tests, conveying simulation experiments and engineering practice accumulation of thousands of pneumatic conveying lines in the project. In addition, the company has independently developed a special system pressure loss calculation model and conveying system calculation algorithm for pneumatic conveying, which completes the parameter calculation of the conveyor line according to the proprietary system algorithm, project environmental characteristics and material characteristics, so as to make it operate safely and stably, and can also make the operation of the conveying system near the economic operation line, so as to achieve the goals of small system investment, low energy consumption, high efficiency, economy and environmental protection.

It has the ability to integrate large-scale systems and has significant advantages in the management of large-scale project implementation process

The company has the ability to integrate large-scale systems. The company uses the self-developed test device to simulate and test the design scheme, so as to select the optimal complete system configuration, and can put forward the customized equipment requirements according to the system requirements and the in-depth understanding of the performance of key equipment and core components, and organically integrate dozens or even hundreds of stand-alone equipment and single-function systems provided by multiple manufacturers into a complete set of systems to meet the needs of customers in terms of technical level, design concept, technical support and after-sales service The demand for docking reduces the customer handover interface, reduces the cost of communication, coordination and maintenance quality assurance management, and improves the efficiency of project implementation, so that the various equipment, components and information data provided by different manufacturers can be accurately and orderly integrated and effectively matched.

The company coordinates project management with a systematic concept, sets up a project management center, coordinates design, procurement, transportation, quality inspection, on-site service and other related work, forms a vertical + horizontal efficient and collaborative project management mechanism, and continuously optimizes project progress, cost, quality and other input resources in accordance with the relevant system of the company's project whole-process management. Therefore, the company can not only realize the organic combination of the system and the customer's overall production equipment, but also make the system optimize in terms of performance, energy consumption, cost, etc., and be easy to expand and maintain, which has significant advantages in the management of large-scale project implementation process.

High technical barriers, qualified suppliers of large petrochemical and chemical enterprises

There are many special requirements for the design and practical operation of pneumatic conveying systems, and the determination of key variables (such as gas velocity, powder and granular particle characteristics, powder and granular carrying, pipe size and structure, powder and granular feeding device, etc.) is a combination of multiple disciplines and strong technical integration. Therefore, entering the industry requires long-term technical precipitation and accumulation, rich engineering design, research and development capabilities, and high technical barriers.

The company regards customer satisfaction as the ultimate goal of project management, and can effectively identify customer needs, and adjust the project plan in a timely and dynamic manner according to the changes in customer needs, so as to meet customer needs.

The company's rich performance experience, good brand reputation in the industry and rapid response mechanism are the decisive factors to win the trust of customers. According to the prospectus, the company has undertaken nearly half of the domestic polyolefin pneumatic conveying system projects in the past ten years, and has completed hundreds of large-scale pneumatic conveying system projects, covering a variety of product types and process routes.

The company is a qualified supplier of Sinopec, PetroChina, CNOOC, China Shenhua, China Coal Group and other large petrochemical and chemical enterprises. In the field of pneumatic conveying system equipment, the "Bolong" brand has been widely recognized by customers.

According to the data disclosed in the prospectus, in 2022, the scale of the company's single project will increase and the amount of a single contract will increase significantly, and the top five customers of the company's complete systems and single-function products will have a high concentration from 2021 to 2022, but the customer concentration of complete system products will decrease in 2022. In terms of sales customers of complete systems and single-function products, the largest customer of the two series of products in 2022 is Zhejiang Petrochemical Co., Ltd., with a total sales revenue of 214 million yuan, of which the revenue of complete systems is 195 million yuan and the revenue of single-function systems is 20 million yuan, followed by Shandong Shouguang Luqing Petrochemical Co., Ltd., with a total sales revenue of 152 million yuan, of which the revenue of complete systems is 113 million yuan and the revenue of single-function systems is 39 million yuan.

Break the monopoly and realize import substitution, and the polyolefin pneumatic conveying system is leading the industry

At present, the domestic pneumatic conveying system industry presents a small and scattered situation, enterprises usually focus on one or two areas, only a few enterprises in the industry can provide customers with from program consulting, technology research and development, to key equipment manufacturing, automation control, system integration, to guide installation and commissioning, after-sales maintenance and other full life cycle services, the industry market share continues to have technical advantages, brand advantages of enterprises concentrated. The company continues to improve its technical capabilities, breaks the long-term monopoly of well-known foreign companies in the pneumatic conveying system of large-scale polyolefin plants, realizes import substitution, and has excellent performance and high market position in the field of powder and granular material processing in the domestic petrochemical and chemical industries, and has become one of the few companies in the international market that can provide pneumatic conveying systems for large-scale polyolefin plants.

According to the "Market Share Certificate" of the Petrochemical Technology and Equipment Professional Committee of the China Petroleum and Petrochemical Engineering Research Association, from 2020 to 2022, the company's total market share in the domestic synthetic resin field will be more than 30%, ranking first in the industry. In addition to the above three companies, there are also a few companies at home and abroad engaged in the supply of large-scale pneumatic conveying systems in the synthetic resin industry, but the relevant performance is small, and most other companies in the industry are mainly concentrated in small and medium-sized projects in the synthetic resin industry and other industries.

The prospectus disclosed that from 2020 to 2022, the number of polyolefin projects undertaken by the company increased year by year, of which the total number of signed sets was 11 sets, 12 sets and 14 sets, of which the number of signed sets with a single-line transportation capacity of more than 400,000 tons/year was 2 sets, 3 sets and 4 sets respectively. In addition, in addition to the petrochemical and chemical industries, the company has laid out and gradually expanded the application of products in silicones, modified plastics, pharmaceuticals, food and other industries, which is expected to provide greater growth space for the company's future performance.

3. Introduction of fundraising projects

The proposed public offering of 16.67 million shares, accounting for 25% of the total share capital after the issuance. The issuance is all new shares, and the original shareholders do not offer shares to the public. After deducting the issuance expenses, all the funds raised by the company will be used for projects related to the company's main business.

According to the prospectus, the company's IPO plans to raise 1.006 billion yuan to invest in the construction of complete sets of polyolefin pneumatic conveying equipment projects, intelligent powder and granular material handling system expansion and transformation projects, etc. It is worth noting that according to the current average price-earnings ratio of more than 30 times the industry, it is estimated that the probability of raising funds is higher than this amount. The details are as follows:

(1) Polyolefin pneumatic conveying complete equipment project

The project plans to invest nearly 400 million yuan for the complete set of polyolefin pneumatic conveying equipment project, which can expand the company's production capacity, reduce capacity constraints, improve the domestic and foreign market share of the company's products, improve the self-sufficiency rate of major components, and enhance the company's core competitiveness.

(2) Expansion and transformation project of intelligent powder and granular material handling system

The project plans to invest 120 million yuan, and the main body of the project is the parent company, which is used to expand the application field of pneumatic conveying system products and improve the company's comprehensive competitiveness.

(3) R&D and headquarters building construction projects

The project plans to invest 287 million yuan to improve the company's R&D strength and operational efficiency. After the completion of this project, it will continue to introduce outstanding talents in technology research and development, management, etc., and be equipped with advanced research and development equipment, instruments and professional software, so as to further improve the company's technology research and development capabilities, design and manufacturing level.

(4) Replenish liquidity

Based on the actual operating conditions such as industry characteristics, existing scale and growth, and capital turnover speed, the company plans to raise funds to supplement the working capital of 200 million yuan in combination with strategic planning and goals.

The prospectus discloses that the company's raised funds should be deposited in a special account approved by the board of directors for centralized management. The special account for raised funds shall not be used for other purposes. The company shall, within one month after the receipt of the raised funds, sign a tripartite supervision agreement with the sponsor institution and the commercial bank depositing the raised funds.

The company said that after the completion of the "polyolefin pneumatic conveying complete equipment project" and the "intelligent powder and granular material handling system expansion and transformation project", the company's intelligent, automated and digital production level will be significantly improved, and at the same time, it will help consolidate and improve market share, broaden product application fields, and enhance the company's comprehensive competitiveness in the industry.

On the basis of improving the company's system equipment testing and technology research and development capabilities, the "R&D and headquarters building construction project" improves the process level and technical strength, promotes the localization application of pneumatic conveying systems, further enhances the company's R&D strength and product technology level, and enhances innovation capabilities.

Fourth, the future development highlights

As a leading enterprise in the field of pneumatic transportation, the company said that it will take this issuance as an opportunity to further enhance the company's product production capacity, R&D strength and innovation ability through the implementation of the raised funds investment project, adhering to the development concept of specialization, standardization, scale and internationalization, guided by customer needs and technological innovation, consolidating and improving the company's market share at home and abroad, and is committed to becoming an international leading provider of overall solutions for powder and granular material handling.

Aspect 1: Policy support superimposes the improvement of intelligence and automation level, and the development space of the pneumatic conveying industry is large

The pneumatic conveying system is a complete set of equipment that uses the energy of the air flow to transport powder and granular materials in the direction of the air flow in a closed pipeline, which is a specific application of fluidization technology. The pneumatic conveying system has flexible layout and convenient operation, which can be conveyed horizontally, vertically or in inclined directions, and can also be used for physical operations or some chemical operations such as heating, cooling, drying and grading of materials during the conveying process.

The complete set of pneumatic conveying system equipment belongs to the equipment manufacturing industry, which started late in the mainland and gradually began to be localized and replaced until the beginning of the 21st century. In recent years, the Ministry of Industry and Information Technology, China Petroleum and Petrochemical Equipment Industry Association and other departments have successively issued a series of support policies: encourage and encourage enterprises to overcome core technologies, enhance the momentum of innovation and development, and accelerate the localization process of major petroleum and petrochemical technology and equipment; promote refining and chemical projects to "reduce oil and increase chemicals", extend the petrochemical industry chain, enhance the supply capacity of high-end polymers, special chemicals and other products, emphasize green production, strictly limit pollutant emissions, and industries with more dust and chemical pollutants in the production process.

With the upgrading and transformation of the global manufacturing industry structure, many industries generally use powder and granular conveying equipment or use related equipment to replace labor. Pneumatic conveying equipment is widely used in petrochemical, steel, fine chemical, rubber, food, medicine and other fields, and is gradually promoted and applied in emerging industries and fields of the national economy such as silicon materials, new energy and new materials.

According to the report "Global Pneumatic Conveying System Market: Industry Trends, Share, Size, Growth, Opportunities, and Forecasts (2022-2027)" released by Research and Markets in 2022, the global pneumatic conveying system market reached $28.4 billion in 2021, with a CAGR of 5.80% during the period 2022-2027, and the global market pneumatic conveying system size is expected to reach $40.5 billion in 2027.

China's pneumatic conveying market is expected to maintain a rapid growth rate. According to the "2019-2025 China Pneumatic Conveying Equipment Market Supply and Demand Forecast and Investment Analysis Report", the market size of pneumatic conveying equipment reached 8.58 billion yuan in 2018, a year-on-year increase of 10.1%. It is estimated that by 2025, the market size of pneumatic conveying equipment will reach 17.6 billion yuan, with a compound annual growth rate of about 9.2%.

The company said that it will be guided by market demand, actively grasp policy opportunities, meet the needs of national development, optimize industrial layout, eliminate capacity bottlenecks, enrich product structure, continuously improve management level and service quality, do fine and deep in key industries in the field of powder and granular material handling, expand downstream customer industries, improve the company's core competitiveness and market position, and ultimately achieve the company's strategic development goals.

Aspect 2: The demand for synthetic resins is strong, and there is a large space for domestic substitution

Synthetic resin is a kind of high molecular weight polymer synthesized, which is the basic raw material for the manufacture of plastics, synthetic fibers and other materials. As an important part of the petrochemical and chemical industries, the synthetic resin industry has become a pillar industry of the mainland economy.

Benefiting from the increase in demand and structural upgrading of downstream industries, the demand for synthetic resins is strong. China is the world's largest producer and consumer of synthetic resins. The overall demand for synthetic resins in mainland China is strong, and the overall output has maintained a rapid growth rate. According to the data of Zhiyan Consulting and China Plastics Industry Yearbook, from 2015 to 2021, the output of synthetic resins in mainland China increased from 78 million tons to 108 million tons, with an average annual compound growth rate of 5.50%, and on the consumer side, the apparent consumption of synthetic resins in mainland China increased from 104 million tons to 131 million tons, with an average annual compound growth rate of 3.88%, and the production-to-sales ratio increased from 75.03% to 82.31%.

With the impact of multiple factors such as global economic recovery and industrial structure adjustment, the world has entered a new expansion cycle of synthetic resins. According to the forecast of the China Petroleum and Chemical Industry Federation, it is expected that the total new production capacity of domestic synthetic resin from 2023 to 2027 will exceed twice that of the past five years, and the market space for synthetic resin pneumatic conveying system equipment is expected to be about 20 billion yuan.

There is a large space for domestic substitution of polyolefins. Among all kinds of synthetic resin materials, polyethylene (PE), polypropylene (PP) and other polymers of high-grade olefins (polyolefins) are the most widely used, and the overall demand for polyolefins exceeds 15 million tons. Affected by technical capabilities, there are still some varieties of synthetic resins in China that need to be imported in large quantities. According to the data of the "Sinopec Market Early Warning Report", from 2017 to 2022, the total demand for polyethylene in mainland China increased from 14.724 million tons to 38.7833 million tons, and although the import dependence (import volume/total demand) decreased from 46.73% to 34.72%, it was still at a high level overall. From 2017 to 2022, the import dependence of domestic polypropylene decreased from 22.14% to 12.99%.

The China Petroleum and Chemical Industry Federation predicts that by 2027, the output of polyethylene in mainland China will reach 39.3768 million tons, the output of polypropylene will reach 46.644 million tons, and the total demand gap for polyolefin will be about 15.3636 million tons.

The company's products are mainly used in the petrochemical and chemical industries, as the petrochemical and chemical industries in the mainland are in an important stage of moving from a big country to a strong country, with the rising demand for synthetic resin applications, the industry continues to develop in the direction of high-end and differentiation, and industrial expansion and structural upgrading will bring more challenges and opportunities to pneumatic conveying technology.

Aspect 3: Expand the application field and increase the application of new energy materials and other industries

The company said that it will give full play to its comprehensive competitive advantages, optimize the industrial layout, and actively expand the application field of products from the aspects of powder and granular material processing production process, research and development of key technologies, and manufacturing of core equipment.

In addition to increasing the application of modified plastics, pharmaceuticals, food, new materials and other industries, the company will gradually enter the fields of new energy materials, modern intensive breeding, recycling of renewable resources, environmental governance and green production, and cultivate and introduce technologies in related industries. Sales and management personnel, targeted to strengthen the technical development and promotion of products, expand the market share in the field of modified resins, and break through the application of products in other fields. In addition to the above-mentioned petrochemical and chemical industries, the company has laid out and gradually expanded the application of products in silicone, modified plastics, pharmaceutical, food and other industries.

From the perspective of the new energy materials industry, the global new energy and new materials industry plays an important role in the development of high and new technologies, the transformation and upgrading of traditional industries, and the enhancement of comprehensive national strength and national defense strength. With the development of new energy vehicles, semiconductors and other industries, the market demand for new materials is becoming increasingly strong, driving the rapid growth of China's new material market.

According to data from the Huajing Industry Research Institute, the market size of new materials in mainland China has risen from 2 trillion yuan in 2015 to 6.41 trillion yuan in 2021, with a compound growth rate of more than 20% during the period. New energy lightweight is the trend of the times, the reduction of interior weight can be achieved by using more modified plastics, and the automotive industry has become the fastest growing area in the demand for modified plastics. Driven by the automobile lightweight and environmental protection policies, the company's modified plastics business has a considerable market scale.

Aspect 4: Actively explore the domestic and foreign markets and expand the international influence of the brand

Although the company's technical strength has entered the world's first-class ranks, the influence of the "BLOOM" brand still needs to be improved in the international scope. According to the data, from 2020 to 2022, the company's overseas business revenue was 6.4112 million yuan, 51.8969 million yuan and 30.814 million yuan respectively, and the proportion of overseas revenue was 1.36%, 5.31% and 2.96% respectively, which was lower than that of comparable companies such as Xinyuan Technology and Feida Environmental Protection, but continued to exceed the median of comparable companies from 2021 to 2022.

At present, the company's products have been expanded to the United States, the European Union, Russia, India, the Middle East and other countries and regions, in addition to large-scale applications in China. In the next 3 to 5 years, the company will add domestic and international sales and service branches on the basis of the existing sales and service center, form a marketing network covering Europe, the Americas, Southeast Asia and the Middle East, further increase overseas project participation, and increase overseas market share.

The company said that it will actively implement the "BLOOM" and "GSBI" dual brand strategies, increase participation in overseas projects, establish a marketing network that radiates overseas, strengthen the positive role of the brand in market expansion, and integrate brand building into the pace of the company's development and growth; strengthen business cooperation with overseas project general contractors, make full use of policy opportunities such as "The Belt and Road" and "going out", and actively contract large-scale foreign pneumatic conveying system projects to improve the international visibility of the brand. Through a good corporate image and excellent product quality, a unique brand culture is formed to enhance the brand's industry influence.

Aspect 5: Benchmark against world-renowned enterprises, increase investment in technology research and development, and improve equipment production capacity and intelligent manufacturing level

Compared with the world's well-known enterprises, the company's market share and brand awareness need to be further improved. Therefore, the company will further enhance the company's product production capacity, R&D strength and innovation capabilities, eliminate capacity bottlenecks, enrich product structure, refine and deepen key industries in the field of powder and granular material handling, expand downstream customer industries, and strengthen the production technology and capabilities of core equipment and components.

According to the research projects disclosed in the prospectus, the company's main R&D types include R&D platforms and common advanced technologies, core component development, advanced equipment and single-function systems and complete sets of systems for new fields or new technologies, among which the R&D platform and common advanced technologies include "comparison and analysis of industrial field operation data and design data of conveying devices" and "construction of powder and granular airflow conveying test platform" and other projects are in the R&D and experimental stage, which are making the calculation of the material conveying process more accurate, and further reducing the investment and energy consumption of the project.

The company uses the self-developed test device to simulate and test the design scheme, improve the design parameters and device configuration system of different material transportation, and improve the modular design ability. The company has built a key equipment production platform, enhanced the self-sufficiency rate of core components, expanded the overall production capacity, and improved the equipment production capacity and intelligent manufacturing level.

The company's R&D personnel, total salary and per capita salary are on the rise. In addition, the company strengthens cooperation with external institutions and universities through commissioned R&D and cooperative R&D as a supplement to strengthen its technical strength. Compared with comparable companies, the company's R&D expenses and R&D expense rate still need to be improved, but the company's R&D investment continues to increase, with R&D expenses of 14.8124 million yuan, 26.2543 million yuan and 33.4569 million yuan from 2020 to 2022, respectively, and R&D expense rates of 3.14%, 2.68% and 3.21% respectively.

The company said that it will continue to independently develop equipment, give full play to the advantages of technology, performance, talent, scale, management and other aspects, strengthen and expand the main business of powder and granular material handling equipment manufacturing, promote the localization of core equipment and components of pneumatic conveying system, further realize the import substitution of pneumatic conveying industry, and contribute to the localization development of high-end equipment manufacturing industry in mainland China.

Aspect 6: Establish a multi-channel financing system to achieve the company's business development goals

The company said that its initial fundraising will further increase investment in R&D equipment, strengthen the construction of R&D technical team, enhance R&D and innovation capabilities, expand the scope of product application under the upgrading of existing product technology, improve the industrial transformation efficiency of R&D achievements, increase forward-looking R&D, better meet customer needs, and provide lasting momentum for the company's development.

In addition, the company intends to establish a direct financing channel in the capital market to raise the necessary funds for the smooth implementation of the company's future major investment projects and ensure the realization of the company's business development goals. At the same time, it strengthens the connection with commercial banks, builds a good cooperative relationship between banks and enterprises, and obtains loan support from commercial banks in a timely manner to alleviate the financial pressure in the process of the company's development.

5. Major financial indicators and valuations of comparable companies

From 2020 to 2022, the company's main business was outstanding, and the operating income increased year by year, with a high growth rate in 2021, with operating income reaching 978 million yuan, a year-on-year increase of 107.57%, and the net profit attributable to the parent company and non-net profit deducted increased by more than 100% in the same period. In 2022, the company's operating income exceeded 1 billion yuan, reaching 1.041 billion yuan, a year-on-year increase of 6.43%, and the net profit attributable to the parent company and non-net profit deducted in the same period decreased slightly compared with the previous year.

In 2023, the company's operating conditions are good and the operating performance is stable. From January to June 2023, the company achieved operating income of 565 million yuan, a year-on-year increase of 27.74%, and net profit attributable to the parent company of 133 million yuan, a year-on-year increase of 16.47%. The company expects that the operating income from January to September 2023 will be 730 million yuan to 770 million yuan, a year-on-year increase of 19.13%-25.66%, and the net profit attributable to the parent company will be about 170 million yuan to 180 million yuan, a year-on-year increase of 16.53%-23.38%.

The ability to collect payments is good, and the company's cash flow is abundant. From 2020 to 2022 and from January to June 2023, the company's net cash flow from operating activities was relatively stable, and its sales collection ability was good, reaching 181 million yuan from January to June 2023, close to 2022. In contrast, the net cash flow of comparable companies fluctuated greatly, and the average value showed a downward trend, with the average value from January to June in 2022 and 2023 being negative, mainly due to the drag of comparable companies such as China First Heavy and *ST Tianwo.

It should be noted that compared with the company's current assets, the company's inventory scale is larger, reaching 1.052 billion yuan in 2022, which is basically the same as in 2021. From 2021 to 2022, the proportion of the company's inventory and current assets exceeded 50%, which is at a relatively high level among comparable companies.

The company said that the large-scale equipment manufacturing industry generally has the characteristics of long production cycle and high value, which in turn leads to a large inventory balance. With the development of the company's business, the size of the company's inventory may further increase, and it is necessary to be vigilant against liquidity risks.

The solvency has improved, and the asset-liability ratio has continued to decline. Relying on endogenous development, the company's asset-liability ratio continues to be optimized, showing a downward trend year by year, and its long-term debt repayment ability is increasing day by day. In contrast, the average debt-to-asset ratio of comparable companies is on an upward trend. Affected by the nature of the industry, the asset-liability ratio of the company and comparable companies is generally high, and the company's asset-liability ratio decreased to 67.38% in 2022, which is lower than the average of comparable companies. From January to June 2023, the company's asset-liability ratio was 66.7%, 4.43 percentage points lower than the average of comparable companies.

The overall rate of the "three fees" continued to decline and continued to be lower than the average of comparable companies. On the whole, from 2020 to 2022, the company's three fees (sales, management, and finance) rates continued to decline, only 0.92% in 2022, a decrease of more than 1 percentage point from the previous year. Specifically, in 2022, the company's sales expense ratio will be only 1%, a decrease of 0.4 percentage points from the previous year, and the average of comparable companies will be 2.07%, of which 3 pneumatic conveying companies, including Xinyuan Technology, Shandong Zhanggu and Feida Environmental Protection, will average more than 8.5% in the same period, and the other 4 chemical equipment companies will average 3.68%, and the company's management expense rate in 2022 will be 2.32%, down 0.48 percentage points from the previous year, with an average of 5.85% for comparable companies, and a financial expense rate of -2.4% , which was also down from the previous year, averaged 3.6% for comparable companies.

There are two main reasons for the decline in the company's three-fee rate in 2022, one is that the home office time in Shanghai in 2022 will be longer, the company's office expenses, business entertainment expenses, travel expenses and other expenses will be reduced, and the decline in after-sales service expenses will jointly lead to a significant decrease in sales and management expenses in the current year;

Return on equity continues to outperform comparable companies. From 2020 to 2022, the company's return on equity (ROE, diluted) remained stable at more than 25%, continuing to lead comparable companies, and the return on equity of comparable companies such as Xinyuan Technology and Feida Environmental Protection continued to be less than 10%, indicating that the company's profitability is leading. From January to June 2023, the company's ROE was 13.27%, still in a leading position among comparable companies. It should be noted that the scale of the company's net assets will increase after listing, and the company's return on net assets will decrease to a certain extent in the short term.

For the first time, the rate of asset turnover exceeded the average of comparable companies. Compared with comparable companies, the company's total asset turnover rate is not high, from 2021 to 2022, compared with 2020, it has increased significantly, and the efficiency of payment collection and asset operation has improved, and the gap between the company and comparable companies has gradually narrowed since 2021, reaching 0.42 times in 2022, with an average of 0.46 times for comparable companies, and from January to June 2023, the company's total asset turnover rate is 0.2 times, and the average of comparable companies is only 0.18 times, exceeding the average of comparable companies for the first time.

Risk Warning

According to the Company's prospectus, investors should consider the following risk factors in particular and carefully. The following risks are ranked according to the principle of materiality or the degree to which they may influence an investor's decision:

1. Revenues are concentrated in large-scale synthetic resin construction projects.

2. Risk of price fluctuations of major raw materials and components.

3. Long-term cooperation with major suppliers concentration risk.

4. The risk that some equipment or parts are mainly purchased from foreign brands.

5. Outsourcing procurement model risk.

6. Risk of loss of technical talent.

7. Pneumatic conveying systems open up risks in new industries.

8. Jointly control risks.

9. The risk that the land for some fund-raising projects has not yet been obtained.

10. The risk that the company's subsequent share registration cannot be handled in a timely manner.

Copyright Notice

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Report typesetting and editing: Wu Zixuan