Despite the enthusiastic response in the secondary market, judging from the current announcement information, Evergreen Technology's 10 billion investment project still lacks planning details.
From May 16th to 17th, Evergreen Technology, which has only been listed for one year, has a continuous daily limit. As of press time, the company reported 35.42 yuan per share, a cumulative increase of 20% in two days, and a total market value of more than 6.8 billion yuan.
The stock price rose continuously because of a news of 10 billion expansion. According to the announcement, Evergreen Technology plans to invest 10 billion yuan to build a new polymer material production base in Taizhou in three phases. Among them, the initial planned investment amount of the first phase of the project is about 3 billion yuan, far exceeding the company's latest audited total assets and net assets, and there is no clear investment plan for the second and third phases of the project.
The construction content also mentions that the first phase of the project plans to build an annual production capacity of 80,000 tons of trimellitic anhydride (TMA). In the context of the recent rise in the concept of TMA, Evergreen Technology, which is mainly engaged in special monomers and special additives for new polymer materials, also wants to get a piece of the pie?
The investment plan of 10 billion yuan is vague
Although the secondary market is applauded, judging from the current announcement, this 10 billion investment project lacks planning details and is worrying about its feasibility.
The first is that the amount of investment is huge, and there are risks in raising funds. Evergreen Technology said that the project will be constructed in three phases, and the construction capital of the first phase of the project is about 3 billion yuan. However, as of December 31, 2023, the company's latest audited total assets were 2.298 billion yuan and net assets were 2.169 billion yuan. Obviously, the investment in the first phase of the project alone has far exceeded the company's current total assets, and the total investment amount of the project even exceeds the company's current market value.
As for the source of funds, Evergreen Technology plans to borrow about 2 billion yuan from banks and use 1 billion yuan of its own funds. Among them, there is still a gap of more than 500 million yuan in its own funds. The company said that the company's own funds (including wealth management) at the end of the first quarter were about 469 million yuan, and the average net cash flow from operating activities in the previous two years was 160 million yuan, and the available funds from 2024 to 2026 were about 480 million yuan, and the remaining 51 million yuan will continue to be invested after the project is put into operation.
Evergreen Technology also reminded that the investment expenditure of the project may lead to a decrease in the company's net cash flow or a significant increase in debt, which may increase the related financial risks.
Secondly, the R&D and production capacity of the construction content is still unclear. According to the company, the first phase of the project will plan to build an annual production capacity of 80,000 tons of trimellitic anhydride (TMA), 10,000 tons of trimellitricarboxylic acid, 110,000 tons of cumene series products, 80,000 tons of (m/p) hydroquinone, 20,000 tons of m-cresol, 2 tons of aromatic diary tertiary carbon alcohol, 5,000 tons of 3,4 dimethylbenzaldehyde, 20,000 tons of methylisobutyl methanol and a total of about 80,000 tons of co-products.
For such a complicated construction content, Evergreen Technology did not disclose the current technical advantages and planning details of construction and production. On the contrary, the company reminded that although it has made many demonstrations on the selected technical route of the project, it may still have certain technical risks due to the fact that the application of new technologies still needs to be further improved, resulting in the inability to operate stably for a long time after the completion of the project, or the inability to achieve the expected operating indicators, etc., which will adversely affect the operational efficiency of the project.
Although according to the company's preliminary estimates, the internal rate of return of the project is expected to exceed 20% after reaching production; However, it also did not disclose the details of the estimate, and stressed that the data does not represent the company's forecast of future performance, nor does it constitute a performance commitment to shareholders.
Finally, there is a lot of uncertainty, and the risk of project landing is high. At present, the first phase of the project has not yet passed the pre-approval procedures such as environmental impact assessment, safety assessment, and energy assessment, but the construction period is 2 years, and the follow-up implementation is also facing many factors such as market changes and construction process.
Looking to catch the TMA Express?
The reporter noticed that trimellitic anhydride (TMA) mentioned in the construction content is a popular concept recently, but the company has not been involved in this field before. On April 26, Evergreen Technology also told investors that the company does not currently produce TMA.
It is understood that trimellitic anhydride (TMA) is an important fine chemical raw material, mainly used in the production of PVC plasticizer trioctyl trimelliate (TOTM). The latter is a rigid additive for high-end PVC products, with unique low volatility, low migration, good electronic resistance and heat resistance. At present, the industry's production capacity is concentrated in five companies: INEOS (70,000 tons), Berlin (30,000 tons), Zhengdan (85,000 tons), Baichuan (40,000 tons), and TEDA New Materials (30,000 tons).
Since April, due to the news of the permanent suspension of production of INEOS, the price of domestic TMA has soared, and the stock prices of Zhengdan shares and other related companies have also risen many times.
Wang Shuai, a TMA analyst at Longzhong Information, told the International Financial News that there are two main reasons for the recent TMA price changes: first, the change in supply and demand, the news of INEOS' suspension of production has tightened supply, resulting in a sharp increase in TMA prices compared with the beginning of the year. Secondly, the price of TMA mainly changes with the price of raw material paraxylene. From 2022 to 2023, TMA profit margins are weak, and the rise in raw material prices has driven TMA prices to rise further. At present, the suspension of production of INEOS has not been announced to the public, so the future price trend is still uncertain, but considering the tight situation of factory orders, it is expected that the domestic market price will still run at a high level in the short term.
Guolian Securities also pointed out in the research report that the global demand for TMA is about 181,000 tons, and due to the high risk factor of high-temperature liquid phase oxidation equipment, the production capacity load is difficult to reach 100% and must be regularly overhauled, the industry's operating rate has never exceeded 80%, and the actual effective production capacity in 2024 will be about 148,000 tons. Downstream rigid demand enterprises are worried about ensuring supply, and combined with the current situation of new low market inventory and the buying behavior of purchasing personnel, the actual demand in 2024 can be quantified to about 211,000 tons, and the supply gap will reach 63,000 tons, accounting for about 30% of the actual total demand. Combined with the rigid demand attribute of TMA and no new production capacity in the short term, the high boom cycle of TMA is expected to last for a long time.
The proposed TMA production capacity of 80,000 tons of Evergreen Technology is close to the 2023 production capacity of Zhengdan Co., Ltd., a leading enterprise, which has also aroused questions from investors. On May 16, an investor asked Evergreen Technology on the interactive platform: Does your company have any business dealings with Zhengdan Group, or does the chemical business overlap? The company replied that it had no business dealings with the group.
However, the construction period of the first phase of the project is expected to be 2 years, and the TMA market is not yet known at that time. In addition, due to the respiratory sensitization of TMA, the European Union has issued relevant regulations in 2018, requiring the closure of all TMA factories in its territory within five years. Under the tightening of environmental protection policies, the export of related products may be further affected.
There are management risks in family holdings
According to public information, Evergreen Technology, founded in 2010 and listed on the Shanghai Stock Exchange in 2023, is a high-tech export-oriented enterprise specializing in the research and development, production and sales of petrochemicals and their derivatives. The company mainly produces and operates methyl styrene series unsaturated monomers, triphenyl phosphite series PVC additives and other special monomers and special additives for polymer materials.
In the past five years, the company's performance has shown a steady growth trend. From 2019 to 2023, Evergreen Technology achieved operating income of 543 million yuan, 563 million yuan, 758 million yuan, 964 million yuan, and 1.019 billion yuan respectively, and net profit attributable to the parent company of 77 million yuan, 128 million yuan, 144 million yuan, 191 million yuan, and 213 million yuan respectively. However, from 2019 to the first half of 2022, the company has enjoyed the preferential tax rate policy for high-tech enterprises, which is calculated and paid at a reduced corporate income tax rate of 15%, which is greatly beneficial to the performance of Evergreen Technology.
Although the performance continues to grow, or can provide some support for the 10 billion project, the company is still facing the management hidden dangers caused by family holding.
As of December 31, 2023, the controlling shareholders and actual controllers of the company are Sun Qiuxin, Jin Lianqin and Sun Jie. Among them, Sun Qiuxin holds 21.16% of the company's shares and serves as the company's chairman and general manager; Jin Lianqin holds 29.94% of the company's shares and serves as a director of the company; Sun Jie holds 12.78% of the company's shares and serves as the company's director, deputy general manager and secretary of the board of directors. Sun Qiuxin and Jin Lianqin are husband and wife, Sun Jie is the son of the two, and the total shareholding ratio of the three is 63.88%. In addition, Lei Shumin, director and deputy general manager, holds 8.87% of the shares, and Yan Dajing, deputy general manager, holds 1.18% of the shares.
Under the high proportion of shares held by Sun Qiuxin's family and company executives, Evergreen Technology has repeatedly had internal control problems such as capital lending. According to media reports, in 2019 alone, due to "the company in order to complete the bank deposit task and help related parties complete the personal bank deposit task", Sun Qiuxin and his related parties, Lei Shumin and his related parties, Yan Dajing and his related parties respectively took out funds from Evergreen Technology, involving a total of about 120 million yuan.
In 2017, according to the China Judgment Network, Gu Weigang, former deputy secretary of the Party Committee and deputy director of the Zhenjiang Municipal Economic and Information Commission, took advantage of his position to seek benefits for Jiangsu Evergain New Material Technology Co., Ltd. (the former name of Evergreen Technology) in the application of special fund projects, and accepted RMB 110,000 from Sun, the general manager of the company, twice.
According to the analysis of industry insiders, the highly concentrated shareholding structure is easy to lead to an imbalance in the governance structure of listed companies, which is easy to breed the transfer of interests, and it is difficult to protect the interests of small and medium-sized shareholders. At the same time, family-controlled listed companies also face greater dependence risks, and if there is a problem within the actual controller or family, it will have a significant impact on the company's operation and development.
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