Cover news reporter Xiong Yingying
In recent years, the rapid departure of sugar-free bubble drinks represented by Yuanqi Forest has also allowed erythritol to enter people's field of vision. This natural, zero-calorie sweetener is widely used in a variety of "0 fat" and "0 calorie" beverages.
On August 11, the IPO of the leading ternary biological CHINext board in the erythritol industry passed. At the moment when sugar-free beverages are popular, Yuanqi Forest, suppliers of Nongfu Spring, gross profit margins that are twice as high as their peers, and erythritol are the first in the world, all of which have attracted much attention from this company. In the face of increasingly fierce market competition, how big can the "sweet business" of Ternary Bio be?
The world's largest erythritol enterprise
Genki Forest is the first major customer
According to Sullivan research data
Sanyuan Bio is the earliest in China to start the industrial production of erythritol professional manufacturers, since its establishment in 2007 the company focused on deep ploughing erythritol products for more than ten years. According to Sullivan research data, the company's erythritol production accounted for 54.90% of the total domestic erythritol production in 2019 and 32.94% of the global total production.
As the world's largest producer of erythritol industry, the company's cooperative customers are also "star-studded", including Yuanqi Forest, Coca-Cola, Pepsi Cola, Nongfu Spring, Unification, Jinmalang, Hankou Second Factory, Southern Black Sesame Paste, Xicha and other well-known brands.
According to the prospectus, in 2020, the sales revenue of Sanyuan Bio to the first largest customer, Sha Luoya, was 159 million yuan, accounting for 20.28%; Yuanqi Forest was the third largest customer, with erythritol sales of 54.5625 million yuan, accounting for 6.97%. By the first half of 2021, Yuanqi Forest has become the company's largest customer.
With the extensive improvement of consumers' awareness of sugar reduction and sugar control, as well as the rapid development of the domestic sugar-free sugar-free beverage industry, the market demand for erythritol is strong, which has also led to the continuous growth of Ternary Biologics' performance.
According to the financial report, from 2018 to 2020, the company's revenue increased from 292 million yuan to 783 million yuan, and the net profit growth was more obvious, from 68.0885 million yuan to 233 million yuan, a three-fold increase in two years.
The company said that in the first half of this year, the company's revenue and net profit indicators will still be significantly improved. It is expected that from January to June, revenue will be 740 million yuan to 770 million yuan, and net profit attributable to shareholders of the parent company will be 227 million yuan to 239 million yuan, which has exceeded the level of profit for the whole year of 2020, an increase of 107% to 118% year-on-year.
Single product structure
Suppliers are too concentrated to risk
Erythritol related beverage products
It is understood that at present, the global erythritol industry production center in China, the main ternary biological, bowling treasure and Zhucheng Dongxiao, the three enterprises are located in Shandong Province.
Among them, Bowling Bao landed on the main board of the Shenzhen Stock Exchange in 2009, becoming the first listed enterprise in the domestic peer industry. In 2020, Bowling Treasure achieved revenue of 2.055 billion yuan and net profit of 499 million yuan; of which the sales revenue of erythritol was 407 million yuan, accounting for 19.83% of the revenue, and the revenue of functional sugars, other starch sugars and fructose syrup also accounted for more than 18%.
Compared with other enterprises in the same industry, they are involved in erythritol while developing a variety of sugar alcohol products. Ternary Biologics has been focusing on the research and development of the product, so the product structure is obviously relatively single, from 2018 to 2020, its erythritol revenue accounted for 84.65%, 59.87%, 78.80% of the revenue, respectively.
The company said that if there is a significant fluctuation in demand or supply in the erythritol industry, or if the company's new product research and development does not meet expectations, it will adversely affect its operating results.
In addition, companies are at risk of a high concentration of suppliers. In 2020, the total procurement amount of the company's top five suppliers accounted for 76.53%, of which the glucose purchased from the largest supplier, Shandong Dongwang Sugar Industry Co., Ltd. (consolidated caliber), accounted for 49.84%.
It is worth noting that although erythritol products are produced by fermentation and are generally considered to be more natural and safe sweeteners, due to the wide variety of consumers' individual physiques, excessive one-time consumption of erythritol may lead to certain adverse physiological reactions. In this regard, the company also carried out a risk warning in the prospectus.
Many companies have entered the market
How long can high gross margins last?
Statistics of China Industrial Information Network
Statistics from China's industrial information website show that from 2015 to 2019, global sucrose consumption increased from 169 million tons to 175 million tons, with an average annual compound growth rate of only 0.8%. In contrast, the total domestic sweetener production increased from about 153,000 tons in 2015 to about 209,000 tons in 2019, with an average annual compound growth rate of about 8.1%, and the growth momentum is strong.
At present, the types of sweeteners on the market are also diverse, traditional sweeteners such as aspartame, acesulfame potassium and sucralose, and a new generation of natural sweeteners such as steviol glycosides, monk fruit stetelin, erythritol and so on. From 2015 to 2019, erythritol grew at a compound annual growth rate of 29.9%, significantly higher than aspartame, acesulfame potassium and sucralose.
From the data point of view, erythritol is indeed a good business, and thus attracted more companies to enter the game. Public information shows that in addition to Bowling, Fengyuan Pharmaceutical, Huakang shares and other listed companies have disclosed plans to invest in new erythritol production capacity, and the future industry competition is bound to be more intense.
In the past three years, the gross profit margin of Tsnbiox Erythritol business was 36.86%, 43.63% and 42.16%, respectively, which has been maintained at a high level, and the gross profit margin of Bowling Bao's erythritol products in the same period was less than half of that of Tsnbiox.
However, consumers' pursuit of healthier sources of sweetness has not stopped, and the market continues to look for new sweeteners that are more conducive to sugar control, sugar reduction and good health. If the supply of erythritol in the future increases significantly faster than the growth rate of downstream market demand, it will also adversely affect its market price. Whether the high gross profit margin level of Ternary Biotech can be sustained is also the focus of regulatory attention.
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