The company started from the chemical trade and is now a leading manufacturer of mid-and high-end nano-silica products in China. Chengli company in 2007 mainly engaged in chemical products trading business, in 2009 began to cooperate with BYK agent sales of coating auxiliaries. It acquired Lengshuijiang SanA in 2013 with its own production capacity, developed and mass-produced opening agent in 2017, and developed and mass-produced ion-exchange antirust pigments and special matting agents for waterborne coatings in 2018. At present, it is mainly engaged in the research and development, production and sales of middle and high-end nano-silica materials, coating auxiliaries and other materials, and has become a leading enterprise in the field of extinction silica in China. The nano-silica produced by the company is located in the middle and high-end market, covering matting agents, adsorbents, opening agents and antirust pigments. Among them, there are few domestic manufacturers who can produce their own products such as mouth openers and antirust pigments.
The gross margin consignment business shrank and the proportion of high-end products continued to grow. The company's 2019-1H22 realized income of 3.3%, 3.5% and 1.9 billion yuan, respectively, with a compound growth rate of about 10% in 18 to 21 years, a decrease of 5% in 1H22 compared with the same period last year, and a net profit of 0.5%, 0.65 and 0.8% in 18-21 years. The products produced by the company are nano-silica and nano-alumina, which can be divided into four categories: matting agent, adsorbent, opening agent and antirust pigment. At present, domestic products in these areas are mainly produced by overseas enterprises, and the gap between the company's product performance parameters and overseas enterprises is very small, and the price generally has advantages, so the company's gross profit margin in the field of mouth opening agents and antirust pigments is more than 50% and the revenue is growing rapidly. While the coating auxiliaries are all non-self-produced products, the income is mainly obtained through the agent BYK, the company does not seek this business growth.
The consumption of the product in the downstream individual customer is less, and the customer composition is scattered. The company's products are additives in the production of downstream enterprises, the cost accounts for about 5%, and the customers are scattered. However, with the increase in the proportion of revenue from the company's own products, there is a trend of concentration of customers. The top five customers of 2019-1H22 accounted for 11.49%, 11.10%, 13.11% and 17.11%, respectively. In 2020, the company's self-produced products established cooperation and generated sales revenue with seven of the top 10 paint brands in the world. in addition, the company has established cooperation and generated sales revenue with seven of the eight domestic paint brands on the list of the top 82 global paint manufacturers.
Domestic high-end silica products are in short supply, and the company's products have price advantages. In 2020, China's precipitated silica industry has a total production capacity of 2.49 million tons and a total surplus capacity of 853200 tons. The total production capacity of enterprises with more than 50,000 tons is 1.771 million tons, with a surplus capacity of 480000 tons. Although there is overcapacity in the industry as a whole, there are few domestic enterprises capable of producing nano-silica for special uses, and there are few enterprises involved in the middle and high-end markets such as coatings, inks, plastic films, catalyst carriers and so on. Grace and Yingchuang are mature multinational chemical giants with a wide range of products and a wide range of applications in the paint industry. In contrast, the company has a small range of products and a small scale, and the production of silicon dioxide is only a small part of the downstream applications, but it is still in the stage of growth. The company has launched specific types of mid-and high-end nano-material products to overseas markets, and the product quality and recognition have been continuously improved.
Comparable company situation: the company's main products are medium-and high-end nano-silica and nano-alumina. There are few domestic producers in this field, and companies based on silicon dioxide products are selected as comparable companies, including Jin Sanjiang, Yuanxiang New Materials and Longxing Chemical.
Risk hint: the risk of continued contraction of the scale of the consignment business, the risk of partial concentration of suppliers, and the risk of rising prices of purchased materials.