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Jiahua Chemicals IPO: Major Fluctuations in Gross Profit Margin
Updated: 2017-07-06 16:36 Source: PUWORLD Exclusive share:
PU WORLD--Jiahua Chemicals Inc. recently released its prospectus on China Securities Regulatory Commission website, where Jiahua is looking to raise around Rmb 355 millions from its initial public offering of 50.6 million shares. Jiahua plans to take Rmb 100 million of the money raised as cash flow and payment for its loan, and the other 255 million as investment into its new 100 ktpa oxethyl production project.


Jiahua Chemicals is a fine chemical supplier specialized in ethylene oxide, propylene oxide derivatives in construction, polyurethane, and surfactant.

In between 2014 to 2016, Jiahua Chemicals’ organic revenues were respectively Rmb 3.618 billion, 2.482 billion and 2.449 billion; its net incomes were respectively Rmb 86.213 million, 27.776 million and 61.565 million; gross profit margins were 9.04%, 8.66% and 10.09%. It is noteworthy that average gross profit margins of comparable listed companies in the industry were respectively 11.58%, 11.57% and 13.62% in the past 3 years.


In the prospectus, Jiahua Chemicals mentioned that ethylene oxide and propylene oxide take good parts in its feedstock sourcing cost, collectively taking up 83.56%, 82.87% and 81.99% in 2014 to 2016. In the three annual results, Jiahua Chemicals’ exchange earnings were respectively Rmb -1.069 million, 8.294 million and 9.586 million. The major changes were due to depreciation of Rmb and that Jiahua did not FOREX hedge.


Up to signing date of the prospectus, Li Jinbiao is the majority shareholder, owning 34.85% of the company. Li Jinbiao, Li Yubo and Qu Yaming, together holding 86.06% percent of the shares, are the actual controllers of the company. Qu Yaming is understood to be Li Jinbiao’s wife, and Li Yubo his son.


It is also noteworthy that Jiahua Chemicals possesses four production sites, Jiahua Chem, Shanghai Fujia, Binzhou Jiahua and Maoming Jiahua, in which Shanghai Fujia was fined three times during environmental inspections since 2014, respectively for Rmb 25,000, Rmb 27,500 and Rmb 60,000.


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