Recently, Zhejiang Millennium Dragon Fiber Special Fiber Co., Ltd. (hereinafter referred to as "Millennium Dragon Fiber") submitted a prospectus to be listed on the Beijing Stock Exchange, with a public offering of no more than 28.47 million shares.
Titanium Media APP noticed that during the reporting period, the performance of Millennium Dragon Fiber increased sharply, especially in 2022, the company's gross profit margin increased by nearly 17 percentage points year-on-year, and its rationality has attracted the attention of regulators. In particular, if Millennium Dragon Fiber is successfully listed on the Beijing Stock Exchange, its initial price-earnings ratio will be 24.87 times, which will exceed the average initial price-earnings ratio of newly listed companies on the main board and the Growth Enterprise Market in 2024.
Performance and gross profit margin skyrocketed
Millennium Dragon Fiber is a high-tech enterprise focusing on the R&D, production and sales of ultra-high molecular weight polyethylene fiber and its products, the main products include ultra-high molecular weight polyethylene fiber series products, non-weft cloth and its protective products.
From 2020 to 2022 and from January to June 2023 (hereinafter referred to as the "reporting period"), Millennium Dragon Fiber achieved operating income of 167.0735 million yuan, 179.5468 million yuan, and 374.0729 million yuan respectively, and net profit of 12.2214 million yuan, 9.6114 million yuan, 84.8784 million yuan, and 46.4157 million yuan respectively, of which the performance of Millennium Dragon Fiber increased sharply in 2022, with revenue and net profit increasing by 108.34% and 783.1% year-on-year respectively.
It is worth mentioning that during the reporting period, the net non-recurring profit and loss of Millennium Dragon Fiber was 4.6 million yuan, 7.0176 million yuan, 6.3895 million yuan and 4.0913 million yuan respectively, accounting for 38.18%, 73.63%, 8.1% and 9.19% of the current net profit. ”
In this regard, Millennium Dragon Fiber said that the company's substantial growth in performance in 2022 is mainly due to the continuous expansion of downstream application fields, the continuous expansion of the gap between supply and demand balance in the global ultra-high molecular weight polyethylene fiber market, and the company's protective products, one of the important application areas of fiber yarn.
In addition, gross profit margin is also one of the main factors influencing the sharp increase in the performance of Millennium Dragon Fiber. During the reporting period, the gross profit margin of Millennium Dragon Fiber was 27.83%, 22.84%, 39.68%, and 42.93% respectively, of which the gross profit margin of Millennium Dragon Fiber in 2022 increased by nearly 17 percentage points year-on-year.
By combing through public information, Titanium Media APP found that the sudden increase in the gross profit margin of Millennium Dragon Fiber may be worth considering. Millennium Dragon Fiber disclosed in the prospectus that its comparable companies are Zhongjian Technology, Guangwei Composites, Tongyizhong, and Taihe New Materials. At the same time, Millennium Dragon Fiber also disclosed a "paragraph" in the declaration draft, which is as follows:
That is to say, among the peers of the above-mentioned Millennium Dragon Fiber, only Tongyizhong is a peer, and the rest are all here to "make heads".
According to public information, during the reporting period, the gross profit margin of Tongyi was 33.91%, 31.62%, 39.87% and 37.22% respectively, combined with the comparison of the gross profit margin of Millennium Dragon Fiber in the same period, it can be seen that the gross profit margin of Millennium Dragon Fiber in 2020 and 2021 is much lower than that of Tongyizhong, and the gross profit margin in 2022 will gradually be the same as that of Tongyizhong, and in the first half of 2023, it will exceed Millennium Dragon Fiber by 5.71 percentage points.
In this regard, the Beijing Stock Exchange requires Millennium Dragon Fiber to explain the reasons and reasonableness of the gross profit margin in 2020 and 2021 that is lower than that of Tongyizhong, and the gross profit margin in 2023 is significantly higher than that of Tongyizhong in combination with unit selling price, unit cost, proportion of overseas end customers, sales regional distribution, and subdivided product structure.
In addition, public information shows that from January to June in 2023 and 2024, Tongyizhong's revenue will be 174 million yuan and 57 million yuan, down 13.42% and 50.04% year-on-year respectively; The net profit was 157 million yuan and 48 million yuan, down 8.22% and 49.24% year-on-year respectively. So, in the case of declining performance of peers, how should Millennium Dragon Fiber maintain the company's growth in the future?
The price-earnings ratio exceeds the average of the main board and the GEM
Titanium Media APP noticed that perhaps it is the surge in performance in 2022, and the "appetite" of Millennium Dragon Fiber's IPO is not small. The IPO of Millennium Dragon Fiber intends to raise 450,683,300 yuan, which will be used to build a new project with an annual output of 200 tons of ultra-high molecular weight polyethylene fine filament, 1,000 tons of ultra-high molecular weight polyethylene coated composite filament and innovative R&D center to supplement working capital.
It should be noted that as of the end of June 2023, the total assets of Millennium Dragon Fiber are 577 million yuan and the net assets are 433 million yuan.
In addition, the above-mentioned 450.6833 million yuan of fund-raising, Millennium Dragon Fiber intends to publicly issue no more than 25% of the equity, that is, if Millennium Dragon Fiber is successfully listed, its valuation will be 1.803 billion yuan. At the same time, combined with the calculation of the net profit attributable to the parent company of 72.4928 million yuan after deducting non-profits in 2022, the initial price-earnings ratio of Millennium Dragon Fiber may be 24.87 times.
According to the Choice financial terminal, as of October 9, a total of 55 companies have successfully landed on the A-share market in 2024, including 19 on the main board with an initial P/E ratio of 20.16 times, 26 on the Growth Enterprise Market with an initial P/E ratio of 21.64 times, and 10 on the Science and Technology Innovation Board with an initial P/E ratio of 28.89 times.
This also means that if the IPO of Millennium Dragon Fiber is successfully listed on the Beijing Stock Exchange, its price-to-earnings ratio will exceed the average of new listed companies on the main board and GEM in 2024.
In addition, the reasonableness of the IPO of Millennium Dragon Fiber to raise 50 million yuan is also worth considering. It is reported that in 2022 and 2023, Millennium Dragon Fiber will pay cash dividends of 49.986 million yuan and 51.246 million yuan, totaling 101.232 million yuan. So, why after the big dividend on the eve of the IPO, Millennium Dragon Fiber has to raise funds from the market to replenish the flow?
In particular, as of the signing date of the prospectus, Yao Xiangjiang and Xu Chunhua directly held 12.29% of the company's shares and 59.08% of the shares respectively, totaling 71.37%, and controlled a total of 98.07% of the company's voting rights through the control of Qianxi Automobile, Qianhe Investment and Longxian Partnership, all of which are the actual controllers of the company. This also means that if calculated with 71.37% of the equity, at least 72.2493 million yuan of the above-mentioned cash dividend of 101.232 million yuan has fallen into the pocket of the actual controller. (This article was first published in Titanium Media APP, author|Deng Haotian)