On October 10, Shenwan Hongyuan Securities Underwriting and Sponsorship Co., Ltd. (hereinafter referred to as Shenwan Hongyuan) ended a three-month listing counseling for Shanghai Junzilan New Materials Co., Ltd. (hereinafter referred to as Junzilan) and issued the 14th listing counseling progress report (hereinafter referred to as the counseling report). This newly released counseling report has brought Junzilan, who is preparing for an IPO (initial public offering), another spotlight.
The cooperation between Junzilan and Shenwan Hongyuan began 4 years ago. On November 2, 2020, the two signed a counseling agreement and filed the counseling with the Shanghai Securities Regulatory Bureau. In accordance with the regulatory provisions on initial public offering and listing counseling, the counseling institution shall carry out counseling work for companies that intend to apply for initial public offering and listing (hereinafter referred to as the counseling object), and regularly update the progress report of the counseling work (within 15 days after the end of each quarter).
Generally speaking, the progress report on the IPO counselling exercise is lackluster and does not disclose the material content related to the operation of the enterprise. However, in the three quarters since the beginning of this year, Shenwan Hongyuan has signed and updated three counseling reports on Junzilan (the twelfth and fourteenth phases), which contain descriptions of the main problems and solutions that still exist among the tutors.
This means that there have been serious uncertainties in Junzilan's IPO application plan, and even to the point where it has to be re-examined.
The results fell short of expectations
In fact, in the counseling report (the ninth issue) updated in April 2023, Shenwan Hongyuan had "warned": the business performance of the counselor (i.e., Junzilan) in 2022 fluctuated greatly, which changed greatly compared with 2020 and 2021 - but it did not lead to the postponement of the IPO application plan at that time.
Entering 2024, Shenwan Hongyuan's description of Junzilan's performance in 2023 in the counseling report became "less than expected", and even led to the postponement of the declaration plan.
The downward trend of the furniture paint market also makes furniture paint companies feel the "cold winter"
What kind of problems have arisen in the operation of Junzilan? According to the list of "Top 50 Chinese Paint Head Enterprises" that has been released for three consecutive years, Junzilan ranked 26th, 25th, and 34th with 1.10 billion yuan (estimated sales in 2021), 1.02 billion yuan (estimated sales in 2022), and 810 million yuan (estimated sales in 2023), showing a continuous downward trend - which is basically consistent with what Shenwan Hongyuan said in the counseling report that "performance is less than expected".
What is the reason for the performance of Junzilan, which was once a leading enterprise in furniture paint, "less than expected"? On the one hand, the impact of the macroeconomic environment cannot be ignored - because of well-known reasons, the entire coating industry experienced a trough in 2022 and extended to 2023, and Junzilan was naturally not immune. On the other hand, the development of furniture and furniture paint industry in China is considered to have passed the inflection point and entered the downward channel, and the gradual shrinking of market capacity will inevitably bring the pain of transformation to furniture paint enterprises.
Overseas factories become unfavorable factors?
The decline in performance and seeking transformation are probably the reasons why Junzilan chose to transfer to overseas markets and transform into industrial paint.
In April 2023, Shenwan Hongyuan disclosed in the counseling report (the ninth issue) that Junzilan plans to establish a production base overseas. The latest news shows that on June 11, 2024, Junzilan Paint (Viet Nam) Co., Ltd. opened. Liang Yuqing, founder of Junzilan Group, said, "The official completion of Junzilan's Viet Nam factory marks an important milestone in our internationalization journey. ”
Opening ceremony of Junzilan Paint (Viet Nam) Co., Ltd
For Junzilan, the opening of the first overseas factory is undoubtedly a positive aspect of the company's development; However, for its IPO road, Shenwan Hongyuan, as a counseling institution, has its "concerns". In the 14th counseling report, Shenwan Hongyuan pointed out that as of now, the company's operating performance is still fluctuating, and the development is less than expected; Although the company has deepened its business layout by expanding its product line and setting up factories overseas, the aforementioned method requires a large upfront investment and a time-consuming layout...... The implication may indicate that building factories overseas at this time is not conducive to the realization of the IPO goal.
In addition to building factories overseas, Junzilan also plans to expand the application of industrial paint in addition to wood paint, but there has been no substantial progress so far. However, whether it is to build overseas factories or expand the industrial paint business, from the perspective of IPO, it is a large investment in the declining channel of performance, and the timing is to be discussed, which is bound to make it more difficult to implement the IPO plan.
Strategic adjustments
In the latest counseling report (14th issue), Shenwan Hongyuan also gave suggestions. It said that in combination with the actual overseas investment progress of Junzilan, the expected orders in hand, and the development of new products, it will work with the company to reformulate a new investment plan to raise funds. Up to now, the investment project of the raised funds is still in the planning process.
Shenwan Hongyuan pointed out in the counseling report (the twelfth issue) that "most of the original fund-raising projects have been invested", according to this description, the main use of the funds raised in the original plan of Junzilan should be the new 50,000-ton-per-year environmental protection coating and R&D center project in Qingpu District, Shanghai. The construction of the base started in July 2022, and the construction period has been more than two years, and it may not even be completed before the launch of Junzilan.
The groundbreaking ceremony and renderings of the new 50,000-ton-per-year environmental protection coating and R&D center project of Junzilan
Shenwan Hongyuan pointed out that it has been a long time since the initial declaration plan, and the company's fund-raising investment projects have changed greatly, which has become the main reason for Junzilan to reformulate a new fund-raising investment plan.
In the latest counseling report, Shenwan Hongyuan also put forward the main problems and solutions that still exist in Junzilan, including the application plate and industry positioning problems, the company's performance and strategic planning problems.
Among them, regarding the declaration sector, the counseling report pointed out that due to the gradual improvement of the positioning and review regulations of each IPO sector, the original declaration plate of Junzilan may be adjusted, and the counseling working group is working with the company to reorganize the industry situation, the situation of comparable companies in the same industry, the company's innovative positioning, core technology, product characteristics, etc., and intends to reformulate a new declaration plan and declaration plate. Up to now, due to the company's operating conditions are not as expected, the declaration plan is still in the planning process.
According to relevant reports, Junzilan originally planned to be listed on the Growth Enterprise Market of the Shenzhen Stock Exchange. With the "proposed reformulation of the new declaration plan and declaration plate", it is likely to mean that it will be difficult for Junzilan to meet the requirements for listing on the GEM in the short term. In this case, the newly established Beijing Stock Exchange (hereinafter referred to as the Beijing Stock Exchange) in 2021 may become the most likely listing option for Junzilan. If Junzilan finally decides to land on the Beijing Stock Exchange as the goal, according to the threshold of "innovative companies listed on the National Small and Medium-sized Enterprise Share Transfer System (commonly known as the New Third Board) for at least one year" listed on the Beijing Stock Exchange, Junzilan needs to be listed on the New Third Board as soon as possible.
A factory in Gentleman's Land
In addition, on the issue of strategic planning, the counseling report pointed out that the counseling agency and the company are taking the opportunity to formulate other development strategies and consider expanding the scale through mergers and acquisitions. This statement may indicate that there is not only one listing in Junzilan's choice of capital route, and it does not rule out seeking to achieve it through mergers and acquisitions.
Of course, for the current Junzilan, this option may not have priority.