Author: Dong Yin
[Data Map]
Production: Insight into IPO
Recently, Zhejiang Paipi Biology Co., Ltd. (hereinafter referred to as "Paipi Biology"), the leader of polypeptide raw materials, submitted a prospectus at Shenzhen Stock Exchange and applied for GEM IPO, which has been accepted. Huatai United Securities is the sponsor and lead underwriter.
Founded in 2015, Peptide Biology is mainly engaged in the research, development, production, sales and related services of peptide products. The company is a leading manufacturer of polypeptide cosmetics raw materials in China. It has polypeptide cosmetics raw materials with multiple functions, such as signal peptide (anti-aging), neurotransmitter inhibitory peptide (wrinkle resistant), carrier peptide (repair) and special functional peptide (other). At the same time, it focuses on the innovation of polypeptide cosmetics raw materials formula and products.
According to Frost Sullivan's data, based on the ex factory price, Peptide Biology will be the largest peptide cosmetics raw material company in China in 2021, accounting for 6.9% of the market share.
It is worth noting that while the performance of Peptide Biology is growing, it is more dependent on key customers, and its customer concentration is high. According to the prospectus, in 2022, Pelaea, Huaxi Biology and Jiuqian Chemical will be the top three major customers of Paipi Biology. At the same time, these three major customers will become shareholders of Paipi Biology through direct or related indirect shareholding.
At the same time, another listed company, China Resources Shuanghe, holds 25.29% of the company's shares, which is also one of the company's main customers during the reporting period.
High customer concentration
According to the prospectus, during the reporting period (from 2020 to 2022), the company's operating revenue was 86.1704 million yuan, 143 million yuan and 215 million yuan respectively, with a compound growth rate of 57.83%, and the revenue from core technology products accounted for a relatively high proportion; The net profits attributable to the owners of the parent company after deducting non recurring profits and losses were 14379700 yuan, 32690700 yuan and 57857500 yuan respectively, with a compound growth rate of 100.59%.
Behind the rapid development of the company's performance is the "great help" of Pai Peptide's big customers. During the reporting period, the company's sales revenue to the top five customers was 48.3287 million yuan, 78.6075 million yuan and 128 million yuan respectively, accounting for 56.09%, 55.00% and 59.59% of the company's operating revenue. The proportion of key customers is increasing.
Table of Top Five Customers
Photo source: Biotech Prospectus
The concentration of the company's customers is high. If the company's main customers lose or the operation of its main customers worsens in the future, it will have a major adverse impact on the company's business.
In fact, the use of polypeptide cosmetics raw materials of the company is affected by the formula design scheme of downstream cosmetics manufacturers. If the preference of downstream cosmetics manufacturers for adding polypeptide compounds to cosmetics formulas declines in the future, it may lead to a decline in the demand of cosmetics manufacturers for polypeptide cosmetics raw materials, which will have an adverse impact on the sales performance of polypeptide cosmetics raw materials of the company.
In addition, the company provides polypeptide CDMO services and APIs/advanced pharmaceutical intermediates for downstream biomedical enterprises. The technical characteristics, production, clinical trials, product commercialization process and capital budget of downstream biomedical enterprises' products will affect the demand for polypeptide CDMO services of the company, thus affecting the income of polypeptide CDMO services of the company.
It is worth mentioning that most of the top five customers have become shareholders of Peptide Biology. The direct relatives of shareholders of Shanghai Jiuqian Chemical Co., Ltd. hold 1.34% shares of the company through Hanyuan Investment. Tang Zhijun, the wife of Cao Liangguo, the former director of Pelaya, and Cao Zheng, his son, hold 4.91% of the company's shares through Hainan Ruizheng. Huaxi Biology directly holds 1.64% of the company's shares. China Resources Shuanghe directly holds 25.29% of the company's shares.
In the process of big customers' equity investment, the valuation of Peptide Biology has increased rapidly. Jiuqian Chemical became a shareholder in May 2019 at a price of 15.00 yuan per share. The share price of CR Shuanghe in March 2021 is 24.50 yuan/share. The price of Pelaya and Huaxi Biology when they became shareholders in June 2022 was 43.92 yuan/share. In three years, the price increased by nearly 200%.
List of shares of customers or their shareholders and key personnel
Photo source: Biotech Prospectus
According to the prospectus, Xing Haiying is the actual controller of the company, and together with the persons acting in concert, they control 49.39% of the voting rights of the company.
Equity Structure Chart
Photo source: Biotech Prospectus
Rapid increase of accounts receivable
According to the prospectus, China Resources Shuanghe holds 25.29% of the company's shares, and is also one of the company's main customers during the reporting period. During the reporting period, the company mainly provided polypeptide CDMO services and APIs/advanced pharmaceutical intermediates for China Resources Shuanghe. The transaction amount between the company and China Resources Shuanghe in each reporting period was 16.1965 million yuan, 6.6378 million yuan and 11.1707 million yuan respectively.
Paiti Biologics said that in the future, if China Resources Shuanghe related preparations are successfully marketed and the company supplies related polypeptide APIs, it is expected that the related party transactions between the company and China Resources Shuanghe will continue to occur and the transaction amount may increase. If the company cannot effectively implement the internal control system related to related transactions in the future, and the effectiveness of internal control is insufficient and governance is not standardized, there may be a risk that related parties may damage the interests of the company or minority shareholders by using related transactions.
Related party transaction table with China Resources Shuanghe
Photo source: Biotech Prospectus
In the process of cooperation with related companies, the company's accounts receivable are increasing.
Major recurring related party transactions of the Company
Balance of A/R and A/P
Photo source: Biotech Prospectus
At the end of each reporting period, the book value of the Company's accounts receivable was 15.3258 million yuan, 23.1720 million yuan and 42.1113 million yuan respectively, accounting for 19.61%, 7.43% and 6.32% of the current assets at the end of each reporting period, and 17.79%, 16.21% and 19.62% of the current operating income, respectively.
With the expansion of the company's business scale, the amount of the company's accounts receivable may further increase. If the future market environment or the credit status of major customers changes adversely, the company may face the risk of uncollectible accounts receivable, which will adversely affect the company's business performance.
At the same time, the gross profit margin of the company has been declining. In each reporting period, the gross profit margin of the company's main business was 68.54%, 67.90% and 65.93% respectively. The gross profit margin of the company's main business was jointly affected by the company's business scale, product structure and quality, cost control, market competition pattern and other factors. If these factors changed significantly, or customer demand changed significantly, The company will face the risk that the gross profit margin of its main business will decrease due to the decrease of the unit price of product sales.
This time, Paiti Biology plans to raise 1.245 billion yuan, of which 800 million yuan will be used for the construction project of polypeptide industrial park, 140 million yuan will be used for the research and development project of pharmaceutical peptides, 102 million yuan will be used for the research and development project of polypeptides for cosmetics, and 200 million yuan will be added as working capital.
The proposed raised capital of 1.245 billion yuan will be 6 times of the income in 2022, and the supplementary capital of 200 million yuan will be close to the income in 2022.
If the company's market development is weak or the market demand is saturated and the market competition is intensified after the implementation of the project, the company's new capacity may not be fully digested. Therefore, there is a risk of capacity digestion in this project.
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