Stock abbreviation: Guangdong Fangyuan Environment Co.Ltd(688148) Stock Code: Guangdong Fangyuan Environment Co.Ltd(688148) Guangdong Fangyuan Environment Co.Ltd(688148)
(No. 11, zone a, Lingang Industrial Park, Gujing Town, Xinhui District, Jiangmen City)
Issue convertible corporate bonds to unspecified objects
Prospectus (application draft)
Sponsor (lead underwriter)
Floor 2, building 27, Guomao street, Chaoyang District, Beijing
March, 2002
Statement
The company and all directors, supervisors and senior managers promise that there are no false records, misleading statements or major omissions in the prospectus and other information disclosure materials, and bear corresponding legal liabilities for their authenticity, accuracy and completeness.
The person in charge of the company, the person in charge of accounting and the person in charge of the accounting organization shall ensure that the financial and accounting materials in the prospectus are true and complete.
Any decision or opinion made by the CSRC and the exchange on this issuance does not indicate that they guarantee the authenticity, accuracy and integrity of the application documents and the information disclosed, nor do they indicate that they make substantive judgment or guarantee on the profitability, investment value of the issuer or the income of investors. Any statement to the contrary is a false statement.
Once any investor holds the bonds through subscription, transaction, transfer, inheritance or other legal means, it shall be deemed to agree to the trustee agreement, rules of bondholders’ meeting and other relevant agreements on the rights and obligations of the issuer, bondholders, bond trustee and other subjects in this prospectus.
According to the provisions of the securities law, the issuer shall be responsible for the changes in the operation and income of the issuer after the securities are issued according to law. Investors independently judge the investment value of the issuer, make investment decisions independently, and bear the investment risks caused by changes in the operation and income of the issuer or changes in the price of securities after the issuance of securities according to law.
Tips on major issues
The company specially reminds investors to pay attention to the following major matters or risk factors, and carefully read the chapter on risk factors in this prospectus. 1、 The risk that the convertible bonds held by the company’s convertible bond investors who do not meet the appropriateness requirements of the stock investors of the science and innovation board cannot be converted into shares
The company is a listed company on the science and innovation board. The investors who issue convertible corporate bonds to unspecified objects this time and participate in the conversion of convertible bonds into shares shall meet the suitability management requirements of stock investors on the science and innovation board. If the holders of convertible bonds fail to meet the requirements for the appropriateness management of stock investors on the science and innovation board, the holders of convertible bonds will not be able to convert their convertible bonds into company shares.
The company has set redemption terms for this issuance of convertible bonds, including maturity redemption terms and conditional redemption terms. The maturity redemption price is determined by the board of directors authorized by the general meeting of shareholders (or the person authorized by the board of directors) through consultation with the sponsor (lead underwriter) according to the market conditions at the time of issuance, and the conditional redemption price is the face value plus the accrued interest for the current period. If the holders of the company’s convertible bonds fail to meet the requirements for the appropriateness of the stock investors of the science and innovation board, when the convertible bonds they hold are facing redemption, considering that the convertible bonds they hold cannot be converted into the company’s shares, if the redemption price determined by the company according to the redemption terms agreed in advance is lower than the price (or cost) of the investors to obtain the convertible bonds, the investors are at risk of loss due to the low redemption price. 2、 Credit rating of convertible corporate bonds issued by the company this time
According to the credit rating report on Guangdong Fangyuan Environment Co.Ltd(688148) issuing convertible corporate bonds to unspecified objects (zpx [2022] No. Z [254] 01) issued by China Securities PENGYUAN credit rating Co., Ltd., the main credit rating of the issuer is a +, the rating prospect is stable, and the credit rating of the convertible corporate bonds is a +.
After the convertible corporate bonds issued by the company are listed, CSI PENGYUAN credit evaluation Co., Ltd. will conduct tracking rating at least once a year.
3、 The company does not provide guarantee for the issuance of convertible corporate bonds this time
There is no guarantee for the issuance of convertible corporate bonds to unspecified objects. Please pay attention to the cashing risk of this convertible corporate bond due to the lack of guarantee. 4、 The company specially draws investors’ attention to the following risks (I) technical and operational risks
1. Risk of high customer concentration
In 2018, 2019, 2020 and January September 2021, the company’s sales amount to the top five customers accounted for 87.28%, 91.04%, 80.40% and 86.01% of the current operating revenue respectively; The company’s sales revenue to Panasonic accounted for 63.00%, 80.43%, 62.71% and 45.20% of the operating revenue of each period respectively. The high customer concentration and high dependence on a single customer will have an impact on the company in the following aspects: (1) the company’s customer concentration is high. If the company’s main customers change the technical route, adjust the product structure, add new suppliers or replace suppliers in the future, reduce the purchase of the company’s products, Or problems such as overdue payment recovery and reduction of sales gross profit margin will have an adverse impact on the company’s operating performance; (2) At present, the company’s business performance is highly dependent on Panasonic, and Panasonic NCA batteries are mainly supplied to Tesla. If the development of new customers and new products is less than expected in the future, or the downstream market demand changes, Panasonic changes the technical route, model and quantity requirements of purchased products and changes suppliers, or Panasonic significantly reduces the purchase of products of the company due to factors such as Tesla‘s reduction of purchase of Panasonic, Will have an adverse impact on the company’s operating performance; (3) In 2021, the cooperation mode between the company and Panasonic China has been adjusted successively. The company purchases metal nickel beans and metal cobalt beans from Panasonic China to produce NCA ternary precursors and then sells them. The changes in the above cooperation mode have a negative impact on the gross profit margin of the company’s sales of NCA ternary precursors to Panasonic China from January to September 2021. The change of cooperation mode may have an adverse impact on the profitability of the company in the future.
2. Risk of high concentration of raw material suppliers
In 2018, 2019, 2020 and January September 2021, the issuer’s purchases from the top five suppliers accounted for 58.44%, 70.26%, 72.21% and 71.03% of the total purchases respectively. The high concentration of suppliers is mainly related to the high concentration of upstream resource industries. The company’s purchase amount of MCC accounts for 37.84%, 58.08%, 57.55% and 7.82% of the total purchase amount respectively. MCC is an important supplier of the company.
Since February 2021, the mode of cooperation between the company and Panasonic China has changed. The company developed its own suppliers. During the reporting period, the company mainly purchased nickel hydrometallurgy intermediate (nickel hydroxide) from MCC to produce NCA ternary precursors and sell them to Panasonic China. The company changed to purchase nickel beans from Panasonic China Cobalt bean raw materials (Panasonic purchases nickel beans from BHP Billiton and other companies in Australia and cobalt beans from Glencore and other companies in the UK) produce NCA ternary precursors and sell them to Panasonic China; From January to September 2021, the purchase amount of the issuer from Panasonic China was 595760500 yuan, accounting for 39.46% of the total purchase amount.
With the gradual expansion of the company’s business scale, the company’s procurement demand will increase accordingly. If there are adverse changes in the operation of the company’s main suppliers or the cooperative relationship between the company and the main suppliers in the future, it will have a certain adverse impact on the company’s production and operation.
3. Risk that the price fluctuation of raw materials has a great impact on the production and operation of the issuer
The company’s main raw materials are nickel beans, nickel hydroxide, cobalt hydroxide, crude nickel sulfate and other nickel and cobalt resources. During the reporting period, the proportion of the company’s direct material cost in the main business cost was 87.48%, 86.35%, 86.37% and 89.89% respectively, which is the main component of the main business cost. The price of nickel and cobalt fluctuates under the influence of market supply and demand, industrial policy, macroeconomic situation, geopolitics and other factors, and then transmits to the purchase price of main raw materials of the company; Changes in macroeconomic situation, adjustment of relevant industrial policies and emergencies may have a significant adverse impact on the company’s raw material supply and purchase price. Affected by the shortage of main raw materials or the sharp rise in prices, the company may not be able to purchase the main raw materials required for production in time or the purchase cost may rise sharply. If the cost pressure cannot be passed on by increasing the sales price of products, the profitability and production and operation of the company will be significantly and adversely affected.
In March 2022, affected by the “Russia Ukraine conflict” and other factors, the LME nickel disk price of the London Metal Exchange rose sharply; If the nickel price remains high or continues to rise in the future, or there is a shortage of nickel resources, the company may face the risk of sharp decline in performance and less than expected benefits of the investment project with raised funds.
4. Risk of technical route change in battery industry
Power battery is the core component to provide power source for new energy vehicles. Ternary lithium battery and lithium iron phosphate battery are the mainstream power batteries in the market. Since 2018, the update and iteration of power battery technology has been rapid. The long cell scheme of lithium iron phosphate battery and module free technology (CTP) have further improved the energy density of its battery pack. The competition between the two technical routes will continue in the future. At the same time, new technological routes such as hydrogen fuel cells and solid-state lithium batteries are emerging. If other battery technologies are continuously developed, gradually matured and gradually industrialized in the future, if the company fails to follow the development trend of technology in the industry in time, it may have an adverse impact on the company’s competitive advantage and operating performance.
5. Risk that the company’s products are mainly NCA precursors
The company’s sales of cathode products and NCA materials accounted for 14.74% of the company’s revenue in the reporting period, accounting for 14.74% of the company’s revenue of NCA and NCA materials, accounting for 34.74% of the company’s revenue in the reporting period. As one of the important routes of ternary precursors, NCM precursor business accounted for a low proportion of the company’s main business income from 2018 to 2020, accounting for 5.79%, 3.80% and 7.50% respectively; From January to September 2021, the company’s NCM precursor business gradually increased in volume, realizing an income of 389 million yuan, accounting for 25.39% of the main business income, covering beiteri, Beijing Easpring Material Technology Co.Ltd(300073) , BASF Shanshan and other customers. The company’s NCM precursor products are still in the initial volume period, the overall product structure of the company is still relatively single, and its resistance to risks caused by downstream market changes and industry changes is weak. If the company’s new business and new customer expansion in the future is less than expected, or the market demand of the existing NCA ternary precursor products is replaced by other products, it may have an adverse impact on the production and operation of the issuer.
6. Risk of covid-19 epidemic affecting the company’s daily business activities and business performance
Covid-19 epidemic broke out in China in January 2020 and the epidemic situation in China has been generally stable since June 2020, but the overseas epidemic situation is still severe and complex. Affected by covid-19 epidemic, the company’s procurement, production, sales and other business activities are also affected to varying degrees. The company’s technical exchanges, market research, customer visits, technology research and development, product feedback and other activities outside China lag or delay accordingly. The negative impact of covid-19 epidemic on daily business activities led to a certain decline in the annual operating performance in 2020. The company realized a net profit attributable to the shareholders of the parent company of 593275 million yuan, a year-on-year decrease of 20.40%; After deducting non recurring profits and losses, the net profit attributable to the shareholders of the parent company was 551802 million yuan, a year-on-year decrease of 25.42%.
At present, overseas regions account for a relatively high proportion of the company’s main terminal sales and terminal procurement. If the epidemic situation in overseas regions, especially the regions mainly involved in the company’s sales and procurement, cannot be effectively controlled or rebound, and the company’s domestic and foreign orders, logistics, procurement and market development may continue to be affected, there is a risk of decline in the company’s operating revenue and profitability. (II) financial related risks
1. Risk of gross margin decline
In 2018, 2019, 2020 and January September 2021, the gross profit margin of the company’s main business was 17.18%, 20.24%, 15.33% and 13.74% respectively, with certain fluctuations, mainly due to the different steps of the impact of market price changes of metal nickel and cobalt on the sales price and cost of the company’s main products, as well as the change of cooperation mode with major customer Panasonic China. The sales price of the company’s products is mainly composed of material price and processing fee, in which the material price mainly depends on the content of nickel and cobalt and the market price of nickel and cobalt; The processing fee is relatively stable in each period. The direct material cost in the company’s sales cost mainly depends on the market price of metal nickel or cobalt at the time of purchase, the content of metal nickel or cobalt in raw materials and the quality of raw materials; If the market price of nickel or cobalt fluctuates greatly in the future, there is a certain fluctuation risk in the company’s gross profit margin. From 2018 to 2020, the company mainly uses crude nickel cobalt raw materials such as nickel hydroxide, nickel sulfate and cobalt sulfate to produce ternary precursor and spherical nickel hydroxide, with obvious cost advantage. After February 2021, the cooperation mode between the company and Panasonic NCA was successively adjusted to purchase nickel beans and cobalt beans from Panasonic to produce NCA ternary precursors and sell them to Panasonic, resulting in a corresponding decline in the company’s gross profit margin; If the company cannot obtain cost advantage in cooperation or maintain the characteristics of high customer concentration in the future, there is a risk of further decline in the company’s gross profit margin.
In recent years, the lithium-ion battery industry has developed rapidly, the downstream market demand continues to be strong, and the industry competitive enterprises have invested in the R & D and production of ternary precursors. The industry capacity continues to expand and the market competition intensifies. In the future, if there are various adverse circumstances such as policy adjustment of new energy vehicle industry, disordered competition in ternary precursor industry, adverse changes in raw material prices, or the company fails to maintain the core competitiveness of products, the company’s gross profit margin will be at risk of sharp decline.
2. Large amount of ending inventory and risk of falling price
As of the end of 2018, 2019, 2020 and September 2021, the book value of the company’s inventory was 292046500 yuan, 414189500 yuan and 458901900 yuan respectively
