Dongpeng Holdings Privatization Three Years Later Fight A Shares Environmental Policy, Real Estate Regulation "Blocking" IPO

Mona Lisa (002918.SZ) succeeded in IPO, and she was merged into the 002798.SZ. Three years ago, Dongpeng holdings, which was privatized from Hong Kong stocks to A shares, is also on the SFC's trial meeting.

On Friday evening, the official website of the SFC announced that Dongpeng holdings will be held on October 24th (Thursday).

Dongfang Peng, the veteran leader in ceramic production, has applied for listing on the SME Board of Shenzhen Stock Exchange. The proposed public offering is not more than 150 million shares, and the sponsor is CICC.

Graph / Song Wenhui diagram

The fund-raising fund is to be invested in 3 million 150 thousand projects, namely, the annual production of the new eco environmental stone slab transformation project of 4 square meters, the expansion of 4 ceramic production lines, the two phase expansion project of Lixian Xin Peng Ceramics Co., Ltd., and the annual production of 1 million 600 thousand water-saving sanitary ware production lines.

Prior to that, Dongpeng holdings had all the short listed time in Hong Kong, but the share price of Hong Kong stock has been rather depressed because of its construction ceramics industry being regarded as "sunset industry" by investors. In June 2016, Dongpeng holdings decisively privatized and moved to A share IPO.

However, in recent years, under the influence of real estate regulation, the development of ceramic industry is slowing down, environmental protection and other factors, Dongpeng holdings back to the A Road, there are many voices of doubt, these "noisy" or become Dongpeng holding IPO's "stumbling block".

"Three high issues" highlighted

According to public information, Dongpeng holding company was established in November 4, 2011, mainly engaged in R & D, production and sales of building and sanitary ceramics products represented by ceramic tiles and sanitary ware.

Due to the low degree of concentration of ceramic industry, as of 2017, the proportion of Dongpeng holding building ceramics market (accounting for the proportion of total revenue of construction ceramics enterprises above Designated Size) was only 1.09%, but still in the forefront of the industry. Meanwhile, the market share of Monalisa, another big building ceramic leader, was 0.57%.

In 2015-2017, Dongpeng holdings's main business income was 4 billion 101 million yuan, 5 billion 190 million yuan and 6 billion 592 million yuan respectively. The net profits attributable to the owners of the parent company were 696 million yuan, 767 million yuan and 986 million yuan respectively. In 2016 and 2017 respectively, they increased 10.16% and 28.62% respectively over the same period last year.

After delisting from Hong Kong stock in June 2016, Dongpeng holdings began to prepare A shares IPO, which disclosed the draft prospectus in Shenzhen Stock Exchange in September 8, 2017. But a year later, the SFC only disclosed feedback. Until October 18, 2019, Dongpeng holdings finally welcomed the new listing progress.

All of this is closely related to the characteristics of the industry. Dongpeng holdings's building ceramics industry has always been labeled "three high" labels, that is, industries with high energy consumption, high pollution and high emissions.

According to statistics, in 2019 1~8, a total of 78 ceramic, bathroom and ceramic raw materials enterprises in Guangdong were punished for environmental violations, and the total penalty was more than 6 million yuan, with an average penalty of 77 thousand yuan.

"From an environmental point of view, many enterprises do not fully use clean energy, and there will be some potential environmental risks, such as nitrogen oxides and sulphide emissions, and so on. It is expected that more natural gas will be the main source in the future. Of course, considering that this process is not achieved overnight, environmental protection will gradually eliminate many small and medium enterprises, because many enterprises have a very thin profit and the cost of natural gas will increase by 2-3 yuan." Qi Shuyang, chief analyst of Huaxi Securities Building and building materials industry, pointed out.

Environmental protection has always been the focus of the IPO audit.

Before Dongpeng controlled A shares, Monalisa had been subjected to more stringent supervision over ceramic enterprises for more than 1 years and 34 feedbacks, while another ceramic giant in Foshan, IPO, gave up the list and was listed on the square curve bought by the imperial household (formerly imperial sanitary ware).

According to public information, Dongpeng control company Dongpeng sanitary ware, in September 24, 2015, due to industrial waste discharge exceeding the standard, was issued by the Chancheng District Environmental Protection Bureau of Foshan Zhangcha branch "administrative penalty decision", and fined 18457.30 yuan.

In addition, according to Changde Environmental Protection Bureau data, in May 19, 2017, Dongpeng holding another subsidiary, Lixian Xin Peng Ceramics Co., Ltd. was ordered to rectify the air pollution problem by the Lixian Environmental Protection Bureau.

Real estate regulation and control under pressure

What is worse is that besides the environmental pressure, the ceramic industry with excess capacity and fierce competition is still undergoing tremendous pressure from real estate regulation.

With the continuous cooling of the real estate industry, the ceramic industry has entered the cold winter. Many investors have questioned the industry prospects of Dongpeng holdings.

According to the statistics of China Building and Sanitary Ceramics Association, in 2018, 1265 large scale construction ceramics enterprises in China achieved a profit of 299 billion 348 million yuan, down 28.09% compared with the same period last year, and realized a total profit of 17 billion 605 million yuan, down 33.57% from the same period last year, and the sales profit margin was 5.88%, down 0.52 percentage points compared with the same period last year. The output of ceramic tiles was 9 billion 11 million square meters, decreasing by 11.2% compared with that of the previous year, of which the negative growth of Guangdong's production area was more than 15%.

During the reporting period, the gross profit margin of Dongpeng holdings declined. The gross profit margin of the company's ceramic tile products decreased significantly, from 41.13% in 2015 to 40.53% in 2017, and the gross profit margin of the sanitary ware products also dropped from 24.69% to 20.88%.

"Our judgement is that the investment data of real estate is difficult to maintain at present level, and the future will go down. At present, these companies mainly look at the completed data, and the completed data should be in the recovery cycle, and it can last for two to three years. However, the background of the future policy has always insisted that" housing is not speculation ", it will be more difficult for enterprises to survive. In October 21st, an analyst with a medium-sized brokerage firm in Beijing told reporters.

However, some market participants are not too pessimistic about this phenomenon.

At present, Dongpeng Holdings has not disclosed the 2018 annual report and the 2019 semi annual report. But compared to the same industry Monalisa and di home, the net profit of the two listed companies maintained stable growth in the first half of 2018 and the first half of 2019.

In the eyes of some market participants, real estate regulation, competition intensification and changes in environmental policies are important opportunities for ceramic leading enterprises.

Qi Shuyang pointed out: "from the total volume of real estate, the future is definitely going down, and the structure of hardcover will become a trend. Whether to meet the requirements of hardcover room and become a supplier of hardcover developer is the key to competition. Generally speaking, 2B business has strong barriers and barriers, and the head enterprise will benefit more. This phenomenon is taking place, and the industry will surely concentrate on large enterprises in the future.