On the evening of June 24th, Hubei Yihua announced that it planned to put up for sale 100% equity of Hubei Yihua degradable New Materials Co., Ltd. (hereinafter referred to as Yihua degradable New Materials), with a transfer reserve price of not less than 151 million yuan.

Hubei Yihua said that the transaction is due to the low market climate of PBAT (polyadipic acid / butylene terephthalate), the core product of suitable degradable new materials.

It is worth mentioning that the "60,000t / a new biodegradable materials project" was undertaken in 2021, and the project was only completed in 2023, with a cumulative investment of 494 million yuan, which is much higher than the floor price of this listing.

Hubei Yihua controlling shareholder intends to participate in the auction

According to the announcement, Hubei Yihua plans to transfer 100% of the equity of the new biodegradable materials, and the base price of the transfer is not lower than the estimated value of 151 million yuan for the subject matter of the transaction, which is 15.93% higher than the net asset premium of the biodegradable new materials on April 30, 2024.

The new biodegradable material was established in February 2021 with a registered capital of 250 million yuan at present. The reporter noticed that Hubei Yihua's semi-annual report of 2023 showed that the registered capital of new biodegradable materials was 150 million yuan at that time. Tianyan investigation also showed that in November 2023, the registered capital of new biodegradable materials was changed from 150 million yuan to 250 million yuan.

According to Hubei Yihua's previous announcement, in 2022, 2023 and before 2024, the operating income of Yihua degradable new materials was 2.7374 million yuan, 91.4356 million yuan and 50.9215 million yuan respectively, and the net profit was-4.3156 million yuan,-92.0731 million yuan and-26.215 million yuan respectively.

It is worth mentioning that Hubei Yihua said that its controlling shareholder Hubei Yihua Group Co., Ltd. (hereinafter referred to as Yihua Group) intends to participate in the auction, so the 100% equity transfer of the new materials will constitute a related party transaction.

The reporter noticed that on May 28 this year, Hubei Yihua also issued a notice indicating that the company intends to transfer some of the fixed assets originally located in Yichang City's Guiting Chemical Industry Park to Hubei Yihua Group Chemical Machinery and equipment Manufacturing and installation Co., Ltd., a wholly owned subsidiary of Yihua Group, at a price agreement of 117 million yuan (including tax).

How much can be recovered from the investment of nearly 500 million yuan in related projects?

According to Hubei Yihua's announcement in February 2021, the company intends to invest in the construction of "60,000 tons / year new biodegradable materials project", which is to be undertaken by suitable biodegradable new materials. The total investment of "60, 000 tons / year new biodegradable materials project" is expected to be 807 million yuan, the sales income is expected to be 1.496 billion yuan / year, and the total profit is expected to be 102 million yuan / year.

According to the 2023 annual report of Hubei Yihua, the new biodegradable materials of Yihua continued to invest 106 million yuan in the "60, 000 tons / year new biodegradable materials project" in 2023. By the end of 2023, the project has invested 494 million yuan, and the investment progress of the project has reached 100%.

However, the "60,000 tons / year new biodegradable materials project" did not achieve the expected revenue. "the national PBAT production capacity is 1.7 million tons, with an operating rate of about 20 percent, that is, an output of 350000 tons. At present, the market demand is less than 200000 tons, and supply exceeds demand." Hubei Yihua explained in its 2023 annual report.

So, why does Hubei Yihua want to sell new biodegradable materials after the project investment of "60,000 tons / year new biodegradable materials project" is completed?

Hubei Yihua said that in the context of the low market climate of PBAT, the core product of biodegradable new materials, and the continuous loss of suitable degradable new materials, the subsequent successful transfer of 100% equity in degradable new materials will help to optimize the allocation of resources and improve the profitability of the company.

In addition, the "60, 000 tons / year biodegradable new materials project" has completed a total investment of 494 million yuan, but now the transfer base price of 100% equity in biodegradable new materials is only 151 million yuan. So, is the reserve price of 100% equity transfer of degradable new materials reasonable?

Hubei Yihua further told reporters that the project itself is indeed a loss, the transfer is to reduce losses, which should be beneficial to all shareholders. Source: daily Economic News