Late to go on the market, Hualv biology wants to find a new “mushroom”

On April 12, with Jiangsu Hualv Biotechnology Co., Ltd. (hereinafter referred to as “Hualv bio”) listed on the growth enterprise market, the four giants of Flammulina velutipes gathered in the capital market. In contrast, Hualv, which relies on Flammulina velutipes to win the world, can hardly have competitive advantage in terms of scale production, market share and product structure.

Aware of the pressure of competition, hualvsheng will place its hope on Hypsizygus marmoreus (also known as white jade mushroom or crab mushroom) and plan to expand its production capacity to six times that of 2019. However, under the condition that the capacity utilization of Hypsizygus marmoreus is not saturated and the dealers are bound by competing enterprises, it is still unknown whether Hualv bio can seize the market share with Hypsizygus marmoreus.

Going public is full of twists and turns

On April 12, hualvbiao officially landed on the growth enterprise market of Shenzhen Stock Exchange, with an issue price of 44.77 yuan / share. Yu Yangchao, chairman and general manager of Hualv bio, said in the listing roadshow that “the company has reached long-term and stable cooperation with well-known chain hotpot stores and large supermarkets, such as Haidilao and guliugulu, and supermarkets such as Wal Mart, Yonghui, Carrefour and RT Mart.”.

According to the listing announcement, the total amount of funds raised by Hualv biological is 653 million yuan. After deducting the issuance expenses, the net amount of funds raised is about 596 million yuan. The funds raised are planned to be invested in the technical transformation project of Hualv biological No.1 plant, the technical transformation project of Siyang Huamao Agricultural Development Co., Ltd. and the annual output of 30 thousand tons of Hypsizygus marmoreus.

In fact, the IPO of China Green bio is not smooth. On July 21, 2015, Hualv bio was listed on the new third board, delisted from the new third board in December 2017, and submitted the IPO prospectus (application draft) to the CSRC on December 15 of the same year. However, on March 30, 2018, the review of Hualv biology was terminated.

After two years, China green biological second sprint IPO. On January 3, 2020, Hualv biology submitted its prospectus again and planned to land on the gem. On March 10, 2021, it was approved by China Securities Regulatory Commission to register its IPO on GEM.

By the time Hualv bio landed on the growth enterprise market of Shenzhen Stock Exchange, the top four enterprises in the domestic edible fungi industry had gathered in a shares. It is reported that in the “four big family” of Flammulina velutipes, the public Hing fungus industry and snow Ficus organisms were listed as early as 2015 and 2016, and the purchase of 56% stake in Shanghai Yu Garden shopping mall (Group) Limited by Share Ltd in 2019.

According to Shen Meng, director of Xiangsong capital, in addition to the scale and cost advantages, there is also the accumulation of technology research and development. Some mushroom cultivation enterprises with small scale and weak technical level have no advantage in the market competition, and even will be eliminated. For Hualv bio, only through listing financing and other ways to improve production capacity can it form a catch-up with the previous listed companies.

Lagging behind peers

No matter in scale production, market share or product structure, Hualv bio, which has entered the capital market, has an advantage over the other three enterprises.

In terms of large-scale production, Hualv bio is the last among the four listed edible fungi companies. According to the Research Report on the industrialization of edible fungi in China in 2019 issued by the industrialization Committee of China Edible Fungi Association, Hualv bio ranked the fourth in the large-scale production of Flammulina velutipes in 2019. As of June 2019, the daily production capacity of Xuerong biology, Zhongxing bacteria, ruyiqing and Hualv biology are 1140 tons, 775 tons, 363 tons and 327 tons respectively.

As the scale of industrialization is at the bottom, the market share of Hualv is relatively backward. According to the data of Shanghai and Shenzhen capital group of Jinzheng research, from 2017 to 2019, the market share of Xuerong biological Flammulina velutipes was 12.83%, 11.27% and 11.51% respectively; the market share of Zhongxing mushroom was 6.16%, 7.7% and 9.58% respectively; while the market share of Hualv biological Flammulina velutipes was only 2.53%, 2.91% and 4.27% respectively.

According to Zhu danpeng, an analyst in the food industry, the production and sales of edible fungi are all over the country, without obvious regional characteristics. However, considering the high logistics cost and short shelf life of products, the sales of edible fungi products have a certain sales radius, generally around the production base and surrounding areas. With only two production bases, Hualv bio has a relatively narrow range of sales of edible fungi products, so it will lag behind its peers in the speed of national distribution.

In addition, in terms of product structure, Hualv bio relies too much on a single product Flammulina velutipes. The data show that during 2017-2019, the proportion of Flammulina velutipes product income of Hualv bio in the main business income is 92.49%, 91.12% and 92.2% respectively. During the same period, the proportion of Flammulina velutipes product income of Xuerong bio, a comparable company in the same industry of Hualv bio, in the main business income was 82.04%, 77.05% and 78.33% respectively; the proportion of Flammulina velutipes product income of Zhongxing bio in the main business income was 82.14%, 83.37% and 78.5% respectively.

Bet on Hypsizygus marmoreus

Hualvsheng seems to be aware of the risk of Flammulina velutipes as a dominant company, and place its hope on Hypsizygus marmoreus.

“There is a risk of a single product.” Hualv said frankly in the prospectus. Yu Yangchao mentioned in the market roadshow that “the Flammulina velutipes market is gradually becoming saturated, and a large number of Hypsizygus marmoreus varieties will be planted.”. The purpose of raising funds in the prospectus shows that in addition to raising 300 million yuan to carry out technological transformation of the existing No. 1 and No. 2 plants, Hualv biological also plans to raise 428 million yuan to build a production project of Hypsizygus marmoreus with an annual output of 30000 tons.

It is worth mentioning that although Hualv bio has been put into production of Hypsizygus marmoreus in a “high profile”, its production growth rate has been declining year by year, and its capacity utilization rate is not saturated. In this regard, Hualv explained that “for the company’s main product Flammulina velutipes, the vast majority of dealers only sell Flammulina velutipes products of the company; as the company’s supply of Hypsizygus marmoreus can not meet the sales demand of dealers, some dealers sell Hypsizygus marmoreus products of other companies.”.

In addition, due to the exclusivity of the dealers in the same industry, the future sales channels of Hypsizygus marmoreus also have some resistance. In the investor relations activity record released on August 31, 2016, Xuerong bio disclosed that “the major distributors of Xuerong bio can only sell Xuerong’s products, which is exclusive”; Zhongxing fungus also disclosed in the prospectus that “the company and all fixed distributors have signed exclusive agreements at present, that is, in the case of sufficient supply of the company, the distributors can not sell other brands in principle “Flammulina velutipes and other similar products”.

In the case that the capacity utilization of Hypsizygus marmoreus is not saturated and some dealers are bound by comparable companies in the same industry, the Beijing Business Daily reporter sent an email to interview Hualv bio in response to the problems such as the product sales plan after Hualv bio raised funds and put into production, but no reply has been received as of press release.

Beijing Business Daily reporter Qian Yu Wang Xiao

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