The performance of biodegradable plastics maker Zhongbao New Materials is greatly affected by the price of raw materials

Financial Associated Press, June 9 (Zhongbao New Materials, a manufacturer of biodegradable plastic products, submitted an IPO application to the Hong Kong Stock Exchange
.
 

Biodegradable plastic products typically react with bacteria, biomass and microorganisms and begin to decompose after a few months in landfill
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According to the Frost & Sullivan Report, Zhongbao New Materials ranked first among biodegradable plastic product manufacturers in Northeast China in 2020, with a market share of 39.
3% in terms of production volume of disposable biodegradable shopping bags, and a market share of 39.
3% in terms of sales revenue The calculated market share is 39.
9%
.
 

According to the same report, due to the expanding application of biodegradable plastics and the steady development of downstream biodegradable plastic products such as biodegradable shopping bags and biodegradable disposable tableware, the consumption of biodegradable plastics in China has increased from 151,400 tons in 2016.
It continued to grow to 219,700 tons in 2020, with a compound annual growth rate of 9.
8%
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Looking ahead, with the growing market demand for downstream biodegradable plastic products, the consumption of biodegradable plastics in China is expected to grow substantially, reaching 954,600 tons in 2026, with a compound annual growth rate of 27.
7% from 2020 to 2026
.

Soochow Securities (Hong Kong) is the lead underwriter 

The company participated in the formulation of the national standard and the net profit has grown steadily in the past three years 

The biodegradable plastic products provided by Zhongbao New Materials mainly include biodegradable continuous roll bags, biodegradable shopping bags, biodegradable packaging wrapping films, biodegradable masterbatches, etc.
, accounting for more than 90% of the revenue
.
It also sells non-biodegradable automotive plastic parts
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Zhongbao New Materials and its CEO Shan Yuzhu have participated in the discussion and formulation of the only national standard GB/T 38082-2019 for biodegradable plastic shopping bags, which was promulgated in October 2019 and will take effect in May 2020
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As at the Latest Practicable Date, Zhongbao New Materials holds 21 utility model patents, 2 invention patents, 3 registered trademarks in China, and is applying for 4 patents
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According to the prospectus, the company aims to strengthen its position as one of the leading manufacturers of biodegradable plastic products in China and expand its business to other parts of China
.
In this regard, the company plans to use the proceeds from the listing to: expand and establish a new production line at the Changchun production base; build a new production base in Huizhou; strengthen research and development capabilities and upgrade research and development equipment; provide funds for research and development projects; and IT systems
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The main material risks facing Zhongbao New Materials include: operating results are affected by the prices of key raw materials; consumer preferences and behaviors may change; strict environmental protection laws and regulations must be complied with; and the spread of the COVID-19 epidemic
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According to the prospectus, in the past 2019, 2020 and 2021, the revenue of Zhongbao New Materials was 103 million, 167 million and 257 million respectively, and the corresponding net profits were 27.
141 million, 49.
272 million and 78.
417 million respectively
.
The net profit CAGR rate was 69.
98%
.