HONG KONG, Jul 8, 2021 – (ACN Newswire) – New materials, with the new international situation, has become a key segment for overcoming market challenges, and is favoured by national strategic development planning policies. Pearlescent materials and synthetic mica are high value-added new materials. Global New Material (6616.HK), which carried out its IPO from June 30 to July 6 and plans to issue 290 million shares at HKD3.52-4.22 when it lists July 16, produces China's market-leading shares in both.

Pearlescent materials are expected to boom, achieving a market size of over RMB140 billion.

Pearlescent materials have dominant advantages when compared with traditional pigments. As a new consumable material without a definite industry life cycle, pearlescent pigments are rapidly replacing traditional organic pigments and metal pigments, and are widely applied in coatings, inks, plastics, cosmetics, automobiles, aerospace and other fields. As set forth in the Classification of Strategic Emerging Industries (2018) issued by the central government, pearlescent materials are included in the pigment manufacturing sector of strategic emerging industries.

Global New Material, which stays focused on technology, plays a leading role in the field of pearlescent materials. With the strong support of the technical team, headed by Professor Jiansheng Fu, a world-renowned pearlescent material expert known as the leading authority on pearlescent materials in China, and father of chameleon pearlescent materials, Global New Material can launch over 100 new products every year, including silicon ball series, the Light of the Dawn series, and other innovative lines of products leading the global industry.

Global New Material has sold its products in China and to more than 30 countries and regions in Asia, Europe, Africa and South America. As shown in a report issued by Frost & Sullivan, in terms of corporate revenue, Global New Material was the largest manufacturer of pearlescent materials and the industry leader in China in 2020 with a market share of 11.0%, the only company in China that occupies a market share of over 10%.

In the global market, Global New Material ranked as the fourth largest manufacturer of pearlescent materials in 2020 with a market share of 3.0% which is only 0.2% lower than that of the third largest one. Global New Material is currently in the explosive stage of acquiring a market share of RMB140 billion.

On the whole, the global pearlescent material market is on the steady rise with the market seize reaching RMB18.9 billion in 2020 and with a compound annual growth rate of 19.2% from 2016 to 2020. Considering that the total market size of the global pigment market is currently RMB160 billion, pearlescent pigments are expected to replace other pigments and gain a bigger market share.

As forecasted by Frost & Sullivan, in view of consumption upgrade and of the fact that pearlescent materials are gradually replacing other pigments, the market size of the pearlescent material market will reach RMB44.6 billion in 2025, and the compound annual growth rate of the global pearlescent pigment market will further climb to 23.9% from 2021 to 2025, indicating that the industry is in the explosive growth stage. (Chart #1)

In the mid-to-high-end consumer sector, the market share occupied by pearlescent materials is growing at an expedited pace.

According to data, the market size of automotive-grade pearlescent materials reached RMB950 million in 2020, accounting for 5.0% of the overall market size of the pearlescent materials market. In the field of cosmetics, the market size of cosmetic-grade pearlescent materials is also on the steady rise. Data shows that from 2021 to 2025, pearlescent materials to be applied in the global automotive market and the global cosmetics market will experience a compound growth rate of 47.1% and 32.8% respectively. (Chart #2)

In the consumer sectors, especially in the mid-to-high-end consumer sector, pearlescent materials that are gaining a greater market share will continue to drive the rapid development of Global New Material.

However, in addition to pearlescent materials, synthetic mica that is a new material extending to the upstream of the industrial chain and having core technical advantages is also giving strong support to the development of Global New Material.

From pearlescent materials to fuel cells, synthetic mica is of great market potential

Synthetic mica is widely applied in different fields, and is used as a base material of pearlescent materials. First-generation pearlescent materials are natural mica-based, and all-natural mica materials currently used are imported from India as natural mica in China has been exhausted. In this context, the best solution for achieving localization and avoiding reliance on imported technologies is to replace natural mica with synthetic mica.

Data shows that the market share of synthetic mica-based pearlescent pigments has increased from 5.3% in 2016 to 11.7% in 2020. Driven by the technology advancement and productivity improvement of synthetic mica, the market share of synthetic mica-based pearlescent pigments in the global market is expected to reach 23.6% in 2025, and the synthetic mica-based pearlescent pigment market will usher in a compound annual growth rate of 47.6% from 2021 to 2025.

Mica products are also widely used in producing insulating materials and refractory materials which are further used in electric power, high-temperature smelting, household appliances and other fields. In 2020, the market size of mica applied in producing pearlescent materials, in producing refractory materials, and in producing insulating materials reached RMB1.38 billion, RMB7.66 billion, and RMB3.70 billion respectively.

Moreover, synthetic mica products with better overall performance than natural mica products are still extending to higher-end markets, including the field of fuel cells that is the focus of the most attention in the market. Additionally, these materials can be further applied to semiconductors and other cutting-edge fields.

Given that synthetic mica-based products show better insulation, high-temperature resistance and corrosion resistance than natural mica-based products, synthetic mica-based products are more likely to be used in higher-end fields and broader applications. For example, synthetic mica-based products are widely used in producing cosmetic-grade and automotive-grade pearlescent pigment products, and in the thermal insulation material industry and even the fuel cell field of new energy vehicles.

Mica can be used as a high-temperature proton exchange membrane for fuel cells. Studies found that compared with graphene, which is developing as a proton-conducting material, mica performs better in terms of proton conductivity and thermal stability. At 150 degrees Celsius, mica membrane shows proton conductivity more than 2 times higher than that required for commercialization, which indicates that vehicles designed with fuel cells using mica membranes will have a greatly improved mileage.

At present, mica membrane as a new type of proton-conducting membrane material with high proton conductivity has taken shape in the research and development process. Studies found that the treated mica films show greatly improved proton conductivity and have their service temperature having been increased from 100 degrees Celsius to 500 degrees Celsius, and that the application of such films with high proton conductivity and excellent heat resistance in improving existing fuel cells will boost the development of the field of fuel cell vehicles.

Global New Material, which ranks first in the synthetic mica industry, is expected to be able to fully exploit the potential of this field. In 2015, the Ministry of Industry and Information Technology of the People's Republic of China listed synthetic mica as one of the 18 key basic new materials for the national industrial upgrading project, and only CHESIR (now Global New Material) was authorized to take on this project.

As the only company in the industry that possesses all the core technologies of synthetic mica, Global New Material has effectively solved the key technical difficulties such as control instability, poor insulation performance, and hardness and brittleness caused by high fluorine content, and has realized the localization of the production of high-quality synthetic mica with the world-leading quality level of synthetic mica products. Besides, Global New Material is also expanding applications of synthetic mica.

Global New Material's business scale is currently ranking first in the global industry.

In the global synthetic mica-based pearlescent materials market, top five market players ranked by corporate revenue in 2020 occupied a total market share of 28.1%, and Global New Material ranked first with a market share of 8.9% which is 3.4% higher than that of the second one. In the domestic market, Global New Material ranked first with a market share of 25.4% which is more than twice the market share of 12.5% of the second player. (Chart #3)

With significant advantages in terms of technology and business scale, Global New Material will have immeasurable development prospects so long as it can commercialize synthetic mica in the field of fuel cells. As a leader in the global new material market which is gaining market share and has space for future development, Global New Material will appear in the secondary market at an attractive corporate valuation.

Global New Material still has an advantage in corporate valuation under the drive of two types of new consumable materials

Global New Material currently has a share capital of 1.163 billion shares at an issue price of HKD3.52-HKD4.22, with a total market value of HKD4.094 billion to HKD4.909 billion.

Global New Material had its net profit attributable to shareholders reaching RMB77.402 million, RMB103 million and RMB148 million respectively from 2018 to 2020, and had the net profit attributable to shareholders in 2019 and 2020 showing a year-on-year increase of 33.07% and 43.69% respectively. It is estimated based on those data that Global New Material's price-to-earnings ratio will reach 15x-18x in 2021.

Ganfeng Lithium, a listed company on HKEx that is engaged in the upstream fields of the new energy battery, is expected to achieve a price-to-earnings ratio of about 64x in 2021, and Flat Glass Group, engaged in the industry of new energy photovoltaic glass materials, is expected to achieve a price-to-earnings ratio of 23x in 2021. This means that as an industry-leader possessing core technologies necessary for manufacturing two types of new consumable materials, Global New Material is of great potential to increase its corporate valuation.

Moreover, once its second-phase plant, with an annual output of 30,000-ton synthetic mica, is completed and put into operation, Global New Material will be able to take control of the upstream fields in the global supply chain of synthetic mica products, to take a leading position in the pearlescent material industry and the synthetic mica industry, and as a result, to further enhance its net profitability in the future.

Therefore, a wave of investment is expected to be triggered once Global New Material is officially listed on July 16.

Contact:
Haolu Wang, Peanutmedia
E: wanghaolu@czgmcn.com
URL: www.Peanutmedia.com

Copyright 2021 ACN Newswire. All rights reserved. http://www.acnnewswire.com

HONG KONG, Jul 7, 2021 – (ACN Newswire) – Global New Material, the global leader in the field of new consumable materials, specifically pearlescent materials, is currently in the offering stage, a step away from its official June 17 listing (6166.HK) on the Stock Exchange of Hong Kong.

Global New Material International Holdings Limited, or Global New Material, has become the largest pearlescent material manufacturer in China and is aiming to be the largest in the world by virtue of its unique technical advantages.

Synthetic mica is expected to replace traditional pigments, while pearlescent materials should further expand in middle and high-end consumption fields, ushering in higher localization rates. We expect Global New Material, benefitting from opportunity in both pearlescent materials and synthetic mica, will develop at a firmer pace with capital market support.

Global New Material remains the industry leader by virtue of its dominant advantages in technology

With the top talent in the industry and synthetic mica as a key base material, Global New Material focuses on R&D and innovation, and has accumulated significant and dominant technical advantages.

Global New Materia's technical team is headed by Professor Jiansheng Fu, a world-renowned pearlescent material expert, and is acclaimed as the premier authority on pearlescent materials in China and as the father of chameleon pearlescent materials. His team authors more than 100 advances in new material research every year, including the silicon ball series, the "Light of the Dawn" series and other innovative material lines already leading international markets.

Global New Material has also hired two doctors from the French Academy of Sciences to run the development of cosmetics products. Global New Material's products have been put into mass production, and have been supplied to several big-name cosmetics companies. Moreover, Global New Material has set up a team dedicated to studying the downstream application of pearlescent materials and has developed thousands of personalized products using pearlescent materials, as well as personalized color product-related services for customers.

In particular, Global New Material has the technical advantages in manufacturing synthetic mica, the second-generation base material used in pearlescent materials. There is an increasingly stronger demand for synthetic mica as natural mica is on the verge of exhaustion. In this context, Global New Material is currently the only company in the industry that has all core technologies required for manufacturing synthetic mica.

To date, Global New Material pearlescent materials are found in 473 natural mica-based products, 266 synthetic mica-based products, 30 glass sheet-based products, and 5 silica-based products. Global New Material pearlescent materials are widely applied for different purposes and in different industries covering automotive coatings, cosmetics, industrial coatings, plastics, printing, textiles, leather and ceramics.

Additionally, Global New Material sells synthetic mica powder products of different particle sizes which are used in pearlescent material products of different grades and produce functional fillers, insulating materials, refractory materials and raw materials of nickel-hydrogen batteries. Global New Material not only remains the industry leader by relying on technical advantage, but it has shaped its business scale as well.

According to the prospectus, Global New Material has sold products to more than 30 countries and regions in Asia (excluding China), Europe, Africa and South America. As shown in a report issued by Frost & Sullivan, in terms of corporate revenue, Global New Material was the largest manufacturer of pearlescent materials and China's industry leader in 2020 with a market share of 11.0%, the only company in China with a market share of over 10%.

In the global market, Global New Material ranked as the fourth largest manufacturer of pearlescent materials in 2020 with a market share of 3.0%, only 0.2% lower than that of the third largest. In the synthetic mica-based pearlescent materials market, the top five by corporate revenue in 2020 occupied a market share of 28.1%, Global New Material ranked first with a market share of 8.9%, 3.4% higher than that of the second one. In the domestic market, Global New Material ranked first with a market share of 25.4%, more than twice the market share of the second player.

In recent years, Global New Material's production capacity has been on the rise. Specifically, its annual planned production capacity of pearlescent material products reached 10,464 tons, 12,978 tons and 13,740 tons at the end of 2018, 2019 and 2020 respectively, and its annual planned production capacity of synthetic mica powder doubled from 4,752 tons at the end of 2019, which remained stable for two years, to 9,504 tons at the end of 2020.
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Driven by existing advantages, business performance is growing at a remarkably expedited pace

Global New Material's two core business segments, natural mica-based and synthetic mica-based products have been on the marked rise, leading to continued increases in corporate revenue.

According to the prospectus, 2018 to 2020 sales volume of natural mica-based products, which account for the largest percentage of Global New Material's revenue, reached 7,217.9 tons, 8,822.4 tons and 10,056.8 tons respectively, an average annual compound growth rate of 18.04%.

Sales volume of synthetic mica-based products, which account for the second-largest percentage of Global New Material's revenue, reached 1,228.8 tons, 2,231.8 tons and 3,943.5 tons respectively an average annual compound growth rate of 79.14%.

Benefiting from the stable increase in sales volume of the forgoing core business segments and of glass sheet-based and silicon oxide-based products, the overall sales volume of Global New Material increased from 8,535.5 tons in 2018 to 11,264.5 tons in 2019 and even reached 14,243.3 tons in 2020.

In terms of corporate revenue, natural mica-based products contributed RMB245 million, RMB296 million and RMB319 million in 2018, 2019 and 2020 respectively, showing a steady increase. The corporate revenue contributed by synthetic mica-based products rapidly increased from RMB68.28 million in 2018 to RMB197 million in 2020, with the proportion of total corporate revenue increasing from 21.5% to 34.6%.

The corporate revenue contributed by glass sheet-based products increased by 9.1 times and 2.4 times in 2019 and 2020 respectively from RMB1.375 million in 2018, and reached RMB46.821 million in 2020. In the past three years, Global New Material's corporate revenue reached RMB318 million, RMB441 million and RMB569 million respectively, increasing by 38.44% and 29.17% in 2019 and 2020 respectively. In particular, a remarkable increase was achieved during COVID-19 in 2020.

We can see that growth in gross profit margins and optimization of expense ratios continues to enhance Global New Material's profitability.

According to financial data, benefiting from the expansion of business scale and technological improvement, Global New Material's gross profit margin increased from 49.5% in 2019 to 49.9% in 2020 even though it lowered prices of its core products during the epidemic prevention and control period in 2020. Besides, its sales expense ratio, administrative expense ratio and financial expense ratio dropped from 5.29%, 12.87% and 4.19% in 2019 to 4.32%, 12.81% and 3.41% respectively in 2020.

In this context, Global New Material had its net profit reaching RMB153 million in 2020, with an increase of 42.42% which is significantly higher than 31.92% in 2019, and also had its net profit margin increasing from 24.4% in 2019 to 26.9% in 2020.

Benefiting from its production capacity expansion plan and the increasingly stronger demands in the industry, we expect Global New Material to remain on its growth trend with business performance.

The era of pearlescent materials is coming

Pearlescent materials, which replace traditional pigments with new applications under exploration, will be of great potential in the future. Pearlescent pigment is a new composite material produced by imitating the formation principle of pearls, and has a micron-sized mica flake at the core which is coated with a nano-sized metal oxide film. Pearlescent pigments can create beautiful, brilliant and long-lasting colours without harm to human health and the environment, as with natural pearls, and are therefore called "pearlescent materials".

As set forth in the Classification of Strategic Emerging Industries (2018) issued by the Chinese central government, mica products are functional fillers as new energy materials used in strategic emerging industries, and mica-based pearlescent materials are pigments as other new functional materials used in strategic emerging industries.

Compared with traditional pigments, pearlescent materials involve 2 distinct and innovative elements: (1) pearlescent materials abandon the color generation principle requiring three primary colors that applies to traditional pigments, and adopt the principle of light interference effect for color generation to ensure long-lasting colors; and (2) pearlescent pigments are non-toxic and harmless to human health and environment. As a new consumable material without a definite industry life cycle, pearlescent pigments are rapidly replacing traditional organic and metal pigments, and are widely applied in coatings, inks, plastics, cosmetics, automobiles, aerospace and other fields.

With the benefit of higher market penetration in the automotive market, automotive-grade pearlescent materials reached RMB950 million in 2020, accounting for 5.0% of the overall market size of the pearlescent materials market. The market size of cosmetic-grade pearlescent materials is also on a steady rise. From 2021 to 2025, pearlescent materials to be applied in the global automotive market and the global cosmetics market will experience a compound growth rate of 47.1% and 32.8% respectively.

On the whole, the global pearlescent material market is on a steady rise with the market seize reaching RMB18.9 billion in 2020 and with a compound annual growth rate of 19.2% from 2016 to 2020. Considering that the total market size of the global pigment market is currently RMB160 billion, pearlescent pigments are expected to replace other pigments and gain an ever-larger market share.

As forecasted by Frost & Sullivan, in view of consumption upgrade and of the fact that pearlescent materials are gradually replacing other pigments, the market size of the pearlescent material market will reach RMB44.6 billion in 2025, and the compound annual growth rate of the global pearlescent pigment market will further climb to 23.9% from 2021 to 2025.

Meanwhile, the trend of replacing imported products with Chinese-made products is creating great market opportunities for leading companies such as Global New Material.

It is known that pearlescent pigment is included in the Directory of High-tech New Material Products for Export and enjoys export tax benefits, and falls in the new material industry encouraged by the state. At present, the market size of the Chinese pearlescent pigment market is expanding at a pace significantly faster than that of the global pearlescent pigment market.

The market size of the Chinese pearlescent pigment market expanded at a compound annual growth rate of 23.9% from 2016 to 2020, and is expected to expand at a compound annual growth rate of 30.8% from 2021 to 2025. Even though some pearlescent pigments sold in China are still imported from Germany-based Merck, BASF and other overseas suppliers, the trend of replacing imported products with Chinese-made products will empower the development of Chinese leading companies such as Global New Material.

Furthermore, the synthetic mica market is booming

First-generation pearlescent materials are natural mica-based, and all-natural mica materials currently used are imported from India as natural mica in China has been exhausted. In this context, the best solution is to replace natural mica with synthetic mica. In 2015, the Ministry of Industry and Information Technology of the People's Republic of China listed synthetic mica as one of the 18 key basic new materials for the national industrial upgrading project, and only CHESIR was authorized to take on this project.

Given that synthetic mica-based products show better insulation, high-temperature resistance and corrosion resistance than natural mica-based products, synthetic mica-based products are more likely to be used in higher-end fields and broader applications. At present, synthetic mica powder is usually used to produce cosmetic-grade and automotive-grade pearlescent pigment products.

Data shows that the market share of synthetic mica-based pearlescent pigments has increased from 5.3% in 2016 to 11.7% in 2020. Driven by the technology advancement and productivity improvement of synthetic mica, the market share of synthetic mica-based pearlescent pigments in the global market is expected to reach 23.6% in 2025, and the synthetic mica-based pearlescent pigment market will usher in a compound annual growth rate of 47.6% from 2021 to 2025.

Like pearlescent materials, synthetic mica is used in broader applications

In addition to pearlescent materials, mica products are used in producing insulating and refractory materials which are then used in automobiles, cosmetics, electric power, high-temperature smelting, household appliances and other fields. From 2018 to 2020, the market size of mica applied in producing pearlescent materials reached RMB1.38 billion, RMB7.66 billion, and RMB3.70 billion respectively. Additionally, insulating materials will be applied to semiconductors and other cutting-edge fields.

With the improvement of the overall R&D capabilities, synthetic mica with better properties will be applied in more fields such as thermal insulation materials. At present, Global New Material is the only company in the industry that has the core technologies required in producing synthetic mica, and it also occupies the largest market share in the global synthetic mica-based pearlescent material market.

With its production capacity being expanded greatly, we expect Global New Material to be the biggest winner of the upcoming market opportunities.

All existing production facilities producing pearlescent pigment in Global New Material's first-phase plant are near full capacity. In view of this, Global New Material is investing RMB1.338 billion to build a second-phase facility covering an area of 145,200 square meters, including four factories with a planned capacity of 30,000 tons/yr, power supply facilities, ancillary facilities and warehouses.

When the new plant is completed and put into operation, Global New Material should be able to dominate the upstream in the global supply chain of synthetic mica, and therefore become the leading enterprise in the pearlescent material and synthetic mica industry.

In summary, Global New Material remains first in China with its technical advantages and aims to lead the global market, developing at an expedited pace following industry opportunity and based on its expansion strategy. We expect to see a new wave of investment by Global New Material following its HKEx debut later this month.

Contact:
Haolu Wang, Peanutmedia
Email: wanghaolu@czgmcn.com
URL: https://www.Peanutmedia.com

Copyright 2021 ACN Newswire. All rights reserved. http://www.acnnewswire.com

HONG KONG, Jul 6, 2021 – (ACN Newswire) – A provider of integrated marketing solutions in Greater China, Activation Group Holdings Limited ("Activation" or the "Company", collectively, the "Group", stock code: 9919), today issued a positive profit alert. Based on a preliminary review of the unaudited management accounts of the Group for the six months ended 30 June 2021 (the "Interim Period"), the Group is expected to record a net profit of approximately RMB38.0 million for the Interim Period, as compared to the net loss of approximately RMB20.0 million for the six months ended 30 June 2020.

Based on the relevant information available, the expected increase in the net profit of the Company for the Interim Period is mainly attributable to the overall increase in the revenue generated from the integrated marketing businesses due to the recovery of the economy in the PRC as the COVID-19 pandemic gradually came under control which offset the adverse effect of the outbreak of pandemic in early 2020 on the revenue of the Group.

About Activation Group Holdings Limited
Activation Group Holdings Limited is a leading and fast-growing integrated marketing solutions provider and brand/IP operator focusing on providing in Greater China experiential marketing, digital and brand communication, and public relations services. It is the largest integrated marketing company serving luxury and trendy brands in Greater China, claiming a 7% share of the market. Its shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on January 16, 2020. The Group also focuses in the IP activation and sports IP activation sectors. Sports IP activation business covers exclusive rights to organize authorized events with LaLiga Club brand and Le Tour de France brand in China. The Company has kept hastening comprehensive deployment of its digital marketing capability, including setting up the MCN organization, securing e-commerce sales of derivatives of LaLiga Club and Le Tour de France and providing effective marketing and live e-commerce services to brands, thereby build a closed loop – marketing to sales – system.



Copyright 2021 ACN Newswire. All rights reserved. http://www.acnnewswire.com

HONG KONG, Jul 5, 2021 – (ACN Newswire) – As one of the seven strategic emerging industries in China and one of the ten key areas of development under the "Made in China 2025" policy, the new material industry is considered the high-tech industry with the greatest potential in the 21st century, with significant impact on future development.

Global New Material International Holdings Limited (Global New Material) is a leading player in the market segment, with main products including natural mica, synthetic mica, silica, alumina and other base materials, all representative of the segment in new consumable materials featuring high market barriers, high added value and broad market prospects.

Global New Material published its IPO prospectus on 30 June 2021. Dealings in its shares on the Main Board of the Hong Kong Stock Exchange (6066.HK) are expected to commence on 16 July 2021.

I. Rapid growth of the new material industry empowers Global New Material's great potential of development

Generally, growth stocks are of greater market potential than value stocks, and a company that grows faster than its industry sector usually shows growth in sales and profits. Many outstanding growth stock companies are leaders in some emerging industries. Global New Material has the characteristics of a growth stock company.

The fast-growing "new material" industry shows promising prospects

With its main products including natural mica-based and synthetic mica-based pearlescent pigment products, Global New Material has the core technologies required in producing synthetic mica, occupies a dominant position in the high-end market, and is at the forefront of advanced technology.

With breakthroughs made in production technology, the rise of scientific manufacturing, increased public awareness and recognition of synthetic mica-based pearlescent materials in the future, and the gradually increased consumption level, synthetic mica-based, alumina-based and other pearlescent materials will be widely applied in different application fields, and will have further space for market growth.

Frost & Sullivan forecasts that the market size of the global new materials market will reach RMB3,251.11 billion in 2024, with an average annual compound growth rate of 10.9% from 2020 to 2024. Frost & Sullivan also forecasts that from 2021 to 2025, the new material market segment in which Global New Material is will experience a compound annual growth rate of 23.9% and 30.8% respectively in the global market and the Chinese market, and a rapidly increasing quantity of pearlescent materials will be applied and demanded.

Moreover, there is a strong demand for high-end and high-performance pearlescent pigment products, and the fields of automobiles and cosmetics in which pearlescent pigment products are widely applied have been developing rapidly in recent years with an annual compound growth rate of 47.1% and 32.8% respectively from 2021 to 2025, which indicates that there is a strong demand for high-end and high-performance pearlescent pigment products, and that Global New Material is expected to further develop in this context.

Global New Material is building a second-phase plant for production of high-end products as synthetic mica-based products, triggering a new wave of growth

From 2018 to 2020, Global New Material revenue increased from RMB318 million to RMB569 million and remained on the steady rise in business performance, with a compound growth rate of revenue reaching 33.7%. The company achieved this business performance thanks to continuous increase in its product sales volume and its adjustments to product structure.

In terms of sales volume, the sales volume of Global New Material's pearlescent pigment products increased from 8,451 tons in 2018 to 14,165 tons in 2020. In terms of revenue structure, the proportion of synthetic mica-based products in total revenue remained on the rise from 2018 to 2020, and increased from 21.8% in 2018 to 34.6% in 2020. Therefore, synthetic mica-based products have become one of the main pillars supporting Global New Material's business performance growth.

In the industrial field, synthetic mica-based pearlescent materials can replace metal, organic and inorganic pigments. Synthetic mica-based pearlescent materials are priced at mid- to high-level, and are mainly applied in mid-to-high-end industrial, automobiles, cosmetics and other fields. Under the influence of the trend of consumption upgrade, increasingly higher requirements are made for the performance of pearlescent materials. Synthetic mica-based pearlescent materials will be widely applied in a wide range of application fields, indicating that such materials will enjoy market potential in the high-end market.

Frost & Sullivan forecasts that from 2020 to 2024, the domestic demand for pearlescent materials will be on the rise, especially in the high-end market represented by synthetic mica-based pearlescent materials.

In order to meet the strong demand in the market for high-end and high-performance pearlescent pigment products, Global New Material is building the second-phase plant to expand its production capacity and seize market potential of pearlescent pigment products. The plant is expected to be put into operation in 2021.

According to the prospectus, Global New Material will start trial production of 6,000-ton synthetic mica in its newly-added production capacity in the second quarter of 2022, and will further expand its production capacity to 14,000 tons in the second quarter of 2023 and to 30,000 tons in the second quarter of 2025.

II. Global New Material possesses many patents, core technologies, and sustainable competitive advantage

It is well known that in the investment philosophy proposed by Buffett, those companies with high gross profit margin in the industry have more advantages. Gross profit margin reflects a company's ability to transform business operations into profit, and also reflects a company's unique advantages in raw material pricing, production technology level, product competitiveness, supply-and-demand relations, market pricing power.

That is to say, gross profit margin directly reflects a company's competitiveness. Gross profit margin of Global New Material was in the range of 46.2%-49.9% from 2018 to 2020. Can we see the unique advantages?

Global New Material possesses core technologies

Technological breakthroughs in the field of pearlescent materials has become one of the major trends in the future development of the industry. Regarding core technologies, breakthroughs in the technologies applied in producing synthetic mica are one of the key factors driving performance improvement of pearlescent materials.

At present, base materials used in pearlescent materials mainly include natural mica and synthetic mica, of which the former is scarce in China and is mainly imported from other countries and regions. Synthetic mica is a new material that features in big difficulties in R&D, low output, high added value and high technical barriers, and is currently in short supply in face of strong demand in the market. Besides, technologies applied in producing synthetic mica are of great importance for manufacturers to have a place in the high-end market.

As one of the few manufacturers with core technologies and capacity to produce high-end products, Global New Material is at the forefront of emerging technologies in the industry, possesses three patented technologies applied in producing synthetic mica, and has its core technologies and corporate strength being widely recognized in the industry.

In 2020, the market size of the Chinese synthetic mica-based pearlescent materials market reached RMB770 million, and in terms of the value corresponding to market share, top five players in the Chinese synthetic mica-based pearlescent materials market occupied a total market share of 43.3%. Among those top five players, Global New Material ranked first with a market share of 25.4%.

Global New Material has outstanding R&D advantages and highly-recognized R&D capabilities

The pearlescent material industry is a technology-intensive industry. Different technologies are required for production of pearlescent materials to meet the needs of different downstream industries. The competitiveness of a pearlescent material manufacturer in the increasingly competitive market depends on its strong R&D capabilities. Global New Material possesses industry-leading R&D capabilities, and has won many awards and titles such as "National Intellectual Property Powerful Enterprise".

Global New Material has 12 registered patents and 26 patent applications, and has 40 R&D workers. The prospectus points out that in the past three years, R&D expenditures of Global New Material were RMB10.7 million, RMB23.2 million and RMB29.3 million respectively, which accounted for 3.4%, 5.3% and 5.1% of its total revenue, and that in the future, approximately 5% of its total revenue will be invested in its R&D activities each year.

Global New Material has significant advantages in business scale, and occupies a dominant position in the industry

With respect to production and marketing of pearlescent materials, huge investments are required in R&D, production sites, precision manufacturing equipment, introduction and training of R&D workers and technicians, market promotion, import and storage of raw materials, daily capital turnover and other aspects, and a long R&D and construction cycle is involved during which huge preliminary capital investments and a large amount of working capital need to be in place. Therefore, adequate operating capital and extensive accumulated R&D technologies are the key factors for success in the pearlescent material industry.

In the pearlescent material market which is fragmented, Global New Material, as the largest synthetic mica manufacturer in China, occupies a big market share and the dominant position, and has certain advantages in terms of financial support, technologies, patents and customer relationships.

Summary:

Global New Material's EPS in 2021 is HKD0.2342, and its price-to-earnings ratio is expected to be about 15X assuming the IPO price is HKD3.52. It is a cost-effective opportunity for investors in the secondary market to buy stock in a leading company in a market segment in the field of new materials that is innovative and has growth potential, profitability, strong R&D capabilities, core technologies and sustainable competitive advantages.

Contact:
Haolu Wang, Peanutmedia
E: wanghaolu@czgmcn.com
URL: www.Peanutmedia.com

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HONG KONG, Jun 30, 2021 – (ACN Newswire) – (This article is reprinted from Gelonghui) Since China Huarong announced the postponement of its 2020 results, several international rating agencies have downgraded its corporate and bond ratings. On June 2, S&P Global Ratings announced that it would continue to keep its "BBB+" long-term and "A-2" short-term issuer credit ratings on China Huarong Asset Management Co. Ltd. (CHAMC) and its subsidiaries, China Huarong Financial Leasing Co. Ltd. (HRFL) and China Huarong International Holdings Ltd. (Huarong International) on CreditWatch with negative implications; The "BBB+" long-term issue rating on the notes that Huarong International guarantees also remained on CreditWatch with negative implications.

However, S&P Global Ratings continued to view CHAMC as a government-related entity with a very high likelihood of extraordinary government support. The reasons of remaining to be listed on CreditWatch with negative implications were the uncertainty caused by China Huarong's delay in releasing its 2020 results to the company's core credit indicators, as well as the uncertainties to be brought to the group from the related transactions.

Then, how to view CHAMC's "Recent Concerns" and "Future Worries"?

1. CHAMC's liquidity is not at risk with cash on hand over RMB140 billion

At present, the market is concerned about whether CHAMC has the problem of default. The core point is its overseas bonds worth US$20 billion. Although its 2020 annual report has not been disclosed, the question can be answered through the analysis of CHAMC's liquidity revealed in the financial reports of the past two years.

The company's liquidity needs to be viewed in the company's financial statements. In the past year and a half, although the cash on the account of CHAMC decreased compared with the previous years, it still remains at more than RMB140 billion (unit same below). According to the latest 2020 Interim Report, its cash on hand is RMB140.3 billion, which remains at a relatively high level, with a year-on-year increase of 38.49% compared with 2018.

The operating cash flow reached RMB82.864 billion in 2019 with a year-on-year increase of 384.02%, and RMB45.752 billion in the half year of 2020 with a year-on-year increase of 32.16%, indicating that CHAMC's business development was relatively stable in the past two years, and its ability to continuously create cash flow remained strong.

2. Substantial shareholders and regulators are unlikely to allow Huarong to default

Apart from the financial statements, on the other hand, CHAMC is a financial enterprise majority-owned by the Ministry of Finance and directly supervised by the China Banking and Insurance Regulatory Commission (CBIRC). Neither the Ministry of Finance nor the CBIRC allows the occurrence of default, so the possibility of the rumored bankruptcy path in the market is currently almost zero.

S&P Global Ratings, an international rating agency, also believes that government authorities should take measures to reduce the relevant systemic risks caused by possible events, including the situation in which domestic banks reported by the news continue to give credit support to CHAMC, and may take further measures. Earlier, Reuters reported that China's regulatory authorities had coordinated with a number of banks to "not withdraw loans" from CHAMC and were ready to support it.

As for Huarong International, the main body of overseas bond issuer, S&P Global Ratings continues to view it as a core subsidiary of CHAMC, and that any potential extraordinary support from the government will be indirectly available to the company, if needed. S&P Global Ratings expects that CHAMC may extend direct liquidity support, or indirect liquidity support to Huarong International through the group's relationships with Chinese financial institutions.

Judging from the latest progress, CHAMC has maintained the timely payment of domestic and overseas public debts. According to its announcement, from April 1 to June 3, CHAMC and its subsidiaries repaid 36 mature domestic and overseas bonds in full on schedule, with a total amount of RMB32.056 billion (calculated at the exchange rate of March 31), including 3 overseas bonds with the amount of SGD600 million, US$300 million and US$900 million, respectively; and 33 domestic bonds (including certificates of deposit of Huarong Xiangjiang Bank), with a total amount of RMB21.456 billion.

3. Improving quality and efficiency is the "foresight", and returning to main business is the industry trend

Diversification vs. specialization? The dispute over road issues has been haunting the 22-year development history of asset management companies. When the originally established ten-year deadline was about to expire, the reform and transformation of asset management companies triggered a round of theoretical and practical discussions. Specialization or diversification was also the choice debated at that time. Facts have proved that in the second ten-year development period, the "Big Four" asset management companies (AMCs) all embarked on a diversified expansion path, and successively won many financial licenses such as banking, securities, trust, insurance and financial leasing.

After 2017, the wind direction has changed. The 19th National Congress of the Communist Party of China proposed to hold the bottom line of preventing systemic financial risks as the fundamental task of financial work. The Central Economic Working Conference held at the end of that year put the prevention and control of financial risks as the focus of the battle to prevent and defuse major risks. Since then, the Chinese regulatory agencies have significantly strengthened supervision on the specialization and core business operation of the "Big Four" AMCs.

According to the open market information, the four asset management companies have also taken corresponding actions. Cinda transferred the equity of three subsidiaries of Cinda Property And Casualty Insurance Co., Ltd., Happy Life Insurance Co., Ltd. and Zhongyuan Asset Management Co., Ltd.; Great Wall transferred part of the equity of Great Wall Xinsheng Trust Co., Ltd., and is promoting the transfer of equity of Great Wall Changsheng Life Insurance Co., Ltd. and local AMCs in Gansu and Ningxia; Orient transferred the equity of many of its small loan companies; Huarong also transferred the equity of Huarong Kunlun held in the early stage. Recently, some foreign media reported that it intends to divest non-core assets.

At the start of the third decade, the four AMCs are unanimously embarking on the road to return to their main business. It can be predicted that the four major AMCs may continue to downsize in the future, which is in line with the development trend of industry, regulatory requirements and the current strategy of preventing and resolving financial risks. In the long run, specialization will help the AMC industry optimize its business structure, improve asset utilization efficiency, and improve core competitiveness and development quality. After all, China does not lack good banking, insurance and securities institutions, but needs more professional and experienced non-performing asset management institutions.

For China Huarong, stabilizing the current liquidity is only a phased task, rather than a goal of reform. From the analysis of all aspects, the "immediate worries" of liquidity are ungrounded, and the market should pay more attention to its "foresight" of improving quality and efficiency, as well as the future development prospects brought by this "foresight" to Huarong.

How can AMCs improve quality and efficiency? It is undoubtedly a relatively quick strategy to divest some non-advantageous and non-main business subsidiaries. On the one hand, the released funds will help optimize AMCs' business structure, promote strategic adjustments, and further focus on the main business. On the other hand, it is also an opportunity for Huarong to completely offload the historical burdens. According to Huarong's 2019 annual report, the revenue of the non-performing asset management segment was RMB69.791 billion, representing an increase of 7.8% over 2018, and the pre-tax profit was RMB19.591 billion, representing an increase of 51.8% over 2018. The contribution of the main business is relatively high.

From the perspective of industry opportunities, under the economic downturn cycle, the non-performing assets that have been building up in recent years are a vast "blue ocean". On June 1, the CBIRC disclosed at a press conference that at the end of the first quarter of this year, the banking industry's non-performing loan balance was RMB3.6 trillion, with a non-performing loan ratio of 1.89%. In the first quarter, the banking industry disposed of non-performing loans of RMB463.2 billion, exceeding the same period last year.

In addition, the CBIRC recently issued the "2021 Regulations and Legislation Work Plan", including the formulation of the "Interim Measures for the Supervision and Management of Local Asset Management Companies", which means that local AMCs are expected to usher in unified supervision this year. Under unified supervision, the AMC industry may face a new round of reshuffle, which will increase the constraints on local AMCs, while it is favorable for the four leading AMCs in the industry.




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