On February 5, 2024, the IPO application of Changzhou Ruihua Chemical Engineering Technology Co., LTD. (hereinafter referred to as "Ruihua Technology") was approved at the Municipal committee meeting of Beijing Stock Exchange.

Prospectus shows that Ruihua Technology was founded in 2007 by Xu Zhigang, who had just resigned as deputy director of the Technology Research Institute of East China University of Science and Technology. Its main business is to provide petrochemical enterprises with complete sets of technology comprehensive solutions based on chemical process package technology. The main products include chemical process package, chemical equipment and catalyst. Sponsored by Citic Construction Investment, the IPO in Beijing Stock Exchange intends to raise 417.4 million yuan, for 12,000 tons/year catalyst project and 100,000 tons/year degradable plastic project.

In the previous three rounds of inquiries, the sustainability of Ruihua Technology's business growth, the rationality of the use of raised investment funds and the accuracy of information disclosure continued to be concerned.

The downstream products of Ruihua technology are mainly styrene, propylene oxide and maleic anhydride, which are in the petrochemical industry and have strong periodicity. Since 2022, the international situation has been grim, geopolitical conflicts have intensified, crude oil prices have fallen, and new production capacity has been released, and the prices of chemical products such as styrene, propylene oxide and maleic anhydride have shown a downward trend. As of June 5, 2023, the price of propylene oxide was 9,630 yuan/ton, about 50% lower than the market high in 2020 and 2021. The gap between China's styrene supply and demand in 2022 is 103,100 tons, down 92.54 percent year-on-year, and there is a risk of overcapacity in the future. In 2022, China's maleic anhydride production is 1.131,400 tons, and China's consumption is 847,900 tons, and the industry is currently in a state of oversupply. Ruihua technology also admitted that when the downstream industry boom declines, product demand shrinks, downstream customers' new chemical project investment is tightened, and the company's business volume will be reduced.

Prospectus "Capacity and production and sales during the reporting period" shows that from 2020 to the first half of 2023, Ruihua technology reactor sales were 1693.27 tons, 386.6 tons, 3876.22 tons, 400,996.00 tons, heat exchanger sales were 2088.38 tons, 315.92 tons, 2218.77 tons, 75700.00 tons. In other words, only in the first half of 2023, the sales volume of the reactor of Ruihua technology increased by more than 100 times compared with the whole year of 2022, and the sales volume of the heat exchanger increased by more than 30 times. In the "overall change in sales price" section of the prospectus in the first half of 2023, the average reactor sales price of Ruihua technology was 62,200 yuan/ton, and the reactor sales revenue of Ruihua technology only reached 24.942 billion yuan in the first half of 2023, far exceeding the operating income of 207 million yuan disclosed in the prospectus in the first half of 2023.

During the reporting period, Ruihua Technology carried out a total of two cash dividends, in February 2020, the implementation of the 2019 half-year equity distribution, the distribution of cash dividends of 20 million yuan, in June 2023, the implementation of the 2022 annual equity distribution, the distribution of cash dividends of 89,999,900 yuan, the total dividend amount of 110 million yuan. At the end of 2019, the monetary fund balance of Ruihua Technology was only 29.439 million yuan, and the cash dividend was 20 million yuan on February 21, 2020. Three days later, the company signed a loan Agreement with a total of 22 shareholders, including the actual controller, the director and the employee shareholders, on the ground that the working capital was tight due to the impact of the epidemic. The borrowed funds of 15.2336 million yuan were used for daily operations, such as paying taxes, staff salaries and suppliers' payments.

The fundraising project intends to use 315 million yuan for "12,000 tons/year catalyst project", including 55.39 million yuan of reserve funds and working capital; And 102 million yuan is planned to be used for "100,000 tons/year degradable plastic project". During the reporting period (from 2020 to January-June 2023), Ruihua Technology has not carried out the production of degradable plastics, and the catalyst business is a new business in 2020, but it does not involve production. The main business process is the purchase of catalyst raw materials, and the sales after outsourced processing. The revenue of each period is 8.1802 million yuan, 15.5688 million yuan and 0.00 million yuan respectively. In other words, Ruihua Technology has no production experience in the two major products in the raised investment project, and the degradable plastics are a new field of downstream terminal products of the original business, and the product quality and market development are greatly uncertain, but Ruihua technology has not given a convincing explanation of entering the new field in the prospectus and the reply to the inquiry.

Although Ruihua Technology has passed the deliberation of the Beijing Stock Exchange Municipal Committee, in the next registration stage, it still needs to give more convincing explanations on many issues to enhance investor confidence.

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