With the rising consumption power of the younger generation and the upgrading of consumption concepts, the "smell economy" of the daily chemical market has officially set sail.
In the past, the global flavor and fragrance market has been occupied by international giants for a long time. However, in recent years, domestic fragrance companies have sprung up, trying to get a share of the 100 billion fragrance battlefield. Since 2020, a large amount of capital has extended olive branches to upstream companies, and Kunshan Yaxiang Fragrance Co., Ltd. (hereinafter referred to as "Asian Fragrance") is one of them.
Since its application for listing on the Growth Enterprise Market in June 2020, Yaxiang has undergone multiple rounds of inquiries and updated its prospectus several times. Finally, on May 6, 2022, the China Securities Regulatory Commission announced that it had approved the registration of Yaxiang’s GEM IPO.
According to Zhitong Finance APP, Yaxiang Co., Ltd. was established in 2001. Its main business is the research and development, production and sales of spices. It has now become one of the main manufacturers of mid-to-high-end spices in China. Fragrance is an organic compound that can sense fragrance by smell or taste, also known as fragrance raw material. Spices and essences are not direct consumer goods in people's lives, but are added to other products as supporting raw materials. They are widely used in food, tobacco, daily chemicals, medicine, feed, cosmetics, textiles and leather and other industries.
The company's main products can be divided into natural flavors, synthetic flavors, cooling agents, etc. Natural flavors mainly include eugenol vanillin, ferulic acid vanillin, natural methyl cinnamate, natural raspberry ketone and other products, and synthetic flavors mainly include Including privet aldehyde, gerponyl ester, apple ester and other products, cooling agents mainly include WS-23, WS-3 and other products.
It is worth mentioning that Yaxiang has become one of the major manufacturers of vanillin and WS series products in the world. In 2019, Yaxiang Co., Ltd. sold a total of about 200 tons of vanillin products, accounting for about 30% of the global market share of similar products; about 280 tons of WS series products, accounting for about 80% of the global market share of similar products. It has established long-term and stable cooperative relations with well-known international companies in the flavor and fragrance industry such as international flavors and fragrances, Givaudan, Firmenich, and ABT, as well as well-known companies in the fast-moving consumer goods industry such as Mars Wrigley, Mondelez International, and Colgate.
Operating income continues to grow
In 2019, 2020 and 2021 (the reporting period, the same below), the company's revenue continued to grow, reaching 511 million yuan, 575 million yuan and 621 million yuan respectively.
During the reporting period, the company's natural fragrance product revenue showed an upward trend, amounting to 253 million yuan, 269 million yuan and 309 million yuan respectively, contributing 50% of the company's revenue and being the company's main source of income. In addition, the company's revenue from cooling agent products has also increased steadily, reaching 136 million yuan, 145 million yuan and 189 million yuan respectively, and the proportion of revenue has also increased from 27.78% in 2019 to 31.05% in 2021. The company's synthetic fragrance product revenue showed a trend of first rising and then falling, respectively 101 million yuan, 128 million yuan and 111 million yuan. According to the prospectus, the fluctuation of the project's sales is mainly affected by the customer's product demand for privet aldehyde.
However, it is worth noting that according to the "High Pollution, High Environmental Risk" Product List (2021 Edition) issued by the Ministry of Ecology and Environment, the company's main products, eugenol vanillin and ferulic acid vanillin, belong to the category " Vanillin" is classified as "high pollution and high environmental risk products". During the reporting period, the total sales revenue of the company's vanillin products accounted for 28.02%, 24.73% and 15.82% of the main business revenue respectively.
Although the relevant national and local authorities have not issued mandatory pressure drop requirements for products in the "Double High Product List", the company has begun to implement a pressure drop plan for vanillin products since 2022. The company admits that if a restrictive policy for the "Double-High Product List" is introduced in the future or the company's new product development is not smooth, it will have an adverse impact on the company's operating performance.
Nearly 70% of revenue comes from overseas
From the perspective of the downstream market, the company's top five customers are all from abroad. During the reporting period, they were ABT, International Fragrance & Fragrances, IFF, Mars Wrigley, Givaudan and Firmenich. The revenue from the top five customers accounted for the company's revenue respectively. 72.72%, 72.29% and 67.97%.
Zhitong Finance APP noticed that although Yaxiang shares did not sell more than 50% of the total sales to a single customer, some products still generated obvious customer dependence.
The company's cooling agent products are mainly WS-23 products. During the reporting period, the sales amount to the top five customers accounted for 87.98%, 75.40% and 72.55% respectively, of which the sales of Mars Wrigley accounted for a higher proportion, accounting for 70.20% in each period. %, 50.21% and 45.46%, it can be seen that the company has a certain dependence on Mars Wrigley in WS-23 products.
In this regard, the company stated that compared with other customers, Mars Wrigley has a large and stable demand for WS-23 products, and it is the most high-quality customer for this product. Therefore, the company prioritizes allocating production capacity to Mars Wrigley. However, if Mars Wrigley reduces the purchase scale of WS-23 products or reduces the purchase price in the future, it will affect the company's sales revenue and product profits of this product.
At the same time, the company's overseas sales revenue was 354 million yuan, 372 million yuan and 411 million yuan respectively, accounting for 72.27%, 68.58% and 67.58% of the main business income, respectively, higher than the peers. Among them, the income of the United States accounted for 42.25%, 40.77% and 39.68% respectively, which accounted for a relatively high proportion. Due to the high proportion of overseas sales, fluctuations in tariffs and exchange rates will have an impact on the company's performance.
According to the Zhitong Finance APP, affected by the Sino-US trade friction, the tariff rate of the products sold by the company through its subsidiary US Yaxiang increased during the reporting period, and the tariff costs borne by the company increased, resulting in an increase in the unit cost of products. Specifically, in addition to the 7.5% tariff imposed on vanillin products, other major products of Yaxiang Co., Ltd. have been levied a 25% tariff.
In terms of foreign exchange gains and losses, the company's export revenue is mainly priced and settled in US dollars, and a small part is priced and settled in euros. In 2020 and 2021, affected by the appreciation of the exchange rate of RMB against the US dollar, the company confirmed that the exchange losses amounted to RMB 8.6417 million and RMB 3.4248 million respectively.
Affected by this, the company's profitability is also relatively volatile. During the reporting period, the company's gross profit margins were 19.61%, 14.88% and 15.50%, lower than the industry average; the company's net profit was 84.4845 million yuan, 77.3472 million yuan and 90.6144 million yuan respectively.
Two-way growth in demand and supply of flavors and fragrances in China
From the perspective of industry data, the global flavor and fragrance industry is mature and the industry has maintained steady growth. According to data released by Zhiyan Consulting, the global market size of flavors and fragrances increased from US$24.1 billion in 2015 to US$28.1 billion in 2019, with a compound annual growth rate of 5.1%. The Asian market has become the region with the largest consumption demand for flavors and fragrances in the world, accounting for about 40% of the global market share. With the current market in developed countries such as Europe and the United States approaching saturation, the fragrance and flavor industry is constantly shifting to developing countries, and the fragrance market in these regions has become the most potential and competitive market.
Among developing countries and regions, China is one of the few countries that can compete with developed countries in the production of flavors and fragrances. The export volume of vanillin and ethyl vanillin has accounted for more than 50% of the global supply. Maltol and ethyl maltol have also captured most of the international market.
At the same time, with the development of China's economy and the improvement of people's living standards, the demand and supply of flavors and fragrances in my country have grown in both directions, and the market size of the flavors and fragrances industry has continued to expand. According to the "14th Five-Year" Development Plan for the Fragrance Industry, during the "13th Five-Year Plan" period, the size of my country's fragrance and fragrance market has grown steadily. According to incomplete statistics from the association, the domestic production of fragrances in 2020 will be about 218,000 tons, and the sales will be about 168 million. 100 million yuan; the output of essence is about 317,000 tons; the sales volume is about 24 billion yuan. It is estimated that by 2025, the main business income of my country's flavor and fragrance industry will reach 50 billion yuan, with an average annual growth rate of more than 2%. Among them, the output of flavors will reach 400,000 tons, and the output of spices will reach 250,000 tons.
On the whole, the fragrance and flavor industry is an industry with stable growth, fierce competition and high product quality requirements. Asia Fragrance, which is a market leader in the industry segment, will definitely benefit from the growth of industry demand. However, considering the company's own problems such as the high proportion of overseas sales and strong customer dependence, after the successful listing of Yaxiang shares, whether the company can seize the opportunity to further enhance the company's core competitiveness requires continuous observation of the market.
Yaxiang shares raised 520 million yuan in this listing, which will be used for 6500t/a flavors, fragrances and food additives, as well as by-product 15 tons of cinnamon essential oil, 1 ton of clove light oil and 20 tons of limonene projects, repayment of bank loans and replenishment of liquidity. funding project.
