China丨Rainbow’s development strategy and market planning

On Oct 28,2022, Rainbow held an IRA in the form of online conference. More than 120 researchers and fund managers from 60 securities companies participated in this conference. Wang, Chairman of Rainbow, attended the meeting.

Wang introduced the company's basic situation and the operation of the third quarter of 2022, and answered the following questions:

1. Q: Could you comment briefly on the company's third-quarter report?

(1)This report shows that the company’s revenue and net profit have a relatively large year-on-year growth, but there is a slight decline compared to Q2.

The main reasons of revenue decline are:

The global crop protection market is geographically unevenly distributed, and the market value is greater in the southern hemisphere than in the northern hemisphere. The geographical distribution of our global business expansion is also uneven. At present, the region that accounts for a large proportion of our revenue is America, especially South America.

Therefore, the annual revenue of the company will have some seasonal differences at present. Generally, it will continue to rise from January to August, and then start to decline in September along with the slow delivery season. The slight decline of the revenue of the third quarter is mainly due to normal seasonal factors.
In recent years, as the company has continued to build a comprehensive global marketing network, seasonal differences have become less and less significant.

2. Q: Since the third quarter of the domestic crop protection industry, the prices of technicals have decreased significantly, and the demand has decreased. May I ask why the gross profit margin of your company has increased?

A: According to the company's medium-term strategic planning (2020-2024)

(1)Since 2021, the company has accelerated the promotion of To C business in more countries with obvious results. The gross profit margin of To C business is significantly higher than To B business, resulting in a continuous rise in the gross profit margin of the company.

(2) The company has launched the expansion of new markets since 2020, and the business competition in many new markets is less fierce than that in traditional markets, and the profit margin is significantly higher than that in traditional markets.

(3) The company's continuous investment in R&D and innovation has better improved the capacity, cost and quality advantages of self-produced active components, and supported the continuous improvement of the company's gross margin since 2019.

3. What is the outlook of your company's future performance?

About our performance outlook: According to our medium-term strategic plan (2020-2024), seven key tasks in our plan are progressing smoothly, and most of the key tasks are ahead of expectations. The company continues to focus on two ends: R&D and innovation of advanced manufacturing; Further improve the global marketing network.

(1) For the R&D and innovation of advanced manufacturing, we just announced the technological breakthrough and the safety and stability of the supply chain, we also decided to resume production of the Glyphosate technical unit through technical modification. At the end of 2023, a herbicide technical device with the world's leading scale and technology will be put into production; in the first quarter of 2024, another herbicide technical device with the world's largest scale and world-leading technology will be put into production; 2024-2026, another 5 important technical equipments will be put into production. On the whole, the company has made more progress than expected with the continuous investment in R&D and innovation since 2019. The technological progress of the technical manufacturing end and the production of the device will enable the company to have more power in the global market of important active components, which will better support the expansion of the global market

(2) In terms of further improving the global marketing network: on the one hand, the company actively expands the global market, and on the other hand, we promote the enrichment, optimization and upgrading of business models in various markets. It should be said that in the past two years, the company has sped up in an all-round way.

(3) Based on the implementation of the above two key tasks, we have full confidence in the company's revenue scale, as well as the continuous improvement of gross profit margin and net profit before 2029 (the next medium-term strategic planning period 2025-2029).

4. Q: What are the current barriers to competition? Does the original advantage of registration license still exist now? Or a new advantage built by company?

A: The company's core competitiveness is based on the industry competition analysis, the critical success factors analysis, customer key purchase factor analysis. Combined with our own SWTO analysis, we have discussed and summarized six value propositions of the company: Rich and perfect product portfolio, best cost performance, global registration capacity, delivery guarantee, strong financial support and reliable partners. And we determined that the competitive advantages to be strengthened and highlighted in the following six aspects: unique business model, clear and firm implementation of strategic planning, professional, dedicated and international core team, advanced manufacturing supported by R&D, extensive coverage of the global marketing network, complete industrial chain.

5. Q: What is the company's plan for the EU market?

A: (1) For the EU market: Due to the long registration process and large investment, the company did not plan and implement this market until around 2018. At present, the first stage of the work has been basically completed—technical equivalent registered. At present, we have obtained 75 technical equivalents from EU, and is expected to complete the construction of a one-stop platform for the supply of active components from EU by the end of 2023. And we have started the second phase of the work - screening related formulations for registration. It is expected that formulations will start to be approved in 2023. At the same time, the company is also looking for suitable medium-sized companies in the EU to carry out M&A to accelerate the growth of the European market. Overall, according to the company's plan, the EU market will contribute to the company's performance in the next medium-term strategic planning period (2025-2029).

6. Q: May I ask whether the company has a market and technical layout for the patent products that will expire soon?

A: One of the six value propositions of the company is rich and perfect product portfolio. Company took the lead in the global market layout for all important active component and has selected the relevant important active component to carry planning layout on the R&D of innovative and advanced manufacturing. And based on the company's understanding of the whole industrial chain from factory to farm, our company has obvious advantages in product planning.