Why did Meibang raise funds to build an annual production line of 6,000 tons of pesticide？

Meibang plans to raise no more than 530 million yuan for the construction project of an annual production line of 6,000 tons of pesticides. The company said that on the one hand, it can provide part of the technical for the production of the company's existing formulations, improve the stability of the supply chain, and enhance the cost control ability; On the other hand, it helps the company to realize the layout of the upstream technical field, enhance the company's comprehensive strength, and meet the development trend of the industry and the company's development plan.

Meibang is mainly engaged in product development, production, sales and agricultural technology promotion and service of pesticide formulations. The main products are insecticides, fungicides, plant growth regulators and so on. The company was listed on the main board of the Shanghai Stock Exchange in September 2021, and raised a total of 429 million yuan at that time, which is planned to be used for the technical transformation project of the environment-friendly pesticide formulation production base, the comprehensive laboratory construction project, the marketing network system construction project, the enterprise information construction project and the supplementary working capital.

 Less than a year after listing, in August 2022, Meibang Shares disclosed the convertible bond issuance plan for the first time, planning to raise no more than 410 million yuan for the "annual output of 4,100 tons of pesticide production line construction project." In May this year, Meibang shares revised the plan, raising the total amount of capital to 530 million yuan, and the raised investment project was also changed to "annual output of 6,000 tons of pesticide production line construction project."

     On August 4 this year, the Shanghai Stock Exchange issued a letter of inquiry to Meibang shares, asking it to explain the necessity of the raised investment project, whether there is significant uncertainty in the implementation, the rationality of the new production capacity and the financing scale. 

Meibang shares replied that the company's current pesticide technical only has a multifunctional production workshop with an annual output of 660 tons, mainly producing a few technicals such as Axine copier and Chlorfenapyr, with fewer types of products and a small volume. The fundraising project is closely focused on the company's main business, focusing on promoting the production and sales of pesticide technicals, opening up the industrial chain of pesticide formulations and upstream technicals, and completing the industrial layout of the integrated development of technicals and formulations.

The project plans to build an annual production line of 6,000 tons of pesticide technicals, with specific products of 2000 tons/year Chlorfenapyr, 2000 tons/year Chlorantraniliprole  and 2000 tons/year Pyraclostrobine. Among them, Chlorfenapyr technical products has achieved a small amount of sales in the first half of 2023, and Chlorantraniliprole and Chlorfenapyr are new products of technicals.

Meibang said that through the implementation of this investment project, the company will vigorously invest in the research and development and production process improvement in the field of technicals, increase the production capacity of technicals, and explore the technicals market, which can not only enrich the company's product matrix, enhance the scale advantage of the company, but also reduce the adverse impact of price fluctuations of some technicals on the company, and further enhance the company's core competitiveness. Increase profitability

Meibang  also said that this investment project involves entering the new business and new products of technicals in the upstream of the pesticide industry chain, and the company may encounter difficulties in expanding the market for new products, instability of the new business team, and price fluctuations of new products, which will have a potential adverse impact on the company's revenue growth and profitability. In addition, if the company's market development is blocked or market demand is not up to expectations after the implementation of this investment project, and market competition is intensified, it may lead to the company's new production capacity of this investment project cannot be fully digested, which will adversely affect the company's overall operating performance.