In-depth Financial Analysis of Benxing New Materials and Research on the Impact of Environmental Policies on Fine Chemicals Valuation

Based on the collected information, I will provide you with an in-depth financial analysis of Benxing New Materials and a study on the impact of environmental policies on the valuation of the fine chemicals industry.

Benxing New Materials (Hubei Benxing New Materials Co., Ltd.) is a fine chemical enterprise that plans to list on the Beijing Stock Exchange. Its main business segments [0] include:

• PVC Heat Stabilizers
  (accounting for 45.16% of revenue)
• Intermediates
  (accounting for 29.32% of revenue)
• Pesticide Technicals
  (accounting for 16.97% of revenue)
• Other Businesses (accounting for 8.55% of revenue)

The company’s main products include methyl tin mercaptide, chlorpyrifos technical, thiamethoxam technical, tebuconazole technical, and their intermediates [1].

Based on the prospectus and public financial data, the core financial indicators of Benxing New Materials over the past three years are as follows [0][1]:

• The gross profit margin of the pesticide technicals business is approximately
  26.81%
  (not 40%), which is lower than the company’s overall historical average [1]
• The compound annual growth rate (CAGR) of net profit is
  -8.99%
  , showing a negative growth trend [0]
• Triggered
  26 financial risk warning indicators
  [0]

The claim of “40% gross profit margin yet cumulative loss of RMB 400 million” is somewhat misleading. The actual situation is as follows:

1. Actual Gross Profit Margin of Pesticide Technicals Business
   : According to the prospectus data, the gross profit margin of the pesticide technicals business in 2024 was 26.81%, with an operating profit margin of -0.68% [1]

2. Analysis of Factors Leading to Profit Decline
   :
   • Industry Overcapacity
     : The pesticide technicals industry faces severe oversupply, which continues to put pressure on product prices [2]
   • Policy Restriction Risks
     : Chlorpyrifos and thiamethoxam are listed as restricted items in the Guidance Catalog for Industrial Structure Adjustment (2024 Edition) [1]
   • Rigid Cost Increases
     : Fluctuations in raw material prices and increased environmental protection investment have led to rising costs [0]
   • Rising Expense Ratio
     : The period expense ratio has continued to rise from 6.88% to 7.07% [0]
   • Deteriorating Cash Flow
     : Net cash flow from operating activities decreased by 42.93% year-on-year [0]

3. Limited Revenue Contribution from Pesticide Technicals
   : This business accounts for only 16.97% of the company’s total revenue, so its role in boosting overall performance is limited [0]

The Guidance Catalog for Industrial Structure Adjustment (2024 Edition), officially implemented in February 2024, has a profound impact on the fine chemicals industry [1]:

• Chlorpyrifos technical production processes
• Thiamethoxam technical production processes

• Restricted items mainly refer to production capacities with backward technologies that do not meet industry access criteria
• It does not prohibit the production of existing restricted products, but restricts the expansion of new production capacities
• Enterprises face pressure to upgrade technologies or transform production capacities

• Environmentally friendly new pesticide varieties (such as low-toxicity products like clothianidin)
• High-end fine chemical new materials
• Clean production process technologies

• Traditional high-pollution, high-energy-consumption varieties
• Low-end intermediate processing
• Traditional products with overcapacity

1. Elimination of Backward Production Capacity
   : Small and micro enterprises that fail to meet environmental protection requirements exit the market
2. Increased Industry Concentration
   : Leading enterprises expand their market share
3. Technology Upgrade
   : Drives the industry towards high-end and green transformation

According to industry research data, the pesticide technicals industry is facing the following challenges [2]:

• The contradiction between continuous capacity expansion and slowing demand growth
• The growth rate of pesticide usage continued to decline in 2024
• Industry inventories are at a high level, putting pressure on operating rates

• Prices of mainstream varieties have continued to fall from their 2023 highs
• Prices of bulk varieties such as glyphosate are sluggish
• Some varieties have entered a loss-making range

• The overall gross profit margin of the industry has declined
• Leading enterprises also face pressure from declining profits
• Some small and medium-sized enterprises have incurred operating losses

1. Business Structure Risk
   : Pesticide technicals account for only 16.97% of revenue, but face policy uncertainty
2. Insufficient Growth
   : The CAGR of operating revenue is only 9.22%, with negative net profit growth
3. Declining Profit Quality
   : Gross profit margin and net profit margin continue to decline
4. Deteriorating Cash Flow
   : The cash collection ratio remains below 1, and the net cash flow ratio has dropped to 0.54
5. Asset Quality Pressure
   : Accounts receivable turnover rate has decreased, and prepaid accounts have increased by 136.4%

1. Policy Risk
   : Risk of further prohibition or restriction on pesticide technicals products [1]
2. Industry Cycle Risk
   : The pesticide industry as a whole faces overcapacity, with sustained downward price pressure [2]
3. Operational Risk
   : Continued decline in gross profit margin, weakening profitability
4. Cash Flow Risk
   : Sustained decline in net cash flow from operating activities

1. The statement “40% gross profit margin yet loss” is inaccurate
   : The actual gross profit margin of pesticide technicals is approximately 26.81%, and the company as a whole remains profitable, but its profit quality continues to deteriorate.
2. The root cause of profit decline lies in industry difficulties
   : The pesticide technicals industry faces multiple pressures such as overcapacity, slowing demand, and policy restrictions, leading to revenue growth without corresponding profit growth.
3. Environmental policies accelerate industry reshuffling
   : Restrictive industrial policies promote the transformation of the industry towards high-end and green development, creating short-term valuation pressure while benefiting high-quality enterprises in the long run.

• The pesticide technicals industry will remain in a bottom consolidation phase
• Environmental protection policies will continue to tighten, accelerating the elimination of backward production capacity
• Industry prosperity is expected to gradually recover after supply-side optimization

• Industry concentration will increase, and leading enterprises will expand their market share
• High-toxicity, high-residue pesticides will gradually be phased out, with low-toxicity and environmentally friendly varieties becoming mainstream
• Technological innovation will drive product structure upgrading

For Benxing New Materials and similar fine chemical enterprises, it is recommended to focus on the following investment points:

1. Focus on Business Transformation
   : The company is deploying new businesses such as new energy materials; pay attention to the progress of transformation
2. Focus on Policy Trends
   : Track industrial policy adjustments and assess their impact on existing businesses
3. Focus on Cash Flow
   : During industry downturns, cash flow adequacy determines survival capability
4. Focus on Valuation Margin of Safety
   : At the industry bottom, high-quality enterprises have mid-to-long-term allocation value

[0] Sina Finance - IPO Eagle Eye Warning | Benxing New Materials’ Gross Profit Margin Declines Year by Year (https://finance.sina.com.cn/stock/aiassist/ipofxyj/2025-12-25/doc-inhczthc3313310.shtml)

[1] Prospectus of Hubei Benxing New Materials Co., Ltd. (http://file.finance.sina.com.cn/211.154.219.97:9494/MRGG/SBGG/2025/2025-3/2025-03-28/10819970.PDF)

[2] Sina Finance - Huatai | Petrochemicals: Prosperity Expected to Rise in 2026 with Gradual Supply Optimization (https://finance.sina.com.cn/stock/stockzmt/2025-12-12/doc-inhanyzn7170897.shtml)