Wuhan Organic Holdings Limited (Stock Code: 2881.HK) successfully listed on the main board of the Hong Kong capital market on June 18, 2024. The company is a well-known supplier of toluene derivatives in China and the global market, focusing on manufacturing toluene oxidation and chlorination products, benzoic acid ammoniation products, and other fine chemical products through organic synthesis processes. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provides exclusive industry advisory services for the listing of Wuhan Organic Holdings Limited, and hereby warmly congratulates it on its successful listing.
Wuhan Organic Holdings Limited (hereinafter referred to as 'Wuhan Organic') successfully listed on June 18, 2024. The company plans to issue a total of 18,300,000 shares, with the final issue price per share being HK$5.50. The net proceeds raised are approximately HK$25.85 million.
During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.
Investment highlights
The company is a market-leading and top-tier manufacturer, producing toluene oxidation products and toluene chlorination products for various household and industrial applications;
The company strategically designs a diverse portfolio of products for four major industries (i.e., food preservatives, household chemicals, animal feed acidifiers, and synthetic intermediates for agricultural chemistry and pharmaceutical use) to enhance its brand and reputation;
The company's cost-effective production processes and sophisticated equipment are driven by advanced R&D capabilities;
The company's vast product distribution network enhances its market leadership;
The continuous and sustainable business success of the company depends on its vast and cohesive customer base;
The company's experienced management team boasts a solid track record and serves as a leading example for guiding its own growth.
According to the Frost & Sullivan report, the company:
Based on sales revenue in 2023, the company is the largest producer of benzoic acid and sodium benzoate in China, as well as the second-largest producer of benzyl alcohol, accounting for 62.0%, 37.9%, and 33.9% of the total revenue in China's market in 2023, respectively.
In the global market, the company ranked second among benzoic acid and sodium benzoate manufacturers and third among benzyl alcohol manufacturers in 2023, accounting for 37.0%, 22.4%, and 20.6% of the total global market revenue in 2023, respectively.
Global Overview of Toluene and Toluene Derivatives Industry
Introduction to Toluene and Its Derivatives
Toluene is one of the most important commonly used chemical raw materials. It is a colorless, transparent, volatile liquid with a distinctive aromatic odor at room temperature. It is mainly used for blending gasoline components, producing toluene derivatives, explosives, dye intermediates, and pharmaceuticals. Toluene derivatives can be produced through various reaction processes, including the oxidation, chlorination, ammoniation of benzoic acid, and other fine chemical products.
Toluene oxidation products:Benzoic acid and sodium benzoate are the main products of toluene oxidation. Benzoic acid is a white crystal or powder that is widely used as a preservative and intermediate in industries such as food, pesticides, pharmaceuticals, and printing and dyeing. Sodium benzoate is a white crystal or colorless powder, mainly used in the pharmaceutical industry, printing and dyeing industry, plant genetic research, and other fields.
Toluene chlorination products:Benzyl chloride and benzyl alcohol are the most common chlorinated products of toluene. Benzyl chloride is a colorless transparent liquid with an irritating odor and is an important intermediate in organic synthesis, used in the production of fragrances, dyes, pharmaceuticals, and synthetic resins. Benzyl alcohol is a colorless liquid used in the manufacture of fragrances and pharmaceutical raw materials, and can also serve as a preservative, solvent for paints and dyes.
Amino benzoate products:Benzonitrile and benzotriazine are typical ammoniated products of benzoic acid. Benzonitrile is a colorless oily liquid with an almond-like odor, mainly used as an intermediate in pesticides and dyes, a solvent antioxidant, and as a solvent for other organic substances. Benzotriazine is a white crystalline powder, mainly used in the manufacture of thermosetting resins, modified resins, amino coatings, plastics, pesticides, and dyes.
Other fine chemical products:Other fine chemical products mainly include benzyl acetate and p-chlorobenzyl alcohol. Benzyl acetate is a colorless liquid with an fruity and floral aroma, and its taste is sweet. It is primarily used in the production of edible fragrances. p-Chlorobenzyl alcohol is a colorless, white, or yellow low-melting-point solid or liquid, used as a pharmaceutical intermediate.
Analysis of the Value Chain of Toluene and Its Derivatives
The main market participants in the toluene and its derivatives industry chain include toluene suppliers (upstream), toluene and its derivatives manufacturers (midstream), and intermediate manufacturers (downstream). Leading enterprises cooperate with upstream chemical companies to ensure a continuous supply of raw materials. The upstream of toluene and its derivatives is the raw material supplier. The Chinese toluene market mainly fluctuates around supply and demand fundamentals and macro-level changes. Due to public health and safety measures, state control over the commodity market, and declining industry profits, the influencing factors of the Chinese toluene market are also undergoing significant changes. The global toluene market is long-term affected by macroeconomic and financial conditions, cost side effects, and industry supply and demand changes. The midstream includes special chemicals manufacturers that produce toluene derivatives. Different companies produce different products based on their respective chemical technologies. The downstream mainly consists of companies producing chemical intermediates, covering multiple industries such as food and beverage additives, feed additives, coating intermediates, and pesticides intermediates.
Source: Frost & Sullivan report
Global and China sales volume and revenue of benzoic acid
Global production capacity of benzoic acid reached approximately 840,000 tons in 2023. Leading benzoic acid manufacturers continue to expand capacity to meet the growing downstream market demand. It is expected that global capacity will increase to about 906,000 tons by 2028. Global sales volume of benzoic acid increased from about 247,000 tons in 2018 to about 265,000 tons in 2023, with a compound annual growth rate of 1.4%. Global sales revenue of benzoic acid increased from about RMB 17.282 billion in 2018 to about RMB 21.207 billion in 2023, with a compound annual growth rate of 4.2%. In 2020, the supply chain and logistics crisis caused by the COVID-19 pandemic had a serious impact on chemical manufacturers. Many production facilities were forced to close or operate at reduced capacity, resulting in a decline in production capacity for most raw materials.
Due to calls from multiple countries and international organizations to gradually reduce the use of antibiotics in healthy animals for growth promotion and disease prevention, the use of animals treated with antibiotics for production has been banned globally. The reduction in antibiotics will largely lead to an increase in the sales of benzoic acid. With the increasing demand for downstream products such as non-phthalate plasticizers, global sales of benzoic acid are estimated to increase from about 287,000 tons in 2024 to about 357,000 tons in 2028, with a compound annual growth rate of 5.7%. Global sales revenue of benzoic acid are estimated to increase from about RMB 24.058 billion in 2024 to about RMB 31.530 billion in 2028, with a compound annual growth rate of 7.0%.
Source: Frost & Sullivan report
Global and China sales volume and revenue of sodium benzoate
Benefiting from the leading enterprises' insight into downstream demand and their excellent capacity expansion plans, the global production capacity of sodium benzoate is estimated to expand from about 363,000 tons in 2023 to about 401,000 tons in 2028. The global sales volume of sodium benzoate increased from about 175,000 tons in 2018 to about 192,000 tons in 2023, with a compound annual growth rate of 1.9%. Therefore, the global sales revenue of sodium benzoate slightly increased from about RMB 171.9 million in 2018 to about RMB 195.23 billion in 2023, with a compound annual growth rate of 2.6%.
Driven by the growing demand from downstream markets such as the personal care market, the sales volume and revenue of sodium benzoate are expected to further increase during the forecast period. The global sales volume of sodium benzoate is estimated to increase from about 205,000 tons in 2024 to about 238,000 tons in 2028, with a compound annual growth rate of 3.8% for the forecast period. The global sales revenue of sodium benzoate is estimated to increase from about 22.307 billion yuan in 2024 to about 26.89 billion yuan in 2028, with a compound annual growth rate of 4.8% for the forecast period.
Source: Frost & Sullivan report
Global and China sales volume and revenue of benzyl alcohol
Global benzyl alcohol production capacity reached 260,000 tons in 2023. Global benzyl alcohol sales increased from about 149,000 tons in 2018 to about 176,000 tons in 2023, with a compound annual growth rate of 3.3%. Global benzyl alcohol sales revenue increased from about 18.441 billion yuan in 2018 to about 22.513 billion yuan in 2023, with a compound annual growth rate of 4.1%.
Driven by the global economic recovery and the increasing application and usage of benzyl alcohol, especially in pharmaceuticals, consumer electronics, additive materials, and home decoration industries, global benzyl alcohol sales are estimated to increase from about 192,000 tons in 2024 to about 239,000 tons in 2028, with a compound annual growth rate of 5.5%. Global benzyl alcohol sales revenue is estimated to rise from about 26.402 billion yuan in 2024 to about 34.946 billion yuan in 2028, with a compound annual growth rate of 7.3%.
Source: Frost & Sullivan report
Key market drivers and trends
-
The market demand in traditional and emerging downstream industries has warmed up
Toluene and its derivatives are widely used in downstream markets such as the food and beverage market, industrial market, feed additive market, pesticide intermediate market, and pharmaceutical intermediate market. Due to changes in consumers' preferences for packaged food products and beverages as well as an increase in per capita income, there is an ongoing demand for preservatives. The global food preservative market is expected to reach $4.1 billion by 2028 and is projected to grow at a compound annual growth rate of 4.0% from 2024 to 2028. The growing food preservative market is driving the growth of the toluene and its derivatives industry.
The market scale of China's feed additive industry, measured by revenue, increased from RMB 944 billion in 2018 to RMB 1223 billion in 2023, with a compound annual growth rate of 5.3%. Although the market scale of China's feed additive industry, measured by revenue, decreased from RMB 1268 billion in 2022 to RMB 1223 billion in 2023, the industry is expected to recover in 2024 and reach RMB 1604 billion by 2028, with a compound annual growth rate of 6.0% starting from 2024. Feed acidifiers are also an important downstream product derived from toluene. New types of feed additives that are efficient, pollution-free, and residue-free, along with new green feed additives such as probiotics, enzyme preparations, and spices, are increasingly favored by the public. The market for feed acidifiers with alternative functions is expected to experience explosive growth.
In addition to applications in traditional industries, downstream applications of fine chemicals for personal care, including precision manufacturing, are also increasing continuously. Ammoniated benzoic acid products mainly include benzonitrile and phenyltrimesene used as pharmaceutical intermediates. The market scale of pesticide intermediates and pharmaceutical intermediates in China reached RMB 393 billion and RMB 467 billion in 2023 respectively, and are expected to reach RMB 449 billion and RMB 705 billion in 2028 respectively. The compound annual growth rates from 2024 onwards are 2.2% and 8.8% respectively. Benefiting from the growing demand in the downstream pesticide intermediates and pharmaceutical intermediates markets, the market demand for ammoniated benzoic acid products is expected to grow in the future, recovering from the decline in 2023.
-
Conducive and long-term effective regulations and policies
The Chinese government has been taking action to plan and support the toluene and its derivatives industry, as well as the development of related downstream industries using toluene derivatives including food additives, food preservatives, and feed additives. According to Announcement No. 194 of the Ministry of Agriculture and Rural Affairs of the People's Republic of China issued on July 9, 2019, starting from July 1, 2020, feed production enterprises have been required to stop producing commercial feeds containing growth-promoting drug feed additives (except traditional Chinese medicine), which has promoted the development of functional feed additives. In recent years, China has been more stringent and comprehensive in regulating the food and beverage preservative industry. In 2019, the State Council promulgated the Regulations for the Implementation of the Food Safety Law of the People's Republic of China, which proposed establishing a food safety risk assessment mechanism to assess the biological, chemical, and physical impacts of food additives and related products.
In 2021, to provide a scientific basis for formulating quality and safety risk control measures and standards for cosmetics, as well as conducting cosmetic sampling tests, the National Medical Products Administration issued the 'National Cosmetics Safety Risk Monitoring Plan for the Second Half of 2021'. While strengthening supervision, it will further promote the development of related industries using toluene and its derivatives. In 2022, the 'Notice on Printing and Distributing the '14th Five-Year Plan' for Promoting the Modernization of Agriculture and Rural Areas' clarified that by 2025, the pesticide utilization rate of major crops will rise from 40.6% in 2020 to over 43.0%. This measure accelerates the adoption of pesticides with low toxicity and minimal residues, promotes the use of pesticide intermediates with less environmental pollution, and increases demand for toluene and its derivatives.
Global and Chinese Toluene and Toluene Derivatives Industry Competition Landscape
In 2023, the global sales revenue of benzoic acid was approximately RMB 21.207 billion. In terms of market revenue, the concentration of the world's top five benzoic acid manufacturers increased from 93.9% in 2022 to 95.2% in 2023. In terms of 2023 revenue, Wuhan Organic ranks second among benzoic acid manufacturers, accounting for 37.0% of the global market revenue.
In 2023, the sales revenue of benzoic acid in China was approximately RMB 12.66 billion. The Chinese benzoic acid market is highly concentrated among the top five benzoic acid manufacturers, with their combined market share accounting for 96.5% of the total revenue in 2023. By revenue, Wuhan Organic ranks first among benzoic acid manufacturers, accounting for 62.0% of the Chinese market revenue.
Source: Frost & Sullivan report
In 2023, the global sales revenue of sodium benzoate was approximately RMB 19.523 billion. In terms of market revenue, the concentration of the world's top five sodium benzoate manufacturers increased from 84.4% in 2022 to 85.8% in 2023. In terms of revenue for 2023, Wuhan Organic ranks second among sodium benzoate manufacturers, accounting for 22.4% of the global market revenue.
In 2023, the sales revenue of sodium benzoate in China was approximately RMB 11.546 billion. The sodium benzoate market in China is highly concentrated among the top five manufacturers, with a combined market share of 88.1% in 2023 based on revenue. By revenue, Wuhan Organic ranks first among sodium benzoate manufacturers, accounting for 37.9% of the Chinese market revenue.
Source: Frost & Sullivan report
In 2023, the global market size of benzyl alcohol reached approximately RMB 22.513 billion. In terms of market revenue, the concentration of the world's top five benzyl alcohol manufacturers increased from 88.3% in 2022 to 91.1% in 2023. In 2023, Wuhan Organic ranked third among benzyl alcohol manufacturers by revenue, accounting for 20.6% of the global market revenue. In terms of sales revenue, Wuhan Organic was the second largest benzyl alcohol manufacturer in China.
In 2023, China's sales revenue from benzyl alcohol was approximately RMB 13.641 billion. The Chinese benzyl alcohol market is highly concentrated among the top three benzyl alcohol manufacturers, with a combined market share of 98.8% based on revenue in 2023. Ranked second among benzyl alcohol manufacturers by revenue is Wuhan Organic, accounting for 33.9% of the Chinese market's revenue.
Source: Frost & Sullivan report
Click at the end of the articleRead the original textView the prospectus
Frost & Sullivan has extensive research experience in the chemical and materials industries, assisting well-known enterprises in successfully listing on the capital market. Successful listings include: Migro Group (9879.HK), Jihai Resources (2489.HK), Zhongbao New Materials (2439.HK), Shengneng Group (2459.HK), Jinli Yongci (6680.HK), Avia Avian (IDX: AVIA), Global New Materials (6616.HK), Dafeng Equipment (2153.HK), Yihai International (8659.HK), GHW (9933.HK), Sanhe Fine Chemicals (0301.HK), Xingyu Holdings (2346.HK), Xinghe Holdings (1891.HK), Xuyang Group (1907.HK), Long Resources (1712.HK), Shandong Gold (1787.HK), Henan Jinma (6885.HK), Xingye New Materials (8073.HK), Dongguang Chemicals (1702.HK), Zhongqi Group (1932.HK), Xinbang Holdings (1571.HK), Meigu Technology (8349.HK), Huajin International (2738.HK), Flater Glass (6865.HK), Dinos (1452.HK), Caike Chemicals (1986.HK), Chang'an Renheng (8139.HK), Sansida (1337.TWSE), Born NYSE, CPC NYSE, Gu NYSE, Tianhe Chemicals (1619.HK), Yihua Holdings (2121.HK), Sijia Group (1863.HK), and others.
Recommended Reading
Frost & Sullivan assists Zhongbao New Materials on successful listing in Hong Kong (2439.HK)
Frost & Sullivan assisted Avia Avian in successfully going public in Indonesia (IDX: AVIA)
Frost & Sullivan assists Easergy International in successfully going public in Hong Kong (8659.HK)
Frost & Sullivan assists GHW in successfully listing on the Hong Kong Stock Exchange (9933.HK)
Frost & Sullivan assists Dinos in successfully listing on the Hong Kong Stock Exchange (1452.HK)
*The above order is not sequential and is arranged in reverse chronological order based on listing time.
