Under the background of refinancing tightening, the rationality and necessity of refinancing of A-share companies has been widely concerned by the market.

A few days ago, Huahai Pharmaceutical Co., Ltd. (600521.SH) updated the refinancing inquiry response materials, in which the rationality of the economic benefits of the production expansion plan attracted the attention of regulators.

According to the application materials, Huahai Pharmaceutical Company plans to raise 1.56 billion yuan to invest in the construction of the project "Digital Intelligent Manufacturing of preparations", "Multi-functional production platform for Antiviral and other characteristic APIs" and supplementary liquidity.

Among them, the project of "Multi-functional production platform for Antiviral and other characteristic API drugs" involves "annual production of 100 tons of Monapivir" and "annual production of 60 tons of Naima raw materials".

It is worth noting that one of the important uses of monapivir and nemativir is to resist novel coronavirus.

With the change of the epidemic situation, Huahai Pharmaceutical's production expansion plan obviously brings many challenges to its financing necessity.

The economic benefit of the new crown drug is a mystery.

In this refinancing, Huahai Pharmaceutical Company plans to issue no more than 148 million shares and raise 1.56 billion yuan to invest in the construction of the project "Digital Intelligent Manufacturing of preparations", "Multi-functional production platform for Anti-virus and other characteristic API drugs" and supplementary liquidity.

Huahai Pharmaceutical expects that after the completion of the project of "digital intelligent manufacturing of preparations" and multi-functional production platform for characteristic APIs such as antivirus, the internal rate of return (after tax) of the two will reach 23.76% and 22.37% respectively, and the static investment payback period will be 7.08 years and 7.53 years respectively.

Although Huahai Pharmaceutical has estimated the benefits of fund-raising projects, the Shanghai Stock Exchange still requires it to explain the reasonableness of this calculation compared with its peers.

"Please the issuer explain the specific situation, process and basis of project benefit calculation, and explain the rationality of income indicators such as growth rate, gross profit rate and forecast net profit rate. Combined with the comparison of key indicators such as gross profit margin, internal rate of return and investment payback period with similar projects in the same industry, the project benefit calculation is reasonable." The Shanghai Stock Exchange pointed out.

The application materials show that the returns of Huahai Pharmaceutical's "Multi-functional production platform for Antiviral and other characteristic APIs" are comparable to the "Insulin industrialization Project" of Ganli Pharmaceutical Company (603087.SH) and the "oligonucleotide monomer industrialization production Project" of 688076.SH.

Among them, the internal rate of return and payback period of Ganli Pharmaceutical are 49.80% and 4.53 years respectively, the former is 27.43 percentage points higher than Huahai Pharmaceutical, the project of Nuotai Biology is 15.40% and 7.08 respectively, the latter is 6.97 percentage points lower than Huahai Pharmaceutical.

With reference to the situation of comparable objects, Huahai Pharmaceutical Company has proved that the benefit calculation of its project is reasonable.

"the internal rate of return of the multi-functional production platform for antiviral and other characteristic APIs is within the range of the same kind of fund-raising projects in the same industry. Therefore, the company's internal rate of return and investment payback period of this investment project are calculated cautiously. " Huahai Pharmaceutical Co., Ltd.

However, the rationality of such a comparison is still controversial.

Trade Wind (ID:TradeWind01) noted that the project "Multi-functional production platform for Antiviral and other characteristic APIs" specifically involves "annual production of 100t Monapivir" and "Annual production of 60 tons of NIMATV APIs".

It is understood that one of the uses of Monapivir and Naimatevir is to resist novel coronavirus. In addition to Huahai Pharmaceutical, a number of API companies, such as 603538.SH and 300584.SZ, have put forward plans to expand production of COVID-19 APIs such as Nimatevir.

However, with the ebb of the epidemic, the market space of anti-novel coronavirus drugs is also shrinking, and the process of production expansion of some pharmaceutical companies is even more slow.

In March 2022, Minohua laid out anti-COVID-19 drugs through the project of annual production of 60 tons of anti-COVID-19 drug nimatvir and its key intermediates, but so far the project has only been put on record and no new progress has been made.

Not only that, some pharmaceutical companies have planned to promote the expansion of anti-COVID-19 drugs through refinancing, but ended up withdrawing materials.

Haichen Pharmaceutical submitted a 400 million yuan refinancing plan to the Shenzhen Stock Exchange in August 2022, one of which was for the "construction project of a key intermediate of 150 tons of anti-COVID-19 API", but it finally withdrew its application for refinancing in February 2023.

Some investment bankers also pointed out to ID:TradeWind01 that it is difficult to calculate the economic benefits of "epidemic-related" projects.

"the economic benefits of anti-COVID-19 drugs are very difficult to calculate and difficult to calculate. However, refinancing fund-raising projects can also be adjusted, but the adjustment of fund-raising projects is very complex, requires a lot of communication, and is not easy to operate. " An investment banker in Shenzhen told ID:TradeWind01.

Under the background that the rationality of economic benefit calculation has become the "standard allocation" of the refinancing plan, it is still uncertain whether Huahai Pharmaceutical's refinancing plan can be carried out smoothly.

The question of sustainable growth

This is not the first time Huahai Pharmaceutical has sold a refinancing plan to the market.

By the end of June this year, Huahai Pharmaceutical had spent a total of 1.708 billion yuan, accounting for 93.74 percent of the funds raised.

However, in the same period, 16 API projects with an annual production capacity of 20 tons of perindopril and 50 tons of ramipril have not yet reached the scheduled state of use, and Huahai Pharmaceutical expects that the project will not be completed until 2025.

According to the "Securities Regulatory Commission to coordinate the primary and secondary market balance and optimize the regulatory arrangements for IPO and refinancing" issued by the CSRC on August 27th, whether the previous fund-raising has achieved the expected benefits is also the focus of refinancing audit.

This means that although Huahai Pharmaceutical has basically used up the amount of money raised before and can refinance plans to the capital market, the relevant projects have not yet been completed and have not produced any benefits. this also poses more challenges to the need for refinancing.

In 2020, Huahai Pharmaceutical, which deeply ploughed the US API / generic drug market, was banned by the US FDA because it was found to contain a very small amount of NDMA (nitrosodimethylamine), a hepatotoxic impurity in valsartan APIs.

Since then, Huahai Pharmaceutical, which has improved its manufacturing technology and passed the FDA on-site inspection, finally lifted the ban on exports to the United States in November 2021, and its performance began to improve-its income and return net profit reached 8.266 billion yuan and 1.168 billion yuan respectively in 2022, up 24.42% and 139.52% respectively from the same period last year.

Huahai Pharmaceutical, which finally got out of the haze of overseas ban, chose to refinance in April this year, which is indeed a good time.

But the sustainability of this growth remains in question.

The performance of Huahai Pharmaceutical Co., Ltd. has grown slowly since the beginning of this year, with income and net profit of 4.294 billion yuan and 569 million yuan respectively in the first half of 2023, up 12.31% and 0.14% respectively over the same period last year, lower than 13.66% and 10.01% in the same period in 2022.

At the same time, Huahai Pharmaceutical has ample cash flow, with cash and cash equivalents remaining at 1.89 billion yuan by the end of June 2023.

Whether Huahai Pharmaceutical's refinancing plan can come true, the market is continuing to pay attention to.