On the evening of March 28, Global New Materials International (06616.HK) released its 2023 annual financial results report. Guided by the development strategy of “putting equal emphasis on endogenous development and epitaxial expansion”, the largest surface performance materials company in China was “busy” and “reaping” in 2023. The implementation of various major tasks such as convertible bond financing, multinational mergers and acquisitions, investment and construction, and new product launches all showed the market its acceleration towards the “leading goal of global surface performance materials”.

As this year's government work report proposes speeding up the cultivation of new quality productivity, new materials have once again returned to the focus of the market. What are the specific financial data of Global New Materials International as the leading scarcity target on the Hong Kong Stock New Materials Circuit? How are the phased development results reflected in financial reports? Will the business progress meet investors' expectations? This article provides a brief analysis of its 2023 financial report.

Revenue has grown steadily, and high-end transformation has achieved remarkable results

Let's first look at the company's performance. Global New Materials International achieved revenue of 1,064 billion yuan in 2023, an increase of 16.1% year on year, mainly due to increased sales revenue of pearlescent pigments; gross profit of 528 million yuan, up 16.0% year on year, gross margin of 49.7%, no different from last year, maintaining a high level; net profit of 213 million yuan, and net interest rate of 20.0%.

Looking at business segments, Global New Materials International's revenue comes from sales of pearlescent pigments, mica functional fillers, new energy materials, etc., which achieved revenue of 964 million yuan, 83.77 million yuan, and 16.29 million yuan respectively. Among them, pearlescent pigments are the core business of Global New Materials International, covering products such as natural mica-based, synthetic mica-based, glass-based, silicon oxide-based, alumina-based, and aluminum-based pearlescent pigments.

Global New Materials International's revenue for synthetic mica-based pearlescent pigments in fiscal year 2023 was 438 million yuan, accounting for 41.2% of revenue, exceeding the revenue share of natural mica-based pearlescent pigments by 37.6%, reflecting the company's remarkable results in high-end transformation. The new alumina-based pearlescent pigments added in 2023 are products with extremely high technical barriers in the industry, further strengthening the company's high-end product lineup.

(Data source: Company financial report)

Technological innovation leads, dual high-end brand strategies to seize market opportunities

In terms of technology research and development, the company maintains a consistent focus on technology research and development. In 2023, it generated R&D expenses of about 7.52 million yuan, accounting for 7.1% of revenue. It successfully developed and upgraded and launched a variety of new high-end pearlescent materials that meet the needs of “technology, fashion, and environmental protection”. The variety and quantity of products are richer and cover a wider range of application fields.

In 2023, the company launched 31 new natural mica-based pearlescent pigment products, 60 synthetic mica-based pearlescent pigment products, 18 glass flake-based pearlescent pigment products, and 14 alumina-based pearlescent pigment products. Up to now, the total number of pearlescent pigment products offered has reached more than 2,000.

Furthermore, with the deepening integration with CQV, the target of the acquisition, Global New Materials International has formed a “seven-color pearl+CQV” dual high-end brand strategy. Its highly innovative and forward-looking products are well recognized by the market. Among them, automotive-grade products provide overall color solutions for mainstream vehicle manufacturing, and cosmetics-grade products are widely used in the supply chain systems of leading cosmetics brands.

Good results have also been achieved in terms of scientific research results, forming a large number of scientific and technological achievements with independent intellectual property rights. In 2023, 16 new authorized patents were added, 3 new patents were applied for, and 7 patents are under substantive examination. It was also awarded “National High-tech Enterprise”, “National Intellectual Property Advantage Enterprise”, “Guangxi Technological Innovation Demonstration Enterprise”, and “Guangxi Innovative SME”.

(Data source: Company financial report)

Epitaxial development has taken a landmark step and consolidated its leading position in the market through deep integration with CQV

In addition to the continuous expansion of the sales scale of pearlescent pigments in its core business, Global New Materials International has also secured broader development prospects with technological leadership, and the company's development potential in the field of synthetic mica is also exciting.

On the one hand, Global New Materials International explored a wider range of application scenarios for synthetic mica and successfully opened a second runway. The synthetic mica-based new energy battery insulation and flame retardant material jointly developed with Zhejiang University has been commercialized; various synthetic mica functional fillers have also been developed to be used in high-end fields such as cosmetic functional fillers and art paints. On the other hand, there was a positive impact of the acquisition of Korea's CQV.

Global New Materials International successfully acquired CQV in 2023. According to data, CQV is a world-renowned pearlescent pigment company with outstanding technical advantages and is famous for its automotive-grade and cosmetic grade products. It is the only company in the world that can mass-produce pearlescent pigment products based on automotive-grade alumina. After completing the CQV acquisition, Global New Materials International immediately initiated post-acquisition integration work, focusing on collaborative integration of technology, products, business, sales channels, and supply chains.

Through the acquisition of CQV, it ranked among the top three in the global pearlescent pigment market share, achieved a breakthrough in automotive-grade pearlescent pigment technology, and became the only company in Asia with a full range of automotive-grade pearlescent pigment product technology. In terms of supply chain collaboration, Global New Materials International will provide CQV with high-quality synthetic mica powder as a raw material for its pearlescent pigment production, which will push the company to expand and strengthen its synthetic mica business.

Complementary advantages in terms of products and sales channels will also further consolidate the leading position of Global New Materials International in the market. The inclusion of CQV has increased the proportion of high-end products in Global New Materials International and further improved the product layout. At the same time, CQV sales are highly internationalized. Currently, sales of Global New Materials International are mainly concentrated at home. The differentiated sales networks and product layout of Global New Materials International and CQV at home and abroad will achieve cross-sales with the cooperation of both parties to achieve full coverage of the different needs of customers at home and abroad to achieve incremental sales.

Production capacity growth ushered in huge breakthroughs, and investors injected capital to support the future development of Global New Materials

As early as two years ago, Global New Materials International experienced a phenomenon of full production capacity, so the company placed the task of increasing production capacity in an important position. While digging deeper into the production capacity of the Phase I factory, it was steadily advancing the construction of the Phase II smart factory. Up to now, the second phase of the plant has been completed and successfully put into operation.

The Phase II plant takes “intelligence” and “greening” as the construction concept, conforms to national “green factory” standards. The production is highly automated and intelligent. The design capacity is 30,000 tons of pearlescent materials, and mainly produces high-end automotive weather-resistant, cosmetic grade, and special functional pearlescent materials. With the release of production capacity, it is expected that the company's competitive strength in the high-end market will be further enhanced and the company's performance will be greatly enhanced.

(Source: company website)

In addition, according to recently released information, the company's other major project related to production capacity is also being carried out intensively. The company landed at Tonglu's Asia-Pacific headquarters and surface performance materials R&D and production base, and officially started construction. The project revolves around the surface performance materials industry chain. The planned land use is about 800 acres. After completion, it will be its largest R&D and production base.

After completion and commissioning, it will help enhance the comprehensive operation capabilities of the global new materials international industrial chain, promote the company's overall improvement in innovation, R&D, production, and marketing levels on the existing basis, effectively complement the existing synthetic mica production capacity, and lay a solid foundation for future business development.

Adhering to the “equal emphasis on endogenous development and epitaxial development” development strategy, Global New Materials International has made outstanding progress in 2023, focusing on the strengthening of R&D capabilities, the completion and commissioning of the Phase II intelligent plant, and the acquisition and coordination of the collaborative development of Korea's CQV.

For Global New Materials International, internally, it has consolidated its leading edge in technology and enhanced its high-end product lineup, greatly increasing the supply capacity of high-end pearlescent pigment products and helping it to stabilize the high-end market; externally, it has successfully acquired CQV and obtained improvements in various aspects such as technology, products, and markets, and has taken a critical step towards becoming a “global leader in surface materials”.

Investors are also optimistic about the development prospects of Global New Materials International. The company successfully issued 40 million US dollars of convertible bonds during the year and received a cash injection of 1 billion yuan from Tonglu Xincheng Development Investment Co., Ltd., to support Global New Materials International to continue to explore investment opportunities in pearlescent pigments and synthetic mica, as well as supplement working capital.

In summary, Global New Materials International's 2023 annual performance had quite a few highlights. The main business achieved steady growth. Even though net profit was temporarily disrupted by merger and acquisition costs, the company's management revealed that the benefits after the merger and acquisition were already shown in January 2024. At the same time, I can strongly feel the company's continuous refinement in the high-end pearlescent pigment market and the field of synthetic mica, and I believe it can achieve great development under forward-looking strategic guidance.

Global New Materials International said that 2024 will be a key year for the company to develop into a leading global surface performance materials company. It will continue to follow the “endogenous development and epitaxial expansion” development strategy, maintain strategic strength, maintain steady progress, and promote the sustainable development of the company's business.