Paper Bag Supplier Nanwang Technology Files for ChiNext IPO; 2020 Revenue Reaches RMB 848 Million as KFC Leads Customers

On June 10, Fujian Nanwang Environmental Technology Co., Ltd. (Nanwang Technology) filed its prospectus (application draft) with the Shenzhen Stock Exchange for a ChiNext listing. The company supplies paper bags to KFC, McDonald's, Uniqlo and Heytea.

Nanwang Technology's main product categories. Image credit: screenshot from the company's official website.

Its product lineup focuses on eco-friendly paper bags and food packaging. The paper bags are used for takeaway and outer packaging of consumer goods, including apparel, footwear, headwear, snack foods, dining, supermarkets, department stores and pharmacies. Food packaging must meet direct food-contact standards and is used in QSR restaurants, coffee and tea shops, bakeries, snack food outlets and conference venues.

Eco-friendly paper bags are part of daily consumption scenes: taking away a burger from McDonald's or KFC, carrying clothes home from Uniqlo, or receiving a Heytea delivery.

With plastic restrictions in place and environmental awareness rising, paper bags are increasingly replacing plastic bags, bringing more attention to eco-friendly paper bag manufacturers.

Nanwang Technology uses a sales-driven procurement model. In terms of 2020 sales,

it sold 917 million eco-friendly paper bags, with sales revenue of RMB 468 million and an average selling price of RMB 0.51 per bag;

it sold 3.652 billion units of food packaging, with sales revenue of RMB 366 million and an average selling price of RMB 0.10 per unit.

In profitability, from 2018 to 2020, Nanwang Technology's operating revenue was RMB 513 million, RMB 692 million and RMB 848 million, while net profit attributable to the parent company was RMB 56.6257 million, RMB 63.9901 million and RMB 66.0464 million, respectively, showing generally steady growth.

The prospectus shows that,

in 2020, Nanwang Technology's top five customers were Baisheng Foods (KFC), Wallace, Tokyo Art (Uniqlo Japan's packaging material supplier), Lexin Trading (McDonald's) and Xingmi Technology (Heytea),

with sales amounts of RMB 178 million, RMB 136 million, RMB 71.5037 million, RMB 46.9249 million and RMB 29.8526 million, respectively.

Some product styles of Nanwang Technology. Image credit: screenshot from Nanwang Technology's prospectus (application draft).

From 2018 to 2020, KFC was Nanwang Technology's largest customer for three consecutive years, with sales accounting for more than 20% each year. In addition to the five major customers above,

Nanwang Technology also provides paper products to brands such as Xtep, Yishion, Erke, ANTA, Starbucks, Wallace and Mixue Bingcheng.

It is worth noting that among Nanwang Technology's top five customers from 2018 to 2020, Chinese domestic fast-food brand Wallace (NEEQ-listed: Huashi Foods, 836475.OC) ranked second each year, with sales accounting for more than 15%,

and it has many related-party relationships with Nanwang Technology.

In terms of technology R&D investment, Nanwang Technology disclosed in its prospectus that its product innovation is mainly reflected in structural innovation, functional innovation and material application innovation. It has developed innovative products such as small-U bags, three-dimensional cup holders, hand-tear bags, bag-in-bag packs, insulated bags and zipper bags. Projects currently under development include research and development of a sealable paper bag with tear functionality, development and research of automated roll-fed square-bottom paper bag technology with a small U-notch, and research and development of an automatic pH and viscosity control system for water-based ink.

However, in R&D investment, Nanwang Technology still has a gap compared with industry leaders. In 2020,

Nanwang Technology's R&D investment accounted for 2.91% of total revenue,

less than Yuto Technology (4.21%), Jinjia (4.84%) and Meiyingsen (4.25%).

Source: China Packaging Network (pack.cn), original link: http://news.pack.cn/show-377753.html