Zhengda Seed Industry's production capacity utilization rate drops significantly, with wealth management products exceeding 300 million yuan, and a dividend of 111 million yuan previously paid.

On March 13, Xiangyang Zhengda Seed Industry Co., Ltd. (Zhengda Seed) successfully listed on the Beijing Stock Exchange, with CITIC Securities serving as the sponsor.

Zhengda Seed mainly engages in the research, production, and sales of corn seeds. Its varieties include self-developed and licensed options, with key high-yield, disease-resistant hybrid corn seeds such as Zhengda 719, Zhengda 808, and Zhengda 999.

The fundraising amount has been reduced by over 80 million yuan, with one project cut. In this IPO, Zhengda Seed plans to issue no more than 48.0495 million shares and aims to raise 283.2606 million yuan. The funds will be used for the construction of the Yunnan Zhengda Seed Processing Center and the second phase of the corn seed processing project at Zhangye Zhengda Bofeng Seed Industry Co., Ltd., with planned allocations of 233.9277 million yuan and 49.3329 million yuan, respectively.

Compared to previous filings, Zhengda Seed initially planned to raise 363.2882 million yuan, a difference of 80.0276 million yuan from the current draft. The two major projects initially proposed to use 264.457 million yuan and 54.3587 million yuan, respectively, which are 30.5293 million yuan and 5.0258 million yuan less than the current figures. Additionally, the initial filing included the Zhengda Seed Xiangyang Core Trial Station Construction Project, with a planned fund use of 44.4725 million yuan.

The company has invested over 300 million yuan in wealth management products and previously distributed dividends of 111 million yuan. In the filing, Zhengda Seed stated that if the net proceeds from the current issuance exceed the planned investment amount, the excess will be used to supplement working capital. The Beijing Stock Exchange has inquired whether this statement complies with relevant regulations such as the “Guidelines for Continuous Supervision of Listed Companies on the Beijing Stock Exchange No. 9 — Management of Raised Funds.”

According to quick analysis, from 2022 to June 2025 (the reporting period), the company’s debt-to-asset ratio has steadily decreased, at 40.28%, 31.95%, 30.93%, and 24.22%. As of the end of each period, cash and cash equivalents, and trading financial assets (bank wealth management products) totaled 134 million yuan and 304 million yuan, respectively. The company has no short- or long-term loans, and non-current liabilities due within one year are only 600,700 yuan, indicating strong financial strength.

More importantly, before the equity restructuring, the company distributed dividends of 111.0914 million yuan based on the year-end distributable profits of 2021. Since net profits from 2022 to 2024 have not reached 100 million yuan annually, this dividend payout approach appears quite generous.

Capacity utilization is not saturated and saw a significant decline in the first half of last year. During the reporting period, Zhengda Seed’s capacity utilization rates were relatively low—63.12%, 66.05%, 59.94%, and 18.43%. Total output fluctuated: 18,935.09 tons, 19,816.42 tons, 17,981 tons, and 2,763.96 tons.

The planned capacity of the Yunnan Zhengda Seed Processing Center after reaching full production is expected to be 10,000 tons annually, about 56% of the 2024 output. With capacity utilization still below saturation and a sharp drop in the first half of 2025, is there a real need for expansion?

Additionally, the company’s statement that “the current seed processing centers’ production capacity is gradually becoming saturated” drew attention from the Beijing Stock Exchange, which asked whether this aligns with regulations such as the “Guidelines for Continuous Supervision of Listed Companies No. 9 — Management of Raised Funds.” The company explained that processing is highly concentrated from October to January each year, leading to uneven annual capacity distribution: high utilization during peak season and low during off-peak. This statement was later removed from the revised draft.

The highest capacity utilization rate during the reporting period was in 2023, at around 66%. Given the seasonal distribution, utilization peaks in Q4—e.g., in Yunnan, Q4 2023 saw rates of 114.13%, 216.29%, and 299.17%. Such pronounced seasonality suggests that expanding capacity could lead to more idle capacity. Would expansion be justified solely because demand peaks in that quarter?

R&D expenses lag behind sales and management expenses, and the company has no invention patents. During the reporting period, R&D expenses declined overall—22.4264 million yuan, 23.3071 million yuan, 20.4295 million yuan, and 9.8585 million yuan—with R&D expense ratios of 7.04%, 5.7%, 5.37%, and 11.01%.

Compared to its own sales and management expenses, which in 2024 are projected at 26.4006 million yuan and 30.5163 million yuan respectively, R&D expenses are lower. The expense ratios for these are 6.94% and 8.02%.

Industry peers have average R&D expense ratios of 5.8%, 4.65%, 5.66%, and 11.41%. In the first half of 2024 and 2025, three comparable companies—Longping High-Tech, Denghai Seed, and Qiule Seed—have higher R&D ratios than Zhengda Seed, with Longping High-Tech at 7.87%, Denghai at 6.68%, and Qiule at 5.52%. Wanxiang Denuo and Kangnong Seed lag behind, at 3.93% and 4.27%.

As of the end of the period, Zhengda Seed employed 28 R&D personnel and holds five patents—three design patents and two utility model patents. Most patent applications were filed between November 2020 and November 2021. Does this R&D output match the company’s annual R&D expenditure of over 20 million yuan?