Missed the 20% gain on the first day of Junda shares, don't miss out on Xinqi'an again.

The last IPO very similar to Xinqi'an was Junda Shares: both at the cyclical bottom, at the industry inflection point after price wars and capacity clearance; both in traditional industries far from retail investors and C-end consumers but closely watched by institutions. Therefore, similar divergences could lead to big gains like Junda.

01 At the Cyclical Inflection Point, a Good Time to Position at Low Levels

Like the cyclical big gainer Junda Shares, Xinqi'an also belongs to the cyclical stock category, following the typical inventory cycle logic, focusing on whether the industry is at an inflection point. In fact, the global artificial sweetener industry where Xinqi'an operates is experiencing a value recovery after deep adjustments.

In 2024, the prices of artificial sweetener raw materials bottomed out and stabilized, accompanied by capacity clearance, bringing a turnaround for the industry. CIC data shows that sucralose prices plummeted from RMB 386,000/ton in 2022 to RMB 142,000/ton in 2024, accelerating industry capacity clearance. By Q1 2025, prices rebounded to RMB 250,000/ton, marking the confirmation of the cyclical bottom.

This rebound benefited from the temporary end of the industry price war. From 2022 to 2024, nearly half of small and medium-sized domestic manufacturers exited the market due to losses, enhancing the pricing power of leading companies like Xinqi'an.

Additionally, industry collaboration has strengthened, with alliances consolidating and long-term growth logic becoming clear. On February 16, 2025, the sucralose industry summit was held, where four leading companies (including Xinqi'an) proposed establishing a regular cooperation mechanism to cultivate a healthy market ecosystem. After the meeting, the industry quickly followed up with price increase notices for sucralose. A week later, the four companies further discussed deepening industrial collaboration and jointly promoting cost reduction and efficiency improvement, reiterating the tone of alliance consolidation, with collaboration efforts far exceeding expectations.

According to Debon Securities, thanks to the promotion of healthy lifestyles like sugar control and the significant cost-performance advantage of domestic products, sucralose demand has a long-term upward growth logic. Against the backdrop of unprecedented industry collaboration and synchronized domestic and international demand, especially with the upcoming summer beverage consumption peak, product prices are expected to rise further.

On one hand, globally, sugar tax policies implemented in over 60 countries continue to boost the penetration of sugar-free products. China's sugar-free beverage market penetration jumped from 2.4% in 2018 to 21% in 2024, directly driving gradual growth in sucralose demand.

On the other hand, from a structural substitution perspective, the fifth-generation sweetener sucralose, with its "600 times sweeter than sucrose + zero calories" feature, is rapidly replacing traditional products like aspartame. As the perception of aspartame's potential carcinogenicity deepens among consumers, sucralose is likely to capture aspartame's market share, and Xinqi'an will undoubtedly benefit from this.

02 Overlooked Signals of Financial Improvement

The market has overly focused on Xinqi'an's performance decline due to industry factors, overlooking the substantial improvement in operational quality and the signals of financial improvement, which mark the arrival of an inflection point and a good time to invest.

First, let’s analyze the reasons for Xinqi'an's performance fluctuations, which are entirely due to inventory cycle logic.

During the 2022 pandemic control period, supply chain pressures prompted customers to overstock. For example, Coca-Cola's procurement reached 1.5 times the normal demand, coupled with rising raw material prices, pushing product prices and profit margins to high levels, creating a temporary supply shortage.

In 2023, with the lifting of pandemic controls and the inventory cycle inflection point, demand contracted significantly. The dual pressures of excess inventory and new capacity releases led to intense price competition, which continued into the first half of 2024. As manufacturers gradually returned to rational operations and overseas markets completed destocking, supply-demand relations began to improve from the second half of 2023. The market has now returned to a dynamic balance, with prices stabilizing and overall development trending positively.

In fact, compared to domestic peers struggling in price wars, Xinqi'an demonstrated significant risk resistance during the 2023 industry downturn through its "overseas factories + multinational client binding" strategy. Xinqi'an's advantage lies in its stable international demand, with sucralose prices overseas consistently higher than domestic prices. Xinqi'an plans to expand its Thailand factory (with an annual capacity of 500 tons) to increase the proportion of international sales from 54.9% in 2023. The high margins and stability of overseas markets serve as a "moat" against domestic price fluctuations.

Despite fluctuating net profits, Xinqi'an has maintained positive operating cash flow for three consecutive years, with RMB 461 million in cash at the end of 2024, providing ample resources for the 500-ton sucralose expansion project in Thailand. This "high walls, ample provisions" financial strategy provides a solid foundation for navigating cycles.

Operational efficiency improvements are reflected in the reduction of inventory turnover days from 93 days in 2021 to 68 days in 2024, and the proportion of accounts receivable over 90 days dropping from 37% to 12%, showing the success of transitioning from "production-driven sales" to "sales-driven production." Coupled with self-produced industrial-grade glycine at the Tibet base (costing 65% of external prices), vertical integration advantages became fully apparent in 2024.

03 Product Portfolio Upgrades, Opening New Growth Avenues

The diversification of products and the construction of technological generational gaps reveal Xinqi'an's keen sense of industry trends. Founder's second-generation Wang Hao, a master's graduate in food engineering from the University of Pennsylvania, leads the R&D team in building the next-generation product matrix, particularly breakthroughs in functional foods. For example, the seaweed dietary fiber production line has secured orders from Danone and Kraft Heinz. This product, as a natural stabilizer, improves the texture of yogurt/ice cream while offering blood sugar control benefits, achieving a 42% gross margin during trial production in 2024, with a planned capacity of 3,000 tons in 2025.

Global capacity expansion 2.0 is also in the works, with the new Thailand factory designed for 500 tons of sucralose and 15,000 tons of isomaltulose annually. The former targets the European zero-sugar beverage market (expected to grow 29% in 2025), while the latter enters the oral care sector as a xylitol substitute, with both product lines expected to boost margins.

Xinqi'an's product strategy "open plan" can also be seen in the use of proceeds from its Hong Kong IPO. According to the prospectus, Xinqi'an Tech's fundraising will be used for:

• Isomaltulose production and sucralose capacity expansion at the Thailand factory;

• Production of seaweed dietary fiber and serine;

• Enhancing R&D capabilities;

• Expanding the international sales network;

• Working capital and general corporate purposes.

Finally, to summarize.

Xinqi'an's future growth mainly comes from, first, industry recovery + fundraising for expansion, with funds used for Thailand factory expansion, international sales network construction, and new product R&D, aligning with industry collaboration and overseas expansion trends; second, product diversification expectations, as glycine and sucralose currently account for over 90% of revenue, while new products (e.g., curcumin, isomaltulose) are expected to become the second growth engine, with new product revenue growth exceeding 1000% in 2025.

Considering cyclical recovery factors, the current valuation offers significant safety margins, especially as the Thailand factory at full capacity will contribute substantial net profit growth. Combined with the small issuance size and recent profitability trends, Xinqi'an is likely to rise on its first trading day, with dual narratives of cyclical reversal and growth. Those who missed Junda's 20% first-day gain might consider a small bet on Xinqi'an, as gains are highly probable.

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Disclaimer:

1. This article represents only one opinion and does not constitute any investment advice or recommendation. The stock market is unpredictable, with ups and downs, so caution is advised.

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