IPO Preview | Traditional chemical industry leader breaking into the Hong Kong Stock Exchange, can Binhe Chemical Group solve the dilemma of "increasing revenue without increasing profit"?

To meet the continuous investment needed for the transformation and upgrading of the chemical industry, and to enhance competitiveness in the international market, multiple A-share listed companies are seeking to establish a second listing platform in Hong Kong. Recently, the Hong Kong Stock Exchange has welcomed a "new birth." According to the Hong Kong Stock Exchange, Befar Group Limited (referred to as Befar Group) has submitted a listing application to the main board of the Hong Kong Stock Exchange, with Huatai International and CCB International as its joint sponsors. It is noted that Befar Group, founded in 1968, is a comprehensive chemical group. According to Frost & Sullivan data, based on revenue in 2024, Befar Group is the largest producer of granular caustic soda, food grade flake caustic soda, vinyl chloride, tetrachloroethylene, and chloropropylene in China. In terms of production capacity as of June 30, 2025, the company is the largest private producer of propylene oxide in China. In terms of financial performance, for the years 2022 to 2024, Befar Group's revenues were RMB 8.892 billion, RMB 7.306 billion, and RMB 10.228 billion respectively; profits for the same periods were RMB 1.203 billion, RMB 399 million, and RMB 217 million respectively; and gross profit margins were 26.5%, 16.7%, and 6.4% respectively. With the pressure on its main business, Befar Groups story of secondary listing is set against a backdrop of declining profitability. The companys main business focuses on organic and inorganic chemical products, covering three main areas: chlor-alkali chemicals, C3-C4 chemicals, and wet electronic chemicals. In the chlor-alkali chemicals sector, caustic soda is the main product. In 2024, China's caustic soda capacity, production, and consumption reached 50.2 million tons, 43.7 million tons, and 40.6 million tons respectively. Compound annual growth rates from 2020 to 2024 were 2.9%, 4.4%, and 3.6% respectively. By 2029, it is estimated that China's caustic soda capacity, production, and consumption will reach 57.3 million tons, 51.0 million tons, and 48.2 million tons respectively, with compound annual growth rates from 2024 to 2029 of 2.7%, 3.1%, and 3.5% respectively, showing a slowdown in growth compared to previous years. In terms of prices, the average price of caustic soda in the Chinese market rose overall from 2021 to 2022, driven mainly by gradual recovery of the global economy and downstream demand growth. However, since 2023, with global economic growth slowing down, weaker export demand, and the continuous release of new capacity for chemicals like chloropropylene and epichlorohydrin in China, the market supply has become more abundant, leading to price declines. By 2024, global economic recovery has slowed down, downstream demand has been weak, and caustic soda chemical prices have seen a slight decline. Regarding the market for epichlorohydrin, the demand growth has also slowed down gradually. In 2024, China's epichlorohydrin capacity, production, and consumption reached 8.2 million tons, 5.5 million tons, and 4.2 million tons respectively. Compound annual growth rates from 2020 to 2024 were 25.6%, 17.4%, and 8.8% respectively. It is expected that by 2029, China's epichlorohydrin capacity, production, and consumption will reach 13.0 million tons, 9.1 million tons, and 5.9 million tons respectively, with compound annual growth rates from 2024 to 2029 of 9.7%, 10.6%, and 7.0% respectively.