New Stock Outlook | Can Mingzhu Chemical's "selling shovels" story pierce through the shortcomings of R&D investment by catching the twin trends of poverty alleviation and environmental protection?

As the Hong Kong stock market welcomes a rebound, the fine chemical industry is about to welcome an "invisible champion". On April 22, 2026, Hunan Mingzhu Mining Chemical Technology Co., Ltd. (hereinafter referred to as "Mingzhu Chemical") submitted its prospectus to the Hong Kong Stock Exchange and plans to list on the main board of the Hong Kong Stock Exchange, with CMBC CAPITAL as the sole sponsor. The company is a provider of mineral processing reagents solutions serving domestic and international markets, mainly engaged in the research and development, production, and sales of flotation reagents, including collectors, modifiers, and frothers. The products are mainly used in the precious metals and non-ferrous metals mining industry, offering efficient, low-toxicity reagent formulas and lime-free flotation processes to increase concentrate recovery while reducing the generation of hazardous waste. According to Frost & Sullivan data, based on 2024 product sales revenue, Mingzhu Chemical ranks second among Chinese flotation reagent companies, with a market share of 1.05%; at the same time, the company also ranks first among Chinese sulfide reagent companies, with a market share of 15.57%. So, in the era of stockpile games of mineralization and grade reduction, how valuable is this "night pearl"? Let's analyze the investment logic behind its listing in Hong Kong through real financial data. Performance: Countercyclical cash cow and imbalanced accounts receivable turnover days Founded in 2010, Mingzhu Chemical inherited the well-known "Night Pearl" brand in the mineral processing industry. In the early days, the company mainly focused on standard flotation reagents commonly used in non-ferrous metal mining (such as yellow medicine and xanthate). As mining operations became more complex and customer demands diversified, the company shifted its strategic direction towards customized solutions, deepened its research and development capabilities, and expanded into new application scenarios. To date, Mingzhu Chemical has served over 500 customers worldwide, with business covering more than twenty provinces, autonomous regions, and municipalities in China, and exporting products to more than 15 countries. From an operational performance perspective, Mingzhu Chemical has delivered impressive results over the past three years. In the context of widespread pressure on traditional manufacturing industries, this company has shown strong profit elasticity. According to the prospectus data, from 2023 to 2025, Mingzhu Chemical achieved revenues of 230 million yuan, 259 million yuan, and 324 million yuan respectively, with year-on-year growth and a 24.89% increase in 2025. The net profit growth rate outpaced revenue growth rate, achieving net profits of approximately 44 million yuan, 49 million yuan, and 67 million yuan respectively during the same period, with a 34.74% year-on-year increase in 2025. In an era of slim profits in the manufacturing industry, being able to leverage revenue growth of over 20% to achieve nearly 35% profit growth indicates that this company is selling not just products, but formulas. The increase in gross profit margin underlines this logic. The company's overall gross profit margin rose to 29.7% in 2025, with the core product collector's gross profit margin reaching 30.7%. This was due to the proportion of high-margin black medicine product income increasing from 19.0% to 25.1%. This customized model of one mine, one medicine, has allowed the company to move away from simple commodity competition. It is worth noting that as a B2B supplier, the biggest risk often lies in high customer concentration. Mingzhu Chemical appears healthy in this regard: the revenue from the top five customers has been declining year by year, accounting for only 17.5% in 2025. With a network of over 500 customers, covering a diversified layout from domestic non-ferrous giants to 15 countries overseas, the company has a strong ability to withstand cyclical fluctuations. As of December 31, 2025, the net cash flow from operating activities for the company was 56 million yuan, a 44% increase from the same period in 2024; and the cash and cash equivalents at the end of the year were 42 million yuan, a significant increase of 104% from the same period in 2024. It is important to note that beneath the shiny financial data, there are also "shadows". According to the prospectus, the accounts receivable turnover days for Mingzhu Chemical increased from 43 days in 2023 to 51 days in 2025, suggesting that as the scale expands, downstream customer payment periods are lengthening, indicating increased difficulty in collection. Overall, Mingzhu Chemical, with its customized formulas of one mine, one medicine and a global customer network, has shown strong profit elasticity and cash cow traits in an industry facing headwinds - with net profit growth consistently outpacing revenue growth over the past three years, and operating cash flow increasing significantly by 44%. However, the increase in accounts receivable turnover days from 43 to 51 days, also suggests that the expansion of scale is bringing pressure on collections and hidden concerns about payment periods. Industry Landscape: Selling shovels in the age of lean ore vs. the dragon head losing momentum in R&D With the global mining industry entering a dual turning point of lean ore and environmental protection, the flotation reagent industry is witnessing a growth opportunity. According to Frost & Sullivan data, from 2020 to 2024, the global flotation reagent market size increased from 50.7 billion yuan to 59.6 billion yuan, with a corresponding annual compound growth rate of 4.1%. From 2025 to 2029, it is expected that the global flotation reagent market size will grow from 62.7 billion yuan to 78.4 billion yuan, with a forecasted annual compound growth rate of 5.7%, further accelerating growth. The growth of the global flotation reagent market mainly covers two reasons: on one hand, as global rich ore becomes depleted, lean and complex ores have become the mainstay of mining, and the lower the ore grade, the greater the difficulty in extraction, requiring more flotation reagents for purification. On the other hand, with the ESG concept deeply rooted, highly toxic traditional reagents are being rapidly phased out. Mingzhu Chemical has accurately hit these two pulse points of the era: the increase in ore grade intensity for low-grade ore beneficiation, its one mine one medicine customized formula directly addresses pain points, substituting technical solutions for simple product sales; and the environmental redline driving supply outflow, low-toxic reagents and lime-free flotation processes build dual barriers of policy and technology, capturing market share in green transformation. In an era of scarce resources anxiety, the real winners are not the miners, but those who can extract commissions through refining technology regardless of fluctuations in ore prices. This also means that as the global mining industry enters a dual turning point of lean ore and environmental protection, Mingzhu Chemical, as someone selling shovels in the industry, will fully enjoy the dividends of industry development. However, the risks of lagging research and development and low market share may be the Achilles' heel that hinders Mingzhu Chemical's long-term growth. Specifically, from 2023 to 2025, R&D investment at Mingzhu Chemical gradually decreased, with R&D expenses rates of 3.0%, 2.1%, and 1.3% respectively, with a cumulative decrease exceeding 56% over three years, indicating long-term concerns about technical iteration. After all, a 1.3% research and development expense rate cannot support the valuation narrative of high-tech new materials. In the technology-driven fine chemical industry, a slowdown in research and development means stagnation in product iteration, and once the innovation momentum is not enough, the company may face the risk of being eliminated by the industry. Secondly, the company's overall market share is only 1.05%, even though it leads in segmented categories, the overall industry influence is still weak. In the decentralized market structure, there is long-term pressure for scale expansion and industry consolidation. At the same time, the production end is highly dependent on upstream raw materials, and fluctuations in commodity prices will directly affect production costs, compressing profit margins and weakening profit stability. In summary, in the short term, Mingzhu Chemical has caught the dual wave of lean ore and environmental transformation, with its leading position, customized barriers, and diversified customer structure, its performance and cash flow have strong certainty, making it a high-quality choice for counter-cyclical allocation. However, in the long term, insufficient research and development investment may erode its technological moat, and if it cannot reverse the trend of research and development lag and fortify its compliance defenses, the current high growth rate may not be sustainable, which may discount its investment value.