Green Bio, Led by 83-Year-Old Founder, Persists in Third Attempt at ChiNext IPO

Deep News12-02

Green Bio-Tech Co., Ltd., a leading Chinese fragrance ingredient supplier, has submitted its third application for an initial public offering (IPO) on the ChiNext board on November 21, despite previous setbacks and regulatory concerns.

Founded in 1999 by 83-year-old Lu Wencong, Green Bio specializes in turpentine, cedarwood oil, and fully synthetic fragrance products, including damascone derivatives. The company supplies major clients such as Givaudan, International Flavors & Fragrances, and Procter & Gamble, with its top five customers accounting for 42.3% of sales in the first half of 2025.

The company's IPO journey has been rocky: 1. First attempt (December 2020): Withdrawn within two months after being selected for regulatory inspection, revealing undisclosed environmental penalties (200,000 yuan fine) at a subsidiary and projected profit decline below 50 million yuan for 2021. 2. Second attempt (June 2023): Withdrawn in September 2024 after two rounds of ChiNext inquiries addressing governance concerns, including: - Undisclosed VAM agreements with shareholders - Succession planning for the octogenarian founder - Historical issues with shareholder capital contributions

Financial highlights show recovery: - Revenue grew from 631 million yuan (2022) to 961 million yuan (2024) - Net profit doubled from 68.14 million yuan (2022) to 150 million yuan (2024) - Gross margin improved from 23.67% to 31.51% (2022-H1 2025) - Damascone series now contributes 63.17% of synthetic product revenue with 48.84% gross margin

However, red flags remain: 1. R&D spending below industry average (3.03% of revenue in H1 2025), with: - 50.65% of 2024 R&D costs being personnel expenses (sudden 109% YoY increase) - Regulatory concerns about accounting practices 2. Aggressive dividends (249 million yuan total since 2018, 46.98% of cumulative profits) while seeking 800 million yuan for working capital in IPO 3. Questionable capacity expansion plans: - Current utilization rates: 53.87%-76.15% - Pending environmental approvals for proposed 6,300-ton expansion

The company plans to raise 690 million yuan for: - Capacity expansion (420 million yuan) - Smart factory upgrades (120 million yuan) - R&D improvements (70 million yuan) - Working capital (80 million yuan)

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