Zhongju Core recently announced an 8 billion yuan private placement plan, intended to fund two capacity expansion projects and supplement working capital.
This 8 billion yuan private placement has drawn market scrutiny for several reasons. Firstly, the company's previous 1.9 billion yuan IPO-funded projects have undergone multiple changes, progress is slow, and cumulative returns are negative. Both the IPO and the new private placement projects significantly increase electronic chemical production capacity. Secondly, the company's books appear flush with cash; even after deducting the remaining IPO proceeds, funds seem ample, raising questions about the necessity of raising additional working capital. Thirdly, the annual report shows that in 2025, the growth rate of the company's electronic chemical inventory exceeded the growth rates of production volume, sales volume, and revenue. Against the backdrop of the company turning from profit to loss, the rationale for a major capacity expansion is under examination.
On the last trading day before the private placement plan was announced, Zhongju Core's stock price surged to a 20% limit-up. In the three trading days prior to the announcement, the stock rose over 30%. In the ten days before the announcement, it surged over 50%, and in the thirty days prior, the stock price doubled. However, in the most recent month, Zhongju Core's published annual report showed a shift from profit to loss, a fifth consecutive annual decline in gross margin, and a fifth consecutive year of losses in non-GAAP net profit attributable to the parent company.
The previous 1.9 billion yuan IPO-funded projects have been altered multiple times, with cumulative returns remaining negative. Zhongju Core is primarily engaged in the R&D, production, and sales of electronic wet chemicals, electronic special gases, and precursor materials. Its products are mainly used in the manufacturing processes of integrated circuits, display panels, and the photovoltaic sector.
The plan indicates Zhongju Core intends to issue shares to no more than 35 specific investors, raising a total of no more than 8 billion yuan. The funds will be directed towards the "New Annual Production of 60,000 Tons of Electronic-Grade Sulfuric Acid Project," the "North China Production Base Construction Project for Key Electronic Materials in Integrated Circuits," and supplementing working capital, with planned investments of 2 billion yuan, 3.6 billion yuan, and 2.4 billion yuan respectively.
Upon completion of these projects, the company expects to add 60,000 tons of electronic-grade sulfuric acid capacity in Quzhou, and at the North China production base, add 60,000 tons of electronic-grade sulfuric acid, 15,000 tons of electronic-grade nitric acid, and 12,500 tons of electronic-grade ammonia water.
Notably, just two and a half years ago, Zhongju Core raised 1.9 billion yuan through its IPO. The previous IPO-funded projects have undergone multiple changes, and their cumulative returns are negative. Both the IPO and the new private placement projects involve significant increases in electronic chemical production capacity.
In September 2023, Zhongju Core listed on the STAR Market at 5.18 yuan per share, raising 1.913 billion yuan. Of this, 1.2 billion yuan was earmarked for the "Zhongju Core Qianjiang Annual Production of 196,000 Tons of Ultra-Pure Electronic Chemicals Project," 300 million yuan for working capital, with over 300 million yuan in excess raised funds.
As of February 28, 2026, the progress of the core IPO project, the "Zhongju Core Qianjiang Annual Production of 196,000 Tons of Ultra-Pure Electronic Chemicals Project," was 84%. The prospectus indicated that upon completion, this project would form an annual production capacity of 196,000 tons of ultra-pure electronic chemicals.
Thus, both the IPO and private placement projects significantly increase electronic chemical production capacity. However, given the multiple changes and negative cumulative returns of the previous IPO projects, is further capacity expansion necessary at this time?
In November 2024, the company decided that the second phase of the "Zhongju Core Qianjiang Annual Production of 196,000 Tons of Ultra-Pure Electronic Chemicals Project" would no longer use raised funds. It planned to redirect the unused raised funds of 692 million yuan to the "100,700 Tons/Year Electronic Wet Chemicals Capacity Expansion and Renovation Project," the "Advanced Electronic Chemical Materials for Integrated Circuits Project (Phase I)," and the "Electronic-Grade Sulfuric Acid Supporting Annual Production of 102,000 Tons of High-Purity Sulfur Trioxide Project," with planned investment amounts of 252 million yuan, 350 million yuan, and 90 million yuan respectively. Data shows the proportion of changed IPO project funds reached 38.30%, nearly 40%.
In October 2025, Zhongju Core again changed its raised fund projects. The company stated that due to changes in the actual market situation during the implementation of the "Electronic-Grade Sulfuric Acid Supporting Annual Production of 102,000 Tons of High-Purity Sulfur Trioxide Project," the production scale was expanded from 102,000 tons annually to 150,000 tons annually. The project name was adjusted to "Electronic-Grade Sulfuric Acid Supporting Annual Production of 150,000 Tons of High-Purity Sulfur Trioxide Project," and the expected date for reaching usable status was adjusted from June 2026 to May 2027.
As of February 28, 2026, the actual investment in the Electronic-Grade Sulfuric Acid Supporting Annual Production of 150,000 Tons of High-Purity Sulfur Trioxide Project was only 594,900 yuan, a shortfall of 89.4051 million yuan compared to the committed investment of 90 million yuan, representing a gap of over 99%. This means the investment progress in the year since late 2024 was less than 1%.
The prospectus shows the core IPO project's second phase was expected to begin trial production in October 2025. Based on the specific timeline, the second phase was projected for completion around April 2026. However, the cumulative returns of the Zhongju Core Qianjiang Annual Production of 196,000 Tons of Ultra-Pure Electronic Chemicals Project from 2023 to 2025 and January-February 2026 were negative 27,805,900 yuan.
Zhongju Core stated that as the second phase of the project is not yet complete, it is temporarily impossible to measure whether expected returns have been achieved. According to the prospectus, upon reaching full capacity, the project is expected to generate annual sales revenue of 1,257,714,600 yuan and total profit of 366,210,900 yuan.
The growth rate of electronic chemical inventory has surpassed the growth rates of production, sales, and revenue. The private placement also plans to raise 240 million yuan to supplement working capital, but the company's books do not appear short of cash, and its asset-liability ratio is low.
As of the end of Q1 2026, Zhongju Core's book cash was as high as 1.329 billion yuan. Even after deducting 562,952,800 yuan of unused raised funds, 766 million yuan remains. Furthermore, the company's asset-liability ratio is low at 26.41% at the end of Q1 2026. Interest-bearing liabilities total approximately 215 million yuan.
2025 annual report data shows the company's electronic wet chemicals series product revenue was 879 million yuan, a year-on-year increase of 17.29%. Production volume was 145,638.66 tons, up 23.98% year-on-year. Cumulative sales were 153,060.66 tons, up 24.29% year-on-year. However, inventory volume surged 37.98% compared to the previous year, far exceeding the growth rates of revenue, production, and sales.
Does inventory growth outpacing sales growth indicate difficulty in digesting capacity, with products accumulating in warehouses? In the previous IPO projects, as of the end of February 2026, the investment progress for the Electronic-Grade Sulfuric Acid Supporting Annual Production of 150,000 Tons of High-Purity Sulfur Trioxide Project was less than 1%, while the Electronic Wet Chemicals Capacity Expansion and Renovation Project investment progress was only about 40% complete. The annual report acknowledges that some products, such as the second phase of electronic special gases and precursor materials, have "still not effectively scaled up, with low capacity utilization."
Zhongju Core stated the purposes of this private placement include: leveraging the company's advanced technology to seize the window of growing downstream demand for products like electronic-grade sulfuric acid and nitric acid, consolidating core business advantages; and meeting the capital needs for business development, supporting the continuous expansion of core businesses.
On the last trading day before the private placement announcement, the stock price instantly hit a 20% limit-up; in the 30 trading days prior, the stock price doubled. Behind this private placement, Zhongju Core turned from profit to loss in 2025. The company achieved annual operating revenue of 1.212 billion yuan, a year-on-year increase of 17.68%, but net profit attributable to the parent company was a loss of 17 million yuan, compared to a profit of 10 million yuan the previous year, a direct shift from profit to loss. More notably, net profit after deducting non-recurring gains and losses has been negative for five consecutive years, with the 2025 loss expanding to 35 million yuan. In Q1 2026, Zhongju Core achieved revenue of 366 million yuan, a year-on-year increase of 35.33%, and net profit attributable to the parent company of 6 million yuan, turning profitable.
Zhongju Core explained that due to market competition, selling prices for some products declined, leading to lower sales gross margin. The operating performance of its wholly-owned subsidiary, Kaisheng Fluorine Chemical, fell short of expectations. Based on judgments of future operations, the company recognized a 39,427,900 yuan goodwill impairment provision for Kaisheng Fluorine Chemical. Additionally, revenue generated by some products remains relatively small, scale effects have not been achieved, the company faces high depreciation pressure, and with increasing R&D investment and expanding operations, management costs have risen. The company did not achieve profitability in 2025.
Data shows the company's comprehensive gross margin from 2021 to 2025 was 22.19%, 21.66%, 19.95%, 14.26%, and 14.03% respectively, a cumulative decline of over 8 percentage points in five years. The company's explanation in the annual report includes factors such as declining selling prices for some products, intensified industry competition, and products like the second phase of electronic special gases and precursor materials still not effectively scaling up with low capacity utilization.
Despite five consecutive years of losses in non-GAAP net profit attributable to the parent company, in the 30 trading days before Zhongju Core announced the private placement plan, the company's stock price had already doubled. In the 10 trading days before the announcement, the stock rose over 50%. In the three trading days before the announcement, it rose over 30%. On the last trading day before the plan was released, the stock price instantly surged to a 20% limit-up.
On April 2, 2026, the company's stock price hit a low of 8.35 yuan per share. On April 29, the low was 11.02 yuan. On May 13, the low was 12.33 yuan. On May 15, the last trading day before the private placement plan announcement, the stock opened 16% higher and instantly surged to a 20% limit-up, closing at 16.79 yuan.
Zhongju Core clarified that the stock price increase was not directly related to market rumors of "South Korean manufacturers purchasing anhydrous hydrogen fluoride from China." The company's electronic-grade hydrofluoric acid business accounts for a limited proportion of sales, and as of now, no substantive price increase orders have been signed with Samsung Electronics.
Although Zhongju Core clarified that the unexplained stock surge was unrelated to South Korean procurement, why did the company's stock price so "coincidentally" hit the limit-up on the day the private placement plan was announced? If the surge was unrelated to South Korean procurement, why did the stock price rise another 10.9% on the first trading day after the clarification? This awaits an answer from the company.
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