China Shengda Packaging Prices IPO Below Range

Dec.10.10 | About: China Shengda (CPGI)

China Shengda Packaging Group (NASDAQ:CPGI), a China based paper packaging company, is expected to price its IPO on 10th December 2010, below the expected range at $4 per share.

Business Overview (from prospectus)

We are a leading paper packaging company in China. We are principally engaged in the design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. We also manufacture corrugated paperboards, which are used for the production of our flexo-printed and color-printed cartons. Based on the 2009 sales revenues of corrugated paper packaging, we are one of the largest domestic paper packaging manufacturers in China and the largest in the YRD, which includes Shanghai, Zhejiang Province and Jiangsu Province, according to a research report by an independent market research company, S&P Consulting. Based on a comprehensive set of criteria, including sales revenue, product quality, R&D and operational records, we were ranked first among the ten large-sized domestic paper packaging companies in China by the China Packaging Federation in 2009. We provide paper packaging solutions to a wide variety of industries, including food, beverage, cigarette, household appliance, consumer electronics, pharmaceuticals, chemicals, machinery and other consumer and industrial sectors. Our major products are single-layer paper cartons for food, drinks and medicine, double-layer paper cartons for garments, chemicals, furniture, refrigerators and air-conditioners, and triple-layer paper cartons for electrical machinery, motorcycles, and other heavy-duty products.

Offering: 10.1 million shares at $4 per share. Net proceeds of approximately $50 million will be used to acquire paper manufacturing companies.

Lead Underwriters: Oppenheimer & Co., William Blair

Financial Highlights:

Revenues increased $22.0 million, or 31.5%, to $91.9 million in the nine months ended September 30, 2010 from $69.9 million in the same period of 2009...Cost of goods sold increased $14.8 million, or 28.8%, to $66.1 million in the nine months ended September 30, 2010 from $51.3 million in the same period of 2009...Selling expenses decreased $1.9 million, or 37.6%, to $3.2 million during the nine months ended September 30, 2010, from $5.1 million in the same period of 2009...Net income increased $5.3 million, or 59.5%, to $14.1 million in the nine months ended September 30, 2010 from $8.8 million in the same period of 2009...


he packaging market in China is highly fragmented and competitive. There are approximately 20,000 paperboard manufacturers in China, most of which are relatively small in size. The top ten manufacturers only have an aggregate of less than 10% of the Chinese market. The total sales volume of paper cartons in China was 36.7 billion square meters in 2009, and Great Shengda's production volume in 2009 was approximately 307 million square meters, accounting for approximately 0.8% of the PRC market. According to S&P Consulting, based on revenues of corrugated paper carton in 2009, we are one of the largest domestic corrugated paper carton companies in China and the largest in the YRD region. Due to the geographic radius limitation, we currently only compete with domestic and international corrugated paper packaging companies located within the YRD region. Our major competitors include: Ningbo Asia Paper Tube Paper Carton Co., Ltd., Salfo Package Group Co., Ltd., Zhejiang Dahua Packaging Group Co., Ltd., Zhejiang Zhongbao Pactiv Packaging Co., Ltd., Yuen Foong Yu Paper Enterprise (Kunshan) Co., Ltd. and International Paper (Shanghai) Co., Ltd (NYSE:IP). We also face competition from upstream paper mills when they expand their business into paper carton manufacturing, and such companies include Zhejiang Jingxing Paper Co., Ltd, Anhui Shanying Paper Industry Co., Ltd, and others.

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