Green Bio: Q3 Net Profit Down 16%; Just Two Months After Listing, Company Proposes Dividend Equal to 96% of First Three Quarters’ Profits

On the expense side, financial expenses, selling expenses, and R&D expenses all rose significantly. Specifically, the company’s financial expenses for the first three quarters totaled RMB 32.73 million, up 78.56% year-on-year; the company attributed this primarily to increased foreign exchange losses—a direct consequence of its heavy reliance on overseas sales. In 2025, overseas revenue from core operations accounted for 85.21% of total core operating revenue. Selling expenses rose 33.48% year-on-year to RMB 6.77 million, mainly due to higher salaries for sales staff; R&D expenses amounted to RMB 28.32 million, up 6.22% year-on-year. Regarding cash flow, Green Bio generated RMB 127 million in net cash from operating activities during the first three quarters, an increase of 13.27% year-on-year; net cash from financing activities reached RMB 771 million, compared with a net outflow of RMB 33.28 million in the same period last year—mainly attributable to proceeds from its IPO. Its monetary funds stood at RMB 879 million, up 1,123.36% from the beginning of the year, also due to IPO proceeds. Meanwhile, the company’s inventory reached RMB 481 million, up 34.21% from the beginning of the year, which it attributed to increased stockpiling; short-term borrowings rose 84.82% year-on-year to RMB 421 million, mainly reflecting adjustments to its loan structure and increased short-term bank loans; accounts receivable climbed from RMB 192 million at the start of the year to RMB 239 million. (2) Proposed Large-Scale Dividend of RMB 133 Million—96% of First-Three-Quarters’ Profits Alongside its Q3 earnings release, Green Bio also announced its profit distribution plan for the quarter. The company proposes to distribute cash dividends based on its current total share capital of 133 million shares, paying RMB 10 per 10 shares (tax inclusive) to all shareholders, with no bonus shares or capital reserve conversions. The total cash dividend payout would amount to RMB 133 million. This proposal was first put forward by Chairman Lu Wencong on October 13 and approved by the Board of Directors on October 21. Based on the company’s RMB 139 million net profit attributable to shareholders for the first three quarters, the proposed dividend represents approximately 96% of that amount. Green Bio specializes in the research, development, production, and sale of fragrance products, offering three major product lines—pine oil, cypress oil, and fully synthetic fragrances—with nearly 40 specific products including sandalwood, methyl cedryl ketone, and ionones. Its downstream customers include major international flavor & fragrance companies such as Givaudan, DSM-Firmenich, and IFF, and its products are widely used in the daily chemical industry. From 2023 to 2025, the company reported revenues of RMB 735 million, RMB 961 million, and RMB 1.075 billion, and net profits of RMB 92.92 million, RMB 150 million, and RMB 179 million, respectively. At IPO, Green Bio planned to raise RMB 690 million, earmarked for projects including an annual production capacity expansion of 6,300 tons of premium fragrances, intelligent factory upgrades, R&D innovation enhancements, and working capital supplementation. In practice, the company issued 33.33 million new shares at RMB 26.33 per share, raising a total of RMB 878 million, with net proceeds of RMB 770 million—RMB 80.44 million above its original target—and an issue P/E ratio of 19.8x. Post-listing, its stock price experienced a sharp surge followed by a rapid correction.

Re-reading 'The Intelligent Investor' Chapter 36: Why a Good Company Is Not Necessarily a Good Investment

02 Better Growth—But How Much More Should You Pay? The second pair comprises Air Products and Chemicals and Air Reduction. The former boasts stronger growth and profitability, while the latter trades at a lower valuation and offers a more generous dividend. Graham acknowledges that prospects and quality can justify differing valuations—but remains cautious about whether any premium paid will actually materialize. A cheaper company may suit a diversified portfolio; a higher-quality one may continue to outperform. Crucially, however, the extra price you pay must be justified by sufficient future growth. 03 Separate Growth Rate from Earnings Quality The third pair is American Home Products and American Hospital Supply. Both firms demonstrate solid growth and strong financial records—but Hospital Supply grows faster, whereas Home Products enjoys higher sales margins and returns on capital. Similar growth histories do not imply identical business quality. Even if both companies’ prospects appear promising, Graham notes that their prevailing market prices already embed excessive expectations about future performance yet to be realized. 04 Popular Services vs. Traditional Businesses The fourth pair is tax-preparation service provider H&R Block and workwear manufacturer Blue Bell. Block’s business grew rapidly, and by year-end 1969, its share price exceeded its earnings per share by over 100 times; Blue Bell, with its long operating history, traded at only about 11 times earnings. Graham considers Blue Bell’s valuation more conservative—but stops short of predicting an imminent decline for Block. Indeed, Block’s stock continued rising afterward. This comparison reminds us of two key points: outstanding prospects do not excuse ignoring price, and perceiving a stock as expensive does not allow us to predict when—or even whether—it will fall. 05 Larger Scale Does Not Guarantee Higher Capital Returns The fifth pair is International Flavors & Fragrances (IFF) and International Harvester. The latter operates on a far larger scale than the former, yet lags markedly in profitability and growth. Thus, one cannot determine relative expensiveness solely by comparing market capitalization or sales figures—profit margins and returns on invested capital matter just as much. Yet this insight did not compel Graham to buy either company. He viewed IFF as overvalued, while International Harvester’s operational performance failed to make its discount sufficiently attractive—neither passed his criteria. 06 Industry Enthusiasm Often Lags Behind Operational Changes The sixth pair is McGraw-Edison and McGraw-Hill. McGraw-Edison operated in equipment manufacturing, while McGraw-Hill engaged in publishing and information services. The market favored publishing, assigning McGraw-Hill a significantly higher valuation—even though its earnings had already begun declining. Later, earnings deteriorated further, severely damaging McGraw-Hill’s stock price. Though the company remained fundamentally sound, its earlier excessive valuation inflicted substantial losses on shareholders. 07 Complex Capital Structures Alter the Meaning of 'Cheap'

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International Flavors & Fragrances Inc. shares rose 2.19% to close at $84.43 on Monday, ending a four-day losing streak, though the gain trailed broader market indices.

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