Danhua Technology, the PGA project is a bit precarious!
On March 19, 2025, Dahan Technology (600844) stated that the research and development and trial production of polyglycolic acid (PGA) degradable materials had made some progress, but due to multiple factors such as production costs, market promotion, product substitutability, and the company's R&D investment, it has not yet achieved large-scale production. The company's main products are still ethylene glycol and oxalic acid.
The PGA project of Dahn Technology has been ongoing for 8 years.
In 2017, Danhua Technology established a new materials company in Jiangsu - Jiangsu Jinhong New Materials Co., Ltd., which is engaged in the research and development and small-scale production of degradable materials. Utilizing the coal-to-ethylene glycol facility, it began R&D work in the PGA field and built a 3,000-ton-per-year PGA pilot plant. The pilot plant has undergone multiple trial runs and has the capability to produce PGA pellets. At the same time, the company also purchased other degradable raw materials for subsequent modification R&D, producing some daily necessities.
However, for 8 years, the project has never been able to break through the technical barriers.
In 2020, its PGA project was in the R&D and testing phase. The products sold externally were mainly for downstream testing applications. Further validation of product quality, stability, and technical issues related to industrial scale-up is still required, which will take a considerable amount of time. DNH Technology stated that there remains significant uncertainty regarding whether the PGA project and its downstream applications can be produced on a large industrial scale in the future.
In 2021, it had strived to complete the expansion of production capacity, producing 10,000 tons of biodegradable modified materials and 100 tons of various film and bag products, but there was no further public information afterwards. The 2022 annual report stated that its trial production of degradable materials had not made significant breakthroughs. The 2023 annual report mentioned that its trial production of degradable materials had increased but still had not made significant breakthroughs.
Jiangsu Jinzhihong's operating revenues for 2020-2023 and the first half of 2024 were 9.36 million yuan, 10.58 million yuan, 13.34 million yuan, 4.84 million yuan, 4.64 million yuan, and 1.7 million yuan, respectively, with net losses of 1.05 million yuan, 17.12 million yuan, 6.44 million yuan, 9.77 million yuan, and 2.1 million yuan. From the revenue data, it can be seen that Jinzhihong's investment in the PGA project is gradually decreasing.
Compared with the PGA projects of domestic companies such as the National Energy Group and Sinopec, Dancheng Technology's PGA project has a gap in scale and progress. Whether it can achieve large-scale production and commercial application in the future remains uncertain. At the same time, Dancheng Technology is under pressure from financial losses and governance issues, making it less likely for further R&D investment in PGA.
Danhua Technology has been in continuous loss for 6 years. From 2019 to 2023, Danhua Technology's net profit attributable to the parent company was -4.33 billion yuan, -3.67 billion yuan, -1.04 billion yuan, -2.93 billion yuan, and -3.93 billion yuan, respectively. The full-year performance forecast for 2024 shows that the net profit attributable to the shareholders of the listed company is -3.07 billion yuan.
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