New stocks outlook | The second-in-command in the segmented market still cannot escape losses, how does Pu'ai Medical capture the heart of the Hong Kong Stock Exchange?

Four years later, Pu'ai Medical once again made an impact on the capital market, this time targeting the Hong Kong Stock Exchange. Recently, Nanjing Pu'ai Medical Equipment Co., Ltd. (hereinafter referred to as "Pu'ai Medical") submitted an application to the Hong Kong Stock Exchange, with Guotai Junan International as its exclusive sponsor. It was learned that the company began receiving guidance for listing on the Growth Enterprise Market as early as March 2017, and submitted an application for listing on the Shenzhen Growth Enterprise Market on June 24, 2021, before withdrawing the application on December 28, 2021. With another impact on the capital market, how promising is Pu'ai Medical? Leading market position for core products According to the prospectus, Pu'ai Medical was established in 2003 and is a supplier of medical X-ray imaging systems, with a market share of 7.6% in 2023, ranking second in the country. In the field of mobile C-arm X-ray machines, the company ranks first in the Chinese market in terms of sales volume, with a market share of 20.6%. The company's product line is rich, with over 100 models including mobile C-arm X-ray machines, digital radiography X-ray machines (DR), and DRF digital fluoroscopy X-ray machines, as well as core technologies such as X-ray tube components, high-voltage generators, and 3D imaging technology. It is worth mentioning that Pu'ai Medical is the first manufacturer in China to receive approval for Siasun Robot & Automation's orthopedic surgery integrated solution with mobile three-dimensional C-arm, and is also the first domestic manufacturer and supplier to establish a comprehensive product range for orthopedic diagnosis and treatment. The company plays an important role in the field of minimally invasive orthopedic surgery in China. In recent years, the company's revenue has shown a fluctuating upward trend. In the fiscal years 2022, 2023, and 2024, Pu'ai Medical's revenue was approximately RMB 377 million, RMB 501 million, and RMB 484 million respectively. Despite Pu'ai Medical's leading industry position and continuously improving revenue, the company has not been able to escape continuous losses. During the reporting period, the company recorded losses of approximately RMB 43.704 million, RMB 15.968 million, and RMB 44.226 million, accumulating a total loss of RMB 104 million over the three years. It is understood that the company's main market has always been mainland China. The revenue from mainland China during the reporting period was RMB 280 million, RMB 420 million, and RMB 410 million respectively, accounting for about 80% of the total revenue, with the growth in revenue in fiscal year 2023 mainly due to the impact of the COVID-19 epidemic rebounding and the issuance of epidemic control policies in mainland China. Revenue from overseas countries has continued to decline during the reporting period, from RMB 97.4 million in fiscal year 2022 to RMB 81.3 million in fiscal year 2023, and further decreased to RMB 72.9 million in fiscal year 2024, with the revenue ratio decreasing from 25.8% in fiscal year 2022 to 15.1% in fiscal year 2024. The company explained that the main reason for the decline in revenue from this region was due to local conflicts, which temporarily prevented local customers from purchasing the company's products. Pu'ai Medical's sales model includes distribution and direct sales. In the Chinese market, direct sales are made to hospitals and medical equipment trading companies. In fiscal year 2024, more than 1,200 hospitals and medical institutions purchased the company's products. In overseas markets, although the company claims to use a combination of distribution and direct sales, according to the prospectus, the company is heavily dependent on distributors in overseas markets. Revenue from sales to overseas distributors in the reporting period was RMB 90.5 million, RMB 76.7 million, and RMB 68.69 million, accounting for 92.9%, 94.4%, and 94.1% of the company's revenue from overseas countries. Therefore, if the company terminates or cannot maintain its business relationship with overseas distributors, it may significantly reduce the sales of its products in overseas countries. In Pu'ai Medical's view, its leading industry position and rich product line are inseparable from its continuous investment in research and development. Research and development costs for Pu'ai Medical in the reporting period were RMB 33.6 million, RMB 38.4 million, and RMB 45 million respectively, accounting for 8.9%, 7.7%, and 9.3% of the company's total revenue for the same year. The company stated that it plans to continue investing heavily in research and development in the future. With increasing research and development expenses, the company's sales expenses have also increased year by year. Pu'ai Medical's sales expenses were RMB 139 million, RMB 168 million, and RMB 175 million respectively, accounting for 36.9%, 33.4%, and 36.2% of the total revenue for the same year. Pu'ai Medical stated that as the company continues to expand its business operations, it expects to achieve higher cost efficiency through its sales and marketing plans. However, changes in sales expenses may have a significant impact on the company's operating costs and business performance. At the same time, Pu'ai Medical also faces certain debt pressures. As of 2022, 2023, and 2024, Pu'ai Medical recorded net current liabilities of RMB 10.5 million, RMB 21.4 million, and RMB 58.5 million respectively. The company openly admitted in the risk factors that net current liabilities may limit the company's operational flexibility and may adversely affect its ability to expand its business. The company may continue to have net current liabilities in the future. This may be the main reason why Pu'ai Medical is eager to go public. It is worth noting that among the uses of the funds raised in this listing, repaying part of the bank loans is one of the purposes. Good prospects for industry demand It is understood that medical X-ray imaging systems (XR) emit X-rays through X-ray tubes, which penetrate human tissues and are received by detectors to generate human images. Depending on the clinical applications, different imaging modes including two-dimensional static imaging, two-dimensional dynamic imaging, and three-dimensional tomographic imaging. XR examinations can be used for screening, diagnosis, and image guidance for surgical and interventional procedures. The global XR market size was approximately USD 19 billion in 2023, with a CAGR of 5.9% from 2019 to 2023. As a relatively traditional medical imaging device, XR equipment is expected to maintain steady growth globally and reach USD 29.5 billion by 2032, with a slightly lower CAGR of 5.0% during the period. In the Chinese market, due to the impact of the COVID-19 epidemic, XR equipment (especially...The installation of mobile DR (Digital Radiography) has significantly increased. In the future, with the further popularization of vascular intervention, minimally invasive orthopedic surgery, etc., fixed C-arm and mobile C-arm are expected to maintain a high growth rate, thereby driving the overall growth of the XR (X-ray) market. Additionally, economic development, aging population, and increased health awareness are driving the demand for high-quality medical imaging equipment. Furthermore, China's advantages in 5G, AI, and cloud services provide prerequisites for the iterative upgrade of imaging technology, thereby promoting the development of remote medical care and information resource sharing. By 2023, the Chinese XR market is expected to reach 24 billion yuan, and is projected to reach close to 45.2 billion yuan by 2032, with an estimated compound annual growth rate of 7.3%.Although the medical device industry in our country has vast development space, the competitive situation shows a clear differentiation trend. Currently, the industry is still dominated by small and medium-sized enterprises, with a low industrial concentration, and most enterprises are concentrated in low-value consumables, biochemical testing, and other low-end fields. It is worth noting that the high-end medical device market is still controlled by foreign enterprises, especially in high-tech sub-sectors. Taking the data for 2023 as an example, although Pu'ai Medical ranks second among the suppliers of medical X-ray imaging systems in China, its market share of 7.6% is still inadequate. However, against the backdrop of increasing geopolitical tensions and trade disputes, the process of domestication of medical devices is expected to accelerate by 2025. At the same time, with the assistance of policies, "replacing old medical devices with new ones" has also become a market focus. It is worth noting that since the end of 2024, with the release of policies such as replacing old devices with new ones and financial support, the medical device industry has shown a significant rebound trend. Data shows that in the fourth quarter of 2024, the amount of medical device tender procurement increased by 18.46% year-on-year and 56.45% quarter-on-quarter; in the first quarter of 2025, cumulative issuance of medical special bonds amounted to 56.512 billion yuan, an increase of 29.1% year-on-year and a significant increase of 174.06% quarter-on-quarter. Overall, as a leading company in the XR industry, Pu'ai Medical has considerable technological advantages and scarcity. However, despite these advantages, the company is still deeply entrenched in losses and debts. As the medical device industry gradually warms up, can Pu'ai Medical break through the current situation? Let's continue to pay attention.