IPO Preview | Gross Margin Rising but Profit Under Pressure, Is Semiconductor Glass Substrate the New Answer for Shandong Linuo Pharmaceutical Packaging?

Title context: IPO Preview | Gross Margin Rising but Profit Under Pressure, Is Semiconductor Glass Substrate the New Answer for Shandong Linuo Pharmaceutical Packaging? Text: Shandong Linuo Pharmaceutical Packaging Co., Ltd. (referred to as: Shandong Linuo Pharmaceutical Packaging, 301188.SZ), a leading Chinese daily-use heat-resistant glass enterprise, has officially launched its A+H layout. According to disclosure by the Hong Kong Stock Exchange on September 28, Shandong Linuo Pharmaceutical Packaging submitted a listing application to the Main Board of the Hong Kong Stock Exchange, with CMSC International and Li Gao Corporate Finance Limited as its joint sponsors. Shandong Linuo Pharmaceutical Packaging intends to use the proceeds from the H-share listing mainly for the industrialization of glass substrates for semiconductor packaging; the industrialization of ready-to-use sterile direct contact packaging materials (RTU) and prefilled syringe systems (PFS); enhancing the R&D capabilities of existing and new products and materials; and working capital and general corporate purposes. China's Ninth Largest Pharmaceutical Glass Packaging Supplier According to the prospectus, Shandong Linuo Pharmaceutical Packaging was established in 2002 and listed on the ChiNext Board of the Shenzhen Stock Exchange in 2021. The company is a well-known supplier of borosilicate specialty glass in China. Borosilicate specialty glass has excellent chemical stability, a low coefficient of thermal expansion, and good thermal shock resistance. Based on the above properties, borosilicate specialty glass is widely used in pharmaceutical packaging, semiconductor packaging, laboratory ware, heat-resistant utensils, and other fields. Shandong Linuo Pharmaceutical Packaging focuses on the development, manufacturing, and sales of borosilicate pharmaceutical glass packaging and daily-use heat-resistant glass, with products used in the pharmaceutical, biotechnology, food and beverage, and daily household industries. Leveraging its R&D capabilities in furnace design and glass melting technology, the company developed China's first hexagonal stepped all-electric glass melting furnace. According to Frost & Sullivan data, based on 2025 sales revenue, Shandong Linuo Pharmaceutical Packaging ranked 9th among pharmaceutical glass packaging suppliers in China, with a market share of 2.4%. In the daily-use heat-resistant glass market, the company ranked first in China and second globally, with market shares of 9.5% and 5.1%, respectively. In terms of product structure, Shandong Linuo Pharmaceutical Packaging's product portfolio includes pharmaceutical glass packaging, covering tubing vials, molded vials, and others such as RTU, PFS, and borosilicate glass tubes; daily-use heat-resistant glass, including heat-resistant glass tableware, glass turntables, and other heat-resistant glass products; and other products mainly including sales of surplus raw materials, molds, and scrap. Among them, pharmaceutical glass packaging accounted for 33.7% of revenue in the first half of 2026, while daily-use heat-resistant glass accounted for 64.8%. The company has a diversified customer base covering domestic and overseas markets, with products sold to customers in approximately 60 countries and regions across the Americas, Asia, and Europe. The company's well-known customers for pharmaceutical glass packaging and daily-use heat-resistant glass include: Beite Pharmaceutical, China Resources Double-Crane Pharmaceutical, Lock&Lock, Midea, and Galanz, among others. In the first half of 2026, the company's revenue from its top 5 customers was approximately RMB 160 million (the same unit below), accounting for 23.7% of revenue. Shandong Linuo Pharmaceutical Packaging stated in the prospectus that during the track record period, the company launched sterile drug delivery glass packaging products. In recent years, the company has also made strategic investments in the development of glass substrates for semiconductor packaging. In June 2026, the pilot furnace of the company's Glass New Material Innovation Incubation Center was ignited, and preliminary trial production of glass substrates for semiconductor packaging began. On September 21, 2026, the company began providing glass substrate samples to participants in the semiconductor packaging industry for testing. Gross Margin Steadily Rising, Net Profit Margin Under Pressure In terms of performance, Shandong Linuo Pharmaceutical Packaging's revenue scale has remained stable. For the years 2023, 2024, and 2025, and the six months ended June 30, 2026, the company achieved revenue of approximately RMB 947 million (the same unit below), RMB 1.081 billion, RMB 981 million, and RMB 673 million, respectively; over the same period, the gross margin increased year by year from 16.6% to 21.4%. The company's net profit margin declined from 7% in 2023 to 4% in 2025; in the first half of 2026, the net profit margin was 4.6%, down 3.6 percentage points year on year. It was noted that Shandong Linuo Pharmaceutical Packaging's business scale has remained stable, mainly due to stable overall demand in the pharmaceutical glass packaging market and the daily-use heat-resistant glass market. According to Frost & Sullivan data, the global pharmaceutical glass packaging market size decreased from RMB 78.2 billion in 2021 to RMB 74.3 billion in 2025, with a compound annual growth rate of -1.3%. During the period, the global public health emergency drove a phased increase in demand for vaccine and related injection packaging, and the market size of pharmaceutical glass packaging reached RMB 84.8 billion in 2023; thereafter, as related demand returned to normal and pharmaceutical companies destocked, the market size declined. The global market size is expected to grow to RMB 86.9 billion by 2030, with a compound annual growth rate of 3.2% during the forecast period. The global daily-use heat-resistant glass market size grew from RMB 10.1 billion in 2021 to RMB 11.8 billion in 2025, with a compound annual growth rate of 3.9%. During the period, glass products gradually replaced some plastic and metal kitchenware due to characteristics such as not easily absorbing odors, being easy to clean, and being reusable. The global market size is expected to further grow to RMB 15 billion by 2030, with a compound annual growth rate of 4.8% during the forecast period. In the future, product upgrades and quality improvements in European and American markets, as well as increased penetration of heat-resistant kitchenware in emerging markets such as Asia and Latin America, will jointly drive global market growth. Since 2023, the decline in Shandong Linuo Pharmaceutical Packaging's net profit margin has been affected, on the one hand, by fluctuations in the gross margin of the pharmaceutical glass packaging business. The gross margin of this business decreased from 21.5% in 2024 to 17.6% in 2025, mainly due to weakening downstream demand under the impact of continued medical insurance cost-control measures, while drug prices declined after the implementation of centralized procurement policies, bringing pressure for product price reductions. In addition, the rapid growth in the company's selling and marketing expenses also suppressed the profit margin. In the first half of 2026, the company's selling and marketing expenses reached RMB 50.891 million, a year-on-year increase of 90.5%. Shandong Linuo Pharmaceutical Packaging stated in the prospectus that advertising and marketing expenses and sales service fees increased significantly in the first half of 2026, mainly due to increased platform promotion expenses and service fees related to the growth of the company's e-commerce business. Glass Substrate Business for Semiconductor Packaging Expected to Become a New Growth Curve Against the backdrop of profit pressure, Shandong Linuo Pharmaceutical Packaging is also seeking new growth support externally, with glass substrates for semiconductor packaging regarded as a potential development direction. According to Frost & Sullivan data, the global market size of glass substrates for semiconductor packaging is expected to increase from RMB 100 million in 2026 to RMB 13.2 billion in 2030, with a compound annual growth rate of 234.8%. This rapid growth stems from a low market base, and the industry is expected to shift from the product verification and small-batch production stage to commercial application. By 2030, the market size of glass substrates used in glass-core packaging substrates, carriers, and interposer applications is expected to reach RMB 5.6 billion, RMB 4.6 billion, and RMB 3 billion, respectively. According to the prospectus, Shandong Linuo Pharmaceutical Packaging is planning to build a glass substrate production line, with an expected total annual capacity of 4.8 million glass substrates, suitable for subsequent TGV processing and semiconductor packaging, and the project is expected to be built at the Jinan factory. The development of the glass substrate production line is expected to enable large-scale production and commercialization of glass substrates for semiconductor packaging, allowing the company to capture the growing demand for advanced packaging materials driven by the rapid development of the semiconductor packaging industry, and to consolidate the company's position in this emerging market. It is worth noting that Shandong Linuo Pharmaceutical Packaging mentioned in the prospectus that new materials and applications differ from the company's existing product lines in terms of technology, production processes, customer requirements, and market dynamics, and the company's experience and capabilities in these fields remain relatively limited. In particular, glass substrates for semiconductor packaging must meet stringent requirements in thermal expansion control, flatness, dielectric properties, defect control, and application testing. As semiconductor packaging technology evolves, its technical specifications and intended uses may also change rapidly. The company may not be able to consistently achieve the required performance or quality at a commercial scale, or quickly adjust products to adapt to such changes, and the company cannot guarantee that such products will be developed and customer-validated as planned or at all. Overall, Shandong Linuo Pharmaceutical Packaging relies on its foundation in borosilicate specialty glass technology, with its daily-use heat-resistant glass and pharmaceutical glass businesses building a relatively stable base. In the future, the company is expected to use this H-share fundraising to advance business expansion in the new materials track and create a new growth curve. However, whether long-term growth can be successfully realized still depends on the R&D results of semiconductor glass substrates, the progress of customer validation, the implementation of production capacity, and changes in the industry competitive landscape.