HK IPO Subscription: Analysis and Application Plan for WuXi AppTec's IPO

Zhejiang Taimei Medical Technology Co., Ltd. (hereinafter referred to as "Taimei Medical") was founded in 2013 and is headquartered in Jiaxing, Zhejiang Province, China. It is a high-tech enterprise specializing in providing digital solutions for the pharmaceutical and medical device industries. The company is committed to promoting the digital transformation of the pharmaceutical industry through technologies such as cloud computing, big data, and artificial intelligence, thereby improving R&D and marketing efficiency.

1. Company Overview

Since its establishment, Taimei Medical has undergone multiple rounds of financing and equity changes, gradually developing into a leading provider of digital solutions for the pharmaceutical industry in China. The company currently has over 73 employees, most of whom are technical personnel with extensive industry experience and professional skills. In 2020, Taimei Medical completed its shareholding reform and was renamed Zhejiang Taimei Medical Technology Co., Ltd.

2. Core Business

Taimei Medical's core business includes digital solutions and services for the pharmaceutical and medical device industries. Specifically:

1. Cloud-based Software: Taimei Medical offers a series of SaaS products, such as TrialOS (a digital collaboration platform for pharmaceutical and medical device R&D) and PharmaOS (a digital collaboration platform for pharmaceutical and medical device marketing). These products allow users to access them anytime, anywhere via the internet without the need for local installation and maintenance.

2. Digital Services: In addition to cloud-based software, Taimei Medical also provides a range of digital services, including independent image evaluation, pharmacovigilance, clinical research data collection and analysis, and sales relationship management. These services aim to help clients conduct R&D and marketing activities more efficiently.

3. Customized Solutions: To meet specific client needs, Taimei Medical also offers customized non-SaaS products.

3. Market Position

According to data from CIC, Taimei Medical holds a leading position in China's digital solutions market for pharmaceutical and medical device R&D and marketing. In 2023, Taimei Medical ranked first with a 5.9% market share. Additionally, the company serves over 1,400 pharmaceutical companies and regulated institutions worldwide, including 21 of the top 25 global pharmaceutical companies and 90 of China's top 100 innovative pharmaceutical companies.

4. Competitive Advantages

Taimei Medical's core competitiveness lies in its strong technical capabilities and extensive industry experience. The company has a team of seasoned industry experts and technical talent, enabling it to deliver high-quality products and services. Furthermore, Taimei Medical has established long-term, stable partnerships with numerous renowned pharmaceutical companies and regulatory agencies, further solidifying its market position.

5. Future Outlook

Looking ahead, Taimei Medical will continue to increase R&D investment to drive technological innovation and product upgrades. The company will actively expand its presence in domestic and international markets to further enhance its market share and brand influence. At the same time, Taimei Medical will strengthen collaboration with upstream and downstream partners to jointly advance the digital transformation of the pharmaceutical industry.

As a leading provider of digital solutions for the pharmaceutical and medical device industries in China, Taimei Medical is steadily progressing toward its strategic goal of becoming a global leader in pharmaceutical digital solutions, leveraging its strong technical capabilities and rich industry experience.

IPO Information:

Pre-IPO and Cornerstone Investors:

Taimei Medical completed a total of 8 rounds of financing before its IPO, from the A-round in 2015 at RMB 0.03 per share to the F-round in 2020 at RMB 15.63 per share, transitioning from a 99.69% discount to a 49.88% premium. Post the F-round, the company was valued at RMB 8.1 billion (approximately HKD 8.935 billion). The current IPO valuation ranges from HKD 5.604 billion to HKD 7.285 billion, meaning all F-round pre-IPO investors are now underwater. This reflects the broader trend where medical-related SaaS platforms saw inflated valuations during the boom but suffered severe declines afterward. Pre-IPO investors are subject to a 12-month lock-up period.

Sponsors:

The IPO is jointly sponsored by Morgan Stanley and CICC, with Morgan Stanley acting as the stabilizing agent. Morgan Stanley has not sponsored any projects in 2024 but sponsored 9 in 2023, only one of which underperformed—the notorious Beisen Holdings, which still irks me. CICC, on the other hand, is synonymous with underperformance. Historically, Morgan Stanley has a strong reputation as a stabilizing agent.

Financial Overview:

Revenue: RMB 466 million in 2021, RMB 549 million in 2022, RMB 573 million in 2023, and RMB 576 million for the 12 months ending March 2024.

Gross Profit: RMB 164 million in 2021, RMB 185 million in 2022, RMB 179 million in 2023, and RMB 190 million for the 12 months ending March 2024.

Net Loss: RMB 479 million in 2021, RMB 422 million in 2022, RMB 356 million in 2023, and RMB 367 million for the 12 months ending March 2024.

Lottery Win Rate:

The company is offering 22.4166 million shares globally, with 200 shares per lot. As of now, the oversubscription rate is 4.61x. Based on current margin financing, there will be no clawback (due to the recent IPO hype and the bullish trend in Hong Kong stocks, this stock may also benefit). Without clawback, there are 5,604.15 lots each for Group A and Group B. An estimated 5,000–9,000 participants are expected, with a lottery win rate of around 60%. Applying for 4 lots guarantees 1 lot.

Comprehensive Review:

Taimei Medical's revenue primarily comes from cloud-based software (SaaS products and customized solutions) and digital services. In 2023, cloud-based software contributed RMB 201 million (35.2% of revenue), while digital services contributed RMB 369 million (64.5%). According to public sources, Taimei Medical is well-known for its digital clinical research and IRC services. The company previously attempted to list on the STAR Market but was rejected due to unmet conditions, leading it to pivot to Hong Kong.

The valuation of medical SaaS platforms has declined significantly over the past two to three years, and they are no longer considered premium assets. Although Hong Kong stocks are transitioning from a bear to a bull market, more established companies in this sector are still languishing. Taimei Medical's IPO valuation offers no advantage. For example, previously listed companies like Yidu Tech and Medlive Technology were once hot stocks. Yidu Tech now has a market cap of HKD 3.704 billion (down from HKD 23.716 billion at its December 2020 IPO), with 2023 revenue of RMB 805 million and a net loss of RMB 632 million. Medlive Technology has a current market cap of HKD 6.317 billion (down from HKD 18.773 billion at its June 2021 IPO), with 2023 revenue of RMB 412 million and net profit of RMB 252 million (P/E of 23.43x). Taimei Medical's IPO valuation of HKD 5.604–7.285 billion, with 2023 revenue of RMB 573 million and a net loss of RMB 356 million, seems unjustified. My rough estimate puts its fair value at no more than HKD 4 billion.

The fundamentals are indeed weak, reflecting the severe contraction of the industry over the past two years. Based on the industry and fundamentals alone, this stock can be skipped. However, the emotional appeal lies in Morgan Stanley's sponsorship and stabilizing role, which is noteworthy. The company is raising HKD 224–291 million, a relatively small amount. Its pre-IPO investor lineup is impressive, including Tencent, Matrix Partners, SoftBank China, 5Y Capital, and Yunfeng Capital. However, none of these investors are acting as cornerstone investors this time, which indirectly signals low confidence in the sector. Another positive factor is timing: Hong Kong stocks are transitioning from a bear to a bull market, and the recent IPO frenzy could boost interest. Unfortunately, the company's IPO terms are underwhelming. Had the valuation been more attractive and a few pre-IPO investors stepped in as cornerstones, this IPO might have taken off.

Bull Rating: Bronze Bull

Rating Scale: True Bull > Gold Bull > Silver Bull > Bronze Bull > Pot Bull (True Bull: all-in with margin; Gold Bull: high certainty, use margin; Silver Bull: decent certainty, multi-account spread; Bronze Bull: volatile, prone to sharp swings; Pot Bull: not worth participating)

Subscription Plan:

Given the sector's current challenges and the company's lackluster IPO terms (with a 30% gap between the upper and lower price ranges, prioritizing fundraising over retail investor interests), I am skipping this one!

$TAIMEI TECH(02576.HK) 

Disclaimer:Investing carries risks; proceed with caution. The mentioned securities are for personal tracking only and do not constitute investment advice. I am not responsible for any losses incurred. If you found this helpful, please like, share, and recommend it to others. Thank you!