Jianerkang Medical Soars Nearly 5x in Market Cap Within Two Days of IPO

On November 7, JIANERKANG MEDICAL (Jianerkang, 603205) officially listed on the Main Board of the Shanghai Stock Exchange, raising a total of RMB 440 million, with China Securities Co., Ltd. serving as the sponsor.

JIANERKANG MEDICAL’s IPO price was RMB 14.65 per share, with an issuance P/E ratio of 14.59x. The stock closed at RMB 72.30 on the morning of November 7, representing a surge of 393.52%, and the company’s total market capitalization reached RMB 8.7 billion.

On November 8, the opening price of JIANERKANG MEDICAL wasRMB 75.50,The dynamic P/E ratio is 76.08x. The closing price on the afternoon of November 8 was RMB 79.00, representing a gain of 12.73%, and the company's total market capitalization stood at RMB 9.48 billion.

Just Two Days Post-IPO, Market Cap Surges Nearly Fivefold: What’s the Background of This Company?

Source: East Money

JIANERKANG MEDICAL is a high-tech enterprise primarily engaged in the research and development, production, and sales of disposable medical devices, such as medical dressings, and disinfection and hygiene products. Its products are categorized into six major series based on their applications: surgical consumables, wound care, disinfection and cleaning, protective equipment, polymers and auxiliary products, and nonwoven fabrics, with a product portfolio covering over 100 varieties.

Since its establishment in 1999, the company has focused on the medical dressing industry, with products such as surgical consumables, wound care items, disinfection and cleaning products (excluding wet wipes), and protective supplies all falling within the category of medical dressings.

After more than 20 years of dedicated development, the company has established a comprehensive marketing platform integrating “domestic and international,” “online and offline,” and “hospital and pharmacy” channels. Its domestic sales network now covers all 31 provinces, municipalities, and autonomous regions in China, with products available in nearly 50,000 pharmacies. In overseas markets, its products are exported to the Americas, Europe, Asia, the Middle East, and Africa, having secured a relatively stable market position in the United States and Europe.

According to statistics from the China Chamber of Commerce for Import and Export of Medicines and Health Products, JIANERKANG MEDICAL ranked fourth among domestic medical dressing exporters for six consecutive years from 2017 to 2022. The top three were Allmed Medical, Winner Medical, and Zhende Medical, all of which are domestically listed companies.

According to the prospectus, from 2020 to the first half of 2023 (January–June), JIANERKANG MEDICAL reported operating revenues of RMB 1.623 billion, RMB 782 million, RMB 1.093 billion, and RMB 476 million, respectively, with net profits of RMB 384 million, RMB 132 million, RMB 157 million, and RMB 53 million, respectively. The company’s relatively large performance scale in 2020 was primarily attributable to the substantial sales volume of protective products. After excluding protective products, the company’s operating revenues during the reporting period were RMB 841 million, RMB 719 million, RMB 888 million, and RMB 447 million, respectively, demonstrating overall stability.

How Did This Company Manage an IPO on the Main Board Despite a Cliff-Like Revenue Drop After Raking in RMB 1 Billion from Protective and Disinfection Products During the 2020 Pandemic?

JIANERKANG MEDICAL’s Key Financial Data and Financial Indicators for the Reporting Period

In 1993, Jintan County Zhixi Sanitary Materials Factory (the predecessor of Jianerkang) was established in Zhili Village, Zhixi Town, Jintan City. The founder, Chen Guoping, served as the factory director from August 1993 to October 1999.Starting with the production of medical absorbent cotton in a modest workshop equipped with only two machines, staffed by just over ten employees, and covering an area of merely several hundred square meters, the materials factory embarked on the journey into medical dressings that would later define JIANERKANG MEDICAL.

In 1999, Chen Guoping established Jiangsu Jianerkang Medical Dressing Co., Ltd. Over the past few decades, the company has grown into a professional manufacturer and exporter of medical dressings, now employing more than 1,500 staff, operating dozens of industry-leading automated production lines, and covering an area of 350,000 square meters.

Over the past two decades, the company has cultivated deep expertise in the medical dressing industry, progressing through three major stages of development. It is currently transitioning from a business model primarily focused on OEM production and export sales to becoming a technology-driven enterprise with its own proprietary brands.

From 1999 to 2007, JIANERKANG MEDICAL adopted a business model primarily focused on OEM production and export sales, establishing production lines centered on products such as absorbent cotton, surgical drapes, gauze pads, gauze rolls, and bandages, thereby completing its initial product layout in the medical dressing sector.

From 2008 to 2013, the company increased its investment in independent research and development and innovation on the basis of its original business model, developed new products, and upgraded its existing production lines by establishing an integrated production line for scouring, bleaching, and dyeing of surgical drape greige fabric. While expanding its production scale, JIANERKANG MEDICAL added the production and sales of non-woven fabrics and gauze pads, and independently developed products such as carrier disinfectants and cotton swabs.

Since 2014, JIANERKANG MEDICAL has intensified its efforts in independent R&D and the development of proprietary brands, while strengthening its domestic market presence and marketing infrastructure. The company has expanded its product portfolio to include lubricants, spunlace nonwoven fabrics, wet wipes, face masks, medical protective suits, laryngeal mask airways, connecting tubes, surgical packs, alcohol-based disinfectants, and hand sanitizing gels. In the process, it has gradually established its own brand matrix, including “Jianerkang,” “Jianweikang,” “Qingbeijian,” and “Ocean Fairy Tale.”

In this process, JIANERKANG MEDICAL has established a relatively mature business model based on its own positioning—the “2+2+2+2” business model. This refers to: “OEM + Own Brands,” “Domestic + International,” “Offline + Online,” and “Medical + Consumer Civilian Use.”

Abroad, JIANERKANG MEDICAL holds product certifications or registration qualifications in countries and regions including the United States (FDA), the European Union (CE), the United Kingdom, and Germany. Its products are exported to the United States, Europe, Africa, Southeast Asia, the Middle East, and other regions. The majority of its export clients are large-scale, well-known manufacturers and distributors.

In China, JIANERKANG MEDICAL’s proprietary brand products have established an offline sales network covering 31 provinces and nearly 50,000 pharmacies. In the online sector, its proprietary brand products are available on Tmall and JD.com, two major e-commerce platforms, leveraging their leading market positions to expand marketing efforts for the proprietary brands.

Driven by global population aging and the continuous advancement of living standards, health consumption, and care concepts, the global medical dressing market is experiencing rapid growth.

Large foreign medical dressing manufacturers in developed economies such as Europe and the United States hold first-mover advantages in channel operations and brand building. In contrast, domestic medical dressing manufacturers started later, primarily undertaking manufacturing activities transferred from Europe and the United States by leveraging advantages in industrial chains and labor costs, with a primary focus on OEM contract manufacturing.

Currently, JIANERKANG MEDICAL primarily adopts a production and business model centered on OEM manufacturing and export sales, mainly providing private-label production for large overseas medical dressing brands, which are then sold under their own brands or as distributed brands.

From 2020 to the first half of 2023, JIANERKANG MEDICAL’s domestic sales revenue amounted to RMB 728 million, RMB 128 million, RMB 312 million, and RMB 84 million, respectively, accounting for 45.06%, 16.40%, 28.63%, and 17.63% of its total operating revenue. The relatively high domestic sales revenue and proportion in 2020 were primarily driven by increased sales of protective and disinfection/cleaning products in the Chinese market. From 2021 to the first half of 2023, the proportion of domestic sales revenue in total operating revenue remained below 30%.

During the same period, the Company’s overseas sales revenue amounted to RMB 887 million, RMB 652 million, RMB 778 million, and RMB 392 million, accounting for 54.94%, 83.60%, 71.37%, and 82.37% of its principal business revenue, respectively.Even in 2020, when domestic sales of protective and disinfection products surged, overseas revenue still accounted for more than half of the total, and its share has never fallen below 70% since then.

The company’s products are primarily sold to developed countries and regions, including the United States and Europe, where it has established relatively stable cooperative relationships with major overseas clients. Its international customer base includes well-known enterprises in the medical device and pharmaceutical industries, such as Cardinal Health, Medline, Owens & Minor, McKesson, and Hartmann, all of which are global healthcare service providers, medical supply brands, or manufacturers.

Analysis of Main Business Revenue by Region

Although JIANERKANG MEDICAL enjoys strong market presence and stable partnerships overseas, its positioning as a business primarily engaged in OEM export manufacturing means that its revenue is subject to numerous unstable factors.such as overseas customer demand and ocean freight capacity. This has led to significant fluctuations in its revenue in line with overseas market demand, as evidenced by the revenue changes in its surgical consumables and wound care products during the reporting period.

Composition of JIANERKANG MEDICAL's Main Business Revenue

First, let’s look at surgical consumables.

JIANERKANG MEDICAL's Surgical Consumables ProductsIncluding surgical drapes and gauze pads. According to the prospectus, from 2020 to the first half of 2023 (January–June), the Company’s sales revenue from surgical consumables amounted to RMB 272 million, RMB 250 million, RMB 291 million, and RMB 150 million, respectively, showing a trend of initial decline followed by recovery. On one hand, the Company’s surgical drapes and gauze pads are primarily exported to the United States for use in end-user medical institutions; starting in 2020, the volume of surgical procedures at U.S. healthcare facilities declined, leading to reduced demand for surgical drapes and gauze pads. On the other hand, global ocean freight rates surged in 2021, and container bookings became tight, adversely affecting the Company’s sales. In 2022, as international shipping conditions improved, the Company’s revenue from surgical consumables rebounded rapidly, exceeding the 2020 level.

Wound Care ProductsIncluding gauze products, non-woven fabric products, absorbent cotton products, bandage products, dressings, and medical care kits. The prospectus shows that from 2020 to the first half of 2023, the company's sales revenue from wound care products was RMB 219 million, RMB 185 million, RMB 328 million, and RMB 153 million respectively, showing a fluctuating trend due to the impact of global shipping capacity.

Constrained by its current stage of development and financial resources, JIANERKANG MEDICAL has adopted a cautious and gradual approach to expanding its proprietary brand market. The company primarily focuses on fulfilling orders from major overseas clients to ensure steady growth, resulting in a relatively low proportion of sales from its proprietary brands.

According to the prospectus, from 2020 to January-June 2023, JIANERKANG MEDICAL’s sales revenue from its own-brand products amounted to RMB 634 million, RMB 79 million, RMB 260 million, and RMB 48 million, respectively, accounting for 39.03%, 10.08%, 23.79%, and 10.17% of its total operating revenue.In the future, if the company wishes to enhance business stability and achieve substantial growth, it may need to prioritize the development of its proprietary brand as a key focus for its future business expansion.

Sales Performance of JIANERKANG MEDICAL’s Proprietary Brands During the Reporting Period. Source: JIANERKANG MEDICAL and China Securities Co., Ltd.’s Response to the Inquiry Letter Regarding the Application for Initial Public Offering and Listing on the Shanghai Stock Exchange Main Board

In 2020, the market demand for products such as face masks and disinfectants surged sharply in the short term. JIANERKANG MEDICAL responded swiftly by ramping up production, resulting in a substantial increase in the production scale of protective equipment, primarily face masks.Of the company’s 2020 revenue, which exceeded RMB 1.6 billion, protective products accounted for over 48%, generating nearly RMB 800 million, while disinfection and cleaning products represented 14.37% of revenue, exceeding RMB 200 million; together, these two categories constituted more than half of the total annual income.

The revenue surge brought about by the pandemic hit the pause button in 2021.

In 2021 and 2022, JIANERKANG MEDICAL’s total revenue amounted to RMB 782 million and RMB 1.093 billion, respectively, representing year-on-year declines of 51.81% and 32.66% compared with 2020. Among these, revenue from protective products and disinfection/cleaning products dropped sharply, reaching only RMB 206 million and RMB 134 million, respectively, in 2022, which corresponded to decreases of 73.73% and 42.26% relative to 2020 levels.

In this context, what gives the company the confidence to pursue an IPO? The answer may lie in its specific business segments.

First, there is the highly watched protective products sector. After enabling JIANERKANG MEDICAL to become “overnight wealthy” during the pandemic, will protective products slump as the pandemic dividends fade, or can they continue to drive revenue growth?

Specifically, Jianerkang Medical’s protective product portfolio includes face masks, protective suits, and isolation face shields, with face masks being the core product. According to the prospectus, the company’s sales revenue from protective products amounted to RMB 782 million, RMB 63 million, RMB 206 million, and RMB 29 million in 2020, 2021, 2022, and the first half of 2023 (January–June), respectively, accounting for 48.44%, 8.02%, 18.85%, and 6.06% of its total operating revenue. Neither the revenue nor the proportion has returned to previous peaks following the sharp decline observed in 2021.

However, this does not mean that protective products will be in a slump from now on.

Revenue and Gross Profit of the Issuer’s Protective Products from January to June 2019–2023Image source: JIANERKANG MEDICAL and the Response to the Audit Inquiry Letter regarding the Application Documents for the Initial Public Offering and Listing on the Shanghai Stock Exchange Main Board of JIANERKANG MEDICAL by China Securities Co., Ltd.

According to disclosures by JIANERKANG MEDICAL, the company’s revenue from protective products in 2019 amounted to RMB 9.3705 million, a relatively low figure compared with that of each period within the reporting period. In 2019, the gross profit margin for its protective products was 49.00%, showing minimal difference in profitability compared with each period within the reporting period. Since the disappearance of external factors in 2023, the company’s revenue from protective products has declined, and the product gross profit margin has returned to a reasonable range compared with 2020; however, it is unlikely that business revenue will fall below the 2019 level.

On the one hand, since 2020, residents’ awareness of disease prevention has generally increased. The market demand for protective products will continue to exist in the future and will remain higher than the 2019 level, providing JIANERKANG MEDICAL with market opportunities. On the other hand, JIANERKANG MEDICAL has not halted its efforts to expand into the protective products market in the post-pandemic era.According to JIANERKANG MEDICAL, the number of customers for its protective products was 327 from January to June 2023, compared to only 103 in 2019.Overall, as downstream demand has returned to normal market levels, the scale of the Company’s protective product business has also stabilized at a normal level since 2023, with the overall scale remaining higher than the pre-2019 baseline. Therefore, it is unlikely that the Company’s protective product business will revert to its previous levels, and no significant changes are expected.

High-molecular-weight products and ancillary products are showing a stable growth trend, which will provide growth drivers for the company.

During the reporting period, JIANERKANG MEDICAL’s polymer and ancillary products primarily consisted of lubricants and needle boxes. According to the prospectus, the sales revenue from polymer and ancillary products amounted to RMB 57 million, RMB 71 million, RMB 131 million, and RMB 70 million in 2020, 2021, 2022, and January–June 2023, respectively, accounting for 3.54%, 9.11%, 11.99%, and 14.68% of the company’s total operating revenue.From 2020 to 2022, the compound annual growth rate (CAGR) of sales revenue for polymer and auxiliary products reached 51.23%.As JIANERKANG MEDICAL developed new products such as needle boxes, connecting tubes, and laryngeal masks and achieved sales, the company's revenue scale for polymer and auxiliary products continued to grow, becoming a new driver of performance growth.

Since 2017, JIANERKANG MEDICAL has continuously increased its investment in the research and development and production of medical polymer products, expanding its product portfolio in response to downstream demand.From January to November 2023, the Company’s polymer and ancillary products generated sales revenue of RMB 130 million, with future revenue expected to grow further.Furthermore, JIANERKANG MEDICAL’s newly built production line for oxygen humidifier bottles has entered the commissioning phase, and the related products have passed preliminary customer validation. The Company has signed a cooperation agreement with its key client, Medline, specifically for oxygen humidifier bottle products, with mass sales expected to commence in 2024, thereby further driving growth in sales revenue from polymer and ancillary product categories.

According to QYResearch, the market size of China’s medical polymer materials industry grew from RMB 82.484 billion in 2017 to RMB 246.998 billion in 2021, representing a compound annual growth rate (CAGR) of 31.55%, while JIANERKANG MEDICAL’s CAGR from 2020 to 2022 was significantly higher than this figure. In recent years, the market size of China’s medical polymer materials industry has shown a trend of rapid growth.Driven by the acceleration of in-house R&D, production line expansion, and market growth, medical polymer products are poised to become a new growth curve for JIANERKANG MEDICAL.

The prospectus shows that from 2020 to the first half of 2023, JIANERKANG MEDICAL's R&D investments were RMB 51.0033 million, RMB 28.638 million, RMB 35.2994 million, and RMB 17.112 million, respectively, accounting for 3.14%, 3.66%, 3.23%, and 3.59% of the operating revenue in the corresponding periods. As of June 30, 2023, the company had a total of 148 R&D personnel, representing 9.76% of its workforce.

Among these, high-end medical dressings represent a key market that JIANERKANG MEDICAL is eager to penetrate.In recent years, JIANERKANG MEDICAL has continuously expanded the application of its medical dressings and other products in high-end markets and emerging fields.

As early as 2015, JIANERKANG MEDICAL began to engage in the research and development of high-end medical dressing products. However, after nearly nine years of development, this business has still not become one of its significant revenue sources.According to the prospectus, from 2020 to the first half of 2023, JIANERKANG MEDICAL’s sales revenue from high-end medical dressings amounted to RMB 800,900, RMB 1.4593 million, RMB 2.183 million, and RMB 839,500, respectively, indicating a relatively small overall sales scale.

The reasons are primarily concentrated in two aspects. First, the production and operation of high-end medical dressings require substantial investment in fixed assets, as well as significant expenditures on establishing sales channels and marketing. Constrained by its current financial strength and stage of development, JIANERKANG MEDICAL has made relatively limited investments in these areas, making it difficult to enter the international market. Furthermore, due to the higher value-added nature of high-end medical dressings, their prices are considerably higher than those of traditional medical dressings, which limits their consumer base and market penetration in China.

However, JIANERKANG MEDICAL has also achieved some breakthroughs in the field of high-end medical dressings.In 2017, the company completed domestic registration for chitosan wound dressings, alginate wound dressings, sterile dressings, activated carbon wound dressings, and transparent dressings. Subsequently, the company completed domestic registration for hydrocolloid dressings in 2019 and obtained product registration for polyurethane foam dressings in 2020. Notably, design transfer was completed for all the aforementioned products during their development, and they are capable of mass production.

In this capital market listing, JIANERKANG MEDICAL plans to raise RMB 720 million, of which RMB 420 million will be allocated to the construction of a project for high-end medical dressings, nonwoven fabrics, and related products.High-end medical dressings present significant barriers to entry in terms of technology, capital, and sales channels. It is precisely for this reason that JIANERKANG MEDICAL aims to leverage its upcoming initial public offering (IPO) to overcome these challenges, further intensifying its efforts in product research and development as well as market expansion within the high-end medical dressing sector.

JIANERKANG MEDICAL's Investment Projects for This Fundraising

Meanwhile, the stable customer network established by JIANERKANG MEDICAL in overseas markets has laid a solid foundation for mature sales channels for high-end medical dressings. To promote the company’s product portfolio and market expansion in the high-end medical dressing sector, JIANERKANG MEDICAL has leveraged its existing base of major overseas clients to sequentially provide samples and quotations of high-end medical dressings, aiming to enter the international market at an opportune time.

If this IPO can resolve the aforementioned funding issues, it may propel JIANERKANG MEDICAL’s high-end medical dressing business to new heights.

Currently, the barrier to entry for China’s medical dressing industry is relatively low, with numerous manufacturers and a low level of market concentration. Meanwhile, domestically produced medical dressings are predominantly traditional products, resulting in significant product homogenization. Most domestic companies engage in price competition in the low-end market, leading to relatively low brand recognition and influence.

In the future, with the advancement of healthcare reforms and the continuous improvement of domestic enterprises’ technological, manufacturing, and R&D capabilities, Chinese companies will more actively expand their global market presence, increase R&D investment, and transition from traditional medical dressings to the high-end medical dressing industry.

In this process, companies with outstanding R&D and production capabilities for high-end medical dressings are more likely to stand out.In recent years, global trends have shown a significant increase in downstream market demand for multifunctional, novel-material, and high-value-added medical dressings. According to statistics from BMI Research and QY Research, the global market size for advanced wound dressings reached USD 5.846 billion in 2020 and is projected to reach USD 7.230 billion by 2027. The transition from traditional medical dressings to advanced medical dressings will become one of the key strategic directions for enterprises in the future. Companies that can rapidly achieve R&D and industrialization of new types of advanced dressings will gain a first-mover advantage.

ThisIn addition, the ability to capture the domestic market may become a significant driver of corporate business growth.Currently, the majority of medical dressing manufacturers in China still primarily engage in OEM production and export sales, with the vast majority of their revenue derived from overseas markets. As domestic demand for medical dressings continues to expand, and ASEAN countries with lower labor costs, such as Vietnam and Thailand, increasingly enter the international market, Chinese medical dressing manufacturers are trending toward refocusing on the domestic market. They aim to mitigate and resolve the risks associated with fluctuations in overseas markets by balancing domestic sales volumes with export volumes.

In recent years, China’s healthcare system reforms have deepened continuously. The establishment and refinement of regulatory frameworks for medical devices and industry standards for medical dressings have fostered a healthy, orderly, and standardized development environment for the domestic medical dressing sector. It is believed that as Chinese medical dressing companies drive technological iteration, increase investment in the research and development of high-end products, and deepen their presence in both domestic and international markets, they will propel the entire industry toward greater internationalization, premiumization, and innovation. The developments unfolding in this field are poised to become even more remarkable.