Meihua, a Chinese Medical Disposables Maker, Seeks New York Public Offering

The small-cap company files amid heightened uncertainty for Chinese listings in New York.
Aug. 14, 2021 20:10
Meihua, a Chinese Medical Disposables Maker, Seeks New York Public Offering

Meihua International Medical Technologies Co. Ltd. has filed this week for an initial public offering in New York, seeking to raise up to $69 million on the Nasdaq Global Market.

Based in Yangzhou, Meihua makes disposable medical devices of Classes I, II, and III and sells its products in "major global markets," including North America and Europe, according to the prospectus.

These products include pill bottles, ID bracelets, puncture and examination kits, surgical dressing kits, catheters, nasal oxygen tubes, electronic pumps, and medical masks. Meihua operates three manufacturing subsidiaries in China. In addition, about half of its revenues are generated from the distribution of medical devices produced by other manufacturers. In 2020, domestic sales accounted for 82%, and sales to overseas customers made up 18% of all sales at Meihua, the company said.

In 2020, Meihua booked $89.1 million in revenues, a 12% year-over-year increase. Net income was $19 million compared to $15.4 million in 2019. The company had $7.2 million in cash as of December 2020.

Citing the China National Medical Products Administration, Meihua said China's low value-added medical disposables market was worth $14.9 billion in 2020, a 26% increase from 2019. At the same time, the demand skyrocketed more than tenfold during the outbreak of Covid-19. As to global figures, the market size was $58.1 billion in 2018, according to Fitch's BMI Research.

Separately, in its prospectus, Meihua noted its "compliance with foreign investment" laws of China as its business is not included on Beijing's so-called "Negative List" that prohibits market access to certain industries. "Therefore," Meihua wrote, "we are able to conduct our business through our wholly owned PRC Subsidiaries without being subject to restrictions imposed by the foreign investment laws and regulations of the PRC."

Among the investment risks, however, Meihua lists "changes in U.S. and international trade policies, particularly with regard to China," specifically, the ongoing tariff war started under President Donald Trump and now stuck in limbo under President Joe Biden. On the China side, Meihua mentions "certain PRC regulations" may pose risks for Meihua's ability to raise capital.

Meihua said it plans to use the funds from its IPO to build another factory, invest in production lines, acquisitions of other medical device manufacturers, R&D, and recruitment, among other things.

Underwriters are Prime Number Capital and Shengang Securities. They have a greenshoe option to acquire an additional 15% of the shares sold in the IPO.

Topics:
IPO, Meihua