On February 27, 2026, the Hong Kong Stock Exchange disclosed the updated prospectus of Shandong Hugu Oral Medical Group Co., Ltd. (referred to as: Hugu Oral). This is the third time this nearly 20-year-old dental materials company has launched a bid on the main board of Hong Kong stocks. The joint sponsors are China International Capital Corporation and DBS Bank.

Stagnant Revenue, Halved Profits

Hugu Oral’s path to listing can be described as a long history of “breaking through obstacles.”

It was listed on the New Third Board in 2015, delisted in 2017, and then fully committed to entering the A-share market. The company signed guidance agreements with multiple securities firms including China Merchants Securities, Haitong Securities, Zhongyuan Securities, and Guojin Securities. It repeatedly switched between the ChiNext and STAR Market, but never achieved its goal.

During its 2021 attempt to list on the ChiNext, the company faced a series of compliance issues. The Shenzhen Stock Exchange’s inquiries pointed directly to irregularities in equity holding and financial internal controls during its NEEQ period.

In the 2016 private placement, former director Li Jun’s holdings included 74.16% held in proxy, involving 57 shadow shareholders. There were also issues such as sales staff collecting payments on behalf of the company and a high proportion of personal refunds, which became key obstacles to its success in the A-share market.

Many investment bankers noted that frequent changes in sponsors often indicate serious review flaws that are difficult to rectify. Additionally, Hugu Oral mainly engages in traditional manufacturing, making it hard to align with the “hard technology” and “innovation-driven” positioning favored by A-shares. Transitioning to Hong Kong stocks appears more like a reluctant choice.

More concerning than historical legacy issues is the company’s large one-time dividend just before the IPO.

In January 2025, Hugu Oral paid out dividends of 145 million yuan to shareholders, nearly 88% of its combined net profit for 2023 and 2024. Looking at the ownership structure, the actual controller Song Xin holds 52.56%, and her mother Qin Lijuan holds 23.16%, together cashing out over 100 million yuan.

As of the end of January 2025, Hugu Oral’s cash and equivalents were only 145 million yuan, while short-term borrowings had risen to 152 million yuan, marking the first time cash could not cover immediate liabilities.

During a period of declining performance and tight funds, the actual controller chose to cash out early, which directly triggered strong market doubts about the company’s governance, financial planning, and listing sincerity.

If ownership and internal control issues are old wounds, then the steep decline in performance is Hugu Oral’s most pressing new injury.

The prospectus shows that Hugu Oral has fallen into a dual dilemma of stagnant revenue and halved profits.

On the revenue side, growth momentum has nearly dried up. From 2023 to 2025, revenue was 358 million, 399 million, and 400 million yuan respectively, with year-over-year growth rates plunging from 27.86% to 0.18%, almost stagnating. In the first half of 2025 alone, revenue even declined by 3.9% year-over-year.

Compared to the “stalling” revenue, profit performance is even more brutal. Net profits for the same period were 88 million, 77 million, and 48 million yuan, declining for three consecutive years. In 2025, full-year net profit dropped by 37.7% year-over-year, with the first half down by 56.44%, showing a “halving” trend.

Behind this bleak performance are persistently high and severely profit-eroding operating expenses. In the first half of 2025, Hugu Oral’s sales, administrative, and R&D expenses together accounted for 42.4% of revenue.

Internal and External Pressures, Slow Transformation

From a business structure perspective, Hugu Oral heavily relies on traditional dental materials. In 2025, clinical and lab products contributed over 80% of revenue, while digital products representing the industry’s future accounted for only 0.2%, indicating a serious lag in transformation.

The company’s two core products—elastomeric impression materials and synthetic resin teeth—are both the top domestic market share leaders by sales. However, they operate in mature, low-margin, price-sensitive “red ocean” markets. For example, the average price of synthetic resin teeth has long been only 0.9 yuan per tooth, with slim profits and limited growth potential.

In high-growth segments like invisible orthodontics, even with price cuts, Hugu Oral’s market share remains below 2%, far behind leading companies like Angelalign and Invisalign. Some of its related products have been included in provincial centralized procurement, further squeezing profit margins.

Overseas business also continues to shrink. Revenue from the core U.S. market fell from 32.28 million yuan to 16.47 million yuan, with its share of total revenue dropping from 9% to 4.1%. Under internal and external pressures, the company’s fundamentals are flashing red.

From the perspective of industry value and product competitiveness, Hugu Oral’s situation shows a clear polarization.

Based on 2024 sales revenue, Hugu Oral is the largest domestic manufacturer of dental impression materials and one of the leading clinical dental material producers. It has stable channels, customer base, and large-scale production capacity, with gross margins around 58%, aligning with the trend of domestic substitution in dental consumables.

The Chinese dental medical device market continues to expand, driven by aging populations, increased oral health awareness, and widespread primary healthcare. These factors provide steady demand for basic consumables, while high-value segments like digital, orthodontics, and implants offer long-term growth opportunities.

To break through growth bottlenecks, Hugu Oral plans to use proceeds from this IPO mainly for two purposes: first, expanding its Rizhao, Shandong production line and investing in digital technology; second, investing in automation and building a factory in Indonesia to promote a global supply chain. However, both strategies face significant contradictions.

Domestically, the company’s traditional business has reached a ceiling. Capacity utilization is not saturated, so large-scale expansion could lead to oversupply.

Overseas, revenue has been declining year after year. With core markets like the U.S. shrinking, building a factory in Indonesia amid adverse conditions involves huge uncertainties in investment returns.

Internal Competition and No Clear Breakthrough

While holding the titles of “market leader,” Hugu Oral is just a minor player on the global stage. When the true industry landscape is revealed, its awkward position becomes obvious.

Foreign brands like 3M and Dentsply Sirona dominate the high-end market, while domestic competitors engage in intense price wars in the low-end segment. The normalization of centralized procurement continues to suppress profits. Caught in the middle, Hugu Oral lacks high-end technological barriers and cannot sustain a long-term advantage through low prices. Its global market share remains only 0.2%.

From an industry and capital perspective, Hugu Oral’s three IPO attempts reflect the pain points of traditional consumables transitioning and the dilemma faced by capital choices.

The current dental materials industry is at a structural inflection point: low-end consumables are nearing saturation, high-end markets are dominated by foreign capital, and digitalization, intelligence, and high-value products are the main industry trends.

Hugu Oral’s strengths lie in capacity and channels for basic consumables, but its weaknesses include insufficient R&D investment, lack of high-end products, and slow digital transformation.

For a Hong Kong IPO, although the company has a niche leading position and stable cash flow, issues such as slowing performance, dividend disputes, historical governance flaws, and unfulfilled transformation plans will be core challenges in review and valuation.

From an investment perspective, the company faces multiple risks: governance issues—such as aggressive dividends, prior equity proxy holdings, and internal control problems—continue to undermine market trust; operational risks—stagnant revenue, declining profits, high expenses, and no clear growth inflection point; product risks—low-end product structure, weak competitiveness in new businesses, and almost no digital presence; industry risks—price pressures from centralized procurement, foreign dominance, and domestic competition; strategic risks—overseas expansion amid shrinking core markets, with potential overcapacity and factory investments increasing operational pressure.

In the future, if Hugu Oral can leverage fundraising to truly upgrade digital capabilities, optimize product structure, and improve governance, it still has a chance to recover value by capitalizing on the domestic restorative industry boom. However, if it continues relying on low-cost traditional consumables and delays transformation, even if it successfully lists in Hong Kong, it will likely remain undervalued, with weak liquidity and sluggish growth.

For investors, this dental company’s third IPO attempt is shrouded in concerns beneath its halo. Vigilance is needed regarding risks of declining performance, dividend hollowing out, and failed transformation.

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