IPO Observation | Tianshi Rui Submits Registration 5 Months Without Results, Market Uncertainty Surrounds, Can It Build a Profitable "Ideal Blueprint"?

“8 months successful meeting, 5 months registration failure.” This is the current situation of Tianshi Rui Intelligent Medical Equipment Co., Ltd. (hereinafter referred to as “Tianshi Rui”) IPO.

Tianshi Rui is a high-tech enterprise focused on the research and development, production, and sales of surgical robots. The company obtained approval for its IPO on the Science and Technology Innovation Board on October 31, 2022, and successfully held a meeting on June 1, 2023. However, this rapid-growing medical device company has been stuck in the registration process.

In the meeting after the listing committee, Tianshi Rui was required to further implement two items: 1) In the prospectus, it should combine industry characteristics and its own situation, fully disclose the risks of market size not meeting expectations in major matters; 2) Improve disclosure of core product production and sales process.

These two items mainly concern market size and core products. They are also key manifestations of Tianshi Rui's uncertainty at present.

The Science and Technology Innovation Board has five optional standards, the first four of which have clear requirements for revenue. The fifth item, which is the standard for listing, requires that the expected market value not be less than CNY 40 billion, the main business or product must be approved by relevant national departments, and the market space must be large. Currently, Tianshi Rui has achieved certain progress in this regard.

In addition, the fifth item also stipulates that medical device companies must have at least one core product approved for phase II clinical trials, while other eligible companies must have significant technological advantages and meet relevant conditions.

Tianshi Rui chose to comply with the fifth standard. As of the signing date of this prospectus, Tianshi Rui has five product lines. Among them, the Kangda robot SR1000 has been listed for sale, while the Kangda robot SR1500 is undergoing clinical trials; the Kangda robot SR2000 has completed type testing and is preparing to launch clinical trials. The other four products are still in the development stage of product prototypes.

This will have no real impact on the main business income. According to the prospectus, Tianshi Rui's net profit attributable to shareholders from 2020 to 2022 was a loss of CNY 3228.89 million, CNY 6663.26 million, and CNY 2.71 billion, respectively. After deducting non-ordinary losses, the net profit attributable to shareholders was a loss of CNY 3838.17 million, CNY 7832.83 million, and CNY 2.50 billion, respectively. As of the end of the reporting period, Tianshi Rui's undistributed profits were -CNY 29278.51 million.

Although the products have not yet created main business income, Tianshi Rui has already outlined a "blueprint" for its future development in the prospectus. According to Forrest's prediction, by 2025 and 2030, the domestic endoscope robot market scale is expected to reach CNY 113.6 billion and CNY 352.5 billion, respectively.

However, these assumptions are all based on industry size assumptions, and the main predictions include that with the promotion of endoscope robots and government support, the penetration rate of three-level hospitals will remain stable, and gradually penetrate into second-tier hospitals and primary care institutions, with an average of one robot per hospital increasing steadily. Whether these assumptions hold true is unknown.

Additionally, there are already many domestic manufacturers entering Tianshi Rui's main product area, including micro-invasive robots, Wei High Technology Robots, Jingfeng Medical Equipment, and Beijing Acute Surgical Instruments. With the continuous release of domestically-made products, market competition will further intensify. Whether Tianshi Rui can stand out in this competition is also unknown.

The response to the opinion implementation indicated that Tianshi Rui currently only has one core product, Kangda robot SR1000, which has been commercialized and partially differs from other companies' products, such as Da Vinci surgical robots by Intuitive Surgical, and Graphene's MTP1000. If Tianshi Rui's commercialization and promotion progress is not smooth in the future, it will affect its market share and sales scale.

It is worth noting that if Tianshi Rui cannot guarantee short-term profitability, there may be a risk of delisting after listing.

If the company's financial situation at the end of the 4th full accounting year from the date of listing triggers Article 12.4.2 of the Listing Rules, it may trigger the delisting conditions.