On 28 September, Shandong Linuo Pharmaceutical Packaging Co., Ltd. (stock code: 301188.SZ), known as Linuo Pharmaceutical Packaging, submitted a listing application to the Hong Kong Stock Exchange, aiming to become a pharmaceutical glass enterprise pursuing a dual "A+H" listing.

Unlike most listing applicants whose narrative centers on strong performance, Linuo Pharmaceutical Packaging presents a different picture: revenue and prices in its core business are both declining, its book cash is being consumed rapidly, and operating cash flow has been negative for two consecutive reporting periods. In addition, its single largest shareholder has pledged 78.28% of its shares to provide financing guarantees within the group structure.

78% equity pledge

The prospectus shows that Linuo Pharmaceutical Packaging was established in March 2002, originally named Jinan Linuo Glass Products Co., Ltd. It was restructured into a joint-stock company and renamed in 2015, was once listed on the New Third Board (833017), and debuted on the ChiNext board of the Shenzhen Stock Exchange in November 2021.

The company is a borosilicate specialty glass manufacturer with two business lines: pharmaceutical glass packaging (tubing vials, molded vials and RTU/PFS) and daily-use heat-resistant glass. According to Frost & Sullivan, based on 2025 sales revenue in the Chinese market, Linuo Pharmaceutical Packaging ranks ninth in China's pharmaceutical glass packaging market with a 2.4% share; based on 2025 revenue in the Chinese market, its daily-use heat-resistant glass ranks first in China with a 9.5% share, and based on 2025 global revenue, its daily-use heat-resistant glass ranks second globally with a 5.1% share.

In China's pharmaceutical glass packaging market, the top ten manufacturers together hold 58.1% of the market, with the leading player alone accounting for 20.4%. The prospectus refers to the leader anonymously as "Company A", while public information indicates that this company is Shandong Pharmaceutical Glass (600529.SH), which holds more than 85% of the molded vial market. Shandong Pharmaceutical Glass's 2025 annual report summary also lists Linuo Pharmaceutical Packaging alongside Gerresheimer, Schott and Zhengchuan Co., Ltd. as major players in the domestic pharmaceutical glass industry. Among listed peers, Chongqing Zhengchuan Co., Ltd. (603976.SH) is the leader in tubing vials, and together with international manufacturers such as Germany's Schott and Gerresheimer, the top tier has product lines, production capacity and customer structures far stronger than those of Linuo Pharmaceutical Packaging.

For this Hong Kong listing, the company plans to direct proceeds toward the industrialization of glass substrates for semiconductor packaging, the industrialization of RTU and PFS, research and development, and working capital. The global market for semiconductor glass substrates was only about RMB 100 million in 2026, and Frost & Sullivan expects it to grow to RMB 13.2 billion by 2030, representing a compound annual growth rate of approximately 234.8%. The company's pilot kiln was ignited in June 2026, and glass substrates for semiconductor packaging have begun preliminary trial production.

In terms of shareholding, Linuo Pharmaceutical Packaging's actual controller Gao Yuankun controls Linuo Investment Holding through Linuo Group (which holds 80%), and the latter holds 25.75% of Linuo Pharmaceutical Packaging's shares, corresponding to 26.55% of voting rights. However, before listing, Linuo Investment Holding has pledged 53.93 million A shares (78.28% of its total holdings and 20.16% of total share capital) to commercial banks to guarantee approximately RMB 604 million in credit facilities for three related entities: Linuo Group, Shandong Linuo Industrial, and Linuo Ritter New Energy. The pledge will remain in place after the H-share listing.

Some analysts believe this situation implies two layers of risk. First, the major shareholder has pledged nearly all of its holdings in a "clear-out" style; if any related entity within the group defaults, the bank has the right to dispose of the pledged shares, directly affecting the stability of the listed company's equity. Second, the borrowers include Linuo Ritter New Energy, a related enterprise controlled by the actual controller's son Gao Lei, meaning that any problem in any link of the family system's funding chain could transmit to the listed company along the pledge chain.

Core business under pressure and cash flow stress rising sharply

From 2023 to 2025 and in the first half of 2026, Linuo Pharmaceutical Packaging achieved operating revenue of RMB 947 million, RMB 1.081 billion, RMB 982 million and RMB 673 million. After year-on-year growth of 14.1% in 2024, revenue fell 9.2% in 2025, with a two-year compound growth rate of only about 1.8%. In the first half of 2026, revenue rose 34.9% year on year, but this was mainly contributed by daily-use heat-resistant glass, while the pharmaceutical packaging core business remained in a weak recovery.

The company's net profit came under pressure earlier. Net profit was RMB 65.9 million in 2023 and RMB 66.1 million in 2024, essentially flat, but fell sharply to RMB 39.7 million in 2025, a decline of about 40%. In the first half of 2026, net profit was RMB 31.2 million, still down 24% year on year. Compared with the recovery in revenue, net profit has not recovered in tandem.

Linuo Pharmaceutical Packaging's revenue decline in 2025 came entirely from the pharmaceutical packaging segment, whose revenue fell from RMB 467 million in 2024 to RMB 357 million, a drop of 23.6%. The company explained that medical insurance cost controls continued to tighten, downstream pharmaceutical companies' procurement demand was weak, and average product prices declined after centralized procurement. The prospectus states that after the implementation of centralized procurement policies, the average price of pharmaceutical glass packaging fell significantly, and some of the company's tubing vial production lines were temporarily shut down in response. The capacity utilization rate of pharmaceutical glass packaging fell from 93.1% in 2023 to 68.8% in 2025, recovering only to 70.5% in the first half of 2026. The segment's gross margin compressed from 22.5% to 17.6% over the same period.

Citing Frost & Sullivan data, the prospectus states that China's pharmaceutical glass packaging industry has seen overcapacity in recent years, reflecting factors including market participants expanding capacity and fluctuations in market demand. Expectations of medium borosilicate substitution attracted manufacturers to expand production in a concentrated manner, while downstream demand growth could not keep pace with supply, and price competition may become long-term.

By contrast, the company's daily-use heat-resistant glass segment generated revenue of RMB 609 million in 2025 and RMB 436 million in the first half of 2026, up about 53% year on year. Its gross margin rose from 12.2% in 2023 to 22.2% in the first half of 2026, and its capacity utilization rate exceeded 100% for two consecutive reporting periods. The company's overseas revenue share rose to 32% in the first half of 2026, almost entirely from exports of daily-use heat-resistant glass, with the pharmaceutical packaging segment accounting for a very small share of overseas sales. A procurement platform under Dutch retail loyalty group, referred to in the prospectus as "Customer B", began cooperating with the company in 2024, entered the top five customer list for the first time in 2025 with 3.4% of revenue, and jumped to become the largest customer in the first half of 2026 with 9.4% of revenue. However, this segment is mainly OEM/ODM, and its own-brand business has just started, so whether it can sustain growth remains uncertain.

In addition to declining revenue, cash generated from the company's operating activities has been continuously negative. Operating cash flow was RMB 60.8 million in 2023 and RMB 69.3 million in 2024, turned negative at RMB -55.2 million in 2025, and widened further to RMB -68.3 million in the first half of 2026. Despite positive net profit, operating cash flow has been negative for two consecutive periods. The prospectus attributes this to working capital occupation, with inventory and accounts receivable continuing to rise (inventory turnover days have lengthened from 88 days to 170 days), while hedging on the payables side is limited. Operating cash flow figures are presented according to the disclosure basis of the Hong Kong prospectus.

Accordingly, the company's cash and cash equivalents at period end fell from RMB 402 million at the end of 2025 to RMB 252 million at the end of June 2026, and further to RMB 106 million at the end of August 2026, shrinking by about 74% in eight months. Correspondingly, the company's previously accumulated wealth management financial assets shrank from RMB 453 million at the end of 2023 to RMB 57 million, mainly invested in production facility construction and equity investments.

It is worth noting that Linuo Pharmaceutical Packaging has paid cumulative dividends of about RMB 118 million since 2023, including RMB 25.9 million in the first half of 2026.