The company's valuation plunged 40% in its latest funding round from four years earlier, as it seeks a Hong Kong listing

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Key Takeaways:

• Sinder Technology's profit declined in 2024, but then more than doubled in the first nine months of last year
• Shares of comparable Mainland-listed companies have undergone similar significant corrections in recent years from earlier peak levels

China's rising living standards have heightened awareness of food safety and livestock health, driving growth in related industries. Shandong Sinder Technology Co. Ltd. rode that wave to prominence, thriving on rising demand for its animal health products. Now, the company is hoping to bring its animal health story to investors with its filing this month for a Hong Kong IPO, adding its name to a long list of hundreds of companies seeking similar listings.

The company is feeding off a Chinese animal health market that expanded from 50.9 billion yuan ($7.37 billion) in sales in 2019 to 68 billion yuan in 2024, averaging 6% annual growth, according to third-party market data in its listing document. That growth is expected to accelerate slightly from last year to reach 141 billion yuan by 2034, increasing at an average annual rate of 7.6%.

Sinder has its own pedigree in founder Li Zhaoyang, 57, who graduated with a veterinary degree from Qingdao Agricultural University in 1991 and established Sinder Technology eight years later. Li currently serves as vice president of the China Veterinary Drug Association, and leads a management team made up mostly of other veterinary professionals.

Veterinary biological products generated around 70% of Sinder's revenue in the first nine months of 2025, with vaccines accounting for 53.8% of total sales. Classified by animal type, poultry products contributed 77.3% of the company's revenue and livestock products made up 13.7%, while pet products accounted for just 1.3%.

Investors indifference

Animal health is a relatively novel concept for investors, putting it at a disadvantage to hotter areas like AI and robotics, which often make their trading debuts with large gains. That discrepancy showed up in the Hong Kong IPO earlier this month by Muyuan Foods (2714.HK), China's leading pig farmer and pork producer. The local portion of Muyan's IPO was just five times oversubscribed, in sharp contrast with tech listings that are sometimes oversubscribed by thousands of times. The stock's debut was also underwhelming, rising just 4% on its first day.

More critically, the animal health sector's heyday appears to be in the past. Sinder has completed three funding rounds to date: a Series A in December 2015 that raised 168 million yuan ($24.3 million), valuing the company at a 671 million yuan; and a Series B in June 2021 that raised 200 million yuan, valuing it at 2.88 billion yuan – more than four times its earlier figure. But the company got a rude awakening with its Series C funding last October, when its valuation fell by nearly 40% to 1.8 billion yuan.

Other companies listed on China's domestic A-share market have experienced similar valuation downsizing as the industry's heyday fades into the rear-view mirror. Industry leader China Animal Husbandry Industry (600195.SH) recently forecast its core profit last year, excluding non-recurring gains, plunged between 62.6% and 72.8% year-on-year, marking a third consecutive annual decline. The company's shares have gained about 18% over the past year, but still trade at less than half their peak levels from 2020 and 2021.

Deep valuation cuts

Pulike Biological Engineering (603566.SH), ranked eighth in the animal health market with a focus on veterinary biologics, offers another grim story from the sector. Its shares have tumbled from a 2023 peak above 30 yuan to recent levels around 13.8 yuan. Such plunging valuations point to intensifying competition, which is pressuring company margins and ultimately filtering down to their bottom lines with falling profits.

Sinder's own results were similarly lackluster until last year. Its revenue dipped slightly in 2024 from 2023 levels, while its gross margin edged down from 46.3% to 46% over that time, resulting in a 19% profit decline to 28.12 million yuan. But things looked up in the first nine months of 2025, when its revenue jumped 25.2% to 877 million yuan and its gross margin rose to 49.7%. As a result, its profit more than doubled to 55.67 million yuan during the nine-month period. The company credited the rebound to strong sales for its higher-margin veterinary biological products, primarily vaccines and transfer factors.

Raw material cost exposure

Sinder's profitability is highly dependent on its raw material costs, which accounted for 63.4% of its total cost of goods sold during the first nine months of last year. A price swing in material costs of just 5% in either direction would alter its profit by about 14 million yuan, meaning an uptick of that magnitude would have slashed the company's profit for the period by around a quarter.

China's animal health sector also remains fiercely competitive. The top 10 players command a collective share of just 23%, with the leader holding only 4%, according to Sinder's prospectus. Sinder ranks ninth nationally with a 1.4% slice, though it holds third place in China's poultry veterinary biologics market.

Despite current strong sentiment for new listings, Sinder's core proposition falls well outside the latest investor flavors of the day. The company's big valuation reset last year, while undermining its current shareholders, could offer a more reasonable value proposition for new investors if the listing makes it to market. That could present a potential opening for investors trying to steer clear of the inflated valuations from more popular sectors.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.