Asia's Probiotic Leader Seeks Hong Kong IPO

Wecare Probiotics ranked third globally and first in Asia by probiotic raw powder production volume in 2025, even as large amounts of its capacity lay idle last year image credit: Bamboo Works Key Takeaways: Wecare Probiotics has filed to list in Hong Kong, reporting its overseas sales have grown steadily to contribute 40.2% of revenue last year The company has attracted a diverse group of investors, including industrial capital, state-backed funds and market-oriented investment institutions Growing health consciousness among global consumers is providing a boost for probiotics, with China emerging as one of the world's largest markets. Behind such familiar products as yogurt and supplements are a platoon of upstream manufacturers focused on things like strain research and production, providing the industry with the latest raw materials. Now, a member of that upstream mix is aiming to give investors a taste of its business as Wecare Probiotics Co. Ltd., based in the East China city of Suzhou, filed last week for a Hong Kong IPO. Second-tier underwriter Haitong International is acting as the listing's sole sponsor, indicating it's likely to be mid-sized, probably raising less than $100 million. Founded in 2013, Wecare develops and sells probiotic strains, which are naturally occurring microorganisms like bacteria and yeast that assist in digestion and fighting some diseases. Probiotics are often created in the fermenting process, and are found in foods like yogurt, sauerkraut and aged cheeses. Wecare ranked third globally and first in Asia by probiotic raw powder production volume in 2025, according to third-party research in its listing document. Its products are mainly used in functional foods, dietary supplements, dairy products, agriculture and other sectors. The company generates most of its revenue from the sale of probiotic powder and also for processing such powder into probiotic formulations based on customer requirements. Wecare's core strength lies in its integrated capabilities combining product development and manufacturing. Leveraging its proprietary strain bank and supporting production capabilities, the company has been able to achieve mass production of probiotic powder with high viability and stability. According to the prospectus, the company has established production bases with intelligent manufacturing systems in its hometown of Suzhou, as well as in the city of Luohe in Central China's Henan province. It has achieved viable cell counts exceeding 1 trillion CFU/g for multiple strains, while its core strains have viable cell retention rates of over 60% after 24 months of storage in ambient conditions. Steady growth Wecare has been growing steadily over the last three years, with its revenue rising from 496 million yuan ($72.5 million) in 2023 to 701 million yuan last year. Its "human health" segment is its main money spinner, with its share of total revenue continuing to increase. In 2025, probiotic powder and formulations under the segment generated approximately 647 million yuan, or 92.2% of the total. Revenue from the company's traditional dairy division, its second largest segment, grew that year as well, but its contribution stood at just 2.5% of total revenue. Geographically, China remains Wecare's core market, although its revenue contribution has been gradually declining. Revenue from Greater China, which includes Mainland China, Hong Kong, Macao and Taiwan, rose from 335 million yuan in 2023 to 420 million yuan last year, though its share of total revenue fell from 67.6% to 59.8% over that time. Overseas sales have been growing rapidly, rising from 161 million yuan in 2023 to 282 million yuan in 2025, accounting for 40.2% of revenue last year. Margin pressure Despite its strong growth, Wecare's financial report card also includes some potential red flags. Its profit declined to 65.21 million yuan last year from 79.61 million yuan in 2024, while its gross margin has also been trending downward, falling from 49.7% in 2023 to 47.5% in 2025. The company attributed the declines primarily to its newly built Suzhou production base being in a ramp-up phase, with capacity not yet fully utilized, resulting in higher fixed costs per unit. The company plans to use its IPO proceeds to expand its capacity at the Suzhou plant over the next three years, and to strengthen its R&D capabilities and expand its strain bank. It expects that upon completion of the expansion, its annual production capacity for probiotic raw powder will increase by an additional 600 tons. Such a big expansion might leave some scratching their heads, since Wecare already has an annual production capacity of 700 tons of probiotic raw powder, and only used 65.6% of that last year – meaning one-third of the capacity remained idle. Underutilization is even more apparent in its probiotic formula operation, with only 1,158 tons produced last year despite 5,484 tons of capacity, translating to a utilization rate of just 21.1%. While the company's expansion plan is ambitious, it also carries significant risks. If growth in the downstream dairy and dietary supplement markets falls short of expectations, or if its overseas expansion stalls, the addition of so much new capacity could be difficult to absorb. Highly valued Wecare has completed multiple funding rounds since its founding, attracting a diverse group of investors including industrial capital, state-backed funds and more market-oriented institutions. Its most recent round was in February this year, with Boyu Capital investing 110 million yuan at 37 yuan per share. Based on the company's total share capital of about 106 million shares, the latest fundraising would value it at nearly 4 billion yuan, or just under $600 million. No comparable probiotic raw material companies are currently listed in Hong Kong, though Shenzhen-listed Scitop Bio-tech (300858.SZ) has a relatively similar business model and trades at around 53 times earnings. Wecare's valuation after its latest financing and its 2025 profit give it an implied price-to-earnings (P/E) ratio of about 61 times, significantly higher than Scitop's. While the probiotic industry is currently in a high-growth phase, fueled by rising interest in gut health and immune regulation, Wecare's current valuation already seems to price in high growth expectations. Investors considering the stock should carefully assess whether the company's aggressive buildup of new capacity, commercialization efficiency, and future profitability can support and justify such a lofty valuation. To subscribe to Bamboo Works weekly free newsletter, click here 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.