On July 8, the domestic composite material manhole cover leader, BAOGAI (08090.HK), officially landed on the Hong Kong Stock Exchange's Growth Enterprise Market (GEM). However, the market response on the first day of listing was lukewarm, with the company's stock price reported at HKD 6.33 per share, an increase of 1.77%.

The final issuance price for this IPO was HKD 6.22 per share, with a minimum lot size of 500 shares. Excluding handling fees, investors had an estimated paper profit of about HKD 55 per lot as of the time of writing.

As the second new stock to list on the Hong Kong Stock Exchange's GEM this year, BAOGAI received enthusiastic market support during the subscription phase. In the Hong Kong public offering, the company was oversubscribed by 3,015.69 times, receiving approximately 117,200 valid applications, with a final allocation of 1.447 million shares, accounting for 10% of the total offering.

Additionally, during the international placement phase, BAOGAI was oversubscribed by 1.26 times, with the final number of international offering shares being 13.023 million, accounting for 90% of the total issuance.

The company globally issued a total of 14.47 million shares, raising a net amount of approximately HKD 69.4 million based on the final offering price. The fundraising purpose is clearly focused on long-term growth: about 30% will be invested in the production line for continuous carbon fiber resin-based composite products, entering the high-end new materials sector; 25% will be used for automation upgrades and efficiency improvements of existing production lines; 15% will increase R&D investment; 20.1% will be used to expand global sales channels; and the remaining 9.9% will supplement daily operating funds.

This indicates that the secondary market's reception has not expanded in tandem with the enthusiasm for subscriptions in the primary market. It also reflects a reality of the Hong Kong stock market, especially for small-cap new stocks on the GEM: while subscription enthusiasm can be high, whether the secondary market continues to buy into it ultimately depends on liquidity, chip structure, the strength of short-term capital games, and subsequent fundamental verification.

From a fundamental perspective, BAOGAI is an invisible champion in the domestic composite material manhole cover sector. The company was established in 2009, with its core product being resin-based composite manhole covers embedded with glass fiber reinforced materials, covering three main categories: cable trench covers, drainage trench covers, and manhole covers, widely used in electricity, transportation, urban infrastructure, and water conservancy projects.

According to Frost & Sullivan data, by 2025, the company will maintain the number one market share in China's cable trench covers and composite material cable trench covers, ranking third overall in the manhole cover industry, with a solid leading position in its segment.

From a financial perspective, the company's performance remains robust, with projected revenues of RMB 137 million, RMB 131 million, and RMB 144 million for 2023-2025, respectively; during the same period, net profits attributable to the parent company are expected to be RMB 25.222 million, RMB 21.624 million, and RMB 24.054 million; and the comprehensive gross profit margins are expected to be 38.2%, 37.5%, and 38.2%, respectively In the long run, the trend of upgrading domestic infrastructure and replacing traditional materials with new materials is clear. BAOGAI, as a leading player in the segment, is expected to accelerate its expansion through the capital market. However, it is important to note that BAOGAI faces risks such as a relatively small revenue scale, performance dependence on the infrastructure investment cycle, high supplier concentration, and increasing cash flow turnover pressure. Investors should remain rational.

It is also worth noting that BAOGAI clearly indicated in the announcement of the allocation results that due to the high concentration of equity among a few H-share shareholders, even a small number of H-share transactions may lead to significant price fluctuations. Investors should exercise caution when buying and selling H shares