Before the IPO, "optimizing" employee costs—when will Deshisheng Biologicals turn profitable?

Deshi Bio is about to go public on the main board of the Hong Kong Stock Exchange. During the reporting period, the company continued to incur losses, and one of the important ways to control costs is to “optimize” employees.

Source: Shetu Network

High period expenses rely on “optimizing” employees to cut costs

On March 26, Hangzhou Deshi Biotechnology Co., Ltd. (hereinafter referred to as: Deshi Bio), known as the “first stock of medical imaging large models,” completed its IPO for Hong Kong stocks.

Deshi Bio is a medical device company focused on developing medical imaging products and services. The company’s products mainly include six types of medical imaging software, three types of commercial medical devices, and four types of key reagents and consumables. The company’s core product is AI AutoVision, an auxiliary diagnostic software designed for intelligent analysis of chromosome karyotypes, based on the iMedImage base model developed by the company.

The company already has some commercialized products. As of the last practical date (March 10, 2026), Deshi Bio has registered a total of 8 products in three categories: medical imaging software, medical devices, and key reagents and consumables. However, the company has not yet achieved profitability, with losses during the reporting periods (the first three quarters of 2023, 2024, and 2025) amounting to 56.116 million yuan, 43.375 million yuan, and 36.649 million yuan, respectively, for a total loss of approximately 136 million yuan.

Looking at the first two complete years, in 2023 and 2024, Deshi Bio’s revenues were 52.844 million yuan and 70.352 million yuan, respectively, with a year-on-year revenue growth of 33% in 2024; the annual losses were 56.116 million yuan and 43.375 million yuan, with a year-on-year reduction in losses of 12.741 million yuan in 2024, a decrease of approximately 22.7%.

In the aforementioned two years, the company’s comprehensive gross profit margins were 71% and 65.5%, with a year-on-year decline of 5.5 percentage points in 2024. Although the gross margin has decreased, the company’s gross profit has significantly increased driven by revenue growth, which is a major reason for the reduction in losses in 2024.

Another major reason is the contraction in research and development costs and administrative expenses. In 2024, the company’s R&D costs decreased by approximately 3.125 million yuan year-on-year, and administrative expenses decreased by approximately 4.309 million yuan, together accounting for about 58% of the total reduction in losses for the year.

In 2023 and 2024, Deshi Bio’s R&D costs were 28.644 million yuan and 25.519 million yuan, with R&D expense ratios of 54.2% and 36.3%, respectively. Among these, employee expenses were 15.908 million yuan and 10.842 million yuan, accounting for 55.5% and 42.5% of the R&D costs in the same period, respectively, making it the largest item in R&D costs. In 2024, employee expenses decreased by 31.85%, reducing by 5.066 million yuan. The post-hearing information set stated that this change was mainly due to the company optimizing its R&D team and improving operational efficiency.

In the aforementioned two years, Deshi Bio’s administrative expenses were 29.927 million yuan and 25.618 million yuan, with corresponding expense ratios of 56.6% and 36.4%. The post-hearing information set mentioned that due to the company’s efforts to optimize its administrative team and improve operational efficiency, employee expenses decreased from 15.02 million yuan in 2023 to 14.079 million yuan in 2024.

Additionally, Deshi Bio’s selling and distribution expenses and financial costs remain relatively high.

In 2023 and 2024, selling and distribution expenses were 21.912 million yuan and 24.950 million yuan, with corresponding expense ratios of 41.5% and 35.5%. Among these, employee expenses were 12.001 million yuan and 11.742 million yuan, with a year-on-year decrease of 2.16% in 2024.

Deshi Bio’s financial costs in 2023 and 2024 were 16.32 million yuan and 21.19 million yuan, with expense ratios of 30.9% and 30.1%, respectively.

In the aforementioned two years, Deshi Bio’s four types of period expenses totaled 96.803 million yuan and 97.277 million yuan, both significantly higher than the income for the same periods, with total period expense ratios of 183.2% and 138.3%.

It is noteworthy that during the historical performance record period, Deshi Bio’s net cash flow from operating activities was -47.395 million yuan, -29.777 million yuan, and -21.533 million yuan, showing a continuous net outflow.

Leased properties raise two major questions, independent directors’ part-time roles not fully disclosed

The post-hearing information set in the “Financial Information” section under “Properties, Plants, and Equipment” shows that Deshi Bio’s leasehold property renovations are depreciated over a usable period ranging from 3 to 10 years.

According to the depreciation method disclosed by Deshi Bio, the company calculates depreciation using the straight-line method, with a depreciation rate for leasehold property renovations ranging from 16% to 75%. Not considering the residual value, a 75% depreciation rate corresponds to a usable period of 1.33 years; if considering the residual value, it would be even lower, which differs from the directly disclosed usable periods of leasehold property renovations in the above-mentioned post-hearing information set.

The post-hearing information set shows that as of the last practical date, Deshi Bio and its subsidiaries did not own any land use rights (owned properties) domestically; the group has three leased properties: 1st and 11th floors, Building A, No. 609 Hongfeng Road, Linping District, Room 801 and Room 901, No. 609 Building 1, and No. 609 Building 3 (Room 201).

However, business registration information shows that Deshi Bio’s two wholly-owned subsidiaries, Hangzhou Deyun and Zhihui Fusion, have registered addresses at Room 706, Building 1, and Room 802, Building 1, Hongfeng Road, which are not included in the aforementioned leased properties.

In addition, Deshi Bio has three independent non-executive directors. The post-hearing information set only discloses that independent director Cha Yang also serves as an independent director at Luckin Coffee and Artis (688472.SH), without disclosing any part-time positions for the other two independent directors, Zhang Jing and Wang Kaifeng.

In December 2025, the company Betong Smart Cayman Holdings Limited (hereinafter referred to as: Betong Smart) plans to go public on the main board of the Hong Kong Stock Exchange, and its independent non-executive director is also named Zhang Jing. Betong Smart’s prospectus discloses that Zhang Jing has been serving as an independent director at Yongzhan Holdings Limited since October 2023 and has also served as Deshi Bio’s independent director since June 2025, starting as independent director at Betong Smart in November 2025.