Recently, OCUMENSION-B (禹王生物营养有限公司) submitted its IPO prospectus for the Hong Kong market, with China Merchants Jinling International and China Jianyin Investment as joint sponsors.

According to the prospectus, OCUMENSION-B is the world's largest supplier of food-grade refined fish oil. However, prior to the filing, the company reported a significant 74% decrease in net profit and a sharp decline in gross margin in the first half of 2025, with prices of multiple core products dropping drastically. The market segment in which it operates experienced negative growth over the past five years, with low expectations for future growth, raising questions about its ability to maintain strong profitability moving forward.

Moreover, OCUMENSION-B has been struggling with a high debt ratio, which reached over 90% in 2024 and remained above 83% in the first half of 2025. Despite these alarming debt levels, the company executed a sudden "clear-out dividend" of 320 million yuan. This amount exceeds the combined net profit of 320 million yuan for 2022-2024 and is nearly eight times its net assets in 2024. The entire dividend flows directly to the controlling shareholder's family, which raises concerns about the potential detriment to the interests of future public shareholders as it seeks financing from investors in Hong Kong after depleting three years' worth of profit.

The financial internal control issues at OCUMENSION-B warrant significant attention. During the reporting period (2022-2024, and the first half of 2025), the firm engaged in illegal note financing totaling 159 million yuan, with an additional 242 million yuan misallocated from intended loan use—combined, over 400 million yuan. The company claimed that the violations stemmed from "unintentional" actions and attempted to shift the blame onto its financial manager. OCUMENSION-B's predecessor, OCUMENSION Pharmaceuticals, was established in 1994, and despite its 31-year history, it seems unaware of the loan regulations introduced later, which may distort investors' perception of the global leader in food-grade refined fish oil.

In the first half of 2025, the 74% fall in net profit correlates with a decline in several core product prices. Data from the prospectus shows that OCUMENSION-B's primary business involves the development, production, and sale of refined fish oil, fish oil softgels, and other dietary supplement products.

Despite holding the top market share of 8.1% in food-grade refined fish oil sales as of 2024, the company reported declining profits upon submitting its prospectus. Its revenue figures for 2022 to the first half of 2025 demonstrated drops in both revenue and net profit, with the first half of 2025 reflecting a year-on-year decrease of 27.13% in revenue and 74.01% in net profit.

A key factor behind the plummeting net profit is the falling gross margin, which was 25.4% in 2022 and dropped to 20.7% in the first half of 2025. A significant contributor to this decline is the drastic price decrease for core products. The price per ton of high-purity fish oil fell dramatically by 58.82%, from 323,000 yuan in the first half of 2024 to 133,000 yuan in the first half of 2025.

The industry’s stagnation raises questions regarding OCUMENSION-B’s future profitability. From 2020 to 2024, the global market size for food-grade fish oil experienced a compound annual growth rate of -6.76%. The company points out that COVID-19 pandemic disruptions from 2020 to 2023 led to a significant sales decline, compounded by logistic issues. However, the prospectus forecasts stagnant growth, estimating a 6.65% annual growth rate for the global food-grade fish oil market from 2025 to 2029.

OCUMENSION-B appears heavily reliant on third-party distributors, with sales to trading companies accounting for significant percentages of total sales over the last few years.

In addition to the sharp decline in profits, OCUMENSION-B's debt levels remain concerningly high, with ratios exceeding 80%. The sudden decision to distribute a 320 million yuan dividend, an amount that exceeds the total net profit of 294 million yuan from 2022 to 2024, raises alarms regarding the sustainability and governance of the company.

Although the Hong Kong Stock Exchange doesn't impose strict definitions or limits on "clear-out dividends," the implication that such actions could undermine the interests of future public shareholders remains a pertinent issue.

Particularly striking is the fact that by the end of 2024, OCUMENSION-B’s net asset stood at only 41 million yuan while its debt ratio surpassed 90%, yet it proceeded with the clear-out dividend.

During the dividend distribution, OCUMENSION Pharmaceuticals was controlled 5% by Liu Ruicui, while 95% was held by Yuwang Investment. The prospectus indicates that Yuwang Investment is managed by Liu Ruicui, Liu Peiji, and Liu Xiqian, signifying familial ties among the controlling shareholders, further indicating that the entire 320 million yuan dividend was funneled to the family prior to the Hong Kong submission.

Finally, OCUMENSION-B's internal control problems extend into illegal financing arrangements of up to 400 million yuan. The company acknowledges noncompliance attributed to a lack of familiarity with regulations governing bank loans, relying on misinformed guidance from its financial manager, which raises concerns about overall corporate governance and internal oversight.

These internal control failures directly implicate the responsibilities of company leadership rather than solely attributing them to individual errors.

In conclusion, the uncertainties surrounding the financial health, governance practices, and regulatory compliance of OCUMENSION-B may pose significant risks to potential investors.