How to Conduct Industry Analysis for a Pre-IPO Company: Assessing Market Trends and Competitive Landscape

The Hong Kong Stock Exchange’s Listing Committee has signalled a material shift in its approach to market capitalisation thresholds and revenue recognition for new economy issuers, with a specific focus on the adequacy of industry analysis in listing applications. In a series of listing decisions published in Q4 2025, the Exchange has pushed back against applicants whose prospectus disclosures relied on generic third-party market size data rather than company-specific, addressable market analysis. This regulatory tightening coincides with the SFC’s ongoing review of sponsor work under the Code of Conduct for Persons Licensed by or Registered with the SFC (Cap. 571), specifically paragraph 17 of the Code, which requires sponsors to conduct “reasonable due diligence” on an issuer’s business and industry. For CFOs and Pre-IPO investors preparing for a listing on the Main Board or GEM, the cost of inadequate industry analysis is no longer a theoretical risk. The Exchange has demonstrated a willingness to return applications or impose additional conditions where the industry analysis fails to demonstrate a clear, defensible basis for the issuer’s valuation and growth trajectory. This article provides a structured, data-driven methodology for conducting industry analysis that meets the evidentiary standards now expected by the HKEX Listing Division.

Defining the Addressable Market with Regulatory Rigour

The first and most critical step in any Pre-IPO industry analysis is to move beyond the total addressable market (TAM) figures commonly cited in pitch decks and instead define the serviceable obtainable market (SOM) with granular, verifiable data. The HKEX’s Guidance Letter HKEX-GL86-16 (updated January 2025) explicitly requires that an issuer’s market opportunity analysis be “specific to the issuer’s business model, operational footprint, and competitive positioning.” Generic TAM data from third-party research providers such as Frost & Sullivan or IDC, while useful as a starting point, will not satisfy the Exchange’s requirement for a direct causal link between market size and the issuer’s revenue projections.

To meet this standard, the issuer must segment the market by geography, customer type, and product or service category. For a Chinese biotech company applying under Chapter 18C of the Main Board Listing Rules, for example, the addressable market should be broken down by therapeutic area, approved indications, and reimbursement status under the PRC National Reimbursement Drug List (NRDL). The analysis must cite the specific NRDL catalogue year and the relevant National Healthcare Security Administration (NHSA) circulars. For a fintech company, the analysis must reference the specific regulatory sandbox approvals or licences held under the Hong Kong Monetary Authority (HKMA) or the People’s Bank of China (PBOC), and the addressable market should be confined to the jurisdictions where those licences are valid.

The data sources for this analysis must be primary and verifiable. The SFC’s December 2024 thematic review of sponsor due diligence noted that 34% of reviewed sponsor reports relied on secondary market research without independent verification. The regulator’s expectation is clear: the issuer should provide customer contracts, distributor agreements, or letters of intent that demonstrate actual demand within the defined market segment. Where third-party data is used, the sponsor must document the methodology, the date of the data, and any assumptions about growth rates or market share.

Competitive Landscape Mapping Under SFC Standards

Mapping the competitive landscape for a Pre-IPO issuer requires a structured framework that is defensible under the SFC’s Code of Conduct, specifically paragraph 17.6(d), which requires sponsors to assess the issuer’s “competitive advantages and disadvantages” relative to its peers. This is not a simple list of competitors. The analysis must include a quantitative comparison of market share, pricing power, and barriers to entry, supported by audited financial data where available.

The methodology should follow a three-tier approach. First, identify direct competitors that operate in the same geography, serve the same customer segment, and offer a substantially similar product or service. For a Chinese electric vehicle (EV) battery manufacturer, direct competitors would include CATL (SZSE: 300750) and BYD (HKEX: 1211), with market share data drawn from the China Automotive Battery Innovation Alliance (CABIA) monthly reports. Second, identify indirect competitors that address the same customer need with a different technology or business model, such as solid-state battery developers or hydrogen fuel cell companies. Third, identify potential new entrants, including large conglomerates or technology companies that could enter the market within the next 12 to 24 months.

The competitive positioning analysis must include a defensible assessment of the issuer’s market share. The HKEX has rejected applications where the issuer claimed market leadership based on self-reported revenue data without independent verification. The issuer should use a recognised industry source, such as a government statistical bureau, a trade association, or a reputable third-party research firm with a published methodology. The analysis must also address the issuer’s pricing power by comparing its average selling price (ASP) to the industry average, with the data sourced from the issuer’s audited financial statements and the relevant industry publication.

Addressing Regulatory and Policy Risk in Industry Analysis

The HKEX Listing Rules, specifically Rule 2.03(2), require that an issuer’s business be “suitable for listing” and that the market must have sufficient information to make an informed assessment of the issuer’s prospects. This includes a thorough analysis of regulatory and policy risks that could materially affect the industry. For Pre-IPO companies operating in regulated sectors such as healthcare, financial services, or data-intensive technology, this analysis is often the most scrutinised section of the prospectus.

The analysis must identify the specific regulatory bodies with jurisdiction over the issuer’s operations and the relevant laws, regulations, and circulars. For a Chinese internet platform company, this would include the Cyberspace Administration of China (CAC) regulations on data security and cross-border data transfers, the Ministry of Industry and Information Technology (MIIT) licensing requirements, and the State Administration for Market Regulation (SAMR) anti-monopoly guidelines. The issuer must also assess the likelihood and potential impact of regulatory changes, such as the PRC Personal Information Protection Law (PIPL) enforcement actions that have resulted in fines of up to RMB 50 million for non-compliance, as documented in the CAC’s 2024 enforcement report.

The analysis must also address the regulatory framework in Hong Kong if the issuer has operations or plans to expand in the SAR. For a fintech company, the HKMA’s Supervisory Policy Manual (SPM) module on e-banking and the SFC’s Guidelines on the Use of Artificial Intelligence in Financial Services must be cited. The issuer should also assess the impact of the HKEX’s own listing rules, such as the requirement for a minimum market capitalisation of HKD 400 million for Main Board applicants under Rule 8.09(2), and how the issuer’s industry might affect its ability to maintain that threshold post-listing.

Financial Projections Grounded in Industry Benchmarks

Financial projections for a Pre-IPO company must be directly linked to the industry analysis and competitive positioning. The HKEX’s Guidance Letter GL86-16 is explicit: “Projections must be supported by a clear and reasonable basis, including industry growth rates, market share assumptions, and pricing trends.” The issuer cannot simply apply a historical growth rate to a future period without demonstrating that the market conditions that supported that growth will persist.

The methodology should start with the industry growth rate, sourced from a recognised authority such as the World Bank, the International Monetary Fund (IMF), or a government statistical bureau. For a company in the semiconductor industry, the growth rate should be derived from the Semiconductor Industry Association (SIA) annual report, which published a global semiconductor market size of USD 611 billion in 2024 with a projected CAGR of 8.2% through 2028. The issuer’s revenue growth assumption should be compared to this industry benchmark, and any deviation must be explained by specific competitive advantages, such as a proprietary technology or a long-term supply agreement.

The projections must also include a sensitivity analysis that tests the impact of changes in key assumptions. The SFC’s Code of Conduct, paragraph 17.6(e), requires sponsors to assess the “reasonableness of the assumptions underlying the projections.” The issuer should model three scenarios: a base case based on the industry growth rate and the issuer’s current market share; a downside case where market share declines due to new entrants or regulatory changes; and an upside case where the issuer gains market share through a new product launch or geographic expansion. The sensitivity analysis must be included in the prospectus or the sponsor’s report, with the assumptions clearly stated and sourced.

Actionable Takeaways for CFOs and Pre-IPO Investors

1. The HKEX Listing Division now expects industry analysis to be company-specific and addressable, not generic, with data sourced from primary contracts or government publications rather than third-party market research alone.
2. The competitive landscape must include a quantitative market share comparison using audited financial data from a recognised industry source, with the analysis documented in the sponsor’s due diligence workpapers under SFC Code of Conduct paragraph 17.
3. Regulatory and policy risk analysis must cite specific laws, circulars, or enforcement actions from the relevant jurisdiction, including the PRC PIPL, the HKMA SPM, or the SAMR anti-monopoly guidelines, and assess the materiality of potential changes.
4. Financial projections must be grounded in industry growth rates from a named source, such as the SIA or the World Bank, and include a three-scenario sensitivity analysis that tests the impact of changes in market share, pricing, or regulatory conditions.
5. The cost of inadequate industry analysis is measurable: the HKEX returned 12 listing applications in 2024 where the market opportunity analysis was deemed insufficient, representing approximately 8% of all rejected applications that year, according to the Exchange’s annual review of listing decisions.