"Wangyue Finance" series of observations:
Frequently involved in disputes and repeatedly inquired, when will the "transformation and upgrading road" of Yingkang Life be smooth?
Synthesis/Gaya
On January 19, Yingkang Life was reduced by 276,700 shares by Shenzhen Stock Connect, and has been reduced by Shenzhen Stock Connect for 3 consecutive days, totaling 1.3415 million shares, and the latest shareholding volume is 1.8395 million shares, accounting for 0.29% of the total share capital of the company's A shares.
Not long ago, Yingkang Life Science and Technology Co., Ltd. (hereinafter referred to as "Yingkang Life") released the first three quarters of 2021 report, the operating income during the reporting period was 491,934,226.40 yuan, an increase of 0.84% year-on-year, and the net profit was 100,342,919.29 yuan, an increase of 135.94% year-on-year net profit.
Among them, the operating income in the third quarter was about 193 million yuan, down 5.52% year-on-year. The net profit attributable to the shareholders of the listed company was about 76.69 million yuan, an increase of 391.52% year-on-year.
Yingkang Life, formerly known as Guangdong Galaxy Biotechnology Co., Ltd., was established in 1998, and its main business is the research and development, production and sales of fresh edible mushrooms. On December 17, 2015, due to the company's acquisition of 100% equity interest in Masip Medical Science and Technology Development (Shenzhen) Co., Ltd., the company's business scope shifted to the research and development and operation of medical devices, and in 2017, it divested the edible mushroom business, completing the transformation to the medical and health field.
In 2019, the controlling shareholder of the company was changed to Qingdao Yingkang Medical Investment Co., Ltd., and the actual controller was changed to Haier Group Company, becoming a member of Haier's big health ecological brand Yingkang Life, and determining the positioning of "Internet of Things Tumor Treatment Comprehensive Ecological Brand".
According to the 2020 annual report, the main business of Yingkang Life is medical services and health care, of which the medical service sector contributed 458 million yuan, accounting for 69.31% of the total revenue. The second largest source of revenue was the sales of gamma knives and distributors in the company's medical device segment, which contributed 15.42% and 15.23% of the total revenue, respectively.
Since the company began to acquire hospitals in 2017, Yingkang Life's operating income has shown rapid growth, with a compound annual growth rate of 26.18%. The medical service sector has become the company's core performance growth point, and the growth momentum is strong.
Yingkang Life's R&D investment in recent years has also been increasing, with a total R&D investment of 11.2328 million yuan in 2019 and a total R&D investment of 17.8132 million yuan in 2020, an increase of 58.58% year-on-year.
However, Yingkang Life has been repeatedly inquired by the Shenzhen Stock Exchange for financing mergers and acquisitions in the expansion:
On May 13, 2021, the Shenzhen Stock Exchange issued an inquiry letter to Yingkang Life: In response to "As of the end of the reporting period, the carrying amount of your company's goodwill was 1.142 billion yuan, accounting for 50.96% of the company's net assets, mainly for the goodwill formed by the merger and acquisition of Ma Xipu Medical Technology Development (Shenzhen) Co., Ltd. and Sichuan Friendship Hospital Co., Ltd., and no provision for impairment was made for the above two goodwill in the reporting period." And other such circumstances, the Shenzhen Stock Exchange proposed to add additional explanations including "the specific calculation process and key parameters of the goodwill impairment test" and other requirements.
On June 21, 2021, Yingkang Life was again inquired about the acquisition of assets of the parent company for 630 million. Yingkang Life announced that it intends to purchase 100% of the equity of Suzhou Guangci Cancer Hospital Co., Ltd. (hereinafter referred to as "Suzhou Guangci") held by Qingdao Yingkang Hospital Management Co., Ltd. ("Yingkang Medical Management") by paying cash, with a transaction amount of RMB631.00 million. After the completion of this transaction, Suzhou Guangci will become a wholly-owned subsidiary of Yingkang Life. The Shenzhen Stock Exchange inquired about the cooperation model, the impact of the loan on the company's financial expenses and net profit, and whether the net asset appreciation rate of Suzhou Guangci was reasonable.
In fact, from August 14, 2015 to July 13, 2021, Yingkang Life received a total of 13 inquiry letters from the Shenzhen Stock Exchange, including 4 restructuring inquiry letters, 2 concern letters, 2 inquiry letters, and 5 annual report inquiry letters. The high-premium acquisition and the company's losses are also the "old problems" of Yingkang's life:
In 2015, the company transitioned into the healthcare sector with a series of large acquisitions. In that year, Yingkang Life acquired 100% of the equity of Masip with a transaction consideration of 1.125 billion yuan, with an appreciation rate of 1941.04%; in 2017, Yingkang Life acquired 75% of the equity of Friendship Hospital through Masip for 975 million yuan in cash, with an appreciation rate of up to 745.45%; in June 2018, Yingkang Life acquired the remaining 25% of the equity of Friendship Hospital for 470 million yuan in cash, with an appreciation rate of 831.51%.
Successive high-premium acquisitions have kept the company's book goodwill high for a long time and have also caused the company to lose money.
In 2019, Yingkang Life lost 703 million yuan due to the huge goodwill impairment loss. Among them, due to the failure of the M&A target Friendship Hospital to complete the performance commitment, Yingkang Life recorded an impairment loss of 376 million yuan; due to the loss of Masip 258 million yuan, the listed company recorded an impairment loss of 340 million yuan in the same year.
In addition, the fact that the target has been frequently involved in medical disputes in the past two years has also put a question mark on the better sustained profitability of Yingkang Life.
According to Tianyan, Suzhou Guangci has had 13 medical damage liability disputes since 2019, 1 tort liability dispute, and a number of litigation announcements.
From the analysis of the public and effective judgment, some patients filed lawsuits on the grounds that they were treated in Suzhou Guangci for treatment, in other words, some patients not only did not cure their illness from the hospital, but also suffered physical damage due to medical accidents.
The announcement shows that good branding and word-of-mouth are one of the barriers for medical institutions to carry out business. When Suzhou Guangci medical disputes increase, it will undoubtedly reduce its reputation and brand power, and then affect the sustained profitability of Yingkang Life.
Resources:
1. Yingkang Life's net profit in the first three quarters of 2021 was 100 million yuan, an increase of 135.94% year-on-year, Digbei Network, 2021.10.28;
2. Freshly baked! Yingkang Life: Net profit in the third quarter of 2021 was about 76.69 million yuan, an increase of 391.52% year-on-year, Daily Economic News, 2021.10.28;
3. Yingkang Life's M&A net assets pre-increased by 1056% was inquired for 6 consecutive years, and the credit was evaluated as B, Investment Research Telecom, 2021.7.14;
4. Yingkang Life 10 times premium to buy Haier's assets Related parties made 80% of their money upside down, Zhongjing Health Island, 2021.5.26.