The application of Shanghai Lianying Medical Technology Co., Ltd. (hereinafter referred to as "Lianying Medical" or the "Company") for listing on the Science and Technology Innovation Board was recently accepted. The Company intends to issue no more than 100 million shares (before exercising the over-allotment option) and plans to raise RMB12.48 billion, with CITIC Securities and CICC as joint sponsors.
Benefiting from the rapid growth of the industry, the launch of new products and the rising demand driven by the new crown epidemic, Lianying Medical has achieved rapid growth in the past few years. But on the other hand, the company is also facing potential risks such as the slowdown in the future growth of the industry and the maturity of core products.
Main medical imaging equipment The new crown epidemic has boosted the company's product demand
The main business of Lianying Medical is to provide medical imaging equipment, radiation therapy products, life science instruments and medical digitalization and intelligent solutions, and its product line includes magnetic resonance imaging systems (MR), X-ray computed tomography systems (CT), X-ray imaging systems (XR), molecular imaging systems (MI), radiation therapy systems (RT) and life science instruments.
At present, MR and CT equipment are the most important sources of income for Lianying Medical, and the proportion of main business revenue in the first half of 2021 reached 18.95% and 53.56% respectively.
The controlling shareholder of United Shadow Medical is United Pictures Group, and the actual controller is Xue Min. As of the date of signing of the prospectus, Xue Min's actual disposable voting rights in the company were 31.88%. As the second largest shareholder of Lianying Medical, Shanghai Lianhe directly holds 18.64% of the company's shares. In addition, Shanghai Yingdong, Ningbo Yingju, Ningbo Yingli, Ningbo Yingjian and Ningbo Yingkang are all employee shareholding platforms of the company.
Figure 1: Shareholding structure of Lianying Medical
During the reporting period (referring to 2018, 2019, 2020 and the first half of 2021), Lianying Medical achieved rapid growth in performance. The company's operating income increased from 2.035 billion yuan in 2018 to 5.761 billion yuan in 2020, with a compound growth rate of 68.27%; the company achieved a turnaround in 2020, from a loss of 0.74 billion yuan in the previous year to a profit of 903 million yuan in the current year.
Figure 2: Revenue and net profit attributable to the parent of Lianying Medical from 2018 to the first half of 2021
The study found that the reasons for the rapid growth of the performance of Lianying Medical during the period include the rapid growth of the industry as a whole and the objective increase in the demand for the company's products caused by the new crown epidemic.
According to the research report of China Insight Consulting, the size of the mainland medical imaging equipment market exceeded 50 billion yuan in 2020, and the compound growth rate of the market from 2015 to 2020 was 12.4%.
In addition, the new crown epidemic has also led to an increase in sales of ct, XR and other epidemic-related products. According to the prospectus, Lianying Medical achieved CT sales of 2.572 billion yuan in 2020, an increase of 152.78% year-on-year, and the proportion of the product in the main business income increased from 34.67% in 2019 to 45.14% in 2020; in 2020, it achieved XR sales of about 824 million yuan, an increase of 126.65% year-on-year.
From 2018 to 2020, Lianying Medical as a whole maintained a high intensity of R&D investment, but the proportion of R&D investment in operating income continued to decline. As of the end of the first half of 2021, the number of employees of Lianying Medical was 4833, of which 1805 were R&D personnel, accounting for 37.35%.
Figure 3: The amount of R&D investment and the proportion of operating income of Lianying Medical from 2018 to the first half of 2021
In the future, the growth rate of the industry may slow down, and the core products have entered a mature period
While the performance is growing rapidly, the risks faced by Lianying Medical include potential risks or problems such as high growth may be difficult to sustain and the market share of high-end products needs to be improved.
With the gradual popularization of new crown vaccines and drugs, the impact of the epidemic in the future will gradually decrease. At that time, the market demand for the company's imaging diagnostic related products may weaken, and the company's performance growth may be affected.
At the same time, the growth rate of the industry may also slow down in the future. According to the calculation of China Insight Consulting, the size of China's medical impact equipment market will rise from 53.7 billion yuan to 108.47 billion yuan from 2020 to 2030, with a compound annual growth rate of 7.3%, lower than the compound annual growth rate of 12.4% between 2015 and 2020.
In the field of MR and CT equipment, which account for the largest proportion of Therapical Medical revenue, China Insight Consulting expects the global compound annual growth rate of these two products from 2020 to 2030 to be 4.5% and 4.8%, respectively, and the industry has entered a mature stage.
Competitors of United Shadow Medical include international giants such as GE Healthcare, Philips Healthcare, Siemens Healthcare (collectively referred to as "GPS"), as well as domestic companies such as Wandong Medical and Neusoft Medical. Compared with domestic enterprises, the advantages of Lianying Medical are more obvious, but compared with "GPS" and other enterprises, the market share of the company's high-end products still has a lot of room for improvement.
According to the prospectus, The market share of Lianying Medical in the domestic MR equipment and CT equipment markets is the first. However, the market share of CT products with MR 3.0T and above and CT products with 64 rows and above in the high-end market of these two devices is the fourth.
Figure 4: Market share of the main equipment of Lianying Medical
In addition, Lianying Medical also faces potential risks such as the procurement risk of some core components and the price reduction of centralized procurement.
According to the company's prospectus, for CT products, most of the company's production tubes and high-pressure generators are purchased from abroad; for XR products, the X-ray tubes, flat panel detectors used by the company's production and the high-pressure generators used in the production of most products are purchased from abroad. In the first half of 2021, the top five suppliers of United Shadow Medical include overseas suppliers such as Philips (purchasing X-ray tubes, etc.), Wanruishi (purchasing X-ray tubes, etc.), ams (purchasing chips, etc.) or their domestic subsidiaries.
Fundraising is mainly used for research and development, capacity expansion and other projects Pay attention to the risk of capacity digestion
In this listing, Lianying Medical plans to raise 12.48 billion yuan for next-generation product research and development, high-end medical imaging equipment industrialization fund, marketing service network, information improvement and supplementary working capital.
Figure 5: Use of funds raised by Lianying Medical
The next-generation product research and development project plans to invest 6.168 billion yuan, close to 50% of the cumulative fundraising, which will be used to promote the upgrading and research and development of MR, CT, XR, MI, RT and other product lines and the research and development of important core components.
The high-end medical imaging equipment industrialization fund project plans to invest 3.126 billion yuan, mainly for the construction of high-end intelligent manufacturing factories to produce high-end XR, CT, PET/CT, MR and PET/MR and other series of products, as well as new production and research and development buildings.
Figure 6: The output and capacity utilization rate of the main products of Lianying Medical from 2018 to the first half of 2021
The data shows that in addition to the CT series of products, the capacity utilization rate of MR products, XR products, MI products and RT products in the first half of 2021 is not very high, all around 60% or below, considering that the future industry growth rate may slow down, whether the company's production capacity expansion can be digested is worth noting.
This article originated from Bread Finance