The figure originated from Visual China
Recently, Shanghai United Shadow Medical Technology Co., Ltd. (hereinafter referred to as "United Shadow Medical") was accepted for IPO on the Science and Technology Innovation Board, with CITIC Securities and CICC as joint sponsors.
According to the prospectus, before the offering, the total share capital of Lianying Medical was 724 million shares, and in the case of full exercise of the over-allotment option, the company intends to issue no more than 115 million shares and intends to raise 12.48 billion yuan; if calculated by the proposed issuance of no more than 100 million shares (before exercising the over-allotment option), the expected issue price is 124.8 yuan per share, and the company's proposed valuation is 104.7 billion yuan.
What is the level of valuation of 100 billion yuan in the A-share market? As of the close of trading on January 21, 10 of the 438 stocks classified in the Wind Healthcare category had a market capitalization above 100 billion yuan, while among the 44 individual stocks classified in the Wind Medical Board Equipment Classification, only Mindray Medical (300760. SZ) has a market capitalization of 100 billion yuan (416 billion yuan), which is followed by Jianfan Bio (300529. SZ) more than 10 times. Not surprisingly, the listing of Lianying Medical will become the "second in command" of the A-share medical device sector.
Founded in 2011, United Pictures Medical has always been surrounded by capital, and before handing over the table, the company has completed 5 rounds of financing, including 3 financings in 2017. This time, Lianying Medical plans to use the intensive funds of the listed companies for research and development, industrialization of high-end medical imaging equipment, marketing and other projects.
The purpose of the funds raised by the listing of Lianying Medical
Single-handedly challenge the "GPS" Big Three
Behind the medical treatment, there is a huge localization market for medical imaging equipment. According to the data, the market size of China's medical imaging equipment has reached 53.7 billion yuan in 2020, and it is expected that the market size will be close to 110 billion yuan in 2030, and the average annual compound growth rate is expected to reach 7.3%.
In the medical imaging equipment industry chain, Lianying Medical is in the middle reaches, is a manufacturer of medical imaging equipment, and called "GPS" the three giants of medical devices GE Medical, Siemens, Philips is the familiar face of the middle of the industrial chain, other domestic manufacturers also include Neusoft Group (600718. SH), Wandong Medical (600055. SH), Mindray Medical, etc.
Medical imaging diagnosis with the help of various types of equipment is generally used to determine the cause of the disease or the condition of the injured person, which is the basic configuration of the hospital. The data shows that in modern hospitals, about 75%-85% of the treatment information comes from medical graphics and images, and medical imaging has been developed by clinical auxiliary examination methods called the main method of clinical diagnosis of diseases.
Medical imaging equipment is rich in types, according to the different purposes, medical imaging equipment can be divided into diagnostic imaging equipment and therapeutic imaging equipment, diagnostic imaging equipment according to the different signals can be roughly divided into magnetic resonance imaging (MR) equipment, X-ray computed tomography imaging (CT) equipment, X-ray imaging (XR) equipment, molecular imaging (MI) equipment, ultrasound (US) equipment, etc.; therapeutic imaging equipment can be roughly divided into digital subtraction angiography equipment (DSA) and directional radiation equipment (orthopedic C-arm) and so on.
The figure is from the prospectus of Lianying Medical
Medical imaging equipment is the highest technical barriers in the medical device industry segment, China's medical imaging equipment industry has always shown a low industry concentration, small enterprise scale, high-end market domestic products share is low. However, this situation has changed.
On the one hand, the overall research and development level of domestic medical equipment is progressing, and the core technology of products is also being gradually overcome. On the other hand, the policy level is promoting "import substitution", in May 2018, the State Food and Drug Administration issued the "Special Approval Procedure for Innovative Medical Treatment", proposing that internationally leading medical devices with core technology invention patents can be included in the special approval. In addition, key development projects have been set up to support innovative research and development, and the procurement documents have been explicitly encouraged to purchase domestic production, and a catalogue of excellent domestic equipment has been released.
With the advancement of policies such as population aging and graded diagnosis and treatment, at present, the low-end medical imaging equipment market has basically completed localization and replacement. Specifically, in 2020, the low-end MR market of 1.5T (Tesla) and below in the Chinese market accounted for about 74.9%, and the localization rate of CT below 64 rows has exceeded 50%. But in the high-end market, the road to breaking through the "GPS encirclement" has just begun.
The outstanding point of Lianying Medical is the full layout of the high-end market, the construction of a complete product line layout including high-end medical imaging equipment, radiation therapy products, life science instruments, and supporting intelligent and information solutions. By the end of 2021, United Imaging Medical has launched more than 70 products to the market, including magnetic resonance imaging systems (MR/MRI), X-ray computed tomography systems (CT), X-ray imaging systems (XR), molecular imaging systems (PET/CT, PET/MR), medical linear accelerator systems (RT) and life science instruments.
The distribution of the product line of Lianying Medical is derived from the prospectus of Lianying Medical
Among them, in the high-end PET/MR field, Shanghai United Film has successfully developed a PET/MR system with independent intellectual property rights, becoming the third enterprise in the world to produce such equipment after GE Healthcare and Siemens. Unidia Medical's MI products include PET/CT and PET/MR, which are diagnostic functions achieved by PET fusion CT or MR.
In the high-end market of 3.0T MR equipment monopolized by "GPS", only a local company of Lianying Medical has obtained a 17.1% share, and GPS has a total market share of 82.3%. The MR equipment market is the second largest medical imaging equipment segment in China, and MR products can be divided into low-end permanent magnet MR, mid-end 1.5T superconducting MR, high-end 3.0T superconducting MR, and ultra-high-end 7.0T MR. The demand for 3.0T equipment mainly comes from the diagnosis and treatment and scientific research needs of tertiary hospitals and some secondary hospitals.
It is worth noting that the core components of superconductivity include superconducting magnets, gradient amplifiers, coils, spectrometers, etc., and the cost accounts for about 70%-80% of the whole machine. These core components are the main factor restricting the research and development process of domestic manufacturers, and more domestic manufacturers in research are still relying on foreign upstream suppliers such as Japan's Mitsubishi and Western Superconductor.
The promotion of the localization of medical imaging equipment is largely due to the release of grass-roots demand promoted by hierarchical diagnosis and treatment, but the sinking market mainly covers low-end equipment, and at present, most of the primary medical service institutions are not equipped with high-end imaging equipment such as MR and PET-CT. The top three hospitals that have accumulated the highest quality medical resources and have the largest number of patients have procurement needs, but at the same time, they have higher reliability requirements for equipment and lower price sensitivity, and the international giants that have formed a word-of-mouth effect have more advantages than local brands.
In addition to graded diagnosis and treatment, in order to divert the diagnostic pressure of tertiary public hospitals, solve the pain points such as the long waiting time for medical marketing examinations and the possible delay in diagnosis of the disease, the third-party imaging center came into being, which also provided new competitive opportunities for domestic manufacturers.
It is not easy for United Shadow Medical to find an entry point in the market lined with foreign giants, but this road has just begun, and the market share of various products of United Shadow Medical is still difficult to match, as the company's pace into the secondary market is approaching, its business progress, financial performance, etc. will receive more attention.
Soon after the turnaround, growth remains to be seen
According to the prospectus data, from 2018 to 2020 and the first half of 2021, Lianying Medical achieved revenue of 2.035 billion yuan, 2.979 billion yuan, 5.761 billion yuan and 3.085 billion yuan, and net profit was -132 million yuan, -4804.76 million yuan, 1.155 billion yuan and 758 million yuan, respectively.
That is to say, Lianying Medical only achieved a net profit reversal in 2020, and this year, the epidemic has spawned a larger market, which is the key to the profitability of Lianying Medical. In the diagnosis of new crown pneumonia, X-ray imaging and CT are important equipment that cannot be avoided, which has led to the growth of revenue of CT and XR series products of Lianying Medical. The sustainability of this growth is not entirely certain.
Titanium Media Mapping; Data Source: Prospectus
At present, the business business of Lianying Medical is divided into three major sectors: equipment sales, equipment maintenance and software revenue, of which the sales of equipment products are the main source of income, and the revenue accounts for about 90%.
Among them, MR, CT and XR series products are the main sources of revenue, MR's revenue contribution ranks after CT and XR series products, in the first half of 2021, the three major product lines contributed 78.8% of the total revenue revenue. Its layout in the field of high-end MI molecular imaging systems has achieved initial results, with sales revenue increasing from 138 million yuan in 2018 to 382 million yuan in the first half of 2021, and the proportion of revenue increasing from 6.9% to 12.46%.
In addition to the growth of equipment sales brought about by the epidemic and the company's early product layout reaching the harvest period, the profitability of Lianying Medical is also indispensable to government subsidies. According to the data, from 2018 to 2020 and the first half of 2021, the company received government subsidies of 233 million, 306 million, 348 million and 207 million, of which in 2020 and 2021 H1, which have achieved profitability, government subsidies accounted for 30.11% and 27.34% of its total profit for the current period.
In the risk factors of the prospectus, Lianying Medical also clearly mentioned that if the relevant government subsidy policies or the company's own conditions change, resulting in the inability to enjoy government subsidies or the reduction of the amount of government subsidies provided by the government, it will adversely affect the company's operating performance and asset status.
In recent years, the revenue level of Lianying Medical has achieved leapfrog growth, at the same time, its gross profit margin level has also increased simultaneously, and the gross profit margin from 2018 to 2020 and the first half of 2021 was 39.06%, 41.79%, 48.61% and 51.66% respectively, close to the average level of the industry. In the same period above, the average gross profit margin of peer companies was 53.77%, 55.47%, 57.37% and 56.95%, respectively.
It can be seen that the average gross profit margin of the industry is relatively stable, which may mean that the gross profit margin of Lianying Medical has little room to rise, and the future growth of the company will rely on the sale of more equipment, and the high sales cost also shows from the side that Lianying Medical is doing this.
From 2018 to 2020 and the first half of 2021, the sales expenses of Lianying Medical were 472 million yuan, 694 million yuan, 756 million yuan and 438 million yuan, respectively, and the sales expense ratios were 23.22%, 23.3%, 13.13% and 14.19% respectively. Specifically, a large part of the sales expenses of Lianying Medical are used for employee salaries, travel transportation and conference reception.
Details of the sales expenses of Lianying Medical, the figure is derived from the prospectus
According to the prospectus, Lianying Medical participates in influential medical device exhibitions and academic conferences at home and abroad, thereby improving market influence and promoting sales revenue, and from 2018 to the first half of 2021, its participation in exhibitions and academic conferences was 214, 296, 281 and 182 respectively. In 2021, the most activities were attended, with an average of one academic conference per day, and the average cost was about 225,800 yuan.
Although Lianying Medical does not spend money on sales promotion, this has not affected the company's high investment in research and development. From 2018 to 2020 and the first half of 2021, the company invested 551 million yuan, 579 million yuan, 756 million yuan and 455 million yuan in research and development expenses, respectively, with research and development expense ratios of 27.1%, 19.42%, 13.12% and 14.75%, even higher than the R&D investment in the A-share medical sector to sell the generous Mindray Medical. In the same period, mindray Medical's R&D expense rates were 9.21%, 8.85%, 8.89% and 8.31% respectively.
As of the end of the reporting period, Lianying Medical had nearly 2,000 R&D personnel, accounting for more than 35% of the total number of employees, of which more than 1,700 had master's or doctoral degrees, and more than 350 had overseas education backgrounds or work experience.
For the high-end medical imaging equipment industry with high technical thresholds, high R&D investment is the cornerstone to support enterprises to continue to move forward. However, from the perspective of operation, the growth of enterprises also needs multi-dimensional considerations. At present, Lianying Medical still has problems such as high asset-liability ratio, accounts receivable turnover rate and low inventory turnover rate, which are all hidden worries that the company needs to balance and solve after entering the secondary market.
(This article was first published on the Titanium Media App, author 丨 Yang Yaru, editor 丨 Sun Cheng)