Producer: Sina Finance Listed Company Research Institute
Author: Tianli
On December 22, Aviaf Hospital Management Group Co., Ltd. (hereinafter referred to as "Avia") submitted an IPO application to the Hong Kong Stock Exchange, with CITIC Securities as its sole sponsor.
According to the prospectus, Aviaf mainly provides assisted reproductive services for infertility patients and has a total of four chartered hospitals. According to Frost & Sullivan data, in 2022, Aviave Hospital provided a total of 6,706 assisted reproductive services, ranking fourth among private assisted reproductive hospitals in the country.
After combing the prospectus, it was found that there are still many hidden worries about the company's future development. First of all, the actual controller of Avieve and his wife have a dominant share, with a shareholding ratio of 91.81%, and there may be risks in corporate governance. Secondly, the company's market share is only 0.9%, and the compound annual growth rate of revenue from 2020 to 2022 is only 5%, and the performance ceiling may gradually appear. At the same time, the company's return on capital has also been declining year after year, and will hit a record low in the first half of 2023, and its future development potential is yet to be examined.
The compound annual growth rate of revenue is only 5%, and the performance ceiling may be gradually emerging
In recent years, the issue of fertility has attracted more and more attention from the state and society. In fact, in the past few years, the state has gradually liberalized the control of the field of assisted reproduction, and issued a series of guiding documents to provide a good policy environment for the development of assisted reproductive services and related industries in the mainland.
In 2022, the Beijing Medical Insurance Bureau proposed to include 16 assisted reproductive technologies such as artificial insemination and embryo transfer into the Beijing medical insurance, and the Yinchuan Health Commission also proposed to give a birth subsidy of 60,000 yuan to women aged 40-49 in special families who really need to implement assisted reproductive technology for reproduction, and in February 2023, the National Health Insurance Bureau replied that it will gradually incorporate appropriate assisted reproductive technology into the medical insurance, and encourage traditional Chinese medicine hospitals to open eugenics and fertility clinics to provide infertility diagnosis and treatment services.
In this context, assisted reproduction is considered to be a golden track with great development potential. However, from a market perspective, the future development potential of Avieve may be limited. On the one hand, at present, in the domestic market, public reproductive centers occupy an absolute dominant position, accounting for about 90% of the market share, according to the optimistic calculation of the market size of 43.41 billion yuan in 2020, leaving a market share of about 5 billion yuan for all private enterprises. Among them, according to the prospectus, the share of Aviaf in the domestic assisted reproduction market is only 0.9%.
From the perspective of the competitive landscape, Jinxin Reproduction, a listed head company, has entered the stage of mergers and acquisitions and expansion, rapidly occupying market share, while many private medical institutions, including Aviaf, Meizhong Yihe, Jiayin Hospital, etc., are facing the challenge of slowing down revenue growth and entering a bottleneck period of development.
According to Wind data, the total operating income of Jinxin Fertility from 2020 to 2022 will be 1.444 billion yuan, 1.854 billion yuan, and 2.379 billion yuan respectively, with a compound annual growth rate of 28.36%. In the same period, the total operating income of AVIE was 369 million yuan, 420 million yuan and 407 million yuan respectively, and the compound annual growth rate of revenue was only 5%.
From the perspective of profitability, the gross profit margin, net profit margin, return on equity and return on assets of AV Aveve showed an overall downward trend during the reporting period, and the performance was weaker than that of previous years. Among them, the return on equity and return on assets hit new lows. On the whole, the company's development ceiling may have appeared.
The shareholding ratio of the actual controller and his wife is as high as 91.81%, and the problem of one share dominance is prominent
From the perspective of equity structure, the phenomenon of Aviaf's dominance is very obvious. According to the prospectus, after equity penetration, Ren Jizhong and Zhang Xiaowen, the actual controllers of Aviaf, hold a total of 91.81% of the company's equity.
In addition, after further combing the shareholding structure, it is found that the listed main company of Avieve Group actually only holds 70% of the equity of the operating main company. From the perspective of the operating entity, the actual controllers of the company, Ren Jizhong and Zhang Xiaowen, actually hold nearly 95% of the shares.
According to the prospectus, the main operating entities of Avieve are Zhanjiang Jiuhe Hospital, Jieyang Avieve Hospital, Kunming Ivev Hospital and Tianjin Ivev Hospital. The above four hospitals are 100% owned by Shenzhen Aviave.
Shenzhen Aiwei Af is held by the company's actual controller Ren Jizhong's wife Zhang Xiaowen and daughter Ren Hongqiao through Aiwei Feiqing, Aiwei Zhenglu, Aiwei Sancai, Aiwei Zhongyuan, and Aiwei Zhengyuan.
At the same time, Ren Jizhong, the actual controller, holds 91.81% of the equity of the listed entity Aviaf Hospital Management Group Co., Ltd. (the "Company" in the figure) through overseas entities Jiuhe BVI, LBRS Holdings and Suda BVI, and indirectly holds 64.267% of the shares of Shenzhen Ive.
To sum up, the actual controller and his wife hold 91.81% of the equity of the listed company on the surface, but since the main body of the listed company is not 100% of the shareholding and operation entity, from the perspective of the operating entity, the actual controller and his wife actually enjoy 94.267% of the equity of the four hospitals.
It is not difficult to see that whether it is a listed company or an operating company, the actual controller and his wife have the absolute right to speak, even if it is estimated according to the public shareholding ratio of 25%, the shareholding ratio of the controlling shareholder may still be as high as about 80%. Excessive concentration of shareholdings may not only lead to various shortcomings at the corporate governance level, but also lead to unequal benefit transfer.
As Professor Liu Jipeng said, the existing shares of state-owned enterprises are temporarily not circulating, so the newly raised 25% of the shares can be bought by investors at a high price. After the three-level amplification of asset evaluation, premium issuance and listing, private enterprises not only do not have to repay principal and interest after financing, but also 25% of the shares enter the market at a high price, and 75% of the stock shares also reach the same price and can be reduced after the expiration of the three-year sales limit, the reasonableness of which needs to be considered.